Prosieben Sat 1 Media

Good morning, ladies and gentlemen, and welcome to the Q3 9-month 2020 results call for ProSiebenSat-1 Media FE. This conference is being recorded. Today's call is hosted by Mr. Dirk Voigtlander. Please go ahead, sir.

Yes, thank you, Operator, and good morning, ladies and gentlemen, and welcome to our Q3 2020 results conference call. As always, today's call is hosted by Rainer Boujean, Chairman of the Executive Board and Group CFO, as well as Ralf Gehrig, Deputy CFO of the group. Rainer and Ralf will first present the group's financial results for the third quarter 2020 and provide an update in terms of the operational development as well as recent portfolio changes. The presentation will be followed by a Q&A session. Web links, dial-ins, and the presentation material were made available via email this morning. The presentation can also be accessed on our website under the section Investor Relations. With these opening remarks, I now hand over to Rainer.

Good morning also from my side and welcome to our Q3 analyst and investor call. We are still in the midst of the COVID-19 pandemic with challenging macroeconomic conditions. In the third quarter, we however saw a recovery in the German economy and in the advertising market from which we at ProSiebenSat.One were able to benefit. This is also reflected in our financial figures. And we were busy in the past months to further build the strategic foundation for continued value creation now and in the future. Let's have a look at today's agenda. We will start with a quick overview of our Q3 highlights and then continue with our group financials. Given the circumstances, we recorded satisfying results and saw recovery in our revenues and earnings compared to the heavily COVID-19-influenced second quarter. In the third section of this presentation, we will talk about some of our key projects this quarter that will be important for our strategic way ahead. And, as announced during our last call, we will also be discussing our financial outlook for the full year 2020. Let's start on slide number three. Q3 was a quarter of financial rebound and long-lasting strategic actions. ProSiebenSat.One is an early cycle company, meaning that we felt the COVID-19 influence on the economy and thus on our business considerably in the second quarter. But we now benefited from the economic recovery much faster than other companies in the third quarter. Despite the still ongoing COVID-19 effects, our group revenues were at previous year level Besides the initial consolidation of the meat group, also recovering advertising markets since July played an important role. Whereas in the second quarter, our 7-1 Entertainment Group showed a revenue decline of 34%, we now recorded a decrease of only 5%. Our cost-saving measures paid off. Our adjusted EBITDA was increasing in this quarter by 13% and for the first time since Q1 2018. My executive board colleagues, Christine Scheffler, Wolfgang Link and I made a clear commitment to build a more profitable, more focused, more diversified and more synergistic company. We made important step towards reaching this objective in this quarter. We continued our group reorganization in our newly created 7.1 Entertainment Group. Our content, digital and sales teams are now working in an integrated way to make our entertainment business fit for the future. And with the launch of our partnership meet group, we created one of the leading global online dating players that will significantly support our diversification. We made progress in our portfolio management where we analyze regularly if we are still the best owner for the different portfolio companies. By selling the hosting solution provider Mylock in September and the sale of the healthcare product provider Winstar Medical signed in October, we took another step towards a more sharpened and synergistic portfolio. So while successfully steering ProSiebenSat.1 through the COVID-19 pandemic, we also worked hard on executing our strategy for long-lasting value creation. Let's now take a closer look at how the different sectors developed in the advertising market in the third quarter. Please turn with me to slide number four. You all know that entire industries cut their advertising spending in the second quarter's economic downturn provoked by COVID-19. Just take the travel, events or beverage industries, for example. But as you can see in this graphic, first sectors recovered in the third quarter, and came back strongly, such as the automotive sector, with its new electric vehicles. Also, the food industry will be returning before Christmas. And the new PlayStation and iPhone are being launched. Nevertheless, other key advertising sectors like tourism and the beverage industry still reflect the COVID-19 impact. Within this market environment, we can be satisfied with our performance in the advertising business in this quarter. The development in the fourth quarter will highly depend on the further development of the pandemic and whether our country will manage to get the rising numbers of daily new infections under control again. We trust in the German federal government and the state authorities to do their best to prevent a second nationwide complete lockdown. But there is of course a higher uncertainty today than it was some weeks ago. Just to remind you the importance of this for our full year results. In the fourth quarter, we traditionally generate around 40% of the adjusted EBITDA for the entire year, even in a normal year unaffected by a crisis like the COVID-19 pandemic. With this, I hand over to my deputy CFO, Ralf Gierig, who will explain how our advertising business is reflected in our group financials and who will run you through our results in the third quarter and the first nine months of this year.

