GreenPower Motor Company Inc. (GP) Q2 2023 Earnings Report, Transcript and Summary

Good morning, everyone. Welcome to Grameenphone's earnings disclosure for the second quarter of 2023. My name is Aleef, and I'm the Head of Investor Relations. And with me today are our CEO, Mr. Yasir Azman; and our CFO, Mr. Jens Becker. Please note that the presentation we are sharing today, financial statements, along with additional documents are available on our Investor Relations website. [Operator Instructions] In case you are unable to post your questions due to technical reasons, please send them to me by email or text. I will now welcome our CEO, Mr. Yasir Azman, to start our presentation.

Thank you, Aleef, and good morning, everyone. Thank you for joining us for our quarter 2 earnings call. I'm Yasir Azman, Chief Executive Officer of Grameenphone, and I would like to begin with some key industry updates. As reported by our regulators, until May this year, the telecommunications industry reported 185.1 million subscribers, increasing by 1.2 million subscribers from March 2023. And during the same period, mobile data users increased by 1.5 million and reaching to 115.6 million in May 2023. If I go to the highlights of the quarter, this quarter, Grameenphone has continued its growth momentum, riding on its network investment, innovation, digital adoption and execution excellence and showed improved financial performance amidst challenging macroeconomic situation. Inflation level in Bangladesh currently stands at the highest level in the last 11 years reported by Bangladesh Bank and directly impacting the overall spending capabilities of our customers. Bangladesh Bank in July announced a new monetary policy lifting the interest cap on bank loans and rising the repo rate by 50 basis points to control inflation. As of July, and in line with the IMF guidelines, Bangladesh's ForEx reserve stands $23.6 billion. The macroeconomic pressure from a depleting ForEx reserve continues, which also impacts on the LC openings in June being the lowest in 2023 with year-on-year fall of 27%. However, as I already highlighted, following growth momentum in the first quarter, Grameenphone is reporting improved performance driven by revenue and EBITDA in the second quarter of 2023. We continue to focus on enhancing our customers' experience through our network investment. At the same time, leading the market in launching industry-first initiatives and digital-centric, customer-focused solutions. With regards to dispute resolutions, Grameenphone and Large Taxpayer Unit, through alternative dispute resolution process, have settled all income tax dispute for the assessment year from 2007 to 2008 to 2019, 2022 (sic) [ to 2020 ] and obtained a tax clearance certificate from LTU Tax for the same period on 22nd June this year. With this settlement of disputes, GP considers that NBR claims under the BTRC audit demands related to corporate tax have been resolved. Following the publication of the honorable Appellate Division written judgement on 1st June 2023, GP has paid the entire principal amount of BDT 9.9 billion to BTRC on 14th June this year, without prejudice to its right to pursue review petitions and without considering any factual or legal issue in accordance with the said judgment. While making the said payment, GP also reserve the right to adjust against its future payment obligations, subject to the outcome of the review petitions. Subsequently, GP also filed review petitions before the honorable Appellate Division challenging the said judgment. GP is also continuing, without prejudice, constructive dialogue with BTRC to resolve any matters related to this in terms of interest and fees. There is a challenging macroeconomic environment. We continue to grow top line and EBITDA now for 9 consecutive quarters, reinforcing our commitment to driving sustainable growth and creating long-term value for our shareholders and stakeholders. Now to expand a bit more on the business aspects. In Q2 2023, we have significant level of network investment in spectrum rollout, increased number of sites and capacity enhancement. We have increased fiber connectivity from 17% to 40% over the last 6 quarters and have rolled out over 21,000 total sites. We have invested in new tools to provide better customer experience in the technology space. We have further strengthened our #1 network position through surgical priority of our increased investment. We have modernized our physical