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1&1 AG Interim / Quarterly Report 2023

May 15, 2023

1_10-q_2023-05-15_04f027c0-2271-4861-aa68-58985ee377dc.pdf

Interim / Quarterly Report

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Interim Statement Q1 2023

Data & Facts

2

Selected Performance Indicators 3M 2023 3M 2022 Change Q4 2022 Q3 2022 Q2 2022
Profit (in €m)
Revenues 1,021.0 975.9 4.6% 1,013.4 998.3 976.1
Service revenues 788.9 789.1 0.0% 788.7 804.8 792.8
Hardware and Other revenues 232.1 186.8 24.3% 224.7 193.5 183.3
EBITDA 182.1 187.1 -2.7% 144.3 180.8 181.1
EBITDA Segment Access 201.3 195.4 3.0% 169.9 191.5 188.9
EBITDA Segment 1&1 Mobile Network -19.2 -8.3 -25.6 -10.7 -7.7
EBIT 133.4 146.8 -9.1% 106.1 141.1 140.9
EBIT excluding PPA write-offs 147.7 167.9 -12.0% 107.3 161.3 162.1
EBT 134.8 145.2 -7.2% 107.3 139.7 139.3
EBIT excluding PPA write-offs 149.1 166.3 -10.3% 108.5 159.9 160.5
Profit per share (in €) 0.53 0.58 -8.6% 0.40 0.55 0.55
Profit per share excluding PPA
write-offs (in €)		 0.59 0.66 -10.6% 0.41 0.63 0.64
Cash flow (in €m)
Net inflow of funds from operating
activities		 100.0 83.9 19.2% 3.9 -61.3 154.1
Net outflow of funds in investment sector -95.3 -77.4 -23.1% 59.4 63.6 -143.0
Free cash flow 59.8 62.6 -4.5% -157.8 -93.5 124.2
31/03/2023 31/12/2022 Change 31/12/2022 30/09/2022 30/06/2022
Headcount
(incl. management board)
Total per end of March 3,218 3,163 1.7% 3,163 3,189 3,145
Customer contracts (in millions)
Access, contracts 15.87 15.78 0.6% 15.78 15.65 15.55
of which mobile internet 11.80 11.68 1.0% 11.68 11.52 11.38
of which broadband (ADSL, VDSL, FTTH) 4.07 4.10 -0.7% 4.10 4.13 4.17
Balance sheet (in €m)
Short-term assets 1,963.3 1,855.2 5.8% 1,855.2 2,054.8 2,149.5
Long-term assets 5,390.2 5,401.9 -0.2% 5,401.9 5,252.0 5,258.7
Shareholders' equity 5,674.2 5,579.8 1.7% 5,579.8 5,509.0 5,410.6
Balance sheet total 7,353.5 7,257.1 1.3% 7,257.1 7,306.9 7,408.2
Equity ratio 77.2% 76.9% 76.9% 75.4% 73.0%

Content

Data & Facts

Profit (in €m)

Profit per share excluding PPA

Net inflow of funds from operating

(incl. management board)

Balance sheet (in €m)

Customer contracts (in millions)

Cash flow (in €m)

Headcount

Selected Performance Indicators 3M 2023 3M 2022 Change Q4 2022 Q3 2022 Q2 2022

Revenues 1,021.0 975.9 4.6% 1,013.4 998.3 976.1 Service revenues 788.9 789.1 0.0% 788.7 804.8 792.8 Hardware and Other revenues 232.1 186.8 24.3% 224.7 193.5 183.3 EBITDA 182.1 187.1 -2.7% 144.3 180.8 181.1 EBITDA Segment Access 201.3 195.4 3.0% 169.9 191.5 188.9 EBITDA Segment 1&1 Mobile Network -19.2 -8.3 -25.6 -10.7 -7.7 EBIT 133.4 146.8 -9.1% 106.1 141.1 140.9 EBIT excluding PPA write-offs 147.7 167.9 -12.0% 107.3 161.3 162.1 EBT 134.8 145.2 -7.2% 107.3 139.7 139.3 EBIT excluding PPA write-offs 149.1 166.3 -10.3% 108.5 159.9 160.5 Profit per share (in €) 0.53 0.58 -8.6% 0.40 0.55 0.55

write-offs (in €) 0.59 0.66 -10.6% 0.41 0.63 0.64

activities 100.0 83.9 19.2% 3.9 -61.3 154.1 Net outflow of funds in investment sector -95.3 -77.4 -23.1% 59.4 63.6 -143.0 Free cash flow 59.8 62.6 -4.5% -157.8 -93.5 124.2

Total per end of March 3,218 3,163 1.7% 3,163 3,189 3,145

Access, contracts 15.87 15.78 0.6% 15.78 15.65 15.55 of which mobile internet 11.80 11.68 1.0% 11.68 11.52 11.38 of which broadband (ADSL, VDSL, FTTH) 4.07 4.10 -0.7% 4.10 4.13 4.17

Short-term assets 1,963.3 1,855.2 5.8% 1,855.2 2,054.8 2,149.5 Long-term assets 5,390.2 5,401.9 -0.2% 5,401.9 5,252.0 5,258.7 Shareholders' equity 5,674.2 5,579.8 1.7% 5,579.8 5,509.0 5,410.6 Balance sheet total 7,353.5 7,257.1 1.3% 7,257.1 7,306.9 7,408.2 Equity ratio 77.2% 76.9% 76.9% 75.4% 73.0%

31/03/2023 31/12/2022 Change 31/12/2022 30/09/2022 30/06/2022

23 Consolidated Financial Statements per 31 March 2023

33 Other

Letter from the Management Board

Dear Shareholders,

1&1 can look back with satisfaction on the start of 2023 in which we were again able to increase our customer contracts as well as our EBITDA in the operating segment Access.

In addition to our operating business, we also focused on the expansion of our 1&1 mobile network in the first three months of the financial year. Together with our partners for the radio tower infrastructure, we created a new rollout plan in March accelerating the expansion of antenna sites.

