Sto SE & Co. KGaA

Thank you for standing by. Welcome and thank you for joining the Q3 Figures 2023 of STRHR-SA. Throughout today's recorded presentation, all participants will be in listen-only mode. The presentation will be followed by the question and answer session. If you would like to ask a question, you may press star followed by one on your touch-tone telephone. Please press the star key followed by zero for operator assistance. I would now like to turn the conference over to Christian Schmalzel. Please go ahead.

Dear ladies and gentlemen, dear analysts, thank you for dialing into our today's call on our Q3 2023. results as it is common practice from previous quarters i would like to share with you highlights and developments of the just ended quarter and discuss the most important strategic topics henning will then present the financials for the third quarter and the first nine months 2023 before we give you a short outlook of what we expect for the remainder of the year afterwards we are looking forward to your questions With that, let us start the call with a short overview of the key figures for the first nine months of fiscal 2023. The economic environment has not become any easier in recent months, and Germany is technically in a small recession. But from our point of view, this is mainly affecting export-oriented companies and therefore less likely to affect massively our customers and our business. Against this environment, we were able to increase our sales by 8.2% from 1.246 billion to 1.348 billion euro in the first nine months of fiscal 2023. Organic growth was with 7.9% on a similar level. Adjusted EBITDA increased by 6% from €354 million to €375 million, only slightly underproportional when compared with the strong revenue developments due to the cost increases, especially for electricity, external service providers and labour. EBIT adjusted was up by 2% to 158 million euro despite increased DNA reflecting higher investments, i.e. in the past three years. Net income adjusted came in at 79 million euro compared with 104 million euro in the first nine months of 2022 due to higher interest rates. Operating cash flow stood at €225 million or €8 million lower compared with the prior year period affected by higher interest and tax payments, which we will discuss later in the finance section. With €98 million, CAPEX was €20 million lower compared with the first nine months 2022, reflecting a step-by-step back to normal against an accelerated ramp-up of our roadside portfolio in 2021 and 2022. Looking at the developments in the first nine months, the German advertising market declined by around 2.2% in gross, driven mainly by a TV spend that fell by 7.3% year on year. By contrast, according to Nielsen figures, which are, as I mentioned, also gross figures, out-of-home advertising increased by 8.2% in the comparative period. As a result, out-of-home share of the overall ad market rose to a new historic high of 8.7%. Our developments in the first nine months of the year in net revenues, plus 8% for the group, plus 6% for our core out-of-home segment, mark the pace, with plus 26% for digital out-of-home, we were able to accelerate the growth of H1 even a little bit further. The developments are outstanding against the German ad market and even the global digital platforms from the US are at best on par with our digital out-of-home development in the period January to September. Even if the difficult times during the pandemic jeopardized the developments of all media categories, the long-term developments show above all one. Struer, with a market share of over 60% in out-of-home advertising, is the driver of continuous growth of the category out-of-home. The out-of-home market share almost doubled from 2013 to 2023, from around 5% to 9% today. It is also relevant to mention that the Caesar movement between TV and out-of-home now opens up with tectonic shifts in the structure of the market. I think RTL Net revenue estimations for the tv market yesterday were minus 11 up to minus 12 in net for full year 2023 one of the drivers here has been our consistent and continuous expansion of our digital portfolio that accelerates these developments while competing channels are facing more and more structural headwind The flexibility, visibility, the massive reach and audience coverage, as well as the progress in programmatic out-of-home and automated sales systems are key to these developments. Digital out-of-home today and i.e. our public video product has become rather a part of the overall digital marketing ecosystem than a digital version of the old out-of-home business. We have already seen a similar chart last quarter. It once again shows the success story of digital out-of-home in the current market environment. Despite reduced advertising budgets, digital out-of-home was able to grow significantly in the first nine months of the financial year, driven by major budget shifts from other media categories to out-of-home from leading national and international customers. The examples here are