Sto SE & Co. KGaA

Dear ladies and gentlemen, welcome to the first Hall of Figures 2020 of Troyes. At our customer's request, this conference will be recorded. As a reminder, all participants will be in a listen-only mode. After the presentation, there will be an opportunity to ask questions. If any participant has difficulties hearing the conference, please press star key followed by zero on your telephone for operator assistance. We are now handing over to Udo Müller, founder and co-CEO of Struja, who will lead you through this conference. Please go ahead, sir.

Thank you. Dear ladies and gentlemen, thank you for joining our Q2 results call today. Together with my co-CEO, Christian Schmalzel, and our CFO, Christian Beyer, we will present the financials for the first half of 2020 and our Q2 figures and give you some additional insights. Where we stand with our long-term strategy, how we evaluate the mid-term developments, and how we respond to the short-term challenges arising from COVID-19. Since the corona epidemic started in Germany, substantially at the end of week 10, roughly 60% of the first half of the year were suffering from the pandemic development. And the crisis is definitely not over, and no one can really predict the overall economic impact and when or if a vaccine will really bring us completely back to the old normal. But we can focus on the areas that we can influence and concentrate operational excellence as in the past. And that's what we did in the last weeks and months. Let me start with our results of the first half of 2020 and the reassurance around our long-term strategy. Kirsten Schmeitzel will give you insights on how we managed Shoya's second quarter during the crisis and what is now emerging for the third quarter, at least on the basis of the current visibility. And Kirsten Bayer will talk to you then through the details of our financial performance in Q2 and will have some brief comments on our sustainability report, which we have recently published. The results of the first six months of 2020 are a perfect proof point that our out-of-home strategy performs in both, in normal but also in rough conditions. Content-based businesses like T-Online, our DAS statistics platform Statista, as well as our direct businesses ASAM and contact centers performed comparably strong. However, the lockdown weeks and the quasi-shutdown of public life took its share from our business performance. especially at out-of-home and public video in the second quarter, despite the expected slight improvement and easing of the pandemic impact end of May and throughout June. The reported revenues in the first half of 2020 for the group stand at €632 million, down 15% compared to the prior year period. Organic revenue was at a comparable level of minus 14%. The adjusted EBITDA declined by 27% to €185 million. Our adjusted EBIT was down from €117 million to €39 million, mainly due to the basically unchanged IFRS 16 effects. When compared to the prior year period, adjusted net income fell by 74%, from €86 to €22 million, however performed better in absolute terms than adjusted EBIT. Operating cash flow in the first six months was extremely solid with 153 million euros. Also in the height of the pandemic, we continue to invest in our core strategic field, especially digitalization. Consequently, net investments of around 64 million euros are still in line with our initial plans. Despite the overall numbers for the first half of the year, the really interesting part is, after our strong Q1, the Q2 development during the peak of the COVID-19 crisis in Germany. Let's maybe start with our expectations three months ago when we published our Q1 numbers mid of May. At that time, we'd just been in the middle of the COVID-19 storm and we saw three benefits of strategic positioning. First of all, our focus on one country, which allows even tighter management and control of operations, especially in such a crisis situation, especially Germany with the help system, as well as the government support for the economy, proved to be very resilient compared to many other countries. Secondly, our so-called class businesses, generating over 100 million cash an year, were as robust as expected. When high-touch business got over-proportionately under pressure, our digital businesses and big parts of our direct marketing businesses held up well and were and are an important stabilizing factor for the total group. And thirdly, our flexible and semi-flexible cost structure gave us a lot of areas to generate cost savings immediately without damaging any of our long-term growth initiatives. to make sure that we are in a strong position once we see sign of market recovery. Even if visibility was really low in that situation, we have been providing a detailed guidance per segment and key businesses, units and we are as close as possible to our customers. Looking at the results of Q2 now, we finished at a group level roughly 8 points better than we had expected mid of May, as the market recovery started a bit earlier than expected. The OOH meter segment, with the longest lead time for new bookings, finished at around index 50 versus previous year, pretty much where we had expected to be. Also, Germany performed clearly better than Poland and the European blow-up business, especially local sales were back at an almost normal level during June, and we see a constant order book stabilization week over week. July and August were currently roughly 15 to 20% better than June and Q2. The digital autoform and content segment showed, as expected, quite a mixed picture, but was overall 8 points stronger than we had forecasted. Public video with index 40 versus prior year was better than the expected index of 25 due to positive developments in June. Statista, as well as our publishing business, were also better than expected and grew mid-single-digit in the challenging second quarter. The less profitable third-party online ad sales business was slightly below expectations. Also especially, the programmatic part was strong in Q2, and the sales of 2.0 networks to Bertelsmann end of Q1 was another good step to focus even more on our core businesses. July and August currently show an ongoing recovery and the total segment is another 15 to 25 points better than Q2. In direct media, we also used the crisis to further optimize our portfolio and sold products for more than 3 million euros. The last commercial asset, apart from other beauty, which got almost a push through the crisis and grew beyond 20% in Q2. Our call center business was robust as expected, and Ranger, our door-to-door business, was suffering by far less than we had feared. Also, there has been a complete safe stop for nine weeks. We have been back on weekly pre-COVID-19 performance already end of June. So overall, direct media and Q2 were 30 parts better than what we had guided, and in July and August, the segment is already back on a mid-single-digit growth. growth level overall. An important driver for this development and also crucial for our core all-of-home business is the fact that public life and mass mobility in Germany is recovering already since May. The closing of schools and kindergartens mid-March, as well as the nationwide restriction of public life beginning in the second half of March, led to a sharp decline of outdoor traffic. The low point was between week 12 and 15. so the first half of April, looking at Apple's mobility report, or also comparable data from Telcos or Google. But with the reopening of shops and restaurants from May onwards, of course, in combination with the obligation to wear masks, the mobility of people were increasing week over week, and public life came back again. So from the end of June, overall mobility got closely back to pre-COVID levels, public transports, still a bit behind, but also with a constantly positive trend. The overall recovery was supported by the beginning of the holiday season, and most of the people rather spending their time at home or at domestic holiday locations. Work from home was reduced in most of the larger corporates, which often started with roughly 50% office presence from July onwards for office jobs again. It's worth my mentioning that according to the consensus data of the German Department of Transport, 21% of the overall mobility is caused by people commuting from and to work. Roughly 40% of the working population have an office job in Germany. 60% have not. We sometimes forget about the fact that still 25% work in industrial production, more than 5.5 million people work in the health system, or that they have roughly 6 million craftsmen. only 4 out of 10 people can theoretically work from home. And even at the peak of the crisis, maximum 50% of the office workers stay at home or work from home, according to a recent study from the University of Mannheim. So even if all office workers would do 50% work from home, as in the peak of the crisis, it would only lead to roughly 4% traffic decline. At the same time, mobility overall might not necessarily decrease, as people reallocate their commuting time in other forms of outdoor activity. So there's no doubt that COVID-19 will change partly mobility patterns and might change traffic across our different product offerings, but we don't see any substantial impact on the overall tables for our industry. As the German government responded quickly and reasonably to the COVID-19 challenges, as our health system proved to be really robust in the peak weeks of the epidemic development, And as the government's support for the economy, including the instrument of short-term work, was really strong and fast, the drop of mass mobility was less sharp than in countries with a harder lockdown. Furthermore, the recovery started earlier and had overall more momentum in comparison to the US or UK. The federal and decentralized structure of Germany, with many mid-sized and smaller cities and only a few larger cities, clearly supported the trend. It's also easier to control the spread of the virus as well as to isolate hotspots quickly. Cities like London or New York, with a stronger importance of the public transportation system and the even more dense population structure, have a slightly bigger challenge than larger German cities as Bologna or Munich, where people live on more expanded space. The one key learning for Germany for Q2 was the out-of-home product and the underlying audience coverage has mostly recovered by the end of Q2 and will therefore don't see any bigger issues with the performance of our out-of-home for advertisers, at least as long as there is no second wave or massive new restrictions of public life. With that, let me hand over to Christian.