Specifically, this envisages the provision of approximately 1,200 antenna masts by the end of 2023. Beginning in 2024, plans provide for 1&1's activation of an additional 3,000 antenna sites annually by Vantage Towers, American Towers and GfTD. Moreover, Eubanet, our fourth partner, supports us in the acquisition of new antenna sites. We are keeping our sights firmly on our targets of supplying a quarter of German households by the end of 2025 and half of them by the end of 2030.

Having significantly fallen short of the first interim target of 1,000 5G antennas by the end of last year owing to the unexpected and almost complete loss of our main supplier, Vantage Towers, we are confident that our partners' commitments will now be fulfilled according to contract and that we will be able to close this gap. We initiated an investigation by the Federal Cartel Office in February that would preclude any possible obstruction of the 1&1 network expansion by Vodafone, which as the main shareholder (82 percent) controlled Vantage Towers.

The establishment of our Company as the fourth network operator represents our objective of driving forward the use of 5G in Germany. Achieving this goal led to our decision to become the first provider in Europe to rely completely on the new OpenRAN technology. To be sure, this is an enormous task, but one that will secure our future viability. The on-schedule launch of our 1&1 OpenRAN featuring a landline network replacement product implemented using a mobile network ("1&1 5G zu Hause") in December 2022 realised a technological peak achievement that demonstrates how innovative mobile networks can be built today. The decision of the Koblenz Regional Court also confirmed that 1&1 is building the most modern mobile network in Europe. This case revolved around the proceedings initiated by Deutsche Telekom in response to the start of the 1&1 OpenRAN product; the court handed down its decision in favour of 1&1 as an innovation leader in March.

The open and cloud-native network architecture in OpenRAN offers us key advantages over conventional mobile networks, which are often provided solely by a single manufacturer. In contrast, we are installing standardised interfaces that allow us to work flexibly with the most secure and best manufacturers on the market. Consequently, we are the only German network operator to reject the products from the controversial manufacturer HUAWEI and any other network equipment suppliers from China. Furthermore, more than 500 local data centres are being built across Germany in the immediate vicinity of the antenna locations – equipped with gigabit antennas and connected to the fibre optic network of our affiliate 1&1 Versatel. This is the only new network architecture that can offer the short transmission paths that are indispensable for real-time applications.

Today, we have already commenced operation of two out of a total of four core data centres, 19 of the 24 local edge data centres and 64 of the more than 500 so-called far edge data centres. This is good progress that will continue to advance in the coming months.

The mobile services for smartphone use are scheduled for activation in the third quarter of 2023. At this point, Telefónica will provide to us the national roaming coverage that this company is developing concurrently with our own efforts and that we will offer nationwide to our 1&1 customers right from the start. We look forward to making a difference with the 1&1 OpenRAN.

For 30 years now, 1&1, one of the leading German telecommunications providers, has been a symbol of how innovative and attractive products and service vitalise and mould competition while simultaneously being recognised for offering good value for its customers' money. Yet the Company does not rely on attractive prices alone; quality and service are further key differentiators for our private and business customers. We were again delighted to receive prestigious awards in the first quarter of the year that emphatically underscored our high standards. For example, 1&1's broadband rate plans were rated as "Excellent" in the "Complete Check of Landline Network Providers" conducted by the reputable trade magazine connect. In no fewer than two user profiles – "Budget Users" and "Normal Users" – 1&1 received the top rating of "outstanding" as the test victor in two categories. The ranking procedure focused on the categories price, network quality and service performance. We are also particularly pleased with the result from this year's connect "Mobile Services Hotline Test" in which 1&1 scored 435 out of a possible 500 points and was rated "Excellent". We scored particularly well in the categories of accessibility, waiting time, voice command system and friendliness.

Now for the operating side of the business

1&1 has continued its path of growth in financial year 2023 and once again increased its customer base, service revenues and EBITDA in the operating segment Access.

We were able to increase the number of customer contracts by 90,000 to 15.87 million contracts (31 December 2022: 15.78 million contracts). Our growth was based on the acquisition of 120,000 new mobile internet contracts, bringing the total to 11.80 million at the end of Q1 2023, while the number of broadband lines fell by 30,000 to 4.07 million in the same period.

High-margin service revenues amount to €788.9 million in the first quarter of financial year 2023 (3M 2022: €789.1 million) and remains at the level of the previous year. Total revenues increased by €45.1 million (4.6 percent) to €1,021.0 million (3M 2022: €975.9 million).

Other sales revenues – essentially from the realisation of hardware sales brought forward (in particular from investments in smartphones that will be reimbursed by the customers over the minimum contract term in the form of higher package prices) – increased by €45.3 million (24.3 percent) to €232.1 million (3M 2022: €186.8 million). Hardware business fluctuates seasonally and its development depends heavily on the attractiveness of new devices and the model cycles of manufacturers.

Consolidated EBITDA (earnings before interest, taxes, depreciation and amortisation) decreased by €5.0 million (2.7 percent) to €182.1 million in the first quarter of the year (3M 2022: €187.1 million). The EBITDA of the segment 1&1 Mobile Network included in the total EBITDA amounts to €-19.2 million in the first quarter of financial year 2023 (3M 2022: €-8.3 million) and includes the costs of the rollout of our mobile network. The EBITDA in our operating segment Access rose again, this quarter by 3.0 percent, and amounted to €201.3 million (3M 2022: €195.4 million).

Profit per share in Q1 2023 amounted to €0.53 (previous year: €0.58). Precluding the effects of the PPA write-offs, the profit per share amounted to €0.59 (previous year: €0.66).

Free cash flow in the first quarter of financial year 2023 came to €59.8 million (previous year: €62.6 million). In comparison, the free cash flow includes investments of €40.2 million (3M 2022: €21.4 million) in tangible and intangible assets relating in particular to the rollout of our mobile network.

