Sto SE & Co. KGaA

The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Christian Schmalzel. Please go ahead.

Dear ladies and gentlemen, dear analysts, welcome back, as we've lost spoken only one and a half months ago, to our Q1 2025 call. As has been common practice for many quarters now, I would like to start our presentation with an overview of our key figures, followed by important strategic topics we saw in Q1. Henning will then guide you through the financials for the first quarter. Afterwards, we will be happy to answer any questions you may have. On the main KPI for the quarter, total revenues were up by 5% reported or by 3.8% on an organic basis. from 453 to 475 million euro. The most important message here is once again that we outperformed the advertising market as a whole in our core business and confirmed or exceeded the long-term trend with the growth figures for digital out-of-home and programmatic digital out-of-home. This was achieved against the backdrop of a generally rather moderate overall economic environment and a lot of uncertainty in the market. As Henning explained in the prelims and as we will see for Q1, we have real operating leverage in our core out-of-home business. This manifests in EBITDA growing faster than revenue, EBIT growing almost twice as fast as EBITDA, and net income growing three times as fast as EBITDA or six times compared to revenue growth. In total, adjusted EBITDA was up from €108 million to €117 million or 8%. EBIT adjusted improved from €35 million to €40 million or 15%. Net income adjusted increased twice as strong compared to EBIT adjusted from €12 million to €16 million or 30%. In contrast to these developments, free cash flow adjusted followed the typical seasonality, especially higher working capital contributions due to a stronger liability decrease as well as higher IFRS 6 lease repayments led to a free cash flow adjusted of minus 35 million compared to minus 24 million Euro in Q1 2024. At 18 million Euro, CapEx in Q1 2025 was 8% below the previous year's figure of around 19 million Euro and reflects the continued back to normal and the objective to further optimize and improve the fill rate of our digital out-of-home portfolio. Let's have a look at the Nielsen numbers in the middle of the chart first. And please keep in mind that those show gross rate call developments and the net revenue is on average six to seven points lower. On a like-for-like and gross basis, the out-of-home category is outperforming all other media, except for radio, which is due to its relevance, neglectable quite significantly. Out-of-home continues winning roughly half a percentage point share per year over the German legacy ad market. Translating the gross Nielsen numbers into net revenue, in Q1 2025, not only the ad market in total was negative by around 7% to 8%. Net TV development should be also in that range, although RTL and ProSieben haven't published their net numbers yet. In contrast, our total out-of-home business, digital out-of-home and out-of-home, was up 15%. Digital out-of-home alone delivered 27% growth, and programmatic digital out-of-home grew 36%. With that, we have outperformed TV and the ad market on a net basis by roughly 22 points with a total out-of-home business. Digital out-of-home is 34 and programmatic digital out-of-home more than 40 points better. That said, digital out-of-home also continues to outperform the average growth rate of global platforms like Google, YouTube, or Meta with a picture we see consistently in the last six to overall ad market dynamics looks like. And the underlying trend lost meanwhile for more than 10 years, with the exception of the COVID lockdown. Our out of home media business has consistently outperformed the legacy media market. And within out of home media, we have been outperforming the rest of our peers. And the growing share of digital out of home has accelerated the structural development. The higher the share of digital out of home within our business, the stronger the performance especially against TV, print, radio, or German online players. Of course, the total ad spend defines what's achievable for us, but the structural momentum is stronger than temporary headwinds from the macro environment. Out of Home was historically rather a niche and complimentary medium, but it always had some kind of exceptional strong position on the KPI location within the media landscape. For many customers, Location is an inevitable core function of the marketing playbook, and they are extremely stable in their revenue flows, also throughout macro cycles. A proof point here is the net revenue retention of our top 100 out-of-home media customers over the last 10 years. They represent roughly 40% of our core business. Even including the pandemic, the net revenue retention over the years is well above 100%, and the customer churn is below 1%. Our strong position regarding the KPI location has a substantial impact on our long-term core customers. Let's then have a look at the revenue development across our broader customer base over the years to better understand the underlying logics here. We have again excluded the services in non-German businesses of blow-up and in Poland and made a customer cohort analysis for out-of-home, digital out-of-home in combination for all customers. you see a sticky and ever-increasing business base already in the years until the pandemic. The lockdowns, especially in 2020 and 2021, have been exceptional, but afterwards you see the same historic trends with even more momentum. Let's look at exactly this momentum since the end of the pandemic. Digitization and the growing share of digital out-of-home has added massive opportunities and improved our gameplay. Advertisers can start with smaller tickets and the entry barrier is low, which means more new business potential. They can buy programmatically and in combination with online, which means more natural integration with all digital media supporting a low churn. Besides the location component, the incremental targeting opportunities open up new potential for more audience-oriented advertisers, which means we're stepping out of the niche into a mainstream proposition. And you see the results in the development of our customer cohorts for digital out-of-home only. Existing customers spend more money year-over-year with a net revenue retention well above 100%, and we constantly add new customers which show