Thank you, Rainer, and welcome to our Q3 2020 results conference call, also from my side. On the next few slides, I will provide a financial performance update for the Group and our four segments in the third quarter and the first nine months of this year. This will also include an update with respect to the Group's current financial position, i.e., how net debt and leverage have developed, including recent portfolio changes. Let me first start with the group and segment revenue performance on our page six. Given the circumstances in terms of the ongoing demanding COVID-19 environment, we are satisfied about the overall stable group revenue development in the third quarter. Let me just remind you, in the second quarter, which was marked by the lockdown in Germany, we recognized a decline of 25% in terms of group revenues. Thanks to an improving environment and sales initiatives paying off, we achieved group revenues in the amount of 921 million euros, including the contribution of the meat group in September. Our entertainment segment, which has been renamed 7-1 Entertainment Group this year, achieved revenues of about half a billion euros and hence still recorded a decline by 5% in Q3 2020 versus Q3 2019. Compared to the second quarter, this, however, is a significant improvement, where the year-over-year decline amounted to 34%. The improved revenue performance can particularly be attributed to a stabilization of the advertising business, where we saw a narrowed reduction in Q3 of 6% year-on-year. Also, the distribution business again provided positive stimulus to the entertainment business with growth of 8%. Red Arrow Studios also achieved a meaningful improvement of external revenues compared to the second quarter. Following a decline by 31% in Q2 2020, the revenue decline could be narrowed to minus 7% in the third quarter. This development is primarily a result of a dynamic global sales business. In addition, Studio 71's revenues also grew slightly by 1%. NuCom, which we report as of Q3, excluding the matchmaking business of Parship and eHarmony, achieved a slight growth which, like in the prior quarter, reflects opposite developments in its three verticals. While consumer advice, in particular the car rental business billiger-mietwagen.de, and to a smaller extent experiences, were still harmed by the COVID-19-related negative impact on their business, The beauty and lifestyle vertical more than compensated the declines with a continued dynamic revenue growth. Last but certainly not least, we are proud of a very promising development at our newly formed Parship Meat Group. Both the existing business, i.e. Parship and eHarmony, but also the newly acquired the Meat Group, achieved a very good growth in the third quarter. This set organic segment revenue increased by 11%. The meet group also grew dynamically compared to the last year. However, please note that we included the meet group for one month only as we closed the transaction on September 4, 2020. Let me now highlight to what extent this has turned into earnings. Please turn to page 7. Thanks to the recovery of many of our businesses combined with strict cost management, group-adjusted EBITDA improved by 13% to €149 million. This reflects the big efforts which management and all employees of ProSiebenSat.1 undertook to cope with the COVID-19 backdrop. As can be seen on page 7, profitability was supported by a positive adjusted EBITDA in every segment. Despite a €26 million revenue decline of the 7-1 Entertainment Group, segment-adjusted EBITDA only fell by €7 million to €114 million. This can be explained by the offsetting effect of lower costs, especially a reduced program spend. Please note that the disposal gain of MILOG in the amount of €35 million, which has driven other operating income, has been adjusted, i.e. is excluded in adjusted EBITDA accordingly. Red Arrow Studios clearly benefited from a significant better global sales business, which more than doubled in Q3 2020. Segment profitability was also supported by a small positive EBITDA contribution of Studio 71. While Newcom Group's adjusted EBITDA largely reflected the segment revenue performance in Q3, Partiot Meat Group's margin improved to 23% and, hence, contributed nicely to Group's profitability. Also, in absolute adjusted EBITDA terms, Parship Meat's contribution was meaningful and amounted to 19 million euros. Besides the consolidation benefit of the meat group, the business benefited from organic revenue growth and notably better earnings at the successfully restructured business of eHarmony, which Parship only acquired in late 2018. Let me now continue on page 8 with additional comments about P&L items below adjusted EBITDA as well as free cash flow development. The positive adjusted EBITDA development also becomes visible in EBIT and net income. In addition to better operating profits, both KPIs also improved as a result of a disposal gain from the sale of hosting business MyLock, which more than offset M&A-related one-time expenses related to the group acquisition. As a result, group EBIT increased by 79%, to 140 million euros and reported net income more than double to 69 million euros. It is also worth mentioning that the group's adjusted net income, which excludes valuation effects such as for MILOG, was also positive both in Q3 as well as in the first nine months 2020. This is a very positive outcome in this challenging COVID-19 pandemic environment. Last but not least, I would like to draw your attention to the development of the Group's free cash flow before M&A. While the first half of 2020 has been in negative territory with minus 55 million euros, we could achieve a strong improvement in Q3 from minus 51 million euros last year to zero in Q3 2020. This can mainly be attributed to strict cash management in order to preserve the Group's liquidity position. As is typical, please also note that the group generates the lion's share of its free cash flow in the fourth quarter. Now, I would like to close my part of the presentation with an update about the group's financial position on page nine. As can be seen on the slide, the group's net debt amounted to 2,488,000,000 euros as per September 30, 2020. This corresponds to an increase of 243 million euros compared to year 2019, but a reduction by 100 million euros compared to end of Q3 last year. This net debt development primarily reflects a free cash flow before M&A of 321 million euros, total net M&A CAPEX of 391 million euros, cash proceeds from General Atlantic related to the acquisition of the meat group, of 259 million euros and other cash expenses of 89 million euros all in the last 12 months. Although net debt has not increased compared to the prior year's level, the financial leverage increased by 0.9 points to 3.7 times. Please note that this can solely be attributed to the COVID-19 related decline in adjusted EBITDA in Q2. We expect this situation to normalize in the future as we are working hard on further adjusted EBITDA improvement. Earnings improvement will be the biggest lever to return to our financial leverage target range of 1.5 to 2.5 times, besides further portfolio measures. On a pro forma basis, i.e. adjusted for the acquisition of the MEAT Group and the disposal of MILOG, leverage amounted to 3.5 times net debt to adjusted EBITDA. As you know, we also announced the disposal of our OTC pharma company WinStar Medical. Subject to the closing of this transaction, the pro forma leverage will reduce by another 0.2 to 0.3 times. I would also like to highlight that we now have established a contractual framework for possible future debt refinancing through node issuances. The associated prospectus has been approved by the relevant authorities just last week. The so-called debt issuance program is a financing umbrella allowing the flexible issuance of fixed and variable rate notes in the future. The program has an overall volume of up to 2.5 billion euros and aims at refinancing existing financial abilities of the group. Amounts, terms and interest rates of the notes to be issued are determined by the conditions prevailing at the respective time of financing. Please note that we do not intend to use our new debt issuance program for the redemption of our existing 600 million notes due in April 2021. The repayment of the 600 million notes is intended to be made from available liquidity resources. Let me draw your attention to our revolving credit facility. At the beginning of the COVID-19 pandemic, we had decided to partially utilize the RCF in order to secure access to our liquidity resources all times. However, since the overall trading has improved notably, and we are in our cash strong fourth quarter, and as we expect to benefit from disposal proceeds related to WinStar Medical, we intend to repay the RCF amount of 350 million euros within the next few days. Note that we can redraw any time if need be. With this, I would like to hand back to Rainer, who will continue with the operational update.

