Sto SE & Co. KGaA

Dear ladies and gentlemen, thank you for joining our today's call on our Q1 2023 results. Let me start the call with a short overview of the key figures of Q1 2023 and then go straight into more strategic topics. Henning will then take over and present the financials of the first quarter in more detail before I give you a short outlook what to expect for Q2. After our presentation, we will be available for Q&A. In Q1, we deliver a very solid quarter, especially against the backdrop of a German advertising market that contracted by more than 5%. Overall, developments are fully in line with our expectations, published with the prelims in March. State growth in the mid-singled digital percentage range and a significant outperformance compared to the overall advertising market. Reported growth revenues in Q1 2023 in total were up by 6% from 385 to 410 million euros. Organic revenue growth was even higher, with 7.3% compared with reported revenue growth. Adjusted EBITDA increased by 3% from 95 million euros to 97 million euros. At the same time, dialogues as well as ASAM and SATISA contributed to the overall positive development. Our further KPIs will be discussed by Henning in the finance section later on. 6% growth for the group, 4% growth for the core out-of-form segment, and 17% growth for digital out-of-form are the expected strong numbers against the German ad market, according to Nielsen. Autoform Media outperformed the German advertising market, minus 5.4%, by around 9 percentage points, and significantly outperformed TV, minus 9.8 percentage points, by around 13%. As a consequence, we see an increasing market share of Autoform in the German advertising market, which reached an all-time high of 8.6% in March 2023. We expect this number to grow further in the upcoming years, parallel with the planned digitalization of our out-of-home infrastructure. The next chart clearly shows these developments. In the years leading up to the corona pandemic, the German out-of-home media market has grown steadily and outperformed the overall advertising market on a sustained basis. In the corona pandemic, the curfews and lockdowns hit our industry hard. However, our business picked up almost immediately after the harsh measures were eased and our digital out-of-home business, in particular, developed in a textbook V-shape. Since then, we were able to maintain a high growth pace and outperform the overall market, especially in 2022 and as described earlier, as well in the beginning of 2023. Our digital out-of-home business was the main contributor to this successful performance. We have continuously expanded the business and accelerated its build-up in 2022. Despite the aforementioned corona crisis and lockdown, we were able to increase digital out-of-home sales double digital percentage points in the period of 2019 to 2022. In the meanwhile, we are achieving for our digital auto form network a reach in the largest German cities that is on par with TV broadcasters. Our revenue growth of around 17% in the first quarter of 2023 speaks for itself. Let me talk briefly about two drivers that I believe are critical to the success of our digital auto form business. For our chromatic and the unique carbon footprint of our premium digital auto form assets. We are developing technology in close collaboration between our proprietary tech tech and best-in-class partners in the industry. As a result, the integration of proven online solutions into the world of digital auto form is one of the major unique propositions of Auto Home Plus inside the Schroer Group. As I have shown in the very beginning, TV as the largest sector of classical advertising is in a sustainable decline of audience and market share. Audiences are using other media and advertisers are facing very volatile and pressure patterns like geographical breakdowns. Public video that is granular regularly targeting can improve classical TV plans and be used on a convergent media as a convergent media channel. The complete digital auto form inventory is available via Google DV360 as of now and available in the most common demand-side platforms. Next, screen retargeting allows the combination of campaigns in digital auto form with campaigns in the mobile media world. Whilst digital auto form quickly reaches audience and makes them aware of the ad, mobile allows immediate conversion. Finally, our public video planner system allows granular planning of campaigns and audiences, and it's a great practical tool to improve daily technical executions. So our sustainable portfolio, and especially with the accelerated expansion of our digital out-of-form portfolio, we have developed Streuer into the most sustainable national media sales house, and the expansion of our digital communications infrastructure goes hand-in-hand with our sustainability strategy where we target a net zero base on an SBTI path. We have reduced the emission of greenhouse gases by using 100% green electricity in Germany. Digital out-of-home plays a very decisive role in this. Thus, digital out-of-home is by far the most energy and resource-efficient medium with 5 grams CO2 per 1,000 contacts. By contrast, other traditional advertising media have a carbon footprint of up to 10,000 grams per thousand contacts. This means that every advertiser will be able to improve their own carbon footprint by giving a higher weighting to out-of-home, especially digital out-of-home in the advertising portfolio. This is also due to structural reasons. Out-of-home is a mass medium, one channel with many recipients, so that we always have a better carbon footprint than one-to-one media usage. Going forward, we anticipate additional impetus for the structural growth of our out-of-home media as customers are attaching even greater importance to lifecycle assessments in the context of marketing and advertising strategies. Alongside traditional campaign performance indicators, such as reach and cost per thousand contacts, we expect the carbon footprint to become an increasingly significant measure for advertising customers. Consequently, we predict that advertising companies will aim to continually improve the carbon emissions. This will clearly create additional growth for Schroer's core business, auto form advertising, particularly digital auto form. Let me now hand over to Henning for his comments on our Q1 results.

