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.

Ladies and gentlemen, at this time, we will begin the question and answer session. The first question comes from the line of Chris Yonen from HSBC. Please go ahead.

Yes, good morning, everyone. Thanks for taking the time to answer my questions. A couple. First, on the lack of a full year guidance. I was hoping that we got a bit more color on how you see the year. If I'm not mistaken, business has gotten basically better over the last couple of quarters, essentially on a monthly basis. So I'm kind of curious to pick your brain as to why you decided to just focus on Q2, although that is clearly appreciated. Just some color on how you see the year. I'm aware of the uncertainties, but just to pick your brain, even if just with relation to the current state of the consensus estimates. Second question on Statista. I mean, the growth has decelerated a little bit. I'm aware that the company Q1 was super high, so that point is already taken. But I'm just curious, consensus expects 21% growth for the full year. And again, I would just, you know, want to hear your thoughts as to what do you think of that estimate and, you know, where the path of that business is going. I also didn't fully understand the The impact, you said there was a bit of a revenue backdrop in Q1 on the back of some internal changes. I didn't fully catch that, so color on Statista would be great. And then a question on the margins in the segment, so the DAS and e-comm segment. Just, again, to hear your thoughts. I mean, obviously, a big step up in margin this quarter. Is this the sort of new normal? I mean, ASAM growth was sort of exceptional, but I cannot really pinpoint this to anything, so I'm just trying to understand whether, you know, the developments here are a reflection of a more one-off-ish type development or whether this is indeed sustainable.

Thank you. Hi, Christopher. It's Christian. Yeah, full-year guidance, interesting topic. I mean, as you say, I think... In general, our business is performing very well. So even the circumstances are difficult. We've seen that in Q1, we see roughly the same development currently for the second quarter as well. And at least at the moment, we also don't see any changing momentum for the rest of the year as far as the pre-bookings and the overall order book is concerned. So I think without the last two or three years. And the experiences we've made with pandemic with inflation with suddenly a war, I think in general, I think what we see in the first half of the year would be the minimum of an annual guidance going forward. But we've been surprised in the last two or three years, constantly with external stuff that was just out of our original expectation and I think that is the only reason why for the moment we decided to on the one hand guide more quarter by quarter but give you also a general outlook what the business performance looks like for the rest of the year with without any bigger macro impact but we just want to be a little bit more cautious not because of stuff that we can control but because of all the external effects. But But in general, I think we are we are very happy with the business. And I think Kenny, Kenny mentioned it in his part. If you look at the momentum of our business in 2022, it almost got a little bit softer month by month because of the constantly growing pressure from the macro environment, which means this year, the comps from prior year becomes a little bit softer month over month. That's why I think we've lined out in our outlook statement we expect a little bit more momentum potential for the second half of the year if there are no bigger changes. But being a little bit more cautious in times where the macro environment is still unclear is the reason for not giving a very precise full year guidance. On your statistic question, yes, on the one hand, as you said, I think the consensus is around or above 20%. I guess that's not wrong. At the same time, Q1 was a little bit softer. The key reason for that is that already, I think, mid of last year, we changed a couple of our sales structures just in line with the company getting bigger and bigger. I think that meanwhile, 1,300, 1,400 employees, specific markets like the U.S. become really big, and we've historically worked with one sales structure, so one team per market approaching more or less all customers, no matter if it's a new customer, no matter if it's an existing customer. So we've changed that into a former hunter model, We've also kicked off two sales hub for large global corporates in London and the U.S. And it's always when a sales organization needs to deal with a little bit of internal optimization restructuring, you sometimes lose a little bit of momentum. And that's what we see in Q1, but nothing that is not reflected in our internal plans. And it's just a necessary step to get to the 250 million revenue or sales that we are planning for 2025, 2026. So I think it's just driven by internal aspects. But in general, we also don't see that Statista faces a lot of macro headwind at the moment. So we're very happy with the development and that's leading to to your last question as well. The margins that step up that you've seen in Q1 in general in the segment, so reflecting both profitability improvements of Statista and ASAM, that's something that is also a result of what we've been working on in the last, I would say, six to nine months on both assets. So in Statista being a bit smarter in investing into topics that are relevant for the long-term growth and at the same time regarding other around activities outside of germany and our marketing spend so maybe the step up in q1 was an an extraordinary one but in general what you will see over the coming quarters and for the four years significant margin improvement that in that segment so i think after q2 we can can be a little bit more specific on that one, what you can expect for the full year. But it's definitely not a one-time effect. It's something which is the outcome of, in general, margin improvement projects we've been working on in the last six to nine months.