Thanks, Udo. And the next key question around the Q2 development is how the advertising market and especially the bookings for out-of-home responded to the crisis in general. but especially to the loss of audience as well as the beginning recovery. As we operate in exceptional times, we wanted to give you exceptional insights in our order book development at the moment. On the slide, you see the revenue development for Q2, week over week, for both traditional out-of-home products in Germany and public video. The light blue line is 2019, and the dark blue line is the cumulative revenues coming in for the second quarter 2020. The columns at the bottom show the deviation of the weekly order intakes 2020 versus 2019. Higher order entry than previous year in a week is green. Lower order entry than previous year is red. Until week 10 or mid of March, we have been in line with Q1, nicely ahead of previous year in the order book for the second quarter and full on track of a strong organic growth development. Then schools and daycare centers closed and restrictions of public life started. And first, incremental revenues stopped before the existing order book even went backwards for about four to six weeks because we had almost no incremental bookings, but many cancellations or shifts of campaigns in the peak phase of the soft lockdown in Germany. With the reopening of shops in week 19 and 20, The inflow for Q2 went back closer to previous year's level, but there was no chance to catch up the losses of the previous weeks for that quarter. And that is an important point in our traditional business, as you see on the left diagram. Both booking and cancellation times lead to a delay of at least four to six weeks in the respondents to the overall environment. And the strong share of long-term contracts with SMEs give us a robust starting point at the beginning of a quarter. Public video or digital out-of-home has shorter lead and booking times, so the product responds more directly to both lockdown and recovery, as you see on the right graphic. The negative deviations in the order book for Q2 were higher, and as one of the key backbone of the product or train stations, the low public transportation traffic in April and May made it difficult to start the recovery before June. But already from week 23-24 onwards, with more normalized public transport Waterbook was in some weeks already slightly stronger than in the same weeks of the previous year. A slightly different picture for the third quarter so far. On the one hand, you see that the weekly deviations versus previous year have never been as extreme for the second quarter, for both classic and digital out-of-home. So the overall gap that we need to fill once the quarter started is already by far smaller. On the other hand, there was lower revenue inflow than previous year until week 24 and 25. That was the time when traffic had more or less and overall normalized again. Since that and over the last six weeks, the weekly order book development for Q3 is not that far away from last year's comparable period. And we will now see what August and September will bring and if we are able to further close the gaps. Especially for digital out-of-home, we have potential until the last day of the quarter. But it's important to say we cannot decouple from the advertising market and especially the larger and regional national advertisers. No one can predict if there are not increasing COVID-19 infections again and also the consumption climate is still not really robust. But you see the constant recovery of the advertising business And as long as we are not facing a second lockdown, there are no indicators that the general recovery shouldn't continue week over week. To what level in Q3 is still difficult to predict, as we are still in the holiday season and many clients and agencies will come back in the next two weeks and work on their activities for September to Christmas. Despite cost-cutting initiatives and short-time work in our organization, we still tried to use the second quarter to push some marketing and sales initiatives for our core business. We had ongoing video group sessions, so-called open talks, with clients, agencies, and industry partners to keep all communication channels open and discuss in a positive way marketing solutions in and for the crisis to stay top of mind. We invested in keeping our sales force motivated, caught up with trainings and coaching to make sure that we are fully standby as soon as we can accelerate our work with clients again. And we have ran many charity campaigns, including a cooperation with the Department of Health on digital out-of-home to inform the population already early in the crisis, to create visibility and talk of town for out-of-home and demonstrate the benefit of our broad and near-casting mediums. Together with the German Out-of-Home Association, FAW, and the network agency Omnicom, we published a synopsis of 250 marketing mix modeling and key learnings and insights around the impact of out-of-home and especially the powerful combination with online media. In the crisis, advertisers challenged their existing media mix. And return on investment, facts-based, is more important than ever. We used exactly that topic to discuss midterm strategies with clients and where and how out of home can drive sales and football. Any crisis is also a chance to build new plans from scratch again. And as a growing challenger medium, we see midterm more opportunities than risks for us. Finally, we invested in demonstrating our total and broad portfolio to enhance the discussions around the impact of COVID-19 in a positive way. Even if the overall impact on mass mobility is lower than expected, some target groups change their mobility pattern and use, for instance, the car instead of public transport or walk specific distances or do their shopping rather once a week than several times. As we manage around 60% of all out-of-home touchpoints in Germany, from the small screen in the supermarket via traditional street furniture and screens in stations to billboards around pharmacies and columns in residential areas, There are incredibly many opportunities to reach people out of home. So the question is not if out of home makes sense. The point is how do you make best use of it as an advertiser and where the smart solutions in the COVID-19 context. We had to maneuver through the so far most challenging quarter in the history of the company and the crisis is of course not over. But when we look at the key growth drivers and KPIs of our business, we are in a robust situation while the German advertising market is slowly recovering and moving from a red to an at least yellow traffic light. The out-of-home market is highly consolidated and our huge market share puts us in a pole position in the recovery scenario. For programmatic sales, tech and data, the crisis will be an accelerator. and we are well positioned through our online and digital business in combination with digital out-of-home. The scalable local sales force is fully up to speed, and the robust long-term contracts of SMEs have helped us to get through the challenging Q2 and might be even more important to win market share from local print in the future. The plus businesses have helped to stay in positive touch with clients, even when audience of out-of-home media was down. we see the structural challenges of TV and magazine haven't become less challenging in the crisis. And most importantly, apart from four to six weeks pause, we still follow our long-term digitization strategy for our out-of-home infrastructure. Of course, with reasonable allocation of capex, Christian will share in more detail the financial numbers and our performance around cost management in Q2. So let me hand over to him to comment on the financials.

