PLDT Inc. Q3 FY2023 Earnings Call

Good afternoon, and thank you for joining us today, to discuss the Company's Financial and Operating Results for Nine Months of 2023. A copy of today's presentation is posted on our website. For those who have not been able to do so, you may download the presentation from www.pldt.com, under the Investor Relations section. Kindly note that this briefing is being recorded. A podcast of this event will be available on our website after the call. QR code for the presentation is on the screen, and the MD&A, FS, and podcast will be made available after the call. For today's presentation, we have with us Mr. Al Panlilio, President and CEO of PLDT and Smart; Mr. Danny Yu, Chief Financial Officer and Chief Risk Officer; Marilyn Victorio-Aquino, our Corporate Secretary and Chief Legal Counsel; Mr. Shailesh Baidwan, President of Maya Philippines and Co-Founder of Maya Bank, as well as other members of the PLDT management team. At this point, let me turn the floor over to Mr. Panlilio to begin the presentation.

Thank you, Melissa. And good afternoon to all, and thank you for joining us this afternoon. I'd like to start off the presentation with a few highlights of the business, and then I'll pass it on to Danny for a more detailed financial highlights report, and then to SB for Maya. Happy to report the first nine months performance for PLDT-Smart. Growth was made possible in nine months; 2023 performance. To start with, we have ₱142.3 billion or 1% growth in revenues, which are nine month high revenues for PLDT. We also had an all-time nine-month high for our EBITDA of ₱78.4 billion, maintaining a margin at 52%. Telco core has shown growth also, plus 2%, ₱26.1 billion for the period. Also want to share the CapEx being managed down to ₱55.3 billion versus ₱67.3 billion of the same period last year. Because of that, the CapEx intensity has gone down to 37% from a high of 46%. We are continuing to expand the network countrywide. We improved our domestic fiber footprint by 4%, which is now up to almost 894,000 kilometers. If you add the fiber optic backbone, in terms of our subsea, it's about 1.1 million kilometers of fiber. Homes passed is ₱17.31 million, up from ₱16.78 million last year. I'm also happy to report that there are no more devices latched on to our network, passive return 74% growth. Now we have 3.64 million who are latched on to the 5G devices environment network. Jupiter Cable Systems, which we launched last year, was also certified for ISO 22301 BCMS. Just an update on the tower sales that we started about a year and a half ago; we closed 1,319 towers as of November 3, generating proceeds of about ₱17.4 billion. In total, from the first sale that we have completed, we have already turned over 5,984 towers, equivalent to approximately ₱78 billion. Happy to report also the recognition that we've gotten as a group, both locally and globally. Ookla has rated Smart as the best in test, both upload speeds, download speeds, and latency experience, and has been a consistent winner since 2019. Time Magazine also put PLDT as the only Philippine telco named and ranked it highest in sustainability among six cited Philippine companies. We continue to receive awards for our governance initiatives and scorecard, recognizing PLDT for upholding high standards of corporate governance. Our three business units continue to push for growth through innovation. Smart continues to empower digital lifestyles through exciting, personalized offers. We have the highest number of subscribers at 55.2 million on Smart, with PLDT being the number one prepaid brand in the country. PLDT Home also has plans to keep families safe, connected, productive, and entertained with our fiber and fixed wireless products. PLDT Enterprise ensures that we provide innovative solutions for the digital transformation of the industries we cover. Staying true to our company's core on sustainability, we had a digital convention in October, called Vision, discussing sustainability initiatives and programs we've embarked on. Our PLDT Smart Foundation continues to serve our communities, supporting public health initiatives. We will continue to innovate for tomorrow but we're excited for innovations today, and will push hard in the last quarter to ensure we end the year strong. At this point, I'd like to move the presentation to Danny for more details regarding our financials.

