Sto SE & Co. KGaA

Ladies and gentlemen, welcome to the Q1 figure 2021 conference call of Struhr SE. At our customer's request, this conference will be recorded. As a reminder, all participants will be in listen-only mode. After the presentation, there will be an opportunity to ask questions. If any participant has difficulties hearing the conference, please press Sparky followed by zero on your telephone for operator assistance. May I now hand you over to Christian Schmalze, Co-CEO, who will lead you through this conference. Please go ahead.

Dear ladies and gentlemen, thank you for joining our Q1 results call today. Together with our founder and Co-CEO Udo Müller and our CFO Christian Beyer, we will present the financials for the first quarter 2021 and give more information about the current business dynamics across all segments but especially out-of-home media during the pandemic, how our financials developed in Q1 across the various businesses and sub-segments, including an update on our ESG initiatives. And we wanted to take the opportunity to make a deeper dive into the development of ASAM and what our strategic roadmap looks like before we close the presentation with the outlook for the coming months. Since meanwhile, more than one year, we are facing the challenges of COVID-19 and Germany was the full first quarter in a hard lockdown, with all shops and restaurants closed and significant restrictions on public life. So the total advertising market, but out-of-home media specifically, were suffering. Nevertheless, our out-of-home plus strategy gives us a really robust setup for this crisis versus pure players, and all long-term strategic business drivers are fully intact. In the first quarter, we focused on a tight management of the semi-flexible out-of-home cost structure as already last year, but we tried to handle this in balance with strategic long-term targets and negotiated with all business partners in a reasonable partnership-oriented way. However, certain methods like rent adjustments are still work in progress and therefore not fully reflected and effective. We expect our out-of-home business rebounding in V-shape as soon as audience and the ad market recover after the lockdown. At the moment, a vaccination quota of around 45 to 50% of all adults in Germany in the next four to six weeks seems to be realistic. And learnings from countries like Israel and the UK show how quickly infection rates go down afterwards and consumption climate and public atmosphere improve immediately. Our non-out-of-home businesses, digital and dialogue media, as well as DARS and e-commerce, have been strong during the crisis and also in Q1. They were operating overall in normal or even better mode. We have observed in Q1 again the further trend towards more digital media in combination with a stronger focus on technology, programmatic trading, and data products. Given our leading market position in online and digital out-of-home media, we are convinced that we will gain market share in the already beginning recovery phase. Our diversified client portfolio, from local SMEs to large national key accounts and across all industries, has clearly helped to protect our top line in the first quarter. When we compare Q1 with the previous year's Q1, please keep in mind that this quarter was still pre-corona with basically no significant negative effects from the pandemic. All in all, the reported revenues of Q1 2021 for the group was 312 million Euro, down by 15% compared to the previous year's quarter. Organic revenue development was on the same level. the adjusted EBITDA decline overproportionally by 37% to 73 million euro compared to 117 million euro in Q1 2020. Our adjusted EBIT was down disproportionately compared to EBITDA from 48 to 8 million euro, mainly due to the basically unchanged DNA volume compared to Q1 2020. Accordingly, Adjusted net income was down 97% from 35 to 1 million euro. Operating cash flow for Q1 stands at 27 million euro despite the full quarter lockdown. Driven by phasing effects in our spend, capex for the quarter was 14 million euro, some 49% below previous year's quarter. In the coming quarters, we will accelerate the ramp up of our digital footprint, especially for digital road time screens. and expect a full year capex spent at least on prior year level. So overall, our Q1 revenue developed at the upper end of what we had guided and expected mid of March. In essence, only our out-of-home segment was impacted by COVID-19. There were very cautious pre-bookings for Q1 as the current lockdown already started in November last year, and many clients decided to hold back money unless they have clarity about the pandemic impact for 2021. Nevertheless, given the fact that the whole quarter was in lockdown, the impact was less sharp compared to Q2 last year, when only five weeks were impacted by massive restrictions of public life. Local sales were still growing in Q1, and we had no problems to get in touch with our SME customer base. But national sales, campaign business, and transport media were going backwards so that the total out-of-home business lost 46% revenue versus a really strong Q1 2020. A completely different picture in the two other segments. Digital and dialogue media grew 5%. The digital business was slightly weaker at Easter campaigns than expected, but especially our news portals, the