As Udo explained briefly in his opening remarks, the figures of the second quarter must be seen in light of the effects of the corona pandemic. Overall group revenue declined in Q2 2020 by 33% from 393 to 264 million euros. At a very early stage of the crisis, we looked at all cost positions and devised stringent cost reduction measures. Most notably, we reacted to reduced workload by leveraging the instrument of Kurzarbeit across many of our businesses. To not risk projects of strategic importance, we selectively eased cost reduction efforts once public life in Germany regained traction in May. As a result, adjusted EBITDA declined by minus 56% from €139 to €62 million. Exceptional items at €10.6 million and contained €4 million from the disposal of Q1 networks and Schroer products. Another €6 million results from ongoing restructuring, the comparable level to Q2 last year. With €94 million, depreciation and amortization is 4% higher than in Q2 2019 due to scope effects from IFRS 16 prior to corona. The financial result of €-8 million is €1 million higher compared to the previous year's quarter as we drew our credit line to secure liquidity in the peak of the corona crisis. The tax result of the quarter was plus €8 million compared to minus €6 million in the previous year's quarter, a technical effect resulting from the negative tax base in Q2. Adjusted net income of the quarter was minus €60 million. Our free cash flow adjusted for Q2 2020 is €18 million, a quite remarkable level in the current environment, quite close to previous year's level, and reflecting our high payment disciplines. Tax cash out was €5 million in Q2 2020 compared to €12 million in the previous year's quarter, as there were no tax prepayments for the current year. Working capital in Q2 2020 was €31 million compared to minus €12 million in the previous year's quarter. This positive development is mainly due to ongoing working capital management improvements, a lower level of receivables in line with this quarter's business development, and our high payment disciplines. The change in others is mainly attributable to less utilization of provisions in Q2 this year as compared to Q2 2019. Despite the challenges and rough conditions, we continue to invest into our growth and digitization strategy, for instance, in digital screens, software, and other intangibles, pretty much as budgeted, with a total of 30 million euros. Least liability repayments were down by approximately 10 million euros from 39 to 29 million euros because of ongoing negotiations with cities and communities. Our bank leverage ratio increased slightly from 1.8 to 1.84 in the second quarter 2020, but is far below our covenant levels. In absolute terms, financial debt fell significantly by more than 100 million euros from 672 to 565 million euros mainly because we haven't paid the dividends so far this year. As mentioned before, the financials of the second quarter were fully hit by the corona crisis. All three segments, out-of-home media, digital out-of-home and content, as well as direct media, suffered from these developments, however, to a different extent. Out-of-home media showed organic growth of minus 51%, digital out-of-home and content decreased by 22%, and direct media fell by 12%. In absolute terms, out-of-home media revenue fell from 181 to 89 million euros. This development can be explained mainly by the significant decline in national advertising, whereas regional and local sales remained relatively robust. Given this revenue drop, we imposed significant cost reduction measures across all our main cost items, including rent and lease payments, personnel costs, and maintenance expenditure. In total, we were able to reduce avatar-relevant costs by 37%. This significant reduction was achieved, although many of the negotiations with cities and communities are still ongoing, and despite keeping our sales team fully operational, as well as continuing our IT and digitization projects. As a result, gross margin and out-of-home media stayed quite stable, and the decline in avatar could be softened. Nevertheless, adjusted EBITDA decreased from 84 to 25 million euro in Q2 2020. With that, EBITDA margin stands at 28.4%, well below the level of the comparable period of 46.4%. Despite the challenging environment, we invested into the build-up of our digital screens in order to be prepared for a quick reboot of the business in the upcoming months. As mentioned before, Public video suffered significantly from Corona as there was basically no traffic in public transportation in the first weeks of the quarter. However, the plus businesses of the segment IET online and Statista performed very well. Overall revenue reported was down to 108 million Euro compared to 141 million Euro in the second quarter of the previous year. In Q2 2020, Adjusted EBITDA of digital art form and content was €33 million, with a margin of 30.5%, or 380 basis points below previous year's Q2 margin of 34.3%. Reported revenue of the direct media segment was down by minus €10 million, from €81 to €71 million, which is easy to explain. The lockdown prevented that our door-to-door sales business ranger could do its job for many weeks. which left its mark in both revenue and adjusted EBITDA. In contrast to this, ASAM, which grew double-digit and our contact centers performed strongly throughout the crisis. Adjusted EBITDA for the quarter was €8 million, down by €4 million versus prior year's quarter, and corresponded to an adjusted EBITDA margin of 11%. Before closing this section on our financial status, let me reiterate one important point. our core business development strategy remains unchanged. In the current situation, we do not only see challenges, but are confident about the future and see an opportunity to further strengthen our market position. We will therefore resolutely and as planned push ahead with the three growth drivers of our successful Art of Home Plus strategy, digitizing Art of Home, expanding and diversifying our sales and distribution forces, and bundling and leveraging our proprietary technological advantages. Where we are slightly behind our plans due to the lockdown, we will have caught up by the following fiscal year at the latest. Let me now say a few words about a topic that is very important to us, sustainability. Sustainability and environmental issues have been on everyone's agenda for a while now. With the Green Deal, for example, the European Union has planned to achieve climate neutrality in the territory of its member states within 30 years and a more effective circular economy. The profitable combination of economy and ecology is an exciting, serious, and long-term challenge, a challenge that we take. To document the importance of this topic to us, we published our first sustainability report last week, which you can download from our investor relations page. The report outlines our sustainability strategy 2030 and addresses the three key dimensions, environment, social, and governance, one by one in a subject-specific manner. We have addressed environmental issues through a variety of products and measures for many years. For example, we installed particular filters in the digital screens in bus waiting areas. As a result, the exhaust air has a much better air quality for the waiting passengers than before. Another big topic is energy efficiency, of course. By inverting the display on our roadside screens, which many of you know as dark mode, we save up to 90% on energy costs. This is only an example and certainly only the beginning. Using more sustainable materials in our billboards and screens, further improving LED energy efficiency and covering street furniture with plants are the topics on our agenda. Social topics comprise the second key sustainability dimensions. We plan to further strengthen a sustainability culture across all hierarchy levels of our organization, for example, through specialized staff development and training. We also want to raise awareness on sustainability matters among all other stakeholders and will continue to offer our advertising space pro bono, for example, to ecology groups or for other good causes, such as the search for missing children. Good governance is a third component of sustainability and a key success factor for our business. We are adapting our corporate structure to the growing size of the company so that it remains effective. Data privacy, IT security, and compliance are key topics in this dimension. Moreover, we provide comprehensive transparency on the composition of our most important governance body, our supervisory board. With the publication of our sustainability report, we have formulated our sustainability strategy 2030. The next step for us is to raise awareness for our ambitious goals, to sensitize all those involved, and to bring them on board. We will pursue our sustainability goals and implement our planned measures also in times of crisis. To measure our progress against our goals, we will define a set of key performance indicators that we will track consistently. Only in this way can we continuously improve. In order to document our progress to all stakeholders, we will report on all relevant ESG topics regularly in our sustainability report. Let me now hand over to Christian to give you some flavor on what we expect for Q3.