Thank you, Ralf. Before discussing our operational highlights, I want to quickly summarize our strategic direction. You will then see that every action we take pays into our strategy. Please turn with me to page number 11. Our strategic direction is defined and now being implemented. We have set up one synergistic business model based on four pillars with the aim to reduce dependency on advertising revenues and to create value for our stakeholders. Our entertainment business and thus our 7.1 Entertainment Group has a clear focus on our core markets, Germany, Austria and Switzerland. We are on our way to become a platform independent entertainment company with a strong focus on our own content, its digital distribution and thus an improved monetization. We invest a total of 1 billion euros per year in our program, more than half of which goes into live and local content formats. Because unique content is our USP and the precondition to reach that we can monetize. This way, we want to generate long-term growth and cash flow. Here, our international production business, Red Arrow Studios, comes into play. We have intensified the exchange between the 7-1 Entertainment Group and our production units. Not only our German Red 7 Entertainment, but also the international companies and our digital studio, Studio 71, are encouraged to pitch formats to 7-1 Entertainment that set us apart from the competition. strong and profitable entertainment builds the foundation to enable growth and development of our other businesses such as our commerce activities and to thus increase our diversification by our own power this means we are building up leading b2c brands with the support of our TV channels and their advertising reach but we have a clear guideline here once the business has matured and next growth steps such as international expansion are on the agenda, we evaluate if we still are the best owner. Because we concentrate on investments that have clear synergies with our core business. If a business is not strongly TV related anymore, we can crystallize value by selling these well-developed commerce brands to a now better suited owner, as we will do in November when we expect the Winster deal to close. Important, this applies only for single companies, not for the whole commerce portfolio. Besides possible divestments, our portfolio strategy also comprises value-enhancing acquisitions. One example is the acquisition of The Meat Group in September. By merging the US company with our Parship Group, we have created Parship Meat Group, a leading mobile-first global player in the online dating segment offering matchmaking, online dating and social entertainment services. Our mission here is clear. We are building a driver for our future growth and diversification. But we will go more into detail on partnership meet group shortly. And in all we do, we focus on earnings and cash flow to improve our ability to pay dividends, to manage leverage to a sustainable level and create value for all stakeholders. We act result-oriented and we strongly take into account the mid-term financial impact of our strategic initiatives. After all, it is crucial that each part of the group contributes to increasing the value of ProSiebenSat.One. Let's now move to our operational business. Slide 12 shows our ProSiebenSat.One playing field for a better monetization of our content in the digital world. While the behavior of our viewers has changed notably in recent years and the overall video content consumption has constantly been increasing, the universe to distribute and monetize our content has at the same time grown meaningfully. Our own platforms built the heart of this universe where we extend our successful linear formats. Be it on our channel websites, apps or platforms. At the same time, Our distribution partners, such as telco companies and other third-party content platforms, continue to be an important part in expanding our digital reach. As well as our social platforms, where we distribute especially complementary short-form content. Our objective is to accompany the journey of our content as efficiently as possible and to thus create optimal conditions for our sales team with an improved digital reach. Now please turn with me to slide number 13. A true milestone on our strategic way forward was the acquisition of the Mead Group, which we successfully closed in September. After merging the company with our Parship Group, we at ProSiebenSat1 hold 53% of Parship Mead Group's shares, whereas our partner, General Atlantic, has 43%. The remaining shares are held by the management. In addition, ProSiebenSat.One holds preferred equity in the amount of currently €350 million. Why was this transaction so important for us? And why do we consider Partial Meat Group as future growth and diversification driver for ProSiebenSat.One? The new group covers the entire spectrum of the online dating market, which is a fast-growing and profitable market. Particularly interesting is that well-established brands such as MeetMe, Scout, Tech, Growler, and Lavoo that now belong to us allow our dating business to also tap into a younger target group and, above all, into the live streaming video market. We see clear revenue and cost synergies within the newly formed Parship Meet group as well as synergies with 7.1 Entertainment. the combined group features a highly diversified revenue model setting us apart from the competition. In addition to long-term subscriptions, it is now also based on short-term subscriptions, platform services, as well as revenues from advertising and in-app purchases. Overall, we expect Parship Meet Group to significantly support the diversification of our revenues and earnings. Let's move on to slide number 40. The example of Parship Meat Group also perfectly illustrates how we at ProSiebenSat.One are using the strength of our entertainment business to build and grow consumer-oriented digital platforms in order to create real value. In the Parship case, starting with the first media for revenue deals, the use of our marketing know-how and finally our M&A power as demonstrated by the acquisition of eHarmony and the Meat Group. You can see on the slide how Parship's financial results increased according to each growth step we at ProSiebenSat.One initiated and how the merger with the Mead Group is further accelerating this growth and providing the scale for a potential value crystallization through an IPO. Our accelerator and seven ventures businesses are an essential part of the strategy. With our media for revenue and media for equity models, we can support young companies from an early stage on with our TV reach to increase their brand awareness in short time. In return, we receive a stake in the company or a revenue share. In other words, we create value far beyond our traditional TV business. On the next slide, you can see the latest example that demonstrates our ability to be leading B2C brands by leveraging our media power and to thus increase the value of the company. Two weeks ago, we successfully signed the sale of Newcom Group's entire 92% stake in OTC provider Winsta Medical to the financial investor Oakley Capital following a competitive process. The closing is expected for November. WinStar Medical is one of the leading providers of healthcare products in Germany, which we acquired in 2016 and integrated into our commerce house Newcom in 2018. In these four years, the company expanded its market position considerably as we have significantly grown the awareness of the WinStar brands through advertising on our channels and platforms. In total, the company received a gross media volume of 90 million euros. Especially thanks to the support, revenues grew from 70 million euros to around 127 million euros, brand awareness of WinStar, key brands SOS from 30% to 75%, and WinStar's enterprise value rose by 2.4 times to 280 million euros. In order to further strengthen the brand recognition also in the future, we concluded a multi-year advertising partnership with WinStar as part of the transaction. This is truly an impressive development and underlines the added value that we can generate through synergies with our entertainment business. However, presuming that one would not have been the best partner for WinStar's next growth stage, that will rather focus on internationalization and our contribution would thus have been limited. The sale was a logical consequence as we are pursuing our strategy of actively managing and focusing our portfolio on maximizing synergies. Let's go to slide number 16, where you can see another example of how our value creation was in Nucon Group and its portfolio company, Flaconis. In 2012, we started investing in Flaconi with seven ventures and a media for equity deal until we took over the majority in 2015. Since then, we fueled the growth of the online beauty retailer with our media power. The COVID-19 lockdown further accelerated Flaconi's upward trend in the first half of 2020, with shopping preferences dynamically shifting from offline to online. More than 700,000 new customers and one additional brand since the beginning of 2020 are the best proof of this development. Plus, we have a high organic traffic share of more than 50% on our website, which underlines the strong brand positioning of Flaconi. Even more important is Flaconi's dynamic Q3 revenue increase. Even after the lockdown and reopened offline stores, Flaconi's development is sustainable with year-on-year growth of more than 45% in the third quarter. Leveraging media power, we turned Flaconi in what is now a leading poor online player for beauty products in Germany. And in September, our Flaconi colleagues have laid the foundation for further growth. They announced building a new warehouse, which is scheduled to start operations in 2021. Its capacity is three times larger than the previous one and there were underlines just how much potential there is for Flaconi also in the future. Please turn with me to the next page. As we have shown you in the last minutes, we made important operational progress in this quarter that pays into our strategic focus. At the same time, we were able to improve our financials compared to the COVID-19-influenced second quarter with our strict cost and cash flow management and brightened economic conditions in Germany. Since October, however, we unfortunately see social and economic uncertainty in Germany and worldwide growing again due to the return of rising COVID-19 infection rates. You all know that we withdrew our 2020 full-year financial outlook this April because of COVID-19 and related economic uncertainty. We now want to provide you an updated outlook for this year. We have based our full year outlook on the following assumptions. The economic environment will remain about stable compared to the third quarter of 2020, and there will be no further substantial restrictions in the fourth quarter beyond the measures announced in Germany at the end of October. This particularly applies to the important Christmas business of our advertising customers. On the basis of these assumptions, the group expects advertising revenues to decline by a single digit percentage rate in the fourth quarter. As explained before, this is among others due to the current loss of single industries like tourism and events as advertising customers as a result of COVID-19. Under these assumptions, We are targeting, on the basis of content exchange rates and without further portfolio changes, group revenues of between 3.85 billion and 3.95 billion euros and an adjusted EBITDA of between 600 million and 650 million euros in the full year 2020. This means that all of our group's key financial figures in the full year will be influenced by the currently strong one-time impact that COVID-19 and the lockdown had on our business, especially in the second quarter. As a result of this impact, we posted a decline in adjusted EBITDA of 190 million euros in the second quarter compared to the previous year quarter. This cannot be made up for over the full year. At the same time, we are confirming our midterm financial targets and financial policy. As communicated at the start of the year, we continue to target a return on capital employed for the group of at least 15% in the midterm, based on the ProSiebenSat.1 definition of the ratio, the so-called ProSiebenSat.1 ROCE, which is according to our definition without taxes. To achieve this target, Expansion and new investments will have to be amortized within three years and generate a return of at least 18%. Strategic projects are usually expected to be amortized within five years. In addition, we are confirming our general financial policy with regard to our financial leverage ratio and dividend. We continue to aim for a financial leverage ratio between 1.5 times to 2.5 times. Also, our general dividend policy of distributing 50% of adjusted net income as a dividend remains in place. I hope that we were able to show you today our key strategic elements that we are pursuing to achieve these targets 2020 and midterm targets and how we are setting up ProSiebenSat.1 in a more focused, synergistic, and sustainable way. Thank you for your attention, and we are now looking forward to your questions.