We are confirming our forecast for financial year 2023 and are not changing our expectations of an increase in new customer contracts by approximately 500,000. Service revenues will presumably increase by approximately 2 percent to about €3.23 billion euros (2022: €3.175 billion) and the EBITDA should be approximately €655 million (2022: €693.3 million). The Access segment and its growth of approximately 4 percent to about €775 million (2022: €745.7 million) and the 1&1 Mobile Network segment and its start-up costs for the rollout of the 5G network of approximately €-120 million (2022: €-52.4 million euros) will contribute to this result. The investment volume (cash capex) is expected to be around €320 million (2022: about €250 million).

1&1 is well positioned for the next steps in the Company's development. We are optimistic about the future. We want to express our special thanks to all of our employees for their commitment and work and to our shareholders and business partners for the trust they have placed in 1&1.

Best regards from Montabaur

Ralph Dommermuth Markus Huhn Alessandro Nava

Montabaur, May 2023

Quartalsmitteilung zum 31. März 2023 8

Quarterly release as at 31 March 2023

Principles of the Group

Quartalsmitteilung zum 31. März 2023

Principles of the Group

1&1 – Only MBA MVNO on the German Mobile Market and Construction of Its own 1&1 Mobile Network

1&1 Group, together with 1&1 Aktiengesellschaft, Montabaur, the listed parent company (hereinafter: "1&1 AG" or, along with its subsidiaries, "1&1" or "Group"), is a telecommunications provider that operates solely and exclusively in Germany. The Group is managed via the two business segments Access and 1&1 Mobile Network.

1&1 is a leading internet specialist in Germany and serves more than 15.8 million contracts in the broadband and mobile product sectors. 1&1 can use one of the largest fibre optic networks in Germany operated by its affiliate 1&1 Versatel GmbH, Düsseldorf (hereinafter: "1&1 Versatel GmbH"), a member of the United Internet AG Group. As a virtual mobile network operator, 1&1 has guaranteed access to as much as 30 percent of the capacity of Telefónica's mobile network in Germany (so-called Mobile Bitstream Access Mobile Virtual Network Operator = MBA MVNO). In addition, 1&1 utilises capacities in Vodafone's mobile network.

1&1's Access segment offers internet access products based in landline broadband and mobile networks. In the segment 1&1 Mobile Network, 1&1 is currently constructing Europe's first fully virtualised mobile network employing the innovative OpenRAN technology and using the 5G mobile frequency blocks procured during the auction in 2019.

The new mobile network began operating on 28 December 2022. Initially, the OpenRAN mobile network will be operated exclusively for a landline network substitute product that replaces conventional DSL, cable internet or fibre optic home lines. Mobile services will be activated as scheduled in summer 2023.

Course of business

Development in the Access segment

The Group's chargeable mobile access and broadband access products, including the related applications (such as home networks, online storage, telephony, smart home or IPTV), are grouped together in the Access segment.

1&1 operates solely and exclusively in Germany. The Company uses the landline network of the affiliate 1&1 Versatel GmbH, a member company of United Internet AG Group, and its access right to the Telefónica network; in addition, it purchases standardised network services from various wholesalers. Pursuant to the agreement with 1&1 Versatel securing access to the broadband household lines of Deutsche Telekom, 1&1 can integrate Deutsche Telekom's fibre optic lines into its products and participates in Deutsche Telekom's growth plans. Access to the networks is enhanced by offerings of devices, own developments of applications and services that set the Company apart from its competitors.

The Access products are marketed via (for example) the well-known brands 1&1, smartmobil.de or yourfone, which address specific target groups on the market. The 1&1 Group covers the entire range from premium rate plans with above-average service standards to low-cost rate plans for price-conscious customers.

In the first quarter of year 2023, 1&1 continued to invest in the acquisition of new customers and in the retention of current customer relationships.

The number of chargeable contracts in the Access segment rose by 90,000 to 15.87 million contracts in the first quarter of 2023. In the mobile internet business, it was possible to acquire 120,000 customer contracts, raising the number of contracts to 11.8 million. Broadband lines declined by 30,000 to 4.07 million contracts. Challenges remain, especially regarding broadband-based lines, where the potential inherent in the marketing of Deutsche Telekom's fibre optic and DSL lines has not yet been exploited.

Contract development in Q1 2023 (in millions)

31/03/2023 31/12/2022 Change Q1
Contracts in total 15.87 15.78 + 0.09
of which mobile internet 11.80 11.68 + 0.12
of which broadband lines 4.07 4.10 - 0.03

Customer contracts are marketed in the Access reporting segment while the 1&1 Mobile Network segment operates as an infrastructure provider, so sales revenues are generated exclusively in the Access segment. The segment reporting is aligned with the internal organisation and reporting structure.

Sales revenue in the Access segment rose by €45.1 million (4.6 percent) to €1,021.0 million (3M 2022: €975.9 million). The increase resulted entirely from higher hardware revenues while high-margin service revenues remained at the previous year's level of €788.9 million (3M 2022: €789.1 million).

Segment EBITDA increased by 3.0 percent to €201.3 million (3M 2022: €195.4 million).

3M 2023 3M 2022 Change
Sales revenue (in €m) 1,021.0 975.9 + 45.1
Service revenue (in €m) 788.9 789.1 - 0.2
EBITDA (in €m) 201.3 195.4 + 5.9

Major revenue and profit indicators in the Access segment

1&1 Mobile Network segment

The first quarter of financial year 2023 in the 1&1 Mobile Network segment continued to be dominated by the rollout of the 5G mobile network.

Along with the passive infrastructure, activities are focusing in particular on establishment of the core network, implementation of the network software and orchestration. 1&1 is fully on schedule with this work and had by 31 March 2023 already commenced operation of two of the total of four core data centres, 19 of the 24 local edge data centres and 64 of the over 500 so-called far edge data centres. This good progress is expected to continue in the coming months.

The mobile services for smartphone use are scheduled for activation in the third quarter of 2023. At this point, Telefónica will provide the national roaming coverage that this company is developing concurrently with our own efforts and that 1&1 will offer nationwide to its customers right from the start.