At the moment, it's still not possible to oversee and predict all potential developments around COVID-19 to give a reasonable guidance for the full year. for Q3 and on the basis of the current order book visibility, therefore based on July and August. We expect our group's top line development in the range of index 80 to 85 versus previous year. So an improvement of 13 to 18 points versus Q2. Let me close our presentation with a reference to our next two key dates. End of September, we will send out the invitation including our dividend proposal for our AGM, which will be held on November 4. By then, we will have also a better overview on the pre-bookings for Q4. Our Q3 quarterly statement will be on November 12, where we will give you also more detailed insights on Q4 and the expected year-end business. So thank you, everyone, and we are now happy to take your questions.

Thank you. We will now begin our question and answer session. If you have a question for our speakers, please dial 01 on your telephone keypad now to enter the queue. Once your name has been announced, you can ask a question. If you find your question is answered before it is your turn to speak, you can dial 02 to cancel your question. If you're using speaker equipment today, please lift the handset before making your selection. One moment, please, for the first question. And the first question we received is from Annick Maas, XM, BNP Paribas. Your line is now open.

Good morning. I have a few questions. The first one is on the digital out-of-home and content bit. I'm referring here to slide number five. You gave an index indication for July and August at 85 to 95 versus the prior year. I was wondering what is within that segment driving that performance? Is it public video, or is it the other bits in the segment? The second one is also, again, referring to that slide, and this time about the traditional out-of-home media business. So, again, looking at this July and August number, and referring to the lead times that you suggested that might be a bit longer in traditional out-of-home, maybe by now you should have an indication there for what September looks like, or at least to start, if you could Give us an indication there and also maybe tell us into which quarter the campaigns that have been canceled in Q2 or respectively delayed in Q2 have been put. Are they expected to come through in Q3 or more in Q4? Then in terms of working capital management, which has been rather strong in the first half, just how shall we think about it for the second half? And then just one more on the digital roadside screens. Can you tell us how many you have today? Thank you.