online and Watson, were strong. The contact centers as well as the door-to-door business grew beyond 20%, although there were some smaller operational challenges around lockdown restrictions. Similar to the second half of last year, DARS and e-commerce, Statista and Asam continue to accelerate their growth, and revenue was organically 37% above last year's Q1. Statista slightly ahead of its historic CAGR, and Asam especially strong in sales via the own shop and digital platform. As all plus businesses consistently deliver as in pre-COVID times, The key question is how the out-of-home business will recover during the coming and hopefully final months of the pandemic. So how does the order inflow convert into monthly revenues for our out-of-home media segment since the beginning of this year? On the left side of the chart, you see monthly revenues 2021 versus 2020. January and February were clearly weak, but the two months don't count for much more than 11% of our annual business in normal time. March was already better, but we have missed large parts of the Easter campaign business due to the prolonged lockdown and the beginning third COVID wave. But with the accelerating vaccination, April was already above prior year, and we have seen more and more campaign bookings materializing for May and June. Both months will be probably 60 to 100% above 2020 comparables. But we are looking at COVID 2021 versus COVID 2020 in the second quarter. So how does the current dynamics compare with 2019 and pre-COVID levels? That's what you find on the right side of the chart. We see continuous improvement month over month since the beginning of the year. And in May and June, despite the lockdown, we are probably only 15 to 20% behind 2019. In case the lockdown ends sometime in June, vaccination dynamics increases as expected so that we get closer to herd immunity in July We should see 2019 out-of-home spending levels and beyond in the summer months again. And the plus businesses have a consistently robust outlook, also based on Q1 initiatives and achievements. Despite the lower demand for our out-of-home media, we have worked on our mid-term opportunities and added more than 100 new roadside screens in Q1 in 16 different cities. We see how COVID has accelerated the demand for digital media products in general, and we prepare our infrastructure to benefit from that trend in the recovery phase and beyond. G-Online, the largest acquisition we have made in the last eight years, had again a really strong start into the year. And it's not only COVID-driven momentum for a news publisher, it's the logical consequence of our development plan since 2015. We outperform our competition, reach more than 31 million uniques every month across desktop and mobile devices at the moment, and for the first time we are also the number one news portal in the age group under 49 years. When we moved the editorial team to our newsroom in Berlin and hired a new leadership team, we wanted to constantly improve the content offering and carefully broaden the user base of the portal. With a new finance section, the local to online portals for meanwhile 28 cities, and the health section kicking off, the positive journey is definitely not over yet. Our third-party sales acquired new mandates like What and Build, Health and Pharma, or Maya Dumont and Holiday Check, which will benefit from the tourism revival at the end of the pandemic and the beginning summer season. And we see more and more new business traction for our dialogue marketing business, coming from our key account structures for out-of-home and digital media. We just signed clients from touristic, insurance, and medical branches that will help keeping the growth pace you have seen already in Q1 for Dialog Media. Back to our total group performance. What trends do we see for the second quarter based on the Q1 achievement? Out-of-home will be, as you've already seen on the previous slide, between 40% to 50% above last year's Q2. Local business growing around 20% and national business fueled by constantly increasing campaign volumes week over week. The trend for digital and dialogue media looks like 35 to 40% growth for Q2 as we are running against softer comps. Ranger marketing couldn't operate for half of last year's Q2 and also our online business had at least some smaller challenges in the peak of the first COVID wave last year. So the relative performance is excellent And the absolute revenue development will be the consequent prosecution of what we have seen in Q1. Our clients invest in premium digital media solutions and increase their direct and dialogue media investments. Azam and Statista, DAS and eCommerce are running against tougher comps, but we expect another quarter with around or beyond 30% growth and overall a similar dynamics as in Q1. And Udo will talk in detail about Azam later in our presentation. And just to round up our soft optimism for the coming months for our core out-of-home business, we have integrated the latest advertising market forecast for out-of-home media from Nielsen. They expect continuously growing momentum quarter by quarter for the rest of the year and see both Q3 and Q4 above 2019 levels and especially Q4 with catch-up effects. Let me hand over to Christian Beyer, who will guide you through the financial details and the results of the first quarter 2021.

