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.