I don't know if it became clear, but we feel completely comfortable with... The next question comes from Annek Maas from Societe Generale.

Please go ahead.

Annek Maas from Societe Generale.

Good morning. So my first question is also on Azam Beauty. Now, the growth has been good, but if I remember well, in Q1 2021, you had suggested that over the next years, actually up to 2026, you would multiply Azam Beauty revenues. So I guess my first question is, is that guidance still holding? Or I guess it potentially is not, and therefore you are focusing on margins. So my second question would be, Why are you now prioritizing margin growth for Azam Beauty as opposed to revenue growth? And then my second bigger question, I guess, is on the out-of-home market. Do you have an idea of how much the out-of-home market has grown net to just make a comparison in between your performance and the market actually in Q1? Thank you.

I mean, with ASAM, I think the point is clear. On the M&A side, clearly, profitability plays a much bigger role than 18 months ago. Everywhere, valuations are more based on profitability. So that's why we clearly focus on profitability because we always said when the business is around 200 million euros, what ballpark we expect for this year. Our target was always to go in the process. But by the way, the business was growing above 30%. So, I mean, luckily we could show very strong growth and with a massively improved profitability. And because the last year was also deteriorated by all these problems with China and the delivery problems, logistic problems, cost explosion, and the pre-product side, et cetera, et cetera. So we are confident that we show strong revenue growth in Amazon this year and a strong improvement of profitability. And from the data perspective, we think Q4 could be a good window to start the socialization process. But clearly there's a different appetite now. Whatever, two years ago, even 18 months ago, even with very low profitability, you got the high valuation, but this has really changed. And we need to take that into account.

And on your second question, I mean, there are no public numbers out for the net development of the market. And I think what we've given you on slide four is our net numbers and the gross numbers from the market. So our estimate for the out-of-home market in the first quarter on a net basis is around about one to one and a half percentage points of growth. Just to put that number into context, yeah, I think in gross terms, The out-of-home market is 7% plus. We think that converts net into maybe 1.5%, max 2% based on us analyzing the market. Just as a reference, the TV market in gross numbers is down 10%. If you look at Nielsen, I think what RTL has so far announced is for the pure TV spending, it's net-wise minus 17%. So I would say in the current environment, there is a gap between 5% and 7% in the gross versus the net numbers. I think for out-of-home, it's a little bit on the lower end, given that I think the discount development there is a different one than, for instance, in television.

And don't forget, I think we are actually the out-of-home market.

Yeah, yeah.

65% market share, and we have almost 100% of the digital auto form market. So then we grow 17% in digital auto form. Then you can understand how much better we are developing than our competitors. In reality, we are in a duopoly with Deco and us, and the others are really, really tiny companies in the meanwhile. So we are in reality the market.

Okay, and just on the azimuthic crystallization in Q4, so, you know, have you prepared the company? Are you talking to someone? Is that meaning in Q4 we will see a sale, or does that mean in Q4 you start getting ready and start to scan the market, I guess?

Exactly. This is second option. Okay. We are very confident that we see a very positive year. And we just got approval last week to get access to the last biggest department store chain for next year. So we already can see the high transparency of positive development for ASAM in this year and next year. And that's why we think on the back of a successful 2023 Q4 could be a good, on the macro side, everything stays like it is from today's perspective. We think Q4 could be a good window to start the process.

Okay, thank you.

The next question comes from Craig Abbott from Kepler's Row. Please go ahead.

Yes, hi, good morning, everyone. Yeah, I just wanted to come back on your optimism on how you could maybe use chat GPT to your advantage, I would say, in statistics. You went through that really quickly, and I didn't really quite understand it. If you could maybe elaborate a little bit on that. Thank you.