just a small collection. Deutsche Telekom is increasing its advertising spending in the digital out-of-home channel by 4%, while at the same time reducing its overall budget by 3%, especially at the expense of TV, which dropped by around 10%. A very similar picture can be seen at Amazon. The trend is much more pronounced at Telefonica, which is reducing its overall advertising budget by 12% and driving up digital out-of-home advertising spent by 81% over the same period. The same at H&M, in contrast to an advertising budget being reduced by 25%, the digital out-of-home category clearly outperformed all other advertising formats with an increase of 72%. This development can be hardly overestimated, taking the 47% reduction in the TV budget into account. Considering the composition and the development of the advertising expenditures of the Peugeot vehicle manufacturer, you can say that they are real and convinced fans of digital out-of-home, plus 211% for digital out-of-home. So what is driving this development specifically? With its large audience reach of up to 75% in the largest German cities, public video can make a decisive contribution to closing the increasing performance gaps of TV campaigns and boost advertising effectiveness. Traditionally, most advertisers use TV to reach mass target groups. However, due to a high level of differentiation in target profiling and also in TV consumption and viewer behavior, The performance of a TV plan shows significance deviations in geography. As you can see on the map on the left, the lighter areas are those where the TV plan has gaps in reach and frequency, whilst the darker areas are covered well by a classical TV plan. Those areas with higher population density and higher mobility, mostly also reflected by younger target groups and higher levels of education and work status, are not reached so well by TV anymore. These areas, most likely urban, are the strength of Digital Out of Home, which is placed in high-density urban areas. That is shown on the second map in the middle that reflects reach and frequency of a Digital Out of Home campaign. Both campaigns use video as format. The map on the very right demonstrates what happens if a TV plan uses Digital Out of Home to cover its weak point even without increasing the budget. By shifting shares of the budget into Digital Out of Home, The campaign can achieve national broadcast reach amongst all targets. So what we see in the overall media mix development is the rational decision of advertisers to respond to the changed media consumption of growing parts of their target groups. Another very important effect of digital out of home is its capability to perform quickly. Most boards are seen several times a day, e.g. while commuting. A classical TV campaign needs a couple of weeks to achieve its full reach performance. By using digital out of home in addition to TV, this effect can be leveraged. Especially in the first week of a campaign, digital out of home has a significant contribution to the performance and reach of a campaign and can reinforce the effect of a campaign launch. 100% TV was a common solution 15 years ago. 80-20 between TV and public video is what we see more and more. And we are convinced that the general trend over time will lead to a constantly higher share for digital out of home. TV is losing audience. It's losing over proportionally fast in urban and more educated and higher income target group segments. digital out of home addresses specifically those audiences and is expanding its infrastructure and digital eyeballs for advertisers. With our broad portfolio across all relevant touch points of the consumer journey outdoors, we enable our customers to play out tailored high reach and efficient campaigns and ensure maximum context down to the point of sale. The mobile device has become the first and most private screen and digital out-of-home can interact as the omnipresent public screen counterpart. Ströhr's share of over 80% in digital out-of-home product categories such as digital giant formats, roadside products with its approximately 2,000 premium locations in Germany or the whole transport sector are globally unique. You can do digital out-of-home only with Ströhr, but you cannot do it without Ströhr. In our last quarterly call, I already talked about AI at Statista. In the meantime, we've worked out potentials and use cases which are very promising and demos have convinced the test audience. With the use of AI, content and data generation is simplified, standardized and accelerated. This enables us to provide our customers with more up-to-date and more precise data and to generate more use cases for our customers. thus maximizing stickiness or conversely minimizing churn. We see five topics that are critical to Statista's success. Number one, our strong global brand based on trusted and curated data that leading international companies trust every day and which is the foundation for strategic decisions of our customers. Number two, taking our productivity to the next level with our