distribution by introducing tax-free distribution model partnering with Mutual Trust Bank, and that eliminates manual intervention. It simplifies our operation and enhance productivity. This signifies a transformative lift towards a streamlined and digitally empowered ecosystem. We have also launched our state-of-the-art Grameenphone Experience Center in Dhaka, which is in Gulshan 2, driven by the commitment to customer at the heart of every endeavor. The experience center has been meticulously designed to fulfill customer demands and queries with utmost convenience. With a future-fit outlook, Grameenphone has created a unique environment here that offers premium service, cutting-edge technologies and an unforgettable experience for our visitors. Our focus on digital adoption has resulted in almost 32% of year-to-date recharge transaction, demonstrating the growing trend towards digital adoption and engagement of our enhanced customer. MyGP continues to be the largest local app in Bangladesh with 15.7 million customers, while our total self-care app users reaches to 17.5 million. This tells the success of our continued efforts to develop seamless digital experience for our customers. Grameenphone always believes in ensuring simplicity and convenience for customers. 99% of our customer services can be availed through the self-care app. International roaming and its related services are the latest addition in MyGP app, which was only available through physical visit to Grameenphone centers earlier. Customers can easily activate roaming service through MyGP app on their own and on-the-go. Subscriber base growth momentum continued in second quarter, increasing by 1.1 million to 81.3 million in total. Unleashing the next level of customer experience, at Grameenphone, we strive to provide customer-centric digital solutions and industry-first initiatives, giving the demand of our customers at the core. There has several exciting and innovative products and services been launched in this quarter to enrich our customers' digital lifestyle and mobility. One of them, the Grameenphone Prime, is the enhanced and revamped postpaid product which offers customers a limitless digital lifestyle with [ life ] and more as its mantra. This subscription not only fulfills the customer's telecom needs but also offers diverse lifestyle benefits like digital subscriptions and exclusive privileges at our partners' outlet. Secondly, Grameenphone has partnered with T Sports, Bangladesh's first dedicated sports channel. And through this partnership, we offer our customers access to popular sports. This initiative, which pairs entertainment and connectivity, is designed to meet our customers' needs and enhance their digital experience. As an industry-first initiative, Grameenphone has also introduced tourist SIM for the first time in Bangladesh. This service enables short-term visitors to purchase authorized SIM cards and enjoy seamless connectivity while visiting Bangladesh. We continued our initiatives that empowering societies. We believe that our responsibility extends beyond just our business operations, and we are deeply committed to drive social impact and make a positive difference in the communities we serve. GP is committed to protect the environment and contribute to the prevention of climate change. The priority is to minimize CO2 emissions from GP's operation in line with the targets set in the Paris agreement on the climate change and through science-based target initiatives. By adopting these climate targets, GP demonstrates its commitment to operate in a sustainable manner while also positioning as an industry leader in [ climate reduction ] in Bangladesh. GP has set a target to reduce 50% due to emissions by 2023 from its base from 2019 levels -- 2030 -- by 2030, 50% reduced. With Grameenphone Academy, we aim to reach the youth of our nation to build their future-fit skill set. Within one year of journey, more than 58,000 individuals have enrolled in this platform. Out of them, 15,000 of which were female. As an equal opportunity employer, diversity and inclusive -- and inclusion are imperative in the way we do our business. Our diversity agenda broadly includes gender, skills and competence. And as of second quarter of 2023, the percentage of women in the total workforce reached to 19.4%. I'll now welcome our CFO, Jens Becker, to take you through our financial performance for the quarter and come back at the end to summarize [indiscernible]. Jens?