Okay. Hi, Annick. Maybe I'll start with the first one. So digital out-of-home and content. I mean, if you look at the results of Q2, then you see that actually Statista and the publishing business have been already quite strong. So the improvement July, August is clearly coming from public video, but also from an improving third-party online sales business. And I think the fact that – well, also the index range even for July and August, we are now – I think in the second week of August, still index 85 to 95. We see that at the moment, the picture is really changing on a daily basis. And we see that state by state, people in Germany come back from the holidays. And therefore, the question at the moment is, I think, what will be the dynamics in the next two or three weeks look like? And that's also, and I think that was another question of you, That's also true for the traditional out-of-home business. You're right, there are more lead times. But we've changed a little bit the logistics that we can, for short-time bookings, can bring campaigns live within 72 hours. So we have a couple of reservations. We have a lot of clients contacting us, and we think the next two, three, four weeks will – can make a big difference for September. So either that the momentum remains the same as in July and August, or it really accelerates. But the tricky part is we're just at the end of the holiday season. And there's still a lot of room to maneuver in both directions. And I think sometimes it just needs to trigger from one of the players in an industry and all the others are following. But in general, I would say we are We're anything but negative. We see that the recovery in June was already quite nice. We see constant improvement. We see that there is a lot of discussions around what people want to do from September to December. So as long as the health situation, I think, remains stable, we're quite positive about the development beyond August, at least on the basis of what we see today. I mean, campaign shifts were probably equally split between Q3 and 4. We tried to push clients as much into Q3 when we allowed them to shift away from the second quarter. But not everything works the way you want. So I think there is no specific effect through that shift of campaigns. of any of the two, in any of the two following quarters, I think it will just be part of the normalizing development around that.

I'm happy to take the question on working capital. Indeed, we saw a very positive development on working capital, an impact of 31 million euro in Q2. And if you compare to the previous, to the quarter in 2019, the difference is actually almost 44 million euro As I mentioned, I think there are three driving forces. One is generally a better working capital management process that we're continually working on. But then there's also two other drivers. One is in Q2 this year, the lower level of assets or the lower level of receivables that we have, which basically went down simply also because of the declining business. And the third factor was the higher payment discipline, explaining why we – you know, saw a relatively little reduction of liabilities there. So these last points, the receivables and the liabilities, I mean, this is obviously something where we will return to normality once the business picks up again. We actually believe to some extent there will be a reversal of that effect, the positive effect that we see in Q2 and in the upcoming quarters of Q3 and Q4. I think What exactly is the extent? We still need to figure out and we'll see. But you can expect that there will be a reverse effect, at least coming from these two drivers in the next two quarters.

And the number of roadside screens at June 30 is exactly 400. So not a made-up number, it's exactly 400. And I think without the corona situation, we probably would have roughly... 25 to 30 more, but that's still something that we can catch up in the remaining weeks. Because, I mean, there's an ongoing process around approvals from municipalities. You need to prepare electricity and so on for the ramp-up period. So I think on the basis of the long-term mechanics of what we are planning here, it had no real impact.

Thank you very much. Can I just ask one more? So again, referring to the slide five, you say under the outdoor segment, local sales back at normal levels since June. Can you just maybe explain a bit what that means and talk about your SME client base, how you are seeing them responding to the current environment? Thank you.

So again, if you structure our revenues in a normal situation, 20% come from really local clients that book mid- to long-term subscription models. 40% come from regional customers that have campaigns plus a couple of subscription elements. And 40% come from national advertisers. So that kind of 20% are quite solid because you have a lot of rollover revenues from previous years. And then in the peak phase of the crisis, the people just couldn't go out and really create a lot of new business. But that has already started with the beginning of June. But that said, all of the deals they make have a time over the next two to five years. So the immediate impact for the coming weeks or months is limited. So that's more a business that you build over time. The other way around, even if the crisis is tough, you have that, at least as long clients pay, you have that in your order book already, and you have the revenues. So what we see on the remaining 80%, and that's more the campaign-driven business with regional, national advertisers that normalizes, you have a couple of industries that spend by far more than that. Funny enough, it's the tourism category at the moment, which is almost counterintuitive, but yes, It's not TUI and Lufthansa that advertise at the moment, but all the domestic destinations for local tourism here in Germany are very active in the last couple of weeks. And automotive sector is quite active around e-mobility. So there are a lot of triggers. We see that FMZG companies come back since about four weeks or so. So we're the first bigger... programmatic public video campaigns from fast-moving consumer goods for summer-oriented products. It's really across the board. That's why we somehow feel it's a step-by-step recovery, and there's more followers every week. And I think the only risk that we currently see is really a completely new situation around the virus and the pandemic developments. business recovery itself really looks looks robust.

In general the SMI client base gave us a lot of more stability and that's exactly what we expected because there were a lot of questions in the beginning if you don't expect many of the SMEs to collapse and this absolutely didn't happen so also very minimal let's say, problems in collecting money, not even a million euros, so it's totally neglectable. And the decline also in the middle of the crisis was much lower than with national customers. So this strong local and regional customer base that we have gives us a much higher stability in a situation like this, you know.

Just concrete numbers on that, because I think it's an important point. In Q2, we had losses on receivables of 600k euro versus 300k euro in the previous year's quarter. So it's really minor and not that substantial, at least for the moment. We also don't see anything dramatic coming up for July, August, and September, because that's what we would see already today. And it's the same with requests for deferral of payments. I think the total volume that we had in the peak phase was 3.5 million, of which 80% have meanwhile already been paid. So the question of are the clients' liquidity okay? And do you see a lot of clients going bankrupt and nothing at all? And on the basis of more than 50,000 booking SMEs at the moment, I think that also shows that, at least for the moment, we don't see any bigger problems and risks embedded in the business.