internal Statista AI. Data production is aided, accelerated, and improved by our own AI engine. Three, research AI will massively improve the user experience and access to our 250 million data aid items. It does not need highly specialized data analysis to get the best data from Statista. Research queries can be entered into Statista formulated in natural language. The answers are also provided in natural language in addition to the familiar Excel or PowerPoint formats. Four, customized solutions can be offered via AI interfaces that can be integrated seamlessly into individual customer applications. And number five. Risks associated with the use of AI, such as a loss of proprietary data or brand related risks when giving wrong answers, can be mitigated by technology, e.g. having an own LLM without data leakage, as well as by implementing automatic quality control routines. All of what I just described to you is based on our current developments. We have already successfully completed the first phase, the so-called alpha testing, and are currently in beta testing with a closed user group. The feedback we have received so far on the various KPIs, such as user satisfaction, correctness of data, are very promising, especially when considering that the current version is trained only on a fraction of Statista's data. The next crucial step will be an open beta testing At this point, we will also share the progress with you in a webinar. Christoph is already aligning dates with the team around our new CEO Marc Berg, who is already since a couple of weeks working closely with our two founders, Friedrich and Hubert, that have moved on into co-chairman roles. Let's stay in our third segment. If you look at the development of ASAM since the takeover by Streuer, this is a prime example of a real success story and we transformed ASAM Beauty into a high-performance German beauty brand with an international footprint. In the last quarter, we were able to increase sales by around 33% to a new quarterly record of over €54 million. One of the reasons is that Azam is based on what we call high performance beauty products. Azam delivers proven functional benefits, true value for money and therefore creates a very loyal user community. While more marketing focused beauty brands are facing less demand or the need for higher marketing spend to defend their market share. We are therefore seeing profitable growth in all channels in which we are active with Azam online, retail, telesales and our international business. We have also reached levels where we are seeing significant economies of scale. Having said this, we expect revenue of approximately 200 million euro for 2023 with an EBITDA adjusted margin of around 20%. For 2024, we expect further revenue growth to around 270 million euro with a further improvement in the margin. Furthermore, we continuously focus on the best performing hero products within the large portfolio to use them as a key driver for growth in the various channels. The pre-orders for 2024 are approved for this blockbuster strategy and give us confidence to perform on or beyond 2023 growth rates and margins in the coming year, as mentioned before. Accordingly, we are very confident of creating significant value for our shareholders through a divestment. We are well underway with the preparations and the necessary extensive documentation. So far on my remarks, and with that, I hand over to Henning.

Thank you, Christian, and a very good morning to everyone from my side. With the developments in the third quarter, we have seen the expected sequential acceleration in sales and earnings growth compared to the first half of this fiscal year. Revenue rose by 11% from €436 million to €484 million and adjusted EBITDA improved by around 10%, almost in line with revenue from €134 million to €147 million. This against an overall still demanding geopolitical and macro context. The German ad market, however, showed some stabilization on a low level. Organic revenue growth came in at 9% for the quarter and excludes especially sales from the opportunistic acquisition and integration of a few call center locations. Adjusted EBITDA increased by 10% to 147 million euro as just mentioned. Adjustments in the quarters stood at plus 0.3 million euro and are mainly reflecting a book gain from the sale of a smaller non-core activity as well as some exceptional costs. For the fourth quarter, we are expecting restructuring costs in the mid-single-digit million euro area for the streamlining and optimization of organizational structures in our content business, and here in particular on the tech side of T-Online. We expect these one-offs to amortize over a period of around three years. Reported EBITDA came in accordingly at 148 million euro compared to 131 million euro in Q3 2022, reflecting an increase of 13%. Depreciation and amortization for the quarter increased to 79 million Euro. Underlying DNA, excluding IFRS 16, developed more or less in line with the first half. Depreciation on IFRS 16 assets was up by around 3 