Okay, Craig. Well, I think if you just look maybe at it from a defensive side first, The most important point is that all, I would say 55%, maybe a little bit more of the Statista content and the data is proprietary. So we are doing the surveys and so it's behind the paywall and it's not accessible by anyone else. Secondly, there is another 30, 35% coming from other sources, from research partners that also have that content behind the paywall. So in general, what you see at the moment is that those generative AI solutions will need to work on something. And the most important point is the core product is not available for anyone else than us. That's the most important topic. And I think especially in times when generative AI can create a lot of stuff, the question, what kind of numbers are true? what is really double-checked and where can you be sure that the quality is really first-class is something that is more important than ever. So we also think that their statista is meanwhile almost the seal for really reliable data and data journalism. So that said, if we look at the two challenges in general of the business we are constantly working on, and we always thought so far we have good solutions, uh we just see that that chat gpt or any other generative ai solutions can deliver even more is two things the first one is creating smart visualization of the data that's what at the moment is predominantly done by people so data journalists that create uh the diagrams and everything, distill the data in a way, package it, visualize it in a way that you can easily consume it and get the inside out of the data as smart as possible. That's one aspect. So we need a lot of people for that. And on the other hand, for the growing database, you need more and more know-how on the customer side because they are looking for something specifically, specifically in the database and need to get there. And that requires time. So, solutions like the ones from ChatGPT have been a fast track for both things. So a lot of the work that is currently manually done by data journalists will be sooner or later be also possible to handle it via, for instance, ChatGPT. We've been already testing it, and I think the latest beta version that is out there in the market can already read and create data um visualize data and secondly if you are a user the kind of of the result that you want to get out of the database is accessible by far faster so you need you don't need to go through the different sections to find the right data you simply ask the system is doing the work for you and giving you the answer that's why we think those two aspects can be real accelerators for both consumption but potentially also profitability of the product.

Okay, that's very interesting, very helpful. Thank you. My second and final question is just more general. You gave us, in response to an earlier question, your general thoughts on the underlying business development based on today's knowledge the rest of the year in terms of revenues and earnings. But also from a free cash flow perspective, Henning, you talked us through some of the effects in Q1. Thank you for that. Just in general, your directional thinking on the free cash flow generation potential for the full year. Thank you.

Yeah, Craig, happy to take that one. I mean, it's basically unchanged to what we shared with you on the occasion of our prelim publication. I think, you know, first of all, in the first quarter, you see we have a good operating cash flow, maybe a bit exaggerated by a shift in working capital. We also talked about that we will have lower capex this year, which should compensate for higher tax expenses. So, in general, I think we're set for improvement in free cash flow vis-à-vis W22. So, that is unchanged.

Okay. Thank you very much. Okay. Thanks.

The next question comes from Julian Roth from Barclays. Please go ahead.

Yes, good morning, everybody. Second question of AI, which is the topic of the day, of the week, of the month. So very clear answer on Statista. But on Dialog, if you see the stock performance of teleperformance, which has been very poor, it seems that the market has a negative view of the impact of generative AI on call centers. So can you give us your view on why the market is right or the market is wrong? That's the first question. Second question, you gave us a timing for ASAM where you're going to start to look for selling it in Q4. An update on Statista. And then the third question is the gap between net outdoor growth and net TV growth is widening. So you're outperforming TV more and more. Any pointers on why that is? Thank you.

Let me take the last question. If you look at the pandemic, actually the pandemic, disrupted the structural development. So there was also a high on TV and really also a low in outdoor in times of lockdowns. But now actually the market is catching up to what we see since years and what we always said. There's a structural decline because eyeballs are actually going away from print and free-to-air TV. And this is a bit later, always reflected in the turnover, because the market is a little bit tied up in deals between agencies and the media companies, especially the big TV companies. So for a long time, this can overcompensate the structural media usage changes. But sooner or later, this will take place. And this is exactly what you see now. And we expect it also to accelerate in the upcoming quarters. I mean, in general, you see that they outperformed the TV by 13%, the overall market by 8%. And don't forget the situation, what we have now with minus 5% for the overall market, So since I'm in the business, and this is now 30 years, it only happened once in 2008. So in 30 years, this is the second time that the market is going down by 5%. So we are in an extraordinary situation. And we are quite happy, I have to say, that everything what we predicted before, that we see this structural growth, that we see that digital out-of-form and out-of-form is constantly growing now with 8.6% of the market. So when I started the business, the market share of out-of-form was 2.7% in Germany. So it's constantly growing. And we said a couple of times, we believe that the market share of out-of-form will become clearly double-digit and beyond that in Germany and also in Europe and worldwide. And this is clearly driven right now, 17%. Let's not forget digital out of home is the fastest media segment globally right now. Nothing is growing faster than digital out of home. And these are the reasons why we've got widening. As more digital inventory we have, as stronger we can outperform the market, and as more, let's say, the eyeballs are moving away from print and TV, as more difficult it becomes. And this is clearly a generation issue because the older people are still watching TV, but younger people don't watch TV anymore. And this is now, let's say, a long-term, really structural development. But for the next 10 years, we will see a very, very similar situation.