the same development. This might be rather SARS benchmarks, but it shows the resilient and recurring structure of our top-line development year-over-year and the structural impact of digital out-of-home on the total core business. Digital out of home is already a massive step up versus out of home. Programmatic digital out of home carries even more potential. It's about informed decision making and campaign optimization on ROI versus general traffic pattern and location demographics. It's about highly targeted and relevant ad delivery at most opportune moments versus limited targeting options. and it's about significant flexibility and responsiveness to market condition versus pre-boxing of ad space. More digital inventory, better software and constantly improving audience data delivers a constant flow of innovation case studies. Just some recent examples from Q1. Danone was increasing their Actimel purchase intention by 38% and reached spontaneous ad recall of 60% on digital screens with a targeting strategy around rush hours, flu seasonality, and current local infection trends. Lauriane was executing a drive-to-store push in six major cities with dynamic creatives. From a single ad template, 133 customized digital out-of-home ads were automatically created and played out in the immediate vicinity of drugstores. The campaign had significant reach and a positive impact on product sell-outs in the targeted drugstores. Shop Apotheke was using our TD Boost solution and data cooperation with all eyes on screens. The digital out-of-home campaign was only played out in zip code areas with low TD penetration, and the blended campaign saw a net reach uplift of 15 points versus allocating the budget on TD only. And to put that into context, excluding the service and just comparing digital out-of-home versus classic out-of-home, the share of digital out-of-home roughly doubled over the last five years. And within digital out-of-home, programmatic was clearly the growth engine and has added more new business opportunities for our sales teams. Or in other words, over 80% of our growth is digital, over two-thirds of the digital growth is programmatic. Software as well as data quality will be the key growth drivers going forward to monetize our digital out-of-home ad inventory in the we clearly benefited from the simple fact that we had invested rather early back in 2014 in an own SSP setup to make our digital out-of-home eyeballs available to online and cross-channel DSPs and therefore bringing our volume to their demand. Today and in the coming years, we see similar beneficial trends around our proprietary DMP setup, which we established already seven years ago, fueled originally by online data only. The DMP provides finely detailed location-specific information for the pre-qualification of inventories based on the advertiser's goals. It's the central technology for collecting, analyzing and using data from various sources to specifically activate our ad inventory. We also see by far more engagement of advertisers in optimizing their digital out-of-home creative and getting the maximum out of the inventory and available tracking data. Our AI-based creative analyzer is a fast and convenient tool. More and more agencies and clients upload the creative via the common power platform. The advertising copy is analyzed based on fundamental learnings from post-campaign tracking of thousands of copies in our database, and the system immediately sends the results via email back to the client with concrete recommendations how to improve visibility, conversion, and ROI of the ad. One important aspect for us, all of this is a long-term development and on an annual basis or rolling 12-month basis, you see the consistent and recurring logics since the end of the pandemic. Our core business has become a double-digit growth profile. Individual quarters will always have deviations, macro influence, volatility in the ad market, very different prior year comps. You see this on this slide for the last four years. Quarters with more than 20% segment growth were no indicator that our business suddenly goes completely through the roof. 4% growth were no indicator for the end of the growth story. It's an ongoing structural development which we focus on. The quarters are and will be no perfect string of firsts.

So far on my remarks, and with that, over to Henning. Thank you, Christian, and a very good morning, everybody. Let us start the final section with a quick look onto the Q1-25 P&L, where Christian already touched upon the key items. In total, we delivered a good set of results for the first quarter and met our internal expectations for the group. While out-of-home media slightly exceeded our forecast and compensated for some weaker than anticipated business development at Assam. Overall, as was already the case for financial year 24, the momentum increases the further south we look in the group income state. Revenue growth for the quarter was 5%. This includes around 120 basis points support, mainly from the acquisition of RBL Media. The corresponding activities are included since November last year. Excluding this effect, organic growth came in at 3.8%. Every year adjusted amounted to €117 million, €9 million, or 8% higher compared with Q1-24. The exceptional items for the quarter were minus €2.5 million, and that's roughly half of the amount reported in the prior year period. Exceptional items essentially comprise three components, 0.9 million for software implementation, 0.8 million for various smaller restructuring measures, and expenses related to our stock option program. Accordingly, reported EBITDA was up by more than 10%, from 104 to 115 million euro. Depreciation amortization increased by 6% to 81 million euro. With that, reported EBIT for the quarter came in at 34 million euro, some 7 million euro higher compared with Q1-24. The financial result improved to minus 15 million euro after minus 18 million euro in the prior year period. Roughly two-thirds of this effect are attributable to a positive currency effect from intragroup debt denominated in U.S. dollar as Statista, but the remainder results from lower interest rates more than offsetting the cost for additional 18 million euro net debt. Earnings before taxes, therefore, more than doubled to 18 million euro compared to 9 million euro in Q1 of the prior year. The tax rate was basically unchanged with around 30% in the reporting