million Euro, also including depreciation on assets recently recognized in the context of out-of-home contract prolongations in Poland and additional leases from the acquired call center locations. Reported EBIT in the quarter was up by 20%, from 58 to 69 million euro. The financial result came in at around minus 20 million euro, compared to minus 5 million euro in Q3 2022. The change is mainly attributable to two effects, just like in the previous quarters. Firstly, interest expenses for financing the business, which increased by around 9 million euro after 7 million euro in the second quarter. The reason being still rising rates as well as a higher level of net financial debt since our dividend payment at the beginning of Q3. In addition, we have the effects of IFRS 16. Here we have an implication if, for instance, there's a change in the parameters of an existing lease contract, where we then must apply the now higher rates on the recognized leasing debt. And at the same time, there's a reverse impact on the corresponding depreciation. IFRS 16 interest expenses, like in previous quarters, increased by roughly €4 million. Accordingly, EBT came in at €49 million compared to €52 million in the previous year's quarter, and with that showing a lower decline than the €28 million decrease we have seen in the first half. Including an expected tax rate of around 28% for the year, reported net income was €35 million for Q3 23. Adjustments to be considered in the quarter were €3 million and related mainly to slightly positive exceptionals, as mentioned, PPA-related amortizations of €4.5 million and income taxes of minus €1.6 million. With that, our net income adjusted amounted to €38 million after €46 million in Q3 2022. Let me now make some brief comments on the cash flow development. The operating cash flow in the third quarter improved slightly, mainly due to the improved EBITDA and the higher cash out for taxes in last year's Q3, following a true up of previously too low advance payments at the time. Looking at the full nine months, the operating cash flow is still slightly short of the prior year. In that context, the improved EBITDA, which is some 11 million higher than in the prior year, is more than offset by higher cash out for interest and here both effects. cash interest for our net financial debt, as well as a higher interest component for all these payments. Free cash flow before M&A improved considerably to around 50 million euro in the quarter, also supported by a strong decline in investments, which last year included the acquisition of our corporate center real estate here in Cologne. With that, also the free cash flow before M&A in the nine month period improved over the prior year. Excluding the effect of the acquisition of the headquarters, investments in the first nine months were down by around €9 million, including an increase of €7 million in Assam and Statista, and thus reflecting a more selective expansion in digital out-of-home. The free cash flow adjusted, so including the full effect of paying for leases, improved slightly to €-3.1 million in the quarter. Thereby, lease payments compared to the prior year were still impacted by phasing effects. For the first nine months, free cash flow adjusted with minus 19 million euro after minus 5 million euro in the prior year quarter. Please bear in mind that Q4 is always in absolute terms our most cash generative quarter and last year Q4 was characterized by overall tough trading conditions and a heavy decline year on year in free cash flow. For this year, and Christian will give more color on that later, we remain constructive on Q4, in particular for out-of-home, as well as for Assam and Statista. From a free cash flow point of view, we shall expect higher cash outs for interest and taxes, but at the same time lower cash outs for investments and lease liability repayments. Net debt year on year was up, as expected, by 121 million euro, from 740 to 861 million in Q3 23. This increase included returns to Ströer shareholders via our share buyback program of €50 million, as well as the dividend payment of around €103 million. Net debt sequentially, so from the end of Q2 to the end of Q3, has gone up by €107 million, including Ströer dividends of €103 million, some €2 million dividends for minorities, a slightly negative free cash flow adjusted of €-3 million, and some €3 million proceeds from disposals. The remainder comes from roughly €3 million of interest payables accrued until the end of the quarter that are recognized as net debt. With that, and as indicated in our last call, the leverage ratio has increased to around 2.5 times. And based on what I just said about Q4 last year, we expect an improvement for this year's fourth quarter. Let me now talk you through the performance of the individual segments, starting with our core segment, out-of-home media. In the first quarter, out-of-home delivered higher sales growth than in the first half of 23. Segment revenues were up by 7%, and this against the backdrop of a still sluggish German media