On your first question, Julian, I mean, I cannot comment on teleperformance or anything like that. But I mean, we're somehow expecting the questions or a couple of numbers when you just look at our dialogue business. I mean, we are not a global BPO company. We focus only on Germany and German language. And we have a special setup that we do not only offer services via contact centers, but also field sales and have all kinds of direct consumer contact opportunities in our portfolio. So that said, currently 60% of the segment of the dialogue sub-segment come from direct sales, so door-to-door sales, 40% from contact centers, roughly, and 84, 85% of the contact center business It's either sales, outbound, inbound sales, or cross and upselling stuff. So where you have maybe sometimes, and that's the most complex point, a service request from a customer, and you convert that into cross and upselling opportunities. And roughly only 15% of the call center business, so 15 out of the 40 of the segment, roughly 6%, 7% of our dialogue business are pure service. So if you look into that, and I think that is the area where with standardized requests on customer care, customer service, I think that's the area that could be attacked the easiest by artificial intelligence solutions. So that said, I think We only have voice topics there. We don't do any messaging text solutions. That's where I would say, again, that's the area where AI might get in first. That's what you see with ChatGPT. Texting works almost perfectly. Voice is already a more complex and difficult thing, especially, I would say, for a German language, if it's not English. Just to put it into a context, I think we have... Nothing that I would see over the next one, two, three years that is critical. And if I look at the total market in Germany, only 30% to 35% of the customer service is really outsourced. So I think it can be also a trigger for a couple of customers because of that new situation that, part of what they do in-house gets handled by AI and parts of what AI cannot do is maybe outsourced as well. That's why I would say in general, yes, it's clearly as many other business sectors is something where you need to have an eye on. It's definitely something where artificial intelligence might help. It already helps today because we are working with with support systems especially on the sales side with with ai solutions that is just listening to the calls and then proposing different products giving keywords the agents should use which might be supportive to actually cross and upsell something in the context of what ai understands that's why i would say mid to long term it's something you need to have an eye on in our situation Short term, I don't think that there is any bigger impact just because of the structure of our business.

And last one on Statista timing?

Well, I think that it's not really changed. We always said we think we want to take the company to around 200, 250 million revenue first and also work profitability topics. that come in line with a couple of scale effects throughout the growth. And I think we'll get to roughly such a revenue base, I don't know, around 25. And I think unless the business is on that level, it also doesn't make sense to think about a potential disposal. So I think maybe it's worthwhile talking about it in two years' time. That said, you never know. what happens if valuations would get crazy again. I think it would be always worth looking at it, but I think for the moment, it's nothing where we have any hurry. We do our homework. We love to see that the business is performing very well. We love to see, as I think Q1 indicates, that the margins will now increase step by step so that people will not only see a nicely growing business, a quite unique business, they will also see what the margin potential will look like over time. So, yeah, and then we'll take it to a level where we think it's worthwhile talking about value crystallization.

Okay, very clear. Thank you.

The next question comes from Nitzler Neisser from Deutsche Bank. Please go ahead.

Great. Thank you. I have two from my end. Firstly, on digital out-of-home, Can you give us some color as to which type of customers, like which sectors are most active these days? And are you getting entirely new customers on a national basis who are previously not classic out-of-home clients? Or is the overlap quite significant? Some color there would be great. And secondly, on digital advertising, I mean, another quarter of declines. By when could we sort of expect a return to growth here? and any portfolio pruning that you think is necessary to sort of stimulate growth in that segment. And within that, perhaps some color on how T-Online in particular is performing would be great. Thank you.