Thank you, sir. Ladies and gentlemen, if you wish to ask a question at this time, please signal by pressing star 1 on your telephone keypad. Please make sure the mute function on your phone is switched off to allow your signal to reach your equipment. Again, it is star 1 to ask a question. We'll pause for just a moment to assemble the queue. Our first question comes from Julian Rock from Barclays. Please go ahead.

Yes. Good morning, Rainer. Good morning, Lars. Good morning, Dirk. Thank you for taking my question. The first one is, could you give us the growth of small advertising in Q3? The second one is, can you give us most recent advertising trends in October and November, if you have them? And then the last one is, can you give us the low and high end for advertising in your full year guidance range? Because that is probably the most important variable. So at 3.85 billion, what is your advertising assumption? And the same for 3.95. Thank you.

So let me start with the current trends in advertising. We have already announced in the third quarter that July will come at approximately minus 20%. We ended up July with minus 19%. August was plus 4% compared to last year. September was minus 5%. And October, you know, is also minus 5%, which is a good number. For November... When I look currently in my books, I have a very, very strong November, you know, which seems to be above last year. But, and, you know, and that's not really priced into my outlook currently because I don't know if there are further measurements of the German government plan because when you look on the infections of coronavirus, This morning, you have approximately 19,990, which is a high number. So we have to see how Corona will develop up to the end of November. But, you know, when I look at my booking behavior currently, you can see that especially our, and I have to say that I only can say that for us, our Customers, advertising customers, love TV. Our customers overall love TV and you can see that in our booking. So we have really, really very good lead time currently. Lots of customers getting into our product and if this would stay also for December, then for sure, you know, I have also chance, you know, not even to be at the higher end, so there's an outage homing chance. Again, my uncertainty is what is happening after November and that the infections are going down again. Therefore, my buffer in the EBTR guidance is based on the situation that when the measurements the German government is taking into account also goes on in December, we are totally fine. If there is more to come, that will be difficult. It all depends now. that our customers can do the Christmas season and the Christmas business as they had originally thought. When you then look at the higher end or the lower end of the guidance, it's at the end of the day when you would calculate it. We have a revenue development on reported numbers means including the meat groove of the lower end is approximately minus 4% in the higher end. and as 3.4%. And if you would translate it to the adjusted EBITDA, you know, there is no direct correlation between the lower and the higher end because it all depends on the mix. That means, you know, approximately minus 18.1% versus minus 3%. So at the end, it really depends. When November comes in, how it looks like currently in my bookings, you know, then, you know, we will have a very, very strong month. which is a very important month because it's a big month, but December is also a very big month. So we have to see how December looks like. We will know that due to the reduced lead time of our customers, which were in the past six weeks now to two weeks, we will know that at the end of November, I would say, and it all depends, you know, what the German government is announcing to the market. For the other segments, obviously, the meat group is, Really great very important for us in the diversification Here we have seen good growth We also expect that going further on And you know that's very helpful and and clearly is offsetting lots of the effects I've seen some analysts reports before we have a doubt that that this is possible now You can see that especially due to our diversification. You know we are able to grow again and And, you know, that also when the meet group is fully included in our numbers, you know, will give us also momentum going on further. And that shows, you know, that our strategy is right and that we are going in the right direction. And the second question is for Ralf, I would say.

Yeah, morning, Julian. Ralf speaking. You were asking for the digital and smart revenue growth that was roundabout plus 27%.

Okay, thank you very much for that. So right now, just coming back on your answer, you say lower minus four, higher minus 3.4. I believe that's reported revenue. What I wanted to have is an idea of your assumption for advertising at the bottom and your assumption of advertising at the top, because you're saying it's going to be down single digit, which is minus one to minus nine. So just to have an idea of your advertising assumption in your total group revenue assumption, if that's possible.

So, you know, you have a range between plus four and minus four percent. That's the base. You know, we haven't given the midpoint. So it's overall 25 million euros, I would say. So that's how it works. And again, you know, as I said, you know, when I look on my November, I have, you know, a lot more conservative guidance here currently in my books, you know, for the outlook. But I seriously don't know how December will develop because that's the uncertainty we have. because when another big lockdown comes in and we have seen that effect in March, then we can have cancellations. I would doubt that due to the fact that all inventories of our customers are already in. So therefore, when I see the campaigns which we have in front of us, it's Mostly, you know, very, very strong. And I don't think that we see a similar cancellation situation than we have seen in March when Corona came in the first time because we all learned to work and to live with it. But, you know, when the shopping malls are closed again, then perhaps that's a different story because not everybody wants to order online. Yeah, but Christmas, you know, where you are not allowed to travel, hopefully... will take all consumers to consume at least that what was originally planned, and then we are very well prepared for the rest of the year.

Thank you very much.

Our next question comes from Anik Mas from Exxon BNP Paribas. Please go ahead.

Good morning. My first question is on programming costs going into next year, assuming the ad market is somewhat recovering. How should we think about programming costs? How many of the costs that you were able to save this year are recurring and how much are not? The second one is, I'm referring here specifically to Flaconi. You suggested that in due time, if you're not right owner of some of the assets, you can be monetizing them. I guess, could you give us an idea on where we are on the timeline regarding Flaconi, but also the other divisions in UConn? And then if you could give us the seven venture revenues for Q3. And finally, just regarding Q4, do you see that there's a share reallocation from maybe other media channels back into TV when you speak to advertisers? Are there new advertisers that previously weren't with TV and have now decided to come back? Or is it really just the typical advertisers you've dealt with before? Thank you.