Thank you very much.

The next question we received is from Michael Siebel, J.P. Morgan. Your line is now open.

Hi. Just one add-on on the previous comments. Given your outlook into Q3, could you talk a bit about the cost? I think outdoor was clearly helped by some delay of payments or cancellation of payments for rent. You commented on this in the past. Where are we on this? Is that also quickly following? I assume so. Therefore, if you could help us to understand some of the operational leverage now works on the way upwards, that would be very interesting. Thank you.

Yeah. Hi, Markus. Right. I mean, probably best to really talk about the out-of-home media segment because there we had the largest revenue drop. Sales went down by roughly 50% in absolute numbers by 18%. 92 million euros. If we look at EBITDA costs, we were actually able to reduce them by 37%, so 55 million euros. That's actually exactly by 37%. And if you look at the different cost components, two or three months ago, we split it down into rent and lease, personnel, maintenance, and others. I mean, obviously, the cost reduction potential there was slightly different. What we have in EBITDA costs for rent at least are mainly tied to revenues. So those we could actually take back over proportionally. So we saved more around 70% on these costs compared to the 50% in revenues. On personnel, as I mentioned before, one huge lever for us obviously was Kurzarbeit, which for the entire company allowed us to save around 20 million euros. In Q2, that amounted for the out-of-home segment to a drop in costs. They are around 20% plus. Maintenance costs, we were able to reduce by 40%, and also other costs like rents for our office buildings, travel costs, and all of that also going down by roughly 20%. So that brings the overall to these minus 37% in EBITDA costs. If you, you know, Compare that to the revenues. We basically talk about a drop rate of 60% then, or differently, that 40% of our costs could be variabilized.

But there's nothing postponed anymore. We are completely on track in paying our rent, our costs, et cetera. So everything is completely on ajour here.

Yes, and I think what's also important is, as I mentioned, as soon as we saw that mobility and frequency is picking up again, that our business is picking up again, in May that we really continued to spend on, for example, our digitization efforts, both the screens but also the processes behind that, that we fully put our sales force back into work to actually capture all opportunities there. So we made very deliberate decisions in order not to forego a potential for the future.

Okay, thanks. Yeah, and from your previous comments, you really feel that the FMEs will remain resilient also in the next couple of months, and it doesn't sound like you really expect any impact on that part of the business.

No, and don't forget there's a lot of permanent advertising here, and the decline from regional to national was one to three almost. Local business was doing three times better. in terms of decline than the national business. So I think that's what you already said in your last conference. I mean, this crisis is the biggest stress ever for the strategies and also for management teams, I think. And I think that we are really satisfied that our portfolio did extremely well. supported from the plus businesses on one hand and inside the auto businesses it's a local business it's much more difficult actually to generate the turnover because you have smaller tickets but it's much more resilient and if you look at our leverage I mean nobody asked about that up to now but leverage stands at the same number like last year I think this is a really really remarkable result

Yeah, okay, thank you.

The next question we received is from Christoph Bast, Bankhaus Lampe. Your line is now open.

Good morning, everyone. Only two questions left for me. Firstly, coming back on out-of-home costs, please. So the drop-through rate in out-of-home of more than 60% was, I think, relatively high, although you stressed in the past that you have a very flexible cost base. So can you tell us how your 15% to 20% guidance for the revenue decline in Q3, obviously for the group level, is going to translate into adjusted EBITDA? And secondly, could you just remind us what percentage of roadside screens are replacements of traditional billboards? and what percentage, let's say, additional billboards or additional locations. That's it. Thank you.

Starting with the cost-based question, and I think that was also along the lines that Markus asked about. As we see that business is recovering, we ease some of these cost reduction measures, specifically the short-term work. We've already started to ease a bit, so we believe that we will not see as high savings on that dimension there. For the, you know, all the rent and lease payments, we're still in negotiations. It remains to be seen where we go. So I would not expect that we, you know, cut back EBITDA costs by 37% in Q2, Q3, probably slightly less. But again, also, we don't expect 50% of sales decline in but rather 30%. So I think that's basically the outlook and how our take is on Q3 developments in terms of cost.

And if you look at the structure of the roadside screen locations, if you really go for that billboard format, probably more than 95% are existing locations. Just here an example also why at the moment, I think in that recovery phase, we need to balance a little bit focus on cost versus long-term sales potential. We have municipalities where the negotiations around special discounts for us in the second quarter started with it's all about price, and we're currently in a phase of the negotiation where we just switch it and say, listen, we are fine with paying the rent for Q2, but we want to have 50 approved contracts roadside screen location, and here's exactly the locations that we would like to have. So there is different ways now to just create the best value. And of course, we try to optimize costs, especially to make sure that there are sustainable benefits in there. But I think we also need to make sure that we don't forget about developing the business as well. I think if the formats roadside are larger than billboard, there can be also a couple of new formats. But in general, it's really about converting existing locations with the digital technology.

Perfect. Thank you.

And the next question we received is from Greg Abbott from Kepler. The line is now open.

Yes, good morning, everyone. A couple questions from my side, please. Just in terms of, you know, you've made clear your customers are coming back also on the national side, but I just wondered if there have been any, you know, changes in their mindset in terms of their ordering behavior. And here I'm thinking about has there been any change in terms of lengths of, you know, pre-booking, how far in advance customers are prepared to pre-book. You went into Q2. with about 50% of your then-expected out-of-home and public video sales already pre-booked. I just wondered going forward if this might structurally change. And secondly, on that front, I just wondered if there's been any change in the mindset of customers with regards to pricing. And sticking operationally, in terms of the public video network, you've shown us nicely all the traffic trends have been recovering. But what is the situation within the shopping malls? And if you could maybe just give us an update there, because it's a pretty sizable part of your asset base there. And finally, on the dividend, you mentioned AGM would be held on the 4th of November. Would we expect any decision on the dividend to be announced with the AGM invitation? Or if you could just maybe give us an update there. Thank you.