Thank you, Azman, and good morning, everyone. Let me start with a short overview of the key financial KPIs. Grameenphone continued its financial performance in Q2 with 9 consecutive quarters of growth in top line and EBITDA amidst rising inflation and other macroeconomic challenges. Fortifying deployment of new spectrum and site rollout to improve network experience along with increased customer-focused market activity resulted in a 5.3% year-on-year growth in subs and traffic revenue after 2.7% growth in the last quarter. Additionally, Grameenphone's continued drive for operational excellence, along with top line growth, resulted in a 5.7% year-on-year EBITDA growth in Q2 after 2.7% EBITDA growth in Q1, while maintaining a strong EBITDA margin amidst highest inflation in the last 11 years. With our continued investment momentum, GP's CapEx to sales ratio, excluding licenses and leases, for the quarter stood at 14.2%, which was 13.4% in the previous quarter based on a 4-quarter moving average. However, on a stand-alone basis, our CapEx to sales ratio for the quarter stood at 17.7%. EPS for the quarter stood at BDT 8.84, with a year-on-year growth of 29.7%. The EPS growth was positively impacted by one-off adjustments. Grameenphone subscriber growth momentum continued in Q2 with 1.1 million net adds during the quarter, though our sub losses during the [ same band ] period have not been fully recouped. In addition, after 3 quarters of degrowth, data users returned to growth momentum with 2.6 million data users added during the quarter. Our reported subscriber base at the end of the quarter stood at 81.3 million with a 1.4% growth from previous quarter and a minus 4% degrowth from last year, while the number of data users stood at 46.1 million with a quarter-on-quarter 6% growth and 0.2% (sic) [ minus 0.2% ] degrowth from last year. Due to the growth in the subscriber base, GP subscription market share improved to 43.9% from previously 43.7% during the quarter according to BTRC published information as of May '23. Grameenphone delivered 9 consecutive quarters of growth in total revenue as well as daily subscription and traffic revenue. Total revenue in Q2 grew by 5.6% year-on-year after 2.8% growth in the previous quarter. The growth in total revenue was mainly driven by 5.3% growth in daily subscription and traffic revenue, which was 2.7% in the last quarter. Continued and improved double-digit growth in data revenue remained the main contributor to the accelerated growth in subscription and traffic revenue in this quarter. For the last 2 quarters, Grameenphone has delivered double-digit growth in data revenue with improved growth momentum. And in Q2, Grameenphone delivered year-on-year 17.1% growth in data revenue, up from 11.5% growth in the previous quarter. This continued growth momentum in data revenue is the outcome of our efforts to improve the network experience along with our consistent efforts to simplify the products and improve the digital experience to ensure that offerings are more focused and effective, meeting our customers' evolving needs. Additionally, Grameenphone introduced appealing bundle packs throughout the quarter in both the physical and digital channels, which led to 9.4% increase in bundle revenue from the prior quarter. Grameenphone's average data usage per user reached the 7 gigabyte milestone during the quarter, which is the highest ever in GP's history, with a 32.5% growth from last year and 15.2% growth from previous quarter. The growth in data usage was supported by better network experience as an outcome of continued efforts towards network expansion, deployment of new spectrum and fiber connectivity. Despite the year-on-year 4% degrowth in our sub base, GP service ARPU grew by 10.6% in Q2 compared to last year, and we recorded a 5.6% growth in service ARPU compared to previous quarter against the quarter-on-quarter 1.4% growth in our sub base. The year-on-year growth in service ARPU was mainly driven by a higher contribution from both our data and voice segments. Reported OpEx for the quarter stood at BDT 13.1 billion with a year-on-year 9% growth. The year-on-year growth in OpEx was mainly contributed by the increased energy price and network expansion. Grameenphone delivered consecutive 9 quarters of growth in EBITDA. During the quarter, GP registered 5.7% year-on-year EBITDA growth, which is double from the previous quarter, while maintaining our EBITDA margin at 61.1%. The accelerated growth in EBITDA was driven by our top line growth and our continued drive towards operational efficiency, which resulted in better cost performance amidst hike in energy prices, inflationary and other macroeconomic challenges. GP invested BDT 7.1 billion CapEx during the quarter, focusing mainly towards our 4G network, coverage expansion and spectrum deployment. We rolled out 2,200 plus new 4G sites and 1,600 plus new coverage sites in the last 12 months. At the end of Q2, the number of 4G sites reached [ 20,603 ]. During the quarter, our 4G population coverage reached at 97.9% with an 0.8 percentage points increase from last year. Net profit for the quarter stood at BDT 11.9 billion with a margin of 29.8%. The year-on-year 29.7% growth in net profit was mainly contributed by positive one-off adjustments arising from the settlement of dispute and completion of assessment. Operating cash flow for the quarter stood at BDT 17.3 billion with a year-on-year BDT 0.2 billion degrowth in combination of BDT 1.3 billion higher EBITDA and [ BDT 1.5 billion ] higher CapEx. On the other hand, net debt stood at BDT 13.8 billion as of Q2 in combination of BDT 23.2 billion short-term bank loan and BDT 9.4 billion cash balance, excluding restricted cash. In the first half of '23, GP has paid BDT 70.3 billion, equaling 91% of its total revenues, to the national exchequer in the form of taxes, VAT, duties, licenses and spectrum assignment fees. And since inception, GP contributed BDT 1,131 billion or [ INR 113,109 crores ] to the national exchequer. During the quarter, Grameenphone saw positive developments on the resolution of legacy dispute. It settled all the income tax dispute until 2018 through alternative dispute resolution process and paid BDT 7.8 billion to NBR. In addition, GP has already paid BDT 9.9 billion with regards to the written judgment for 2G. With this, as mentioned before, our contribution to the national exchequer in the first half equals 91% of total revenues. Additionally, GP is in constructive dialogue with BTRC for the remaining settlement with an unknown outcome. Despite this positive development on dispute resolution, this BDT 17.7 billion payment strains GP's cash position as it comes on top of our regular payments. In light of these additional payments and the uncertainties around the final settlements, GP is not recommending interim dividend for the first half of '23. With this, I'm handing back to Azman now.