I start with the last one. The last one for Q4, we can clearly say that a lot of advertisers came back into especially into our channels due to the fact that we especially attract the young target groups between 14 and 49 years with our program, which is great. We also have seen that a lot of people, especially out of the e-commerce world, is now advertising on TV because they also figured out that 60 million people watching TV on a monthly basis is very attractive for them because you can't reach more people as with our TV channel. This is very, very relevant, and we believe that this is the right approach also going further. Again, I hopefully could explain that we try to take the linear success which we have also in the digital world on one side, and that especially, and you'll find that also in our backup slides, the distribution business is an important piece. And you also have seen in our content strategy, then I come to program cost. costs that we really look on local and live. That's one of the reasons also for our distribution customers for the platforms why we also bought the Bundesliga rights because if you are someone who is interested in soccer, which in Germany is in most of the cases very relevant, um, and you are a platform provider by not showing the nine life games, which are, you know, qualification games, all decisive games, you would have a problem. So that helps me to also to, to look on our distribution business and, um, you know, several contracts will come up during next year so that we also have their chance, you know, to make distribution a more and, and, and stronger business than we have seen in the past. So, um, Program costs overall, we have done the savings or we are in front of the savings for this year. I would like to remind all of you, I know that you know it, but all others perhaps also to remind that we originally said that we want to spend 50 million more for the year than last year, 2019. And then we cut back, first of all, the 50 million increase and we also reduced to 50 million. I can say currently that around a billion is a number where I feel comfortable with precise numbers. We will update perhaps in detail next year because we have first of all to see if what we can see currently, if all that works. Consequently, we are above 50% in our grids with local and live. That will further increase. And therefore, then we consequently will look on our overall program. We monitor especially the access and the prime time because that's the basis for the success in the advertising business. And those of you who are Germans and watch together with their children, for instance, The Masked Singer, The Voice of Germany, or some documentaries really figure out how good and how great our program is. We started with quiz shows. in the excess time every evening, try to interact with our customers to get more digital information about our customers. We also increased the data and the registration process. The registration was directly in March when I started to take over the responsibility for this year and so that's also the basis for more digital so we can deliver lots more customers than we did in the past. It also increases our per customer or per campaign price. You all remember the rules which was provided to you in the past that normally a digital campaign costs one and a half to two and a half times more than a linear campaign. So therefore, we are working on all these fields, everything in starting phase, some programmatic offers you already have in the market. So, you know, we, we testing a lot, we're doing a lot. And, and I believe that the basis and the basis for all that is program that we have a different program than you can find on Netflix, um, and, uh, on Amazon. And, and, and that's clearly our focus. And therefore we will come up after we also analyzed and finished the year and hopefully it works out like it did in Q3, also in Q4. And then based on that, we will make a decision how much money we will spend, but I think it's approximately a billion. That's a good number. I don't expect that it's going up to 1.2 billion or 1.1 billion, but we have to see how this plays out. Seven venture revenues. Alf?

Well, Seven Ventures was actually soft in Q3, was down by more than minus 10%, driven by the fact that obviously in uncertain times, the particular customers we are targeting are also keeping their budgets restrained.

And Flaconi? That's for sure a great business. We've shown lots of people also now the numbers also to prove a little bit our business model, which is value creation, starting point, media for equity, media for revenues, and then with the accelerator and the seven venture business to take that to a certain level before we then monetize in our commerce segment or a newcomer. And for sure, we have, especially after the HUD group went out to IPO, for sure also lots of strategics who are interested in the best asset, which is in the German or in the international market currently. But we also believe that we are well positioned here. Overall, we have to make up our mind what we want to do, but first of all, we want to finish the Christmas business because we totally see that this is something which also will support the overall strategy. As we have decided last year in 2019 Q3, Q4, especially Q4 when we said we go for growth, You can see it's working out and in this case Corona was helpful because here for sure a lot of other cosmetic sellers were struggling and we are clearly the place to be currently for a lot of brands. I also said that in my speech, approximately 100 brands more on our Flaconi website. and several thousand of customers are new registered. So for sure that's the basis for a very high price for such an asset. But again, you know, we don't have a timeline here because for us it's more or less that we have to create further value and then for sure summer somehow, as I said in my speech, as more internationalization need is there and so on, for sure that's also then an asset which for sure is something people could be interested in for the right price, you know, I'm always open to discuss.

Great, thank you very much.

Our next question comes from Omar Sheikh from Oregon Stanley. Please go ahead.

Good morning, everyone. I have three questions as well. If I could maybe start with Parship Meat, if that's possible. Could you maybe just give us some color on what was driving the growth during Q3? Was it subscriptions, virtual goods, or just some more color on that business, that would be helpful. And it looks like the organic growth in Q3 was slightly slower than the number you reported with Parship standalone in Q2. So if you could sort of give us some color on what's happening within Parship and within Meet during the quarter. That's the first question. And then secondly, I wanted to just touch on programming costs in Q4. I mean, normally this is the quarter where you have a look at your inventory. And in the past years, you've had some programming inventory write down. So I just wonder whether what you're thinking about that halfway through the quarter and also about the P&L programming expense during the quarter. And then finally, Ralph, maybe you could just give us a guide on free cash flow pre-M&A for 2020. That would be very helpful. Thank you.

So let's start with partnership meat. First of all, subscriber growth was driving our overall growth here. The organic growth was slightly lower. We have given out the numbers before. For September, we had approximately, out of the first time consolidation of the meat group, sales of 26 million and an adjusted EBITDA effect of approximately 6 million. expectation for the rest of the year that especially the subscriber businesses go on further so therefore if this EBITDA effect is something which you can take month by month I doubt because as more growth we have you know as more EBITDA effect is on that because the calculation is on subscriber acquisition costs in in some cases very high and We are first of all very very happy about it and I think it was a very good price and when I see valuations here in the market especially those of you who also believe like I do that the value of POSIMS ART1 is not only cash flow based when you take Flaconi as an example and there are also multiples existing in that market and when you would take Matchmaking or Match.com with EBITDA multiple above 30 times and yes that's the market leader and we are only the number two but we are the number two you know that that's clearly also when you take a discount shows how much value we have in these kind of businesses so for us very important and for me really something which really drives the diversification and will also support when you believe in in this kind of business also will give us further growth for the group.

Oma, good morning. I will be taking your free cash flow question. Obviously, Q4 is our typically EBITDA strong quarter. Hence, we are also generating the bulk of our cash flows in the fourth quarter. You should assume that we have a high EBITDA to cash conversion. based on, let's say, the guidance range we are providing, the number should be at around maybe 200 million something, depending obviously on trading and developments. So that overall pre-cash flow will really look good.

Great, thank you. And on the programming costs in Q4, maybe the P&L programming costs?