Thank you, Christian, and hello to everyone. Before we get into the details of the Q1 2021 figures, let's note again that we are comparing two quarters from different economic environments here. Q1 2020, before corona with basically no negative effects, versus Q1 2021, a quarter with three months of lockdown. Taking this into account, Q1 marked a solid start into the year. Revenues were down only by 15% on absolute terms from €368 to €312 million. Organic growth developed accordingly. As in the previous quarters, we continued to look at all cost positions with focus on the semi-flexible cost structure of out-of-home. This again included deploying the instrument of short-time work and renegotiating rents with landlords. Despite these efforts, adjusted EBITDA declined overproportionately compared to sales by 37% from 117 to 73 million euros. This development was driven primarily by the significant decline of our highly profitable digital out-of-home business, mainly public video, due to the lockdown effects caused by the corona pandemic. Exceptional items are minus 2.4 million euros compared to the minus 4.7 million euros in Q1 2020. This contains €1.3 million for incentive schemes for executives and €1 million for a broad variety of different smaller topics. Depreciation and amortization, including mainly the depreciation effects from IFRS 16, was €-75 million, some €6 million below the level of Q1 2020 due to declining PPA depreciation. With €-7 million, the financial result is just €1 million higher compared to Q1 2020 mainly because of IFRS 16 effects. Tax result was positive with €3 million compared to a tax expense of €5 million in Q1 2020 due to the negative profits from the pandemic. Thanks to our diversified business portfolio and our stringent cost management, we were able to meet the challenges of the quarter with a three-month lockdown and still achieve a positive adjusted net income of €1 million. Besides the traditionally weaker cash flow in the first quarter of the year, the cash flow development of Q1 2021 must be seen in light of the lockdown. All in all, free cash flow adjusted for Q1 2021 was down versus prior year from minus 4 to minus 34 million euros. The main drive for this development, of course, was the decline in earnings, which was partly mitigated by a comparably lower capex of 14 million euros in Q1 2021 compared versus 27 million euro in the prior year period. All other cash flow items, such as tax or changes in working capital, are basically on prior year's level. Please keep in mind that our cash flow development is, as usual, more back-loaded, and H2 is the crucial period for our cash flow generation. Our bank leverage ratio increased to 2.96 due to the negative effects from COVID-19. As the calculation of the leverage ratio includes the average of the last 12 months, The leverage ratio will be reduced again in the upcoming quarter as the weak Q2 2020 will be eliminated by a stronger Q2 2021. In our last presentation, we already shared with you our initial ideas for a new segmentation. The new structure should reflect the dynamics, changes, and developments of our business, especially since the introduction of Artifone Plus. Q1 2021 is now the first quarter that we report in the new segment structure. Let me briefly reiterate the changes. Out-of-home and public video are combined in one segment. This should make things easier to compare our core business with other pure-play out-of-home companies. Furthermore, the plus businesses with a focus on advertising, marketing, and sales services are grouped in digital and dialogue media. Finally, other statistics from the third segment, data as a service and e-commerce. With regrouping the segments, it is our ambition to maximize transparency and to unveil the potential of Früher and the Art of Home Plus strategy. Let us now have a closer look at the segments. The new Art of Home Media segment faced quite some challenges as the lockdown had a massive impact on the business. Due to changed commuting habits in the pandemic, we significantly reduced public transportation and consequently significantly lower audience, and with that lower number of contacts, Digital out-of-home faced a decline of 56% in sales, which was also reflected in lower adjusted EBITDA and adjusted EBITDA margins. Revenue declined from €180 million in Q1 2020 to €98 million in the reporting period and adjusted EBITDA fell to €36 million. Due to our rigid cost management, we were able to stabilize our gross margin and achieved an EBITDA margin of 37% despite the lockdown. As mentioned, Several times before, our out-of-home flat strategy is well balanced. This is particularly evident and in difficult times. Our new digital and dialogue media segment performed well in the challenging business environment caused by the pandemic. Revenues