Yeah. Maybe I'll start with mindset of customers. Yes, you're right. I mean, normally the level of pre-bookings for Q4 at the beginning of August would have been higher than now. And we see that customers, especially the national ones, book rather month over month. based on two points. First one, no one knows what the situation might look like, especially in Q4. And secondly, it's also not the challenge that we are fully sold out already. So people just book later to be sure what the situation looks like. And I think that has changed. If that is in general... Long-term aspect, I don't know, I would say over the last five years, especially national customers used to book later and later. I think the digitization of our inventory is supporting that and clients want more flexibility. And in such a situation as now, yes, we expect everything coming in a little bit later, at least until the rest of the year and probably also Q1, just to be sure that you don't have to cancel stuff that you've already booked. Maybe you're out the... out of the normal booking location. Mindset on pricing. I mean, as you ask us about costs, you would assume that every advertiser will also ask his marketing team internally, what about costs? So yes, we rarely have discussions where clients at least not also talk about what about prices. We see that advertising is It's still not where it was. I can put my money anywhere, yes, but I think we've been so far quite good in defending existing bookings and being reasonable about pricing. We've been giving audience-based discounts, especially for public video, until mid of June. And from then onwards, we are really now switching to the normal rate card again. And at least for the moment, It looks like, I think as Udo said in his part, the audience is back, so the product is not really questioned again. We try to be here also quite clear around the pricing and rather try to be then flexible when it's about cancellation periods for Q4, just to give customers the confidence that if it comes to the worst, we will find together a reasonable solution Shopping malls are back on a normal level traffic-wise, and I think also the revenues develop in line with what we see for the public video product in total. So it's one part, a smaller part of the public video network, but I think it was probably the ultimate crash in April when they were simply shut down. But what we see now in the summer weeks is a lot of people were not leaving the country for holidays and stayed here. They spent more time in the shopping centers. So I think everything is there quite normal again, apart from the fact that people wear masks. Anything else is more or less normalized again.

But our total turnover is less than 0.5% in shopping centers. So it's a super small business.

On the ATM, which indeed is happening on the 4th of November, you're right. We will send out our dividend proposal along with the invitation, which will be end of September of this year.

Okay. Thank you all very much for all the questions. Thank you. Great.

The next question we received is from Patricia Paray, UBS. Your line is now open.

Hi. Good morning. I just have two from my site on CapEx. Can you remind us how much are you budgeting for 2020? And then thinking about 2021, how many more roadside screens and public video screens are you planning to add? And are you thinking about potentially shifting away from public video into more roadside? And then just to come back on public video, I don't know if you've given that number. Maybe I missed it, but what You mentioned that for digital out-of-home and content segments, you're seeing July, August at 85 to 95 index level. What is that number specifically for public video?

Okay. I can start with the last one. So I think public video at the moment is slightly better than the number of traditional out-of-homes. So we're around index 70. until mid of August. Until mid of August and as there's a lot of stuff coming really in on a daily basis, that number could still change over the next two or three weeks. So the August could be on that level or maybe even a couple of points better, even up to 10 points better. That's exactly what we mentioned at the beginning. At the moment, we see a lot of dynamics and we just want to be cautious that we are not too positive too early given that there's also a little Germany, but the product itself develops quite nicely again. And screens, you're right, we probably switch from a little bit more from indoor to outdoor screens when we look at 2021. Realistically, even if we haven't really made detailed plans for that, but I think the original plan for 2020 was to add another in total roughly 500 screens, indoor and outdoor. and we probably will get into that direction, maybe a little bit less, not because we have less roadside, but maybe that we just skip a couple of the indoor streets, and that number will be clearly higher for 2021, but we haven't decided about the final pace. It's just difficult to predict it right now. We just will see what the next two or three months will bring business-wise.

And on CapEx in terms of numbers, nothing really changed compared to what we have communicated earlier with that 6% to 7% CapEx as a percentage of turnover. I would apply that rather on last year's turnover as we want to continue to grow and invest into our future. That leads you to the $120 million corridor for this year. Currently, we stand at 64, so I think we are right on track to get somewhere into this corridor.

Okay, thank you. The next question we received is from Ms. Lanaisa from Deutsche Bank. The line is now open.

Great, thank you. My questions revolve around the SaaS business, if I may. Firstly, on statistics in Q2, the index implies that it was up 5%, and that's still a deceleration from its previous growth levels. Just wanted to understand what's impacting this, and when can we see a return to maybe the 30% type of growth that statistics have previously generated. Secondly, on us on beauty, clearly benefiting from the e-commerce sort of tailwind. How should we think of growth in Q3, and how large is this business on an annual revenue sort of contribution to Stroa. Lastly, you mentioned that Q1 was sold at the end of Q1. Could you give us the impact of financials from the sale? And connected to that, I guess, online advertising, how is the outlook for T-Online and the third-party advertising business going into Q3? Is it holding up strong? Some color there would be great. Thank you.