Well, Uma, I think we have stated in our prior calls, Q1, Q2, that we will embark on cost savings. And in the P&L, when you look at the adjusted program cost, we have already reduced program cost in Q3, around about $22 million. And we guided for around about $50 million in the full year. So the remainder will likely come in Q4. Okay. Thank you very much.

Our next question comes from Adrian de Saint-Lihilaire from Bank of America. Please go ahead.

Good morning, everyone, and thanks for taking the questions. A few for me, please. First of all, your guidance implies that Q4 revenues at the group level will be about flat, I think, but EBITDA is down minus 5% to minus 20% according to your guidance range. Can you just explain a bit further why There is such a gap between revenue and EBITDA performance. Secondly, on Flaconi, thanks for the disclosure on revenues and indeed quite impressive. Can I kindly ask you whether you could give us some color around the profitability of Flaconi perhaps now and how it was in the last few years? And lastly, thanks for the guidance for 2020 and the implied drop through that we can see on the business in 2020. Just wondering if you could help us do the same calculation for 2021. If indeed we assume that the ad market recovers, how much of that should hit the bottom line? Do you plan any reinvestment in programming or elsewhere? That would be super helpful. Thank you so much.

So for the top line, the situation is it all depends mostly on the TV market. cash or advertising assumption because that's decisive. The gap between revenues and EBITDA is based on the consolidation effect because we will have the first time then the meat group also part in the last quarter. So the profitability of this business is from a mixed point of view lower than I would win or lose TV cash ads which is more than 80, 90% contribution margin getting into the business. So the correlation of the lower end of sales compared to the EBITDA, the lower end of EBITDA as well as the higher end of sales compared to the EBITDA is a little bit wrong calculation. I would go for the mixed expectation. And as I said, you know, currently, I would say we have, you know, we are very committed to I think the current analyst estimate was around 630 million on adjusted EBITDA for the whole year. I believe we are currently a little bit above, up to the 650, and if November comes in as expected, we have an outperformance chance. If December is not going down further, that's the problem, which I don't know. December we have to see, especially the German government measurements, what will come if coronavirus infection stays on that high level which we currently have in Germany. So that's a little bit our approach to it and I think your question is mostly based on, please have in mind that the consolidation effect of the meat group is the reason why there is a higher EBITDA decline compared to revenues because we have a mixed effect here. Flaconi profitability, When you make markets and gain market share against everybody else in the industry, for sure your profitability is hurt. I can say we are, and I don't want to be too precise, but we are break-even slightly positive. And if we would reduce the growth, for sure we are clearly positive. So this is really like we make the market because we have the great opportunity currently. We are growing above 40% year-on-year. in some months even higher, and that's clearly what we want to reach because as bigger this business is, as we have seen businesses, for instance, like the Hut Group IPO-ing above three and a half times of sales or four times of sales, that's at least where we see that these kind of businesses have to be valued different than based on a cash flow, and that's also what we have in mind here. Programming costs, I already said before that I would say that a billion is a good assumption, also going on further, but we have to see how successful we are with our program, and especially access and prime time are key for our advertising customers, so our concentration is on that. Life and local is relevant, so therefore you shouldn't expect us to close huge studio contracts in the U.S., Therefore, also here our flexibility in programming costs are increasing based on a different approach than perhaps two to three years ago.

Thank you, Reiner.

Our next question comes from Lisa Yang from Goldman Sachs. Please go ahead.

Good morning. Thanks for taking my question as well. I just want to clarify in the four-year guidance that you gave, does that include any deconciliation impact of either MILOC and or WinSTAR? And would it be possible to get potentially the impact if it does? The second question is on the cost savings. I mean, thanks for giving us the saving of premium cost savings in Q3, Q4. I'm just wondering, obviously, you had a strong cost reduction overall, whether there was any sort of saving of other cost savings, any potential pull forward of cost savings from Q4 into Q3, for instance. That's the second question. The third one is on Newcombe. I'm just wondering why, given, obviously, the restrictions related to COVID were mostly impacted in Q2. Why was Q3 organic worse than Q2? And how should we think about the organic growth trends there for Q4, especially given the new restrictions? And the very final one, if I may, global sales within studios was very strong in Q3, which I assume had a strong drop through. So how should we think about that line in Q4 as well? Thank you.

So let me start with Newcom. You know, Q3 was on an organic growth a little bit worse than Q2 because we really got a huge push on Flaconi in Q2 due to the fact that with the lockdown, a lot of customer audit. And we also will see in our opinion in Q4, again, a huge push in Flaconi you will see in Q4 compared, you know, I'm now comparing as you did Q3 to Q4. You know the Amorelli calendar business and so on. So you have a lot of good products getting into that market. Here we can see Kia's success. Biggest issue in Q4, Silver 2 never came on their feet again based on being relevant to the travel business. The experience business is here in Nukom our challenge for Q4. Here we have to see if customers will order vouchers. You know, for Christmas, all depends, you know, on the development of COVID-19. You know, and that's, you know, one of the uncertainty in the newcomer business. So we see Flaconi, in our opinion, very strong in Q4. Amoreli, very strong in Q4. Question mark, experienced business, also a very good performance in Verivox. Um, so in my opinion, there are, we have to, and, and for sure, silver tours means building a meet one, the struggling due to being not able to travel or to, to rent cars or something like that. Um, guidance and, uh, you know, for sure in our guidance, my log deconsolidation as well as Insta is included. Um, Winster stands dependent on when we close our assumption is November end of November. approximately on sales 20 million, on profitability 2 million, and for my log, out of my head, approximately 3 to 4 million in sales and 1 million on the EBITDA. So that hopefully helps you to make your model and figure out how that works out. Cost savings?

I will take the cost savings question. I think I already elaborated on program cost. We realized a savings already in Q3 and there are additional savings to come in Q4. That should be another low double-digit million amount. We had 22 million in in the third quarter on an adjusted basis and we guided for 50 million in H2 in its entirety and obviously we continue to be cost conscious also in other cost elements like selling admin you name it and let's see how we manage the P&L but I would expect also and this is obviously before consolidation effects because we will have the meet group in Q4 in our accounts. There should be another staving, but let's see where we get to.

So in global sales, we had a strong Q3, especially due to our library sales. I mean, here, especially the move is a secret, you know, which we started in the third quarter. We also expect, you know, good performance in Q4. It all depends, again, you know, if you're able to finished some productions here too, but overall, you know, we are also here positive and also have in mind our strategy. 7-1 Entertainment Group is getting very close to Red Arrow Studios and Studio 71 because we want to build a more synergistic business model out of that. That's the reason why Wolfgang Link, my colleague, myself, and Henrik Papst, who is our purchasing manager, guy for all this kind of content whatever are now in the advisory board we have taken out we have changed the setting so therefore we very close because we are checking now what helps what is good for us which supports our approach of more local more life more special you know in our program and you know for Germany Austria and Switzerland And that's our approach. So, you know, very synergistic, very clear. Same, by the way, for some other areas which we have, you know, really focusing on making the maximum out of it and not, you know, living their own lives somewhere in the world.