On the other hand, 1&1 has fallen behind original expectations with regard to the passive infrastructure. After the first interim target of 1,000 5G antennas was missed by a wide margin at the end of the previous financial year, 1&1, together with its expansion partners for the radio mast infrastructure, established a new rollout plan in March intended to drive the expansion of antenna locations.

Specifically, this envisages the provision of approximately 1,200 antenna masts by the end of 2023. Beginning in 2024, plans provide for 1&1's activation of an additional 3,000 antenna sites annually by Vantage Towers, American Towers and GfTD. Moreover, Eubanet, our fourth partner, supports us in the acquisition of new antenna sites. The target is provision of services to a quarter of German households by the end of 2025 and to half of them by the end of 2030.

While the rollout targets were missed significantly in 2022, 1&1 is now confident that the commitments made by the expansion partners will be fulfilled in accordance with the contracts and that the gap can be closed entirely.

As 1&1 has already reported, the Federal Cartel Office, at the instigation of 1&1, is currently investigating whether the almost complete failure of the expansion partner Vantage Towers in the expansion in 2022 is due to unlawful influence by Vodafone, the controlling shareholder of Vantage Towers.

As expected, the Federal Network Agency initiated fine proceedings in April 2023 due to the failure to meet the expansion obligation. In these proceedings, 1&1 has the opportunity to explain its position to the Federal Network Agency. It is not yet possible to predict whether the Federal Network Agency will impose a fine at the end of these proceedings, or if so, in what amount.

The establishment of our Company as the fourth network operator is the manifestation of our objective of driving forward the use of 5G in Germany. This aspiration led to 1&1's decision to become the first provider in Europe to rely completely on the new OpenRAN technology, and it is now rolling out Europe's most modern mobile network.

The EBITDA in the 1&1 Mobile Network segment in the amount of €-19.2 million (3M 2022: €-8.3 million) contains primarily costs related to the construction of 1&1's own mobile network. The increase in incurred expenses is due to the ongoing progress of the rollout.

Position of the Group

Earnings position

The 1&1 Group continued its unabated course of growth in the first quarter of 2023. This growth was driven above all by the contract customer business. It was possible to increase the number of chargeable contracts in comparison with the previous year by 0.6 percent to 15.87 million contracts.

Sales revenues rose in the first three months of 2023 by 4.6 percent from €975.9 million to €1,021.0 million. At €788.9 million (3M 2022: €789.1 million), service revenues are at the previous year's level despite the rising number of customer contracts. The reason for this lies in particular in the declining number of contracts for higher-priced broadband contracts.

Other revenues, which consist largely of revenues from the realisation of hardware sales (especially from investments in smartphones that are repaid by customers over the contractual minimum term in the form of higher package prices), posted growth of 24.3 percent to €232.1 million. In addition to the growing number of customer contracts and rising prices for hardware, the increase also results from shift effects of devices that were temporarily unavailable until Q1 2023. The business with hardware fluctuates seasonally, however, and is dependent on the attractiveness of new devices and the model cycles of manufacturers. Regardless, these revenue fluctuations have no significant impact on EBITDA development.

Cost of sales increased in the first three months of 2023 by €50.7 million (7.7 percent) to €712.5 million (3M 2022: €661.8 million). The cost of sales in the Access segment amounts to €686.6 million (3M 2023: €656.7 million). The increase is due above all to the higher cost of goods sold for the sold hardware. The cost of sales in the 1&1 Mobile Network business segment incurred for the construction of the mobile network amounts to €25.9 million in the first three months of 2023 (3M 2022: €5.1 million). The cost of sales of the 1&1 Mobile Network segment includes €11.1 million in write-offs that is largely attributable to the scheduled depreciation of the 5G frequencies.

The gross profit margin came to 30.2 percent (3M 2022: 32.2 percent). Gross profit declined by €5.6 million (1.8 percent) from €314.1 million to €308.5 million.

Distribution costs increased by €5.5 million to €126.2 million as a result of further intensification of advertising and marketing campaigns (3M 2022: €120.7 million). In relation to revenues, distribution costs in the first three months of 2023 amounted to 12.4 percent (3M 2022: 12.4 percent).

Administration expenses remained essentially constant over the previous year at €28.2 million (2.8 percent of sales revenue) (3M 2022: €28.4 million, 2.9 percent of sales revenue). The administration expenses in the Access segment amounts to €24.1 million (3M 2022: €24.9 million). Administration expenses in the 1&1 Mobile Network business segment amount to €4.1 million (3M 2022: €3.5 million) and largely relate to expenses for administration activities in the rollout of the 1&1 mobile network.

Other operating income of €8.0 million (3M 2022: €7.4 million) and other operating expenses of €1.9 million (3M 2022: €1.8 million) are essentially at the same level as the previous year.

Impairment losses on receivables and contract assets amounted to €26.8 million (3M 2022: €23.8 million). As of the start of 2022, payment default rates have increased significantly as a result of increased economic pressures, above all inflation-related price increases, leading to an increase in payment defaults since the second quarter of 2022.

In the first three months of 2023, the EBITDA amounted to €182.1 million (3M 2022: €187.1 million) and was 2.7 percent below the figure for the comparable period of the previous year because of the increase in expenditures for the rollout of the mobile network. The EBITDA margin came to 17.8 percent (3M 2022: 19.2 percent).

Earnings before interest and taxes (EBIT) in the first quarter of 2023 amounted to €133.4 million (3M 2022: €146.8 million). The EBIT margin came to 13.1 percent (3M 2022: 15.0 percent). Precluding the effects from PPA write-offs, the EBIT amounted to €147.7 million and the EBIT margin to 14.5 percent (3M 2022: €167.9 million and 17.2 percent, respectively).