Thank you and good morning everybody. As already mentioned, our group revenue developed in line with our guidance and increased by 6% from 385 to 410 million euro in Q1. Just like in previous quarters, organic growth was slightly higher compared to reported revenue growth, due to the disposal of our Turkish online marketing business SEM, which was still included in the prior year comps. As explained already, adjusted EBITDA increased by 3% from 95 to 97 million euros. Adjustments stood at minus 2.8 million euros, so some 500,000 euros lower compared with the prior year period. Accordingly, reported EBITDA came in at 94 million euros. Depreciation and amortization from the quarter increased from 71 to 76 million euro or 7% due to the accelerated ramp up of our digital portfolio over the last couple of quarters. Taking this into account, EBIT decreased by 2 million from 20 to 18 million euro. The financial result came in at minus 14 million euro. The change is due to two main effects. Firstly, a net interest expense in a narrower sense, which reflect the higher interest rate level in the past quarter compared with Q1-22. And on the other hand, in a broader sense, the effects of IRV16. Here we have an implication if we, for instance, change the parameters of an existing lease contract, where we then have to apply the now higher interest rates for the value in use calculation. This effect amounted to roughly 3 million higher interest rate expenses for the quarter. and at the same time, a reverse impact on the corresponding depreciation, which is declining by more or less the same amount. Taking the described effects into account, EBT was at €5 million compared to €14 million in the previous year's quarter, and accordingly, tax expenses are down to €1.3 million, which corresponds to a tax rate of 27.5%. All in all, reported net income stands at €3 million in Q1 2023. Adjustments to be considered in the quarter are down from 8 to 5 million euro, which leads to a net adjusted income of 9 million euro, so 10 million lower compared with Q1 2022. Moving on to the cash flow development, altogether we see a quite positive operating cash flow, despite a continued challenging business context. Thus, operating cash flow increased from 32 to 53 million euro. Let's have a short look into the different effects that contributed to this development. Cash out from working capital declined significantly from 39 to 7 million euro due to the tighter network and capital management as well as some normalization following a quite substantial outflow in Q4. Tax payments increased from 5 to 15 million, especially due to the catch-up effects in total of 7 million euro from the deferral of 22 tax payments aligned with the tax authorities and following energy crisis mitigation measures implemented by the German government last year. In addition, the position others declined to minus 8 million euro due to lower adjustments on non-cash items like changes in provisions and accruals. So all in operating cash flows stood at 53 million, as mentioned before. Following the record high investments into the accelerated expansion of our digital portfolio last year, the expansion and thus CapEx is returning to a lower normalized level. In total, we invested around 31 million euros, not only in digital out of home, but also in sustainable growth at Assam and Statista. All-in free cash flow before M&A increased significantly from minus 2 million euro in Q1 2022 to 21 million euro in Q1 2023. IRS 16 repayments declined from 42 to 36 million euro as lower office rents had to be considered as well as some phasing effects compared to Q1 2022. This led to a free cash flow adjusted of minus 15 million euro after minus 44 million euro in the prior year period. Net debt year on year was up by 93 million euro from 653 to 746 million euro in Q1 23. This increase includes returns to Ströer shareholders either via dividends or via our share buyback program of more than 117 million euro over the last 12 months. In a sequential view, the bank leverage ratio increased only slightly by eight basis points from 2.2 to 2.28 times. Let me now talk you through the performance of the individual segments, starting with out-of-home media. Out-of-home showed a strong revenue performance, especially against the backdrop of an overall challenging German media market, which was going down by minus 5.4%. And when considering the second stage of the tobacco ban, in total revenue increased by 3.5%, from 152 to 157 million euros. When