WOOD Flash – Wirtualna Polska: key takeaways from the 1Q20 earnings call

We see the outcome of the call as negative. Most of Wirtualna Polska’s businesses have suffered due to the pandemic, some of them counterintuitively, like Domodi.pl, which should have benefited from the migration from offline to online channels. Wakacje.pl’s results were already weak in 1Q20 (sales down 30% yoy, EBITDA down 121% yoy) and are likely to be considerably weaker in 2Q20E: management stated that, in April-May, the subsidiary recorded negative revenues due to refunds. The media segment, which supported WPL’s overall performance in 1Q20, is also likely to suffer in 2Q20E: online advertising sales, according to management, have dropped by single digits yoy in April-May, while the TV segment should return to negative EBITDA in the quarter. On the positive side, WPL is trying to offset the negative impact of the pandemic with cost savings, which should support 2Q20E: ytd, WPL has cut its opex by 21% yoy. The company also has a good liquidity position, it generates high FCFs, and reported low leverage of 1.5x as of the end of 1Q20. Moreover, since the end of Easter, the company sees some improvement in the traffic in all of its businesses, apart from Wakacje.pl. The timing of the results rebound, even excluding Wakacje.pl, still seems uncertain.