period, and with that, the tax result follows the development of EBT. All in all, reported net income for the quarter came in at close to €13 million after €6 million in Q1-24. Adjustments were down by €3 million, mainly because of lower pre-tax accessional items, as described before. Again, slightly increased amortizations resulting from purchase price allocations following the acquisition of RBL. Whereas part of the first-time consolidation, we recognized goodwill of €35 million and depreciable assets of €69 million. Accordingly, net income adjusted to €16 million after €12 million in the prior year period, or in percentage terms, an improvement of 30%. Let us now switch over to the cash flow. As you are familiar with the seasonality patterns of our business, you know that usually Q1 cash flow development is not a relevant indicator for the full year. In particular, when it comes to the development of networking capital, that somewhat is a reflection of the productivity of a quarter. Our Q4 usually accounts for close to 30% of annual sales, while Q1 only accounts for around 22%. Absolute sales levels in the first quarter are usually more than 100 million lower than in the preceding Q4. While earnings, as we have just seen, continue to improve and cash out for interest, other items and investments were lower than in last year's Q1. This was more than upset by the just-mentioned seasonal change in working capital, as well as IRPR 16 lease repayments, which increased also due to the acquisition of RBL and some phasing effects. So altogether, free cash flow adjusted was minus 35 million euro after minus 24 million euro last year. Compared to our calendarized forecast, Our Q1 cash flow was no better than anticipated, and we continue to expect clearly improving cash flow generation for the full year, and in particular the second half of the current fiscal year. Let me come to the net debt development in the sequential view from the end of Q4-24 to the end of Q1-25. Net debt was up by roughly 27 million euros, including the adjusted free cash flow for the first quarter of minus 35 million, and M&A expenses of 1 million euros. The remaining difference in the reconciliation of around 9 million euros relates to a reduction of previous customer overpayments, representing a cash outflow with no effect on net debt. Net debt year over year was up by 81 million euros to 864 million, including our dividend payment last year, as well as the acquisition of RBL, representing in total a cash outflow of more than 210 million euros. With that, our leverage ratio improved slightly compared to prior year due to higher earnings to now 2.18 times versus 2.24 in Q1-24. Let us now take a look at the performance of the individual operating segments in the past quarter, starting with our core segment, out-of-home media. Out-of-home media was able to meet and even slightly exceed the expectations placed on it for the quarter. Sales growth amounted to more than 15%, and this against a strong prior year base. Last year's Q1 equally delivered growth of more than 15%. Organic growth in Q1 was around 13% against a comp basis of 17% last year, thereby showing only slight moderation in a now, compared to the beginning of last year, much more challenging market context. Thus, our performance is characterized by rising sustainable outperformance against the market. In total, segment revenue was €210 million. Looking across the different revenue streams, all of them supported growth. Out-of-home group classic grew by more than 8%. Business development was supported by the acquisition of RBL and a positive effect from ad spend for the federal elections. Excluding these effects, the underlying development was broadly flat. As in the previous quarters, digital out-of-home was again the main growth contributor. In total, digital out-of-home was up from 64 to 81 million euro, or 27% respectively. Within the digital out-of-home sub-segment, programmatic digital out-of-home grew even stronger, with 36%. Also, out-of-home services contributed with double-digit growth to the segment development, and revenue was up to 13 million euro in Q125. Consequently, the EBITDA margin for the quarter was slightly up to 41.1% and EBITDA adjusted came in at 86 million euro or 18% higher compared to the prior year period. EBIT adjusted even improved by more than 50% in Q1. Q1 revenue for digital and dialogue media increased by 1% to 206 million euro. Digital media thereby grew by 2%. Within digital media, sales from our own assets, such as programmatic public video and owned internet content, such as the online, grew or were flat, respectively, and more than compensated for a decline in ad sales for operated assets. Our dialogue business came in with revenues of €108 million and with that basically on the same level as in Q124. In detail, the two dialogue activities, call center and direct marketing, showed different sales dynamics in the first quarter. Our call center's activities grew by double digits, compensating for a sales decline in door-to-door business, which are currently facing a little higher churn in the field force. In total, the segment EBITDA adjusted came in at 28 million euro after 31 million euro in Q1 24. Digital media and our contact centers contributed broadly stable earnings, earnings that our door-to-door activities followed the mentioned sales declines. Last but not least, some comments on our data as a service and e-commerce segment with Statista and ASA. Revenue developments continue to show a differentiated picture in the first quarter. As expected, data as a service, Statista, continued to show positive revenue developments. Sales in Q1 rose from 40 to 42 million euro, or 5% respectively. While the outbound sales of platform access grew double-digit, our business performance in the U.S. moderated due to macroeconomic headwinds. Assam's business development was still impaired by declining trading and wholesale distribution to China in the amount of roughly 3 million euro in the period under revenue. Excluding that, sales were broadly stable in a now more challenging consumer environment. EBITDA adjusted for the segment with 11 million euro or 1 million euro lower when compared with the prior year period. A good earnings and margin improvement in Statista could not fully compensate for earnings decline at Assam. With that, let me hand you back over to Christian for the outlook and some closing remarks.