Financing expenses in the first three months of 2023 amounted to €2.2 million (3M 2022: €1.9 million). As in the previous year, the financing expenses in financial year 2023 include expenses similar to interest incurred because of the acquisition of the 5G frequencies. 1&1 has signed an agreement with the Federal Ministry of Transport and Digital Infrastructure (BMVI) and the Federal Ministry of Finance (BMF) for payment of the costs for the acquired 5G frequencies in twelve annual instalments. In return for the deferral, 1&1 has committed to building hundreds of mobile sites in so-called "white spots", giving the investment costs a character similar to interest. The share of the total investment volume attributable to the first quarter of 2023 is €1.5 million (3M 2022: €1.6 million).

Financial income amounted to €3.6 million (3M 2022: €0.3 million) and represents as in the previous year primarily interest on the cash investment at United Internet AG.

Earnings before taxes (EBT) in the first three months of 2023 amounted to €134.8 million (3M 2022: €145.2 million). Tax expenses amounted to €40.8 million (3M 2022: €43.6 million).

Consolidated profit amounted to €94.0 million (3M 2022: €101.6 million).

Undiluted profit per share in the first quarter of 2023 came to €0.53 (3M 2022: €0.58). Precluding the effects of the PPA write-offs, the undiluted profit per share in the first quarter of 2023 amounted to €0.59 (3M 2022: €0.66).

Major revenue and profit indicators (in €m)

3M 2023 3M 2022 Change
Revenues 1,021.0 975.9 + 45.1
Service revenues 788.9 789.1 - 0.2
EBITDA 182.1 187.1 - 5.0
EBIT 133.4 146.8 - 13.4

Financial position

Cash flow from operating activities amounted to €133.2 million and declined by €4.9 million compared to the first quarter of the previous year (3M 2022: €138.1 million). At €100.0 million, net cash inflows from operating activities were above the figure of €83.9 million for the comparable period of the previous year.

In the first quarter of 2023, cash flow from investment activities increased because of the investments in the 1&1 mobile network, causing the investments in intangible and tangible assets to rise to €40.2 million (3M 2022: €21.4 million). The outflows from investment activities reported in the cash flow from shortterm monetary investments in the amount of €55.0 million (3M 2022: €56.0 million) are related to the short-term investment of free cash at United Internet AG within the framework of the current cash management agreement.

Free cash flow, defined as net inflow of funds from operating activities less investments in intangible and tangible assets plus inflow of funds from disposals of intangible and tangible assets, amounted to €59.8 million in the first three months of 2023 and was essentially at the previous year's level (3M 2022: €62.6 million).

Just as in the previous year, cash flow from financing activities related exclusively to payments for the repayment of leasing liabilities (3M 2023: €4.7 million; 3M 2022: €4.4 million).

Cash and cash equivalents as at 31 March 2023 amounted to €4.7 million (31 December 2022: €4.7 million).

Assets and liabilities

The balance sheet total increased from €7,257.1 million as at 31 December 2022 to €7,353.5 million as at 31 March 2023. On the assets side, the increase of €108.2 million was attributable to current assets; non-current assets fell by €11.8 million compared to the previous year.

As at 31 March 2023, cash and cash equivalents amount to €4.7 million (31 December 2022: €4.7 million), and trade accounts receivable amount to €270.0 million (31 December 2022: €267.8 million).

Accounts due from associated companies increased from €570.8 million as at 31 December 2022 to €624.6 million as at 31 March 2023, of which €620.0 million (31 December 2022: €565.0 million) comprises essentially accounts due from the short-term investment of free cash at United Internet AG.

Inventories at €135.1 million are higher than the year-end level (31 December 2022: €120.4 million) particularly due to increased prices for hardware (in particular smartphones). Short-term contract assets include in particular receivables from the sale of hardware and increased by €28.1 million compared to the end of the year. Short-term prepaid expenses rose from €214.0 million to €219.5 million and relate essentially to contract costs and prepaid utilisation fees that will not be recognised through expenditures until later periods. In addition, the prepaid expenses include advance payments for FTTH and VDSL wholesale procurements pursuant to the FTTH and DSL allotment agreement with Deutsche Telekom in effect since April 2021.

Other current financial assets amount to €29.1 million (31 December 2022: €25.3 million). Other non-financial assets increased slightly from €7.3 million to €7.4 million and concern primarily short-term claims for income and value-added tax.

Non-current assets of €5,390.2 million as at 31 March 2023 are slightly below the value as at 31 December 2022 (€5,401.9 million).

Tangible assets increased by €13.5 million compared to the end of the year. The additions relate in particular to investments in the 1&1 mobile network. Intangible assets declined by €16.8 million as a consequence of scheduled amortisation. While the additions to the intangible assets relate mainly to software for the operation of the mobile network, the depreciation and amortisation concern primarily the 5G frequencies and the assets determined within the scope of the purchase price allocation on the occasion of the merger of 1&1 and Drillisch. Goodwill remains unchanged at €2,932.9 million.

Long-term contract assets rose by €4.2 million to €220.8 million as at 31 March 2023. Long-term prepaid expenses fell from €396.9 million as at 31 December 2022 to €384.2 million as at 31 March 2023 and comprise basically advance payments made pursuant to long-term purchase contracts and long-term capitalised costs for fulfilling and obtaining contracts.

On the liabilities side, €94.4 million of the increase is attributable to equity and €2.0 million to debt.

Short-term debt increased from €549.7 million as at 31 December 2022 to €562.0 million as at 31 March 2023. Trade accounts payable amount to €208.0 million (31 December 2022: €229.1 million). Accounts due to associated companies declined to €75.6 million (31 December 2022: €77.9 million).

Short-term contract liabilities are unchanged and include short-term liabilities from reimbursement obligations of one-time fees for revoked contracts and deferred income from one-time fees. Short-term other financial liabilities increased by €8.7 million from €121.5 million to €130.2 million. Short-term other non-financial liabilities amount to €49.5 million and rose by €9.8 million compared to 31 December 2022 (31 December 2022: €39.7 million). Income tax liabilities amount to €45.2 million (31 December 2022: €28.8 million).

