Telefónica (TEF) Q2 2024 earnings summary

Executive summary

• Q2 2024 revenue grew 1.2% year-on-year, with robust B2B and B2C growth and strong commercial momentum in Spain, Germany, and record customer levels in Brazil.

• EBITDA minus CapEx (or EBITDAAL - CapEx) increased 11.5% year-on-year, supported by operational efficiency, personnel savings, and legacy shutdowns.

• Free cash flow, excluding extraordinary tax payments in Peru, grew over 20% year-on-year, keeping the company on track for full-year targets.

• Strategic initiatives included MOUs with Millicom for Colombia and Vodafone for a joint FiberCo in Spain, and long-term network agreements in Spain and the UK.

• Sustainability leadership was reinforced, with updated AI ethics, a new Climate Action Plan, and recognition among the world's most sustainable companies.

Financial highlights

• Q2 2024 revenue: €10,255m (+1.2% y-o-y); service revenue up 2.2%; B2B up 4.9%; B2C up 1.8%.

• Q2 2024 adjusted EBITDA: €3,219m (+1.8% y-o-y); EBITDA minus CapEx up 11.5% y-o-y.

• Free cash flow up 22.6% year-on-year in Q2, excluding extraordinary Peru tax payments.

• CapEx/Sales at 12.1% in Q2, 11.3% year-to-date, below the up to 13% full-year guidance.

• Net financial debt stood at €29.2bn as of June 2024, with a net debt to EBITDA ratio of 2.78x and average debt maturity of 11 years.

Outlook and guidance

• 2024 guidance reaffirmed: revenue growth around 1%, EBITDA growth 1%-2%, EBITDAAL - CapEx 1-2%, and more than 10% free cash flow growth.

• CapEx intensity expected to remain below 13% for 2024, trending toward less than 12% by 2026.

• Dividend of €0.30/share for 2024 confirmed, paid in two tranches.

• Leverage reduction targeted to 2.2x–2.5x by 2026.

• Free cash flow generation is expected to accelerate in the second half of 2024, supporting deleveraging and dividend sustainability.