market. The consequence is a STRÖR-induced market share gain for the entire out-of-home category to a new all-time high of 8.7% in the first nine months, or 9.4% in Q3s, respectively. When taking out sales from tobacco advertising, growth even amounted to 8% in Q3 and 7.9% in the first nine months, respectively. Main contributor for the strong revenue development was again our digital out-of-home business, which delivered growth of 28%. With that, revenue of the digital out-of-home category increased from 58 to 75 million euro, or 34% of out-of-home revenues. Within digital, our programmatic channel outperformed considerably. This reflects the demand for our digital portfolio and especially for programmatic public video from large national accounts. Sales from classic out-of-home were pretty much on prior year level when adjusting for tobacco ad sales. EBITDA adjusted for the quarter increased from 99 to 102 million euro despite still elevated SG&A cost inflation. We continue to work hard to bring our cost structures for the classical portfolio in line, also in the context of a continuously strong outperformance from our digital products. Having said this, we by no means see declining margins as a recurring feature of our out-of-home business. In digital and dialogue, revenue increased, accelerated significantly and compared to the second quarter was up by 18% from 176 to 208 million euros. Following a restrained development in H1, digital online advertising, including programmatic and content publishing, showed double-digit revenue increase in Q3 of 19% to 106 million euro. The strong development was driven by strong programmatic sales, but must also be seen in the light of low prior year comps and publishing. Our dialogue activities showed a revenue increase of more than 16% from 87 to 101 million Euro in Q3. Main contributor for this development was the acquisition of a number of selected call center locations as part of an asset deal that had already been closed at the beginning of June. The corresponding locations and teams represent a very good fit for our existing network and do not comprise central overhead functions. The transaction included three locations in the north and east of Germany, such as Itzehoe, Neubrandenburg and Frankfurt Oder. On top of that, we integrated agents and customers into our locations in Munich, Thessaloniki and Pristina. In total, approximately 1,000 agents were added to our call center workforce. The purchase price amounted to less than €500,000. Third quarter sales contribution amounted to slightly more than €9 million with a positive EBITDA contribution. So excluding the transaction, organic sales growth was rather around 6% for Dialog in a tougher trading environment for both our call center as well as our door-to-door activities. Altogether, the segment delivered an increase in EBITDA adjusted, which rose from 37 to 38 million euro. The strong sequential improvement compared to the earnings decline of the first half is in particular a function of lower comps following the downturn of the ad market in the second half of last year. The overall business context is still challenging for the entire segment, so that the development in Q3 cannot be seen as an indication for Q4. Moving over to our data as a service and e-commerce segment with Statista and Assam. In total, revenue growth accelerated further compared to the previous quarter and was up by 22% to 19 million euros in the third quarter. In detail, Statista increased revenues by 9% from 33 to 36 million euros, but somewhat dampened by negative currency effects. Adjusted for FX effects, revenue growth even accelerated to 13%. Strong growth across all channels, telesales, e-commerce, retail, and our international business accelerated Assam's revenue further, outperforming the already strong growth momentum in Q2. In total, revenue increased by 33% from 41 to 54 million euro and marking a new record in quarterly sales in Q3 23. Against this backdrop, earnings developed very positively and more than doubled from 7 to almost 15 million euro. The EBITDA margin rose from 9 to 16%. Let me conclude my remarks with some comments on ESG at Ströer. As you can see, we are doing very well overall and are practically always in the upper range compared to our peer companies and in the sector. Compared to the second quarter, we were able to improve our S&P global score by further three points to 41 points, putting us in the 92 percentile in our sector. But it doesn't come for free. It's thanks to the dedication of our teams who are passionate about this topic and make us better every day. Sustainability has now developed into a decisive success factor in the capital markets and the public space and for our entire industry. We are therefore very pleased that our efforts and above all, our progress are being recognized and rewarded as one of the most sustainable companies in the media sector to has been nominated as a finalist for the German Sustainability Award. With this, I would like to hand you back over to Christian.