taking out sales from tobacco advertising, growth even amounted to 5.6%. Main contributor for the strong revenue development was our digital out-of-home business, which continued to grow double-digit by 17% to 49 million euro, and which stands now for 31% of out-of-home revenues. EBITDA adjusted was flat with 59 million euro, as we had to compensate for higher costs as discussed before. First quarter sales of the digital and dialogue segment returned to the growth path again, and total revenue increased by 6% from 170 to 180 million euro. In digital, sales declined by 4%, reflecting the disposal of our Turkish subsidiary SEM in summer last year. Organic sales in digital were broadly flat. Against challenging comps, especially in the current online advertising environment, digital altogether had a solid start into the year from a sales perspective. At the same time, traffic on T-Online was still subdued to the high prior year base, as well as several Google Core updates impacting traffic. We expect stabilization against easy incomes going forward. On the dialogue side, the business delivered remarkable 16% growth, driven by our successful direct sales activities for telecommunication products, and thus more than compensated the sales decline in digital. Given the higher operating leverage of digital from our own assets such as T-Online, however, earnings declined by 4 million to 33 million euros. Finally, let us have a look into our data as a service and e-commerce segment with Statista and Assa. Revenue increased again with close to 24% and achieved a new Q1 record high with 88 million Euro sales. In the last couple of quarters, Statista prepared its sales organization for the next level and further optimized structures, including the implementation of Salesforce, which enables us to serve customers even more efficiently and closely. On the organizational side, Statista has also further focused a sales team with the development of a hunter and farmer structure, which will help to provide our customers with optimal support in every phase of the customer lifecycle. With this setup, we will be well prepared for further profitable growth. Against the backdrop also of quite a bit internal optimization, revenue increased by 13% from 34 to 39 million euros. With great excitement, we follow the dynamic developments in the field of generative AI and especially in its most prominent representative, ChatGPT. Here we see great opportunities and potential for our product, especially in the area of improving customer experience and usability of the platform. In addition, we see great chances for a more efficient, automated and thus cost-efficient collection and preparation of data records. Assam's revenue were up by 34% to above 49 million euros, driven by significant revenue growth across all different sales channels. As for the valuation of high-growth assets such as Assam and Statista, profitability is getting more important. We have also applied more focus on the trajectory of the bottom line. EBITDA adjusted for the segment was strongly up to more than €12 million, reaching a margin of 14% and demonstrating the profitability potential from the scaling of both assets. Let me now hand you back over to Udo for a brief outlook on what we expect for our second quarter and our financial calendar. Thank you, Henning.

Based on our current trading, as well as what we see in our order books, we expect organic revenue growth for the second quarter as well as the ABDA development to be brought in line with what we have seen in Q1. In parallel, we expect to further substantially outperform the German ad market. For the second half of the year, we should be able to benefit from easy incomes, assuming no further macro deterioration. Finally, we see our structural growth drivers unchanged on track. visualization of our auto form infrastructure, sustainably growing SME business backbone, client access via plus businesses, and value growth of non-core assets. Let me now close the presentation with looking at our financial calendar for 2023. Our AGM will take place on July 5, and the invitation, including our dividend proposal, which has to pass the final stages and the statutory committees will be published in the next days. Our H1 figures will be published on August 9th. And in November, on the 9th, we will update you on the Q3 performance. As always, further dates can be found on our financial calendar on our IR website. Thank you, everyone. We are now happy to take your questions.