Long-term debt amounts to €1,117.3 million as at 31 March 2023 over €1,127.5 million as at 31 December 2022. At €763.9 million, long-term liabilities remain attributable to the purchase price liabilities from the auction of the 5G mobile frequencies reported under other financial obligations. Deferred tax liabilities amount to €214.1 million as at 31 March 2023 (31 December 2022: €224.1 million). Long-term contract liabilities in the amount of €7.3 million (31 December 2022: €7.3 million) include deferred long-term income from one-time fees.

Group equity rose from €5,579.8 million as at 31 December 2022 to €5,674.2 million as at 31 March 2023. The share capital remains unchanged at €194.4 million. The share capital is distributed into 176,764,649 nopar shares issued to the bearer with a proportionate share in the share capital of €1.10 each and represents the share capital of 1&1 AG. 1&1 AG continues to hold 465,000 treasury stocks, just as at 31 December 2022, so that the number of shares in circulation amounts to 176,299,649.

The change in equity is essentially due to the consolidated profit of €94.0 million. The equity ratio amounts to 77.2 percent (31 December 2022: 76.9 percent).

Risks and opportunities report

The risk and opportunity policy of 1&1 Group is oriented to the goal of maintaining and sustainably increasing the Company's value by taking advantage of opportunities and identifying and controlling risks at an early stage. The risk and opportunity management as practised ensures that 1&1 can carry out its business operations in a controlled corporate environment.

Risk and opportunity management regulates the responsible handling of uncertainties that are always associated with entrepreneurial activity.

Overall statement by the Management Board on the Group's risk and opportunity position

The assessment of the overall risk position is the result of the consolidated consideration of all significant risk fields or single risks, taking into account interdependencies.

The overall risk and opportunity position remained largely stable in the first three months of 2023 compared with the risk and opportunity reporting in the 2022 consolidated financial statements. No risks to the continued existence of 1&1 as a going concern were identifiable either from single risk positions or from the general risk situation during the reporting period or at the time this quarterly release was prepared.

By continually expanding the scope of its risk management, 1&1 counters these risks and limits them, insofar as reasonable, to a minimum by implementing specific actions.

Forecast report

1&1 sees no reason to change the growth targets forecast in the consolidated annual financial statements for 2022. The 1&1 AG Management Board expects an increase of about 2 percent in service revenues to approximately €3.23 billion for financial year 2023 as a whole (2022: €3.175 billion). Operating EBITDA is expected to be around €655 million (2022: €693.3 million). Growth in the Access segment of approximately 4 percent to about €775 million (2022: €745.7 million) and the results in the 1&1 Mobile Network segment of approximately €-120 million (2022: €-52.4 million) are the contributing factors. Operating growth in customer contracts is expected to be +500,000 in 2023 (2022: 600,000 operating growth in customer contracts). The investment volume (cash capex) is expected to be around €320 million (2022: about €250 million). At the level of the separate financial statements, the Management Board expects sales revenue for 2023 to be roughly on a par with the level of financial year 2022 and a largely unchanged result for the year, adjusted for the unscheduled depreciation.

Future-oriented statements and forecasts

This quarterly release contains future-oriented statements that are based on the current expectations, assumptions and forecasts of the 1&1 AG Management Board and the information available to the Management Board at this time. The future-oriented statements are subject to various risks and uncertainties and are based on expectations, assumptions and forecasts that may possibly prove to be false in future. 1&1 AG does not guarantee that the future-oriented statements will prove to be correct, and it neither assumes any obligation nor does it have any intention to adjust or update any future-oriented statements made in this quarterly release.

Explanatory comments on the quarterly release

Information about the Company

1&1 Group, together with 1&1 Aktiengesellschaft, Montabaur, the listed parent company (hereinafter: "1&1 AG" or, along with its subsidiaries, "1&1" or "1&1 Group"), is a telecommunications provider that operates solely and exclusively in Germany. Serving more than 15.8 million contracts, 1&1 is a leading internet specialist and is authorised to use the fibre optic network (one of Germany's largest) of its affiliate 1&1 Versatel GmbH, Düsseldorf (hereinafter: "1&1 Versatel GmbH"), which is a member of the United Internet AG corporate group. As a virtual mobile network operator, 1&1 has guaranteed access to as much as 30 percent of the capacity of Telefónica's mobile network in Germany (so-called Mobile Bitstream Access Mobile Virtual Network Operator = MBA MVNO). In addition, 1&1 utilises capacities in Vodafone's mobile network. The Group's business unit Access offers internet access products based on landline and mobile networks. They include, among others, chargeable landline and mobile access products and the related applications such as home networks, online storage, telephony, video on demand or IPTV. Moreover, 1&1 is currently preparing the rollout of its own mobile network using the 5G mobile frequencies that were acquired in the auction in 2019. 1&1 is currently building Europe's first fully virtualised mobile network based on the innovative OpenRAN technology using the 5G mobile frequency blocks procured during the auction in 2019.

The address and registered office of 1&1 AG, the parent company of the group, is Elgendorfer Strasse 57 in 56410 Montabaur, Germany. The Company is registered in the Commercial Register of the Montabaur Local Court under the number HRB 28530.

Major accounting, valuation and consolidation principles

The quarterly release from 1&1 AG as at 31 March 2023 was prepared, just as the consolidated annual financial statements as at 31 December 2022, in compliance with the International Financial Reporting Standards (IFRS) as they are to be applied in the European Union (EU).

This quarterly release does not constitute an interim report within the sense of IAS 34. The accounting and valuation principles applied in the quarterly release are exactly the same as the methods applied as at 31 December 2022 with the exception of the standards that must be applied for the first time, and the release must be read in the context of the consolidated financial statements as at 31 December 2022.

Use of assumptions and estimates

During preparation of the quarterly release, management makes discretionary decisions as well as estimates and assumptions that affect the amounts of the income, expenses, assets and liabilities disclosed on the closing date and the disclosure of contingent liabilities. The uncertainty related to these assumptions and estimates may lead to results that in future require substantial restatements in the carrying value of the relevant assets or liabilities.