Thank you. Good afternoon, everyone. I'll be presenting the financial and operating highlights for the first nine months of 2023. Service revenues of ₱142.3 billion for the first nine months of 2023 were higher by 1% compared to the same period last year. On a gross basis, service revenues of ₱149.8 billion were up 3% from ₱145.7 billion in 2022. Operating expenses decreased by 3%, or ₱1.7 billion, to ₱63.9 billion. Consolidated EBITDA rose by 4% to ₱78.4 billion, an all-time nine-month high with an EBITDA margin at 52%. Telco core income, excluding the impact of asset sales and Maya, grew to ₱26.1 billion, up 2% year-on-year. Revenue growth was broad-based. Individual revenues, which represent about 43% of consolidated revenues, rose 1% to ₱60.6 billion. Record highs were recorded in the Home and Enterprise segments. Home revenues rose 2% to ₱45.3 billion, with Fiber Only revenues having risen 10% to ₱39.3 billion. Our Enterprise business grew by 1% to ₱34.8 billion. Home Broadband revenues grew by 2%. Fiber Only revenues, now accounting for 87% of total Home revenues, were higher by 10%, up ₱3.6 billion compared to the same period last year. Fiber net adds re-accelerated in the third quarter, bringing total net adds for the year to 210,000. The gross of our Fiber Only revenues and the sequential albeit modest improvement from our fixed wireless broadband business underscores our view that the home broadband market remains underpenetrated. PLDT enjoys strong brand equity and superior network quality, making it a formidable competitor in the market. Data and ICT remain the key drivers of our enterprise business, which increased revenue by 1% to ₱34.8 billion from the same period last year, with third-quarter revenues up by 2%. Corporate data grew by 6% due to higher fiber and managed IT data revenues. ePLDT recorded a 10% increase in revenues mainly from data center and cloud services. With the Santa Rosa Data Center capacity expected to come on stream ahead of competition in the first half of '24, ePLDT is well-positioned to capture robust demand from hyperscalers. Positive trends are also manifesting in the individual segment despite challenges. Revenue for our individual business rose by 1% in the first nine months of the year. Mobile data revenues jumped to ₱52.4 billion, with active data users of almost 38 million following a 15% increase in data traffic. Average monthly data usage per customer escalated to 10.8 gigabytes, up by 23% from last year. In the first nine months of 2023, 82% of our consolidated service revenues were from data and broadband. By service type, mobile data rose by 3% year-on-year while broadband and corporate data grew by 4% and 6%, respectively. ICT revenues were up 10%. The combined impact of increased revenues and decline in costs resulted in a 4% rise in consolidated EBITDA to ₱78.4 billion, a nine-month record high, with a margin of 52%. Telco core income for the period grew by 2% to ₱26.1 billion year-on-year. PLDT's net debt-to-EBITDA at the end of September was at 2.44x, lower than the 2.48x at the end of June. Total CapEx for nine months amounted to ₱55.3 billion. In line with our objective of bringing down CapEx and aiming for positive free cash flow, CapEx intensity has fallen below the 40% mark to 37%. We maintain our CapEx guidance for the year of between ₱80 billion and ₱85 billion, including approximately ₱11 billion out of the ₱33 billion prior year's commitment. This ensures we continue to optimize our investments for growth.

Thank you, Danny. In 2023, we continue to push the boundaries of our FinTech ecosystem with Maya Digital Bank at the heart of it and continue to launch new products and grow all our businesses. In the Philippines, we are the #1 digital bank in terms of number of depositors and the deposit balance, and we continue to see very good growth across our loans portfolio. On the merchant acquiring business, we process Visa and Mastercard transactions, and we are the leaders in transactions processed across all fund sources in the Philippines, with our market share expanding. Our Maya consumer app has evolved from a payment-centric app to an all-in-one financial service app for consumers. We introduced a high-engagement savings product last year. Customers have provided positive feedback, which helps us create better profiles and deeper understanding of their behavior, aiding our credit scoring models. We launched our first credit product last year, and recently expanded it with a longer-tenure product, Maya Personal Loans, seeing positive take-up. We continue to expand our services, allowing customers to invest in various funds and soon individual stocks on the Philippines Stock Exchange. This integration makes the Maya consumer app the primary financial services app for users, generating 2x to 4x more ARPU and profit per user compared to a payments-only app. Enterprise side of the business is also growing. We provide large online players with a full suite of payment solutions. With the addition of Maya Bank, the integration allows SMEs to utilize their deposit accounts more effectively. We have disbursed over ₱16 billion in loans recently, and this expansion has made the data business profitable in Q3 2023. Overall, we are optimistic about achieving cash flow positivity by the end of 2024 as we continue scaling our products.

Thank you, S.B. So, regarding the outlook for the remaining nine months, our service revenue growth is expected to be low single-digit growth, while EBITDA will also show low single-digit growth. Core income will be at least ₱24 billion, with CapEx expected to be around ₱25 billion. We aim to maintain a 60% dividend payout. I can start answering some questions after that.

Thank you for joining us today for the third quarter briefing. We look forward to seeing you again in February or March next year. In the meantime, on behalf of all of us, we wish you a very Merry Christmas.