Great. That's helpful. Thank you.

Our next question comes from Richard Early from UBS. Please go ahead.

Yeah, morning, everyone. Three questions from me. Firstly, in terms of given your comments about cash flow for fourth quarter, proceeds from Marlog and Windstar, what's the sort of net debt range that we should think for the full year number based on where we were at Q3? The second question is that In the actually accounts this time, you've actually given a Parship profitability number, and I think you've now put out some segment information in terms of where Parship was on a quarterly basis. So it highlights obviously the Nucon Group ex-Parship, the profitability in the first three quarters has been particularly weak, although that it was obviously positive in the third quarter. Can you just walk us through some of the puts and takes within that. I'd imagine there is obviously quite a negative operating rate leverage on Village and Baroom, but it'd be interesting to try and get some profitability understanding of the three businesses within that. You talked about Flaconi being sort of flat to slightly positive. Veribox, I'd imagine, should be positive. So it'd be interesting to see what the profitability is for the other businesses and how that should shape if we get a recovery into next year. Uh, so that's, uh, the second question. And then just the third question on the programming cost, you talked about a billion. Is this a P and L number or is this a cashflow number? Just to be clear.

Last one is easy. That's a P and L number. Um, you know, on the profitability on the new com business. Um, first of all, you know, we have, um, the ones which are growing, which are supported by COVID, and the ones who are struggling, which is the experienced business, especially when the second quarter started, as well as, you know, for sure, everything which had to do with travel. And especially Silver Tools is a very, very high margin, very profitable business in normal times. But in current times, you know, it's really struggling. That's the reason why short work short workage time was integrated directly when we have seen that they are struggling and so therefore we did everything to reduce the cost so therefore we are overall and especially our new com team has done here a tremendous good job you know for these kind of businesses on the other side you are totally right you know I can I can rely on what you've analyzed because for sure I'm really as well as Verivox are performing better because Verivox was struggling in 2019. We have that now better under control. So we are on a good track. And that's how it is. So it's up and down in this NuCom portfolio. And Flaconi, I already mentioned before, you know, sales up a lot. And on the other side, profitability is not the key element I'm concentrating on here. You know, we really try to make the market against all the others in this industry, in that market, because we want to gain market share and to increase our position here. Comments about cash flow? I would say, yeah, Ralf.

That's one I take. I think when you look at the net debt position at the end of Q3, $2,488,000,000, taking into account my comment on free cash flow before M&A in the fourth quarter of, let's say, roundabout 200,000, And assuming, and we are optimistic that this will happen, we are closing the Windstar transaction, which would yield, let's say, proceeds north of $200 million. As you can imagine, then net debt should come in at around $2.1 billion or so, give or take. This is probably the best you can put into your model.

Thanks. Can I ask a couple of follow-up questions, please? Just if we look to the performance of Newcombe last year, obviously the quarterly numbers, X matchmaking, first quarter was 12 million of Ibadar, second quarter was 6 million, third quarter was 4 million, and then we had a 33 million increase in the fourth quarter. You know, where we stand today is, Obviously, there's going to still be some disruptions on the experience business as we go into Q4, I would imagine. But where do we think that sort of EBITDA number sits in the fourth quarter within the guidance that you presented today on the 600 to 650? If we can get a feel for that, that would be helpful.

Yeah, I won't give a precise number, but as I said, you know, calendar business of Amoralee Works is very strong. Flaconi is very strong. VeriWorks is very strong. On the other side, you know, for us, most decisive will be how much influence we will have on the experience business. Because last year and the last quarter, for sure, in front of Christmas, people are buying vouchers if they have nothing else which they found as a Christmas present. we will see if this development is the same situation this year. And that's the decisive thing we are talking about, a deviation of 10 to 15 million as risk or upside potential.

So could I read that as out of the 33 million of last year, 10 to 15 million was that on the experience side?

It can be, yeah. Approximately, yes. Approximately, yes.

Yeah. sorry one final question is that on red arrow studios normally fourth quarter is a good number uh particularly on the profitability side you talked about on the call i think rhino about studio 71 actually been positive in margin in the third quarter he did 22 million of profitability in the fourth quarter of 2019 uh and if you look at the business in terms of where we're in this year And are we expecting another good quarter of profitability in the Q4, or is there anything that we should be aware of which will impact that number?

Well, Richard, that will very much depend on whether or not productions will become postponed because of the renewed lockdown conditions. So we also see obviously some risk to last year's EBITDA. However, not significant. So upside probably limited to what we saw last year in Q4 with some potential for downside should productions become postponed.

We talk here approximately 10 million down or something like that. This is not dramatic if something goes down. At the end, when we look on our outlook, the most important assumption is the advertising business because the rest is pretty stable overall. The risks are pretty limited. At the end, it all depends what is going on with December. And if the great November, which we currently see for our advertising business, stays there where it is currently. And then, you know, for sure, whatever happens on Red Arrow Studio and, you know, in the other parts of NuCom is not really relevant. So at the end, it's the advertising expectation and the COVID-19 development in Germany. Okay.

can i just sorry to ask is that the step changes need to die from q3 19 to q3 20 from 9 million to 15 million was there anything in there in terms of catch-up in terms of the benefit of programming sales that benefited the margin in q3 that won't be replicated in q4 because obviously you're indicating q4 will be down from the 22 million you know potentially that you did in q4 last year so i'm just trying to understand why Q3 was better this year than last year, but Q4 will be worse.

Yeah, Q3 versus Q4, Q3 versus Q3, that's the question, catch up. That's at the end for us, more or less, mostly library sales. As I said, The Secret is relevant in that case, the new movie which came out for Red Arrow Studios. And again, I personally, if I would know exactly and precisely how my crystal board is as unclear as everybody else. So we have done here an assumption of the 600 to 650 million euros, which is best guess currently. And, you know, we also built in some risks and some opportunities. And for sure, you know, 3 million up and down, 5 million up and down is always possible. And that's how we look onto it, because we are not guiding... different segments here. We are looking on the overall group and we believe that that's something which I would like to repeat because at the end, our guidance is not Brett Erich is doing this, Nucon Group is doing that, Matchmaking is doing that. It's more or less we want to reach 600 to 650 million euros on adjusted EBITDA. Currently, I would say it's the higher end dependent on a very, very strong November. even an outperforming chance. But, you know, on the other side, whatever happens, if the lockdown effects, you know, from the German government for Germany gets into play again deeper than we have seen it or which were announced at the end of October, you know, then we perhaps, you know, have this buffer downwards to the 600 to offset some effects. And again, the advertising business is, the basis for a better or worse number.