Use of key financial indicators relevant to business management

Financial performance indicators such as gross profit, gross profit margin, EBITDA, EBITDA margin, EBIT, EBIT margin or free cash flow are used in the Company's annual and interim financial statements – in addition to disclosures required by the International Financial Recording Standards (IFRS) – to ensure a clear and transparent presentation of 1&1's business development. Information about the use, definition and calculation of these performance indicators is available starting on page 57 of the 1&1 AG Annual Report 2022.

The aforementioned performance indicators are adjusted for special factors / special effects to the extent necessary for a clear and transparent presentation and are reported under the designation "comparable operating performance indicators" (e. g. comparable operating EBITDA, comparable operating EBIT or comparable operating EPS). As a rule, the special effects are related solely to those effects that, because of their nature, frequency and / or scope, are capable of negatively affecting the meaningfulness of the financial performance indicators for the financial and earnings development of the group. All special effects are pointed out and explained in the relevant sections of the financial statements as part of the rollover to the unadjusted financial performance indicators.

The financial key performance figures relevant for the management of the Group are service revenues, EBITDA according to IFRS and cash capex.

Miscellaneous

All major subsidiaries are included in the consolidated interim financial statements. The group of consolidated companies has not changed compared to the consolidated financial statements as at 31 December 2022.

As in the previous year, no companies were sold in the reporting period.

The quarterly release has not been audited in accordance with Section 317 Commercial Code [Handelsgesetzbuch; HGB] or reviewed by an auditor.

22 Konzern-Zwischenabschluss zum 31. März 2023

Consolidated Financial Statements per 31 March 2023

Konzern-Zwischenabschluss zum 31. März 2023

Consolidated Comprehensive Income Statement

from 1 January to 31 March 2023

2023 2022
January - January -
March
€k		 March
€k
Sales 1,021,037 975,897
Cost of sales* -712,548 -661,833
Gross profit from revenues 308,489 314,064
Distribution costs -126,162 -120,729
Administration costs* -28,226 -28,390
Other operating income 8,006 7,381
Other operating expenses -1,876 -1,777
Impairment losses from receivables and contract assets -26,803 -23,759
Results from operating activities 133,428 146,790
Financing expenses -2,234 -1,915
Financial income 3,577 313
Profit before taxes 134,771 145,188
Tax expenses -40,799 -43,628
Consolidated profit 93,972 101,560
Profit per share (in €)
- undiluted 0.53 0.58
- diluted 0.53 0.58
Weighted average number of shares outstanding (in millions)
- undiluted 176.30 176.30
- diluted 176.30 176.61
Rollover to total consolidated profit
Consolidated profit 93,972 101,560
Other results 0 0
Total consolidated profit 93,972 101,560

* For better comparability, reclassifications were made in the administration costs and cost of sales for Q1 2022 in the 1&1 Mobile Network segment.

Consolidated Balance Sheet

per 31 March 2023

31/03/2023
€k		 31/12/2022
€k
Assets
Short-term assets
Cash and cash equivalents 4,698 4,677
Trade accounts receivable 269,996 267,820
Receivables due from associated companies 624,631 570,763
Inventories 135,142 120,385
Contract assets 667,034 638,922
Prepaid expenses 219,475 213,992
Other financial assets 29,091 25,286
Income tax assets 5,905 6,061
Other non-financial assets 7,374 7,291
1,963,346 1,855,197
Long-term assets
Other financial assets 2,364 2,268
Tangible assets 276,151 262,655
Intangible assets 1,573,738 1,590,541
Goodwill 2,932,943 2,932,943
Contract assets 220,765 216,533
Prepaid expenses 384,199 396,948
5,390,160 5,401,888
Total assets 7,353,506 7,257,085
31/03/2023
€k		 31/12/2022
€k
Liabilities and equity
Short-term liabilities
Trade accounts payable 207,965 229,137
Liabilities due to associated companies 75,625 77,927
Contract liabilities 49,418 48,298
Other provisions 4,096 4,413
Other financial liabilities 130,221 121,451
Other non-financial liabilities 49,452 39,704
Income tax liabilities 45,176 28,765
561,953 549,695
Long-term liabilities
Contract liabilities 7,255 7,297
Other provisions 38,005 38,551
Other financial liabilities 857,933 857,650
Deferred tax liabilities 214,128 224,051
1,117,321 1,127,549
Total liabilities 1,679,274 1,677,244
Equity
Share capital 194,442 194,442
Treasury stocks -512 -512
Capital reserves 2,438,359 2,437,940
Cumulative consolidated results 3,042,529 2,948,557
Other equity -586 -586
Total equity 5,674,232 5,579,841
Total liabilities and equity 7,353,506 7,257,085

Consolidated Cash Flow Statement

from 1 January to 31 March 2023

2023
January -
March
€k		 2022
January -
March
€k
Results from operating activities
Consolidated profit 93,972 101,560
Allowances for rollover of consolidated profit
to incoming and outgoing payments
Amortisation and depreciation on intangible and tangible assets 27,153 16,652
Depreciation on assets capitalised within the framework of corporate acquisitions 21,544 23,645
Personnel expenses from employee stock ownership programmes 419 647
Changes in the adjustment items for deferred tax assets -9,923 -4,422
Correction profits / losses from the sale of tangible assets 9 0
Cash flow from operating activities 133,174 138,082
Changes in assets and liabilities
Change in receivables and other assets -5,911 -1,741
Change in contract assets -32,343 -1,327
Change in inventories -14,758 1,913
Change in prepaid expenses 7,266 11,037
Change in trade accounts payable -21,171 -27,774
Change in other provisions -862 -1,535
Change in income tax liabilities 16,411 13,999
Change in other liabilities 18,247 -28,712
Change in receivables due from / liabilities due to associated companies -1,170 -19,748
Change in contract liabilities 1,078 -308
Changes in assets and liabilities, total -33,213 -54,196
Net inflow of funds from operating activities 99,961 83,886
2023
January -
March		 2022
January -
March
€k €k
Cash flow from investments
Investments in intangible and tangible assets -40,204 -21,384
Inflow of funds from disposal of intangible and tangible assets 45 84
Investments in other financial assets -93 -121
Outflow of short-term investment -55,000 -56,000
Net outflow of funds in investment sector -95,252 -77,421
Cash flow from financing sector
Repayment of leasing liabilities and rights of use -4,688 -4,387
Net outflow of funds in financing sector -4,688 -4,387
Net increase/decline in cash and cash equivalents 21 2,078
Cash and cash equivalents at beginning of fiscal year 4,677 4,555
Cash and cash equivalents at end of reporting period 4,698 6,633