Okay. So... Let's start Statista. I think with a lot of companies sending people to the home office and procurement and CFOs internally just stopping any kind of expenses where possible, you could just see strong impact, very short-term oriented on Statista in April. But from the beginning, mid of May onwards, that's the overall global picture, it recovered again. So that kind of 5% growth in Q2 was a mixture of an almost normal June, no growth May and a slight shortfall in April. If you look at the global picture, over-proportionally negative impact from the U.S. exactly in the last three months. I mean, we have two offices there, and like 90% of our sales team sit in New York. That's currently quite a challenging situation. There's no one in the office anywhere in downtown Manhattan. And I think that's roughly where we are at the moment. But we think that already Q3 will be, probably on maybe two-thirds of the growth where we are normalized. And there's a fair chance that at the end of the year, we are back on the growth level where we used to be pre-COVID. But it's a little bit driven by the development in the U.S. because, I mean, we globalized the business. The U.S. is the key market. Meanwhile, it's the biggest market. And the situation there has obviously also some impact there. on new business rollout. I think the summer months are normally a little bit weaker in general because people have other things to do than shopping. So we might get close to where we've been in Q2. but maybe just seasonality-driven slightly below that. But the general development, e-commerce, very strong. Also, the historic telesales business is still surprisingly very good and still small, but more and more relevant. Retail arm is also developing nicely here in Germany, especially as all the shops are open again. So what we've seen in Q2 seems to be a sustainable trend development and we probably get to roughly 100 million revenue maybe a little bit less or a little bit more by the end of the year so it's meanwhile then a really remarkable piece of business inside our group t online and uh yeah i think they had really good q2 at the moment we don't see any reasons that q3 shouldn't be where it was in q2 so yes the whole news traffic around COVID is going a little bit backwards again, but you cannot monetize anyway all of that incremental traffic and not all advertisers want to place their ads next to infection statistics and those kind of things. But we see that the traffic of the portal is developing nicely, it's growing, and we don't see that the advertising revenues don't follow in line. That's good. Programmatic business is probably even accelerating in Q3 versus Q2. The still little bit open point is how the normal IO business develops. So that's the higher priced individual ad solutions across our portfolio, especially the third party assets. That's where advertisers, just as normal in a crisis, they're a little bit more cautious here. It has recovered already in the last six weeks. So we're probably not already where we've been before the crisis, but at least by the end of the quarter, we will be close to pre-commit levels, I guess that.

On Tube 1, with the disposal of Tube 1, we realized a profit of around 3 million euros. And that we exceptionalized. That's really part of the exceptionals, which is also a key driver why the exceptionals were a bit higher in Q2 this year than in the previous year.

Great. Thank you. We have currently no further questions. As a reminder, if you would like to ask a question, please press 01 on your telephone keypad now. And we received a question now from Patrick Wellington from Morgan Stanley. Your line is now open.

Yes, good morning, everybody. Two questions. The first one is actually on the dividend. Your business is improving. The balance sheet is fine. So what are the considerations going into the payment or not of the dividend? Why shouldn't you pay a dividend given that improving trend? And then secondly, just trying to summarize your overall trading trends, it looks to me as though obviously July and August are smaller months, but the underlying trends are good, should look at a reasonable September. So would you say that your guidance for Q3 is relatively conservative? And in that context, how close do you think you might get to sort of zero year-on-year revenue growth in Q4? Sure. Or you might want to answer this one in the context of when do you think, using your skill and judgment, best guess, when do you think the group will be back into positive organic revenue growth? Will it be Q1 or the very easy comp in Q2? What's your best feel if you had to make a guess on that? Thank you.

Yeah, thank you, Patrick. So regarding the dividends, we're going to pay dividends. That's what we already said a couple of months ago, and we're going to decide in the AGM about the amount we're going to pay, but it will be a substantial dividend because our balance sheet is strong, we have a lot of cash, and the business is doing reasonably well. Good. Much better than I expected originally. You might remember that we made a full drawdown of our credit lines at the beginning of the crisis. This was definitely not necessary. If you look back now, so we're definitely going to pay attention. And on the valuation of the guidance and the non-given guidance for Q2, Maybe just two comments.

I think first of all, if you look at how we were looking at Q2 and where we ended up and what we are guiding now for Q3, I think it's fair to say that there is a really good chance that we end up at the higher end of the corridor that we've given for Q3. That would mean that our business jumps from index 70 in Q2 to index 85 in Q3. And if you just, I don't know, I'm not as smart as you, but a linear curve would lead to index 100 in Q4. But no one really knows what the fourth quarter will actually look like. I mean, we have the flu season coming. People will be now back from the holidays. People will optimize their year-end budgets. No one can really predict this. I think that's why we cannot say anything on the fourth quarter. I think the general underlying trend is very good and probably in line with what you were describing. But for the moment, we can only really predict what is realistic for Q3. And I think the corridor is a realistic one. And if you look at the lower end, If you are more positive, I think the higher end is also doable for us.

I mean, most of the businesses don't give any guidance right now. So I think that this is also an expression of that we are really tied to the business and that we control our processes very well and we have a very strong relation to our customers. But clearly, the big unknown thing is What kind of second wave is coming? The infection numbers are picking up, that's obvious already. And this is what we're also expecting for the winter especially. On the other hand, everybody gets more used to the situation. So it's a glass ball now, really, to answer what exactly is going to happen. I think zero growth for the fourth quarter, that's too aggressive, that's not going to happen. we definitely hope that we definitely hope that in the beginning of next year we come back to organic growth territory if it's Q1 or Q2 it's definitely early it depends on what's going to happen in the winter flu season but in general I think and that's what we want to express today we are really happy with our performance and I have to say all of our teams made a tremendous job here. And if I look on the leverage, again, I'm more than pleased that on the financial side, we're in a very, very good situation. That's also the reason why we're able to pay a dividend. And I think if you look on the media sector, besides Google, Facebook, et cetera, you won't see a you won't see many companies who are able to pay a dividend this year. And I think this is also an expression of the strength of our portfolio and our strategy.

That's great. Thank you.

Thank you very much.

There are currently no further questions. As a reminder, if you would like to ask a question, please press 01 on your telephone. Keep it now.

Okay, thank you very much. Have a nice remaining summer and stay healthy.

Bye-bye. Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.