Thank you, Jens. To summarize, the second quarter of 2023 registered ongoing growth momentum in both revenue, which is at 5.6% level, and EBITDA, which is at 5.7%, driven by 10.6% ARPU growth, strong market execution, innovation and a strategic focus on network investment. Keeping the customer at the core of everything we do, we are enhancing customer value and strengthening as the #1 network. We have invested BDT 7.1 billion CapEx in the passing quarter. We continue to focus on looking towards the needs of our customers to focus digital-centric innovation and services driving growth momentum. More than 99% customer services can be fulfilled by the largest local app in the country. Digitalization of our customer interactions from MyGP and other digital channels has contributed both in efficiency and driving growth. We have had positive developments on dispute resolutions with our authorities, and those have already been highlighted by our Chief Financial Officer. I'll now hand back to Aleef for Q&A session. Thank you, everyone.

Thank you, Azman Bhai. We will wait for a few minutes now for the questions to start coming in, I believe which they have. So we can start first with Jens. So Jens, from where did such a big tax addition come back from? Or where did we get such a big tax addition from?

Yes. Let me answer this. This amount includes -- or this includes the amounts arising from the settlement of disputes and completion of assessment. And I think if you look into the financial statements, you will find disclosure note 29.1 for more details.

Thank you. We have another question for you, Jens. What was the total settled amount for 2 litigations? And how did you incorporate them in financial reporting?

Yes. I assume that this refers -- 2 litigation means 2G litigation, I assume. So during the quarter, Grameenphone saw the positive development on the resolution of our legacy dispute, and it settled all the income tax dispute well until 2018 through alternative dispute solution and paid BDT 7.8 billion to NBR. And in addition, GP has already paid BDT 9.9 billion with regards to the written judgment for 2G. And for the accounting topics, you see it, please, in the note 20.1 and 35b.

Thank you. Azman Bhai, this one is for you. What is causing active data users degrowth?

Okay. Actually, Grameenphone subscriber growth momentum, which has continued in Q2, as we already mentioned, with 1.1 million subscriber additions during the quarter. However, the sub losses during the [ same band ] period have not been yet fully recouped. After 3 quarters of degrowth, data users now returned to growth momentum with 2.6 million data users added during the quarter, which is a significant progress. Thank you.

Thank you, Azman Bhai. Jens, we have some more for you. So what are the updates on other legal issues?

Yes. Except as disclosed in note 35 of the interim financials, there has been no significant development of the events disclosed in the financial statements for the year ended 31st December 2022. So no further significant developments on the other topics.

Thank you. Jens, we have one more for you. We see no declaration of interim dividend, which is an exception of GP's usual norm. What are the reasons?

Yes, I think I mentioned it in the speech already, but let me reiterate. During the quarter, Grameenphone saw the positive developments on the resolution of our legacy disputes. And with this, we have settled all the income tax disputes until 2018 through alternative dispute resolution and paid BDT 7.8 billion to NBR. In addition, GP has already paid BDT 9.9 billion with regards to the written judgment for 2G. And with this, as mentioned before, our contribution to the national exchequer in the first half equals 91% of total revenue. And we are, additionally, also in constructive dialogue with BTRC for the remaining settlement where as of today, it's an unknown outcome. So despite these positive developments on dispute resolution, those topics together, the BDT 17.7 billion payment strains our cash position as it comes on top to our regular payments. And in light of these additional payments and the uncertainties around the final settlements, we are not recommending interim dividend for the first half.

Thank you, Jens. We have some more for you. So what is the current total amount of contingent liabilities net of all these payments?

I think you can find our Grameenphone's contingency in the annual financial statements of the year 2022 and as well in the interim financials of the year for the first half of this year.

Thank you. Another one for you. Could you please explain the BDT 4 billion provision under finance expenses and BDT 6.4 billion provision reversal under income taxes? What are their sources?

Yes. GP has taken the provision for regulatory disputes based on the available information of the outcome of court proceedings mentioned in disclosure note 28.1. And the tax, as I mentioned before, includes amounts arising from the settlement of disputes and completion of assessment. And again, this -- with more details in disclosure note 29.1.

Perfect. So that's all the question and answers that I can see until now. Why don't we give it a couple of minutes and see if any more questions come in. Okay. So I think that concludes it. If there are any more questions that may have been unanswered or you have any further questions, please reach out to me, and then we will take that forward. So there are no further questions. And thank you very much, Azman Bhai and Jens, and thank you all for joining. Goodbye.