Consolidated Change in Equity Statement

in Fiscal Years 2023 and 2022

Share capital Treasury stocks Capital
reserves		 Cumulative
consolidated
results		 Other
equity		 Total
equity
Denomination €k Denomination €k €k €k €k €k
Per 1 January 2022 176,764,649 194,442 465,000 -512 2,436,106 2,590,044 -879 5,219,201
Consolidated profit 101,560 101,560
Total results 101,560 101,560
Employee stock
ownership
programme		 647 647
Per 31 March 2022 176,764,649 194,442 465,000 -512 2,436,753 2,691,603 -879 5,321,407
Per 1 January 2023 176,764,649 194,442 465,000 -512 2,437,940 2,948,557 -586 5,579,841
Consolidated profit 93,972 93,972
Total results 93,972 93,972
Employee stock
ownership
programme		 419 419
Per 31 March 2023 176,764,649 194,442 465,000 -512 2,438,359 3,042,529 -586 5,674,232

Segment reporting

from 1 January to 31 March 2023

Access
€k		 1&1
Mobile
Network
€k		 Total
€k
Revenues with third parties 788,886 0 788,886
Hardware and other revenues 232,151 0 232,151
Segment revenues 1,021,037 0 1,021,037
Cost of materials for segment -677,941 -13,473 -691,414
Gross profit for segment 343,096 -13,473 329,623
Segment EBITDA 201,358 -19,233 182,125
Customer contracts (in millions) 15.87 - 15.87

from 1 January to 31 March 2022

Access
€k		 1&1
Mobile
Network
€k		 Total
€k
Revenues with third parties 789,070 0 789,070
Hardware and other revenues 186,827 0 186,827
Segment revenues 975,897 0 975,897
Cost of materials for segment* -653,459 -1,347 -654,806
Gross profit for segment 322,438 -1,347 321,091
Segment EBITDA 195,419 -8,332 187,087
Customer contracts (in millions) 15.49 - 15.49

* For better comparability, reclassifications were made in the administration costs and cost of sales for Q1 2022 in the 1&1 Mobile Network segment.

Bestätigungsvermerk 32

Other

Sonstiges

Publications, Information and Order Service

Publications, Information and Order Service

This Interim statement is also available in German.

You can view and download our business and quarterly reports, ad-hoc announcements, press releases and other publications about 1&1 AG at www.1und1.ag/investor-relations-en

Please use our online order service on our website www.1und1.ag/investor-relations-en#bestellservice

Naturally, we would also be happy to send you the desired information by post or by mail. We will be glad to help you with any personal queries by telephone.

Financial Event Calendar *

16 May 2023 Annual General Meeting, Frankfurt am Main
3 August 2023 6-Month Report 2023, Press and Analyst Conference
10 November 2023 Quarterly Statement Q3 2023

* These provisional dates are subject to change.

Contact

Our Investor Relations and Press Department will be glad to answer any questions you may have concerning 1&1 AG and the report.

Investor Relations

Elgendorfer Straße 57 D - 56410 Montabaur

Telephone: +49 (0) 61 81 / 412 200 Telefax: +49 (0) 61 81 / 412 183 E-Mail: [email protected]

Press Elgendorfer Straße 57 D - 56410 Montabaur

Telephone: +49 (0) 61 81 / 412 620 Telefax: +49 (0) 61 81 / 412 183 E-Mail: [email protected]

Legal Information

1&1 AG is a member of the United Internet Group.

Company Headquarters

Elgendorfer Straße 57 D - 56410 Montabaur

Telephone: +49 (0) 26 02 / 96 0 Telefax: +49 (0) 26 02 / 96 1010

Responsible

1&1 AG

Investor Relations-Contact

Telephone: +49 (0) 61 81 / 412 200 Telefax: +49 (0) 61 81 / 412 183 E-Mail: [email protected]

Commercial Register Entry

HRB 28530 Montabaur VAT ID No.: DE 812458592 Tax No.: 03522506037 Offenbach City Tax Office

Disclaimer

Due to calculation processes, tables and references may produce rounding differences from the mathematically exact values (monetary units, percentage statements, etc.).

This Interim Statement is available in German and English. Both versions can also be downloaded from https://www.1und1.ag/welcome - Investor Relations - Reports. In all cases of doubt, the German version shall prevail.

Future-oriented Statements

This Interim statement contains certain forward-looking statements which reflect the current views of 1&1 AG's management with regard to future events. These forward looking statements are based on our currently valid plans, estimates and expectations. The forward-looking statements made in this Interim Statement are only based on those facts valid at the time when the statements were made. Such statements are subject to certain risks and uncertainties, as well as other factors which 1&1 often cannot influence but which might cause our actual results to be materially different from any future results expressed or implied by these statements. Such risks, uncertainties and other factors are described in detail in the Risk Report section of the Annual Reports of 1&1 AG. 1&1 does not intend to revise or update any forward-looking statements set out in this Interim Statement.

Management Board

Ralph Dommermuth (CEO) Markus Huhn Alessandro Nava

Supervisory Board

Kurt Dobitsch (Chairman) Kai-Uwe Ricke (Deputy Chairman) Matthias Baldermann Dr. Claudia Borgas-Herold Vlasios Choulidis Norbert Lang

Brand portfolio of 1&1

Additional information as contact details, can be found on the homepage: www.1und1.ag/contact-us

1&1 AG Elgendorfer Straße 57 56410 Montabaur Germany

www.1und1.ag

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