Hi, Nisla. Maybe we start with the first one, digital out of home. I think we see at the moment what we've seen throughout the years, almost as Udo described. I think we we have growing volumes from existing customers and we have new clients. What we see is that especially on digital out of home, we have a lot of overlaps and more and more overlaps with TV. And we just see that pure TV focused clients start that maybe have historically combined TV with, with, uh, pre-roll advertising, YouTube and so on, now add also digital out of home and grow that. The ones that haven't done it so far start doing it. I think it's coming from all industries, but especially from the new clients come especially from fast-moving consumer goods and retail. I think the growing categories at the moment is clearly tourism. They're doing a lot, but also transport is something uh airlines that that has gone up in the last three months uh versus prior year significantly um but it's difficult to say that it's uh it's a specific industry we really see it across the board i think as out of home and especially digital out of home is growing its share in the ad market it becomes more and more a natural element for almost every advertiser and that's i would say a continuous and ongoing process but we see that the the most intense discussions that we have also around audience measurements across media tracking and so on is clearly with with fmdg clients i think they still have such a high share in their in tv and they see that they need to work on alternative solutions and they almost see that beyond global platforms it's only digital out of home that can be a reliable a partner to deliver video eyeballs on the long run, also structurally. So I think that's where in general most of the positive momentum comes from. I think on your second question on digital, in general, I would say even I think the organic digital development in Q1 is already almost flat. I think we have the reported number is a little bit lower because of the disposal we had last year on SEM that happened, I don't know, April or May. So the good news is second half of last year, we've seen double digit decline in some months and beyond that. So the business is slowly has been coming slowly back to where where it was the beginning of last year. I think there is a turning point somewhere in Q2 for the digital segment where we see different aspects. On the one hand, softer comps from last year, but at the same time, a couple of the Google updates that Henning mentioned are over now and traffic has normalized, especially across all publishers in Germany, a little bit more than in the past. We also see that demand is coming back a little bit more than what we've seen in the second half of last year. And I would say in general, that's also true for T-Online. So traffic has had a softer dip the second half of last year is coming back again we're happy with organic traffic there via search we see that bookings have stabilized throughout q1 that's why i would say including the full year guidance for the group i think the toughest comes and the most difficult situation from what we see at the moment was a little bit in the first quarter it gets better throughout q2 and versus rather softer comes in the second half of the year, I think we'll also see, again, up to mid-single digit growth, maybe even more in Q4 for the digital segment. So I would say, given the overall market environment that we see, we think we are relatively performing quite well. I think, again, because it's not for bashing any competitors, but it's the At the moment, the only local peer that has announced Q1 numbers, RTL TV spend was minus 17, I think, and the digital advertising spend they've announced was minus 8 or minus 9, I think, for Q1. So I would say the organic roughly minus zero that we have looks quite robust in that environment. So we're happy with the momentum we see there.

Very helpful. Thanks, Christian.

The last question comes from James Tate from Goldman Sachs. Please go ahead.

Hi, everyone. It's James Tate from Goldman Sachs. I've got two questions, please. I think firstly, just following up on your answer on generative AI for Statista, how much of your data is from public sources like government statistics, etc.? And then you also mentioned that you have proprietary data, including surveys. Could you give some color on what else is proprietary? And then how do you tend to protect from other large language models getting behind the paywall and training of the data that you do have? And then secondly, your guidance implies a margin compression in Q2. What's really driving that and do you expect to follow similar trends in H2? Thank you.

James, let me start with the first question. Well, I think really crawlable public available content, what you've mentioned is I think below 10%. And again, for most of the output that we deliver, it's just one element. So the full effect of of that is probably less than the share of the total, because sometimes to give someone a proper valuation of market potential, you use that data as a source, but it's only the add-on that you put on top, just to put that on the context. So As I said before, 55% is proprietary. That's really staff service that we create, and it's behind our payroll, and we decide who has access to that and how you can approach it. So it's not that easy for someone to just do something with it and steal it. And if it's outside our business regulations, and 35%, 35 to 40 come from business partners, like in the ad market from players like Nielsen or also GFK, for instance, where we have a deal and the data is they get backlinks. If clients look for more detailed and specific information, information that they would get from a specialist, like, for instance, Nielsen, while for sending them those backlinks, we get the access to the data for free or for a specific amount of money. And again, I think that kind of generative AI can only work with data they have access to. So I would say the fully fledged database is available to only us or our customers. and our customers in the way we allow them to access. And secondly, I think the, yeah, it's not the pure data. You also need to mix and match the data from different sources to get the kind of full reliable picture that we deliver. And that's why at the moment we are testing it already with APIs and see what you can do with the system But we also see the difference if you're looking for really specific and reliable information, if you do that on the basis of our database versus what creates the system, if it's just crawling free content in the Internet, that's massive. And I think ultimately in the B2B context, people look not just for, I don't know, the

I think Tristan set out. Let's see if he's coming back. Or is the question answered for you?

Yeah, that's helpful. I'm just on the margin heading into the second half in Q2.

Yeah, maybe Udo, I take that. What you described, I mean, is correct. We more or less believe that in a relative sense, we can achieve the same development as we've seen it in Q1. And I think it's quite strong that we were able to cover a lot of the cost increases that we see now in many lines of the P&L. So we were still able to deliver on earnings improvement, which is good. However, at the same time, clearly, this is more of a challenge in like 23 than in the normal year before. but I think there's also some opportunity in the second half once we face a lower comp situation, particularly in the fourth quarter, if you remember where we had a slight earnings decline.

Okay, thank you. Sorry, I think I was interrupted on my line.

The question was answered, but I think we were done.

Gentlemen, there are no further questions at this time. I hand back over to Udo Muller for closing comments. Please go ahead, sir.

Yes, just thank you very much for attending our call. I hope we could answer your questions, and we are happy to see you back for the Q2 results. Thank you very much, and goodbye. Goodbye, everybody.