increased by around 4% from €154 million to €161 million in Q1 2021. Our online advertising and content publishing performed slightly below the strong pre-COVID period of Q1 2020. In contrast, our call centers and door-to-door business continued to grow strongly. Adjusted avatar grew from 37 to 38 million euros in Q1 2021, and adjusted avatar margin remains stable, above 23%. Asam and Statista continued their success story in the first quarter of 2021, exceeding our high expectations. In total, segment sales increased by 35% from 42 to 56 million euros. With organic sales growth of 31%, statistics once again significantly accelerated growth compared to the average of previous years. The same applies to Asam, where sales growth of 41% is well above pre-corona levels, with growth of around 80% e-commerce segment in particular contributed to Asam's success. Despite increasing investments and accelerated growth and the expansion of our international business, we were able to improve the margin from 9% to 12%. Adjusted EBITDA for the segment developed positively and increased from 4 to 7 million euros. Now, let's go even one level deeper to product groups, and let me give you an overview of which products we have clustered and which product groups we are reporting on. In the segment out-of-home media, we have a total of three product groups. First, classic out-of-home. Here, we have clustered all forms of traditional advertising, such as city light posters, bus shelters, etc. This area accounts for approximately 72% of segment sales. Second, digital out-of-home, which is made up of all digital inventory. In addition to public video, this also includes the entire digital roadside portfolio. This product group represents approximately 18% of segment sales. Third, out-of-home services. This product group includes all other Artifrom related products and services, such as management of our displays, but also printing of posters and giant posters. With around 10%, this is the smallest product group in terms of sales. In our new digital and dialogue media segment, we've split sales into two product groups. First, with a share of around 53% of sales, the digital product group, in which we have combined our content publishing activities, including our flagship portal to online, and our online advertising activities on third-party websites. Second, the dialogue product group, where we bundle our call centers and our door-to-door business ranges. This makes up some 47%. Finally, our data as a service and e-commerce segment contains statistics and other. This breakout is intended to ensure greater transparency and an easier accessibility of the value we see in these potential unicorns. As commented on The previous slide both performed very strongly in Q1 2021. With 59% of segment sales, ASAM forms the larger part of the segment. Accordingly, Statista or Data as a Service Business is 41% of segment sales. Let us now come to another important topic for us, ESG. Since our last update, we've continued to push this important issue forward. The central point in the last weeks was to determine our CO2 footprint. Together with the renowned agency Climate Partner, we've initiated a group-wide project to determine where we stand in terms of CO2 emissions. First, preliminary data shows that we are within the typical range for our industry. In parallel, we have been working on several topics to reduce our carbon footprint quickly and sustainably. For example, we have started to switch electricity procurement to green energy where possible. Another step towards reducing our emissions is the gradual conversion of our company car fleet to hybrid and e-vehicles. In addition, we successfully participated for the first time in an environmental rating, GAIA. We were also active on social matters. Many of our female colleagues actively participated in International Women's Day under the hashtag Choose to Challenge. In this way, we were able to set a sign to challenge gender bias and to promote equality. On the G, governance side, cybersecurity is a top priority. We pushed this topic and conducted cybersecurity checks in all business areas. We are pleased to see that we achieved an overall satisfactory security level, but we also identified some improvement areas, which are now being tackled by the respective business units. In addition, we have launched a comprehensive cybersecurity program to further mitigate risk. The focus of this program is to install a group-wide cybersecurity organization. This includes central governance, standardized asset and risk management, structured user management, and professional incident response management. To implement this program successfully, we are working together with cybersecurity experts at USD. Let me now hand over to Hugo, who will give you an update on ASAM.