Okay. That's good. Thanks.

Our next question comes from Connor or she from Kepler-Shavroot. Please go ahead.

Yes. Good morning, everybody. Thanks for taking my questions. Three quick questions from my side. Firstly, thanks for giving the comments on programming costs. But do you have a sense of what maybe could be characterized as temporary cost savings outside programming costs in 2020, which might cycle back in in 2021? And they're thinking beyond that. Those activities that you mentioned that are under significant pressure where there may be a cost of sales impact in 2020 that might cycle in. But thinking more about the fixed costs and admin and so on, travel, do you have a sense of what that number might be cycling back in next year? Second question. Just on JOIN, I was curious, I don't think you've got any mention in your slide pack, which is a little bit surprising. Can you maybe update a little bit on the KPIs and what's happening there? And then the last question, just on beauty and lifestyle, thanks for giving the numbers on Flaconi, but with 45% growth in Flaconi organic Q3 versus 19% for the division overall, just wondering what the declines in the other activities, I guess it's stylight and maybe one or two others must be significantly down to bring the overall average down much lower. If you could maybe say a couple of words about that. Thank you.

So the last question is pretty easy because it's Möbels and stylight. Stylight was good, by the way, sorry. Möbels as well as about home. So everything which is... More lifestyle, not beauty. And the expectation for the year-end is, especially Amorelie, get into the game in the last quarter with their calendar. The year-end calendar is decisive for the beauty and lifestyle business for Amorelie. Yeah, Ralf, you want to do the rest?

Yeah, I take the programming cost question, I think. Rainer has already elaborated of what we believe could be the right number for the P&L, around about a billion. Please be reminded that we entered the year with an intended 50 million cost increase, which we then cut back, and then we also embarked on another 50 million of savings, bringing the P&L expense down. slightly below the 1 billion mark so I think we can have a better discussion on this subject next year when we have a little bit more visibility but I think we want to contain cost in this uncertain environment, and I believe the one billion is the right number.

Well, it was more about the non-programming costs. Is there any costs that you've temporarily cut back that you think will cycle back in next year?

Okay. Look also on the other cost items. We will be very cost-conscious. And obviously, we are hoping for improved top-line developments, which will bring revenue-related costs. Every cost line item we can control, we want to control, and we won't accept hyperinflation here. So we will continue our course of managing cost and cash flows in a very disciplined manner. I think your next one was on join, updating KPIs. We are currently with join at 3.5 million unique users, which is an improvement over September where we were at 3.1. And this is a function of the usual, let's say, seasonality. Now come winter or we are in autumn, then usage goes up. And so far so good. We are satisfied with the development.

A new program is coming to join and therefore we will have a better usage again because we didn't have new shows, new series in the third quarter. And that's the reason why it wasn't growing a lot. But we also expect that to grow But Join is part of our overall universe. Please have in mind when you, for instance, are one of our customers and you watch The Voice of Germany, for sure we also have a huge audience in The Voice of Germany, as well as for The Masked Singer in our voting and so on. And Join is one of our distribution channels to get more digital sales and more digital advertising in. But it's overall... part of our universe to take our content from the linear world into the digital world.

Okay, so on the 3.5 million, you're still not willing to give a proportion that are taking the paid version?

That's easy because it's not a very big number because our target here clearly is we are an advertising financed business model. because we believe, it's more or less our belief, that when you look on things like on subscription-based model, which are already in that market, it will be very difficult to succeed with this. And therefore, we have decided that subscription is one part and most of the customers are coming out of the old Maxdome universe. We have several of them. but at the end, our business model is selling advertising and getting a higher price for that than in a linear campaign, as we do with others.

Many thanks, Werner. Sarah Simon from Berender. Please go ahead. Your line is open.

Yes, hi. I've got three questions. Firstly, just now you've sold WinStar, which I think everybody was positively surprised by in terms of A, the profitability, and B, the valuation. How are you feeling about things like Immoralee and Mobile and Skylight, which we don't really hear so much about? Do you think those are as key to you as Flaconi at the moment? Second one was on TV. I mean, I think we've all got the sense that November's looking pretty good. And if we think about last year, you were obviously willing to sacrifice a bit of profitability to accelerate the growth of Flaconi. Would you be open to putting a bit more money back into, say, marketing or programming if the advertising comes in better, or should we just assume that if advertising is better, it all drops to the bottom line? And then just quickly, on disposals, you were obviously trying to sell your non-German studios business and put a pause on that. When should we expect that transaction to kind of restart? Thanks.

So overall, WinStar was a huge success for us, totally right. But it also has shown how the value creation in our portfolio works. So lots of other German small companies are interested in talking to our seven ventures and the accelerator to get media for revenue, media for equity deals, because in three to four years, be really or even five to six years, we can create huge value. Mobile and style art, these are businesses in the beauty and lifestyle business. As I already said in the past, we always screen the market. Same for Flaconi. If we are the best owner, a huge internationalization outside Germany, Austria, and Switzerland where we are not the best owners anymore. It's also something we look at, so everybody who's interested always can ask us. But Amoreli or some other businesses, we really think currently we are the best owners and we have to develop that further on and create more value because we believe there is more. For Flaconi, last year we changed the strategy from a cash flow basis to a growth-oriented strategy, this was totally right. And we keep that on that level. So I have priced everything which we can do in marketing for Flaconi already in my guidance. So even when my TV advertising business gets better, that falls down to the profitability. Because at the end, I treat every business best for each business. So that means I'm not subsidizing one with the other. So therefore, the focus is on each part of the different areas, and everybody has to fulfill their profitability targets, their sales targets, and they have to explain to me why it's not the case if it's not the case. So therefore, I have no excuses, and I don't put more money into it than we already have planned, whatever happens to the rest. Disposals... For the international business Red Arrow Studios, we clearly stopped that process at the beginning of this year. As I said, we are currently analyzing in our management team together. I'm very happy that Henrik Papst, as I said, our content head, as well as my honored colleague Wolfgang Link, who is our 7.1 Entertainment segment responsible person, We look carefully, you know, on each asset. We talk to every talent to make sure what we can more to get synergies out of the Red Arrow Studios in our direction. And that's exactly how we want to proceed. And, you know, that's currently my target. And then we have to see what the time will bring. Similar discussion like with the Nucon portfolio, if we have to also figure out if we are the best owner and currently in lots of these assets we know we are. Take Red7 as one example for sure. This is in most of the cases our production business. There we are clearly. Same for Studio 71 Germany with the influencer business that's also very close to us and also for the international ones. Some of them take Red7. Yesterday evening, Merit as First Sight should start. That's one of the, in Germany, in our program. You know, that's one of the developed businesses in our Red Arrow Studio Group. So we have a lot of talent there. In the past, you know, the focus was more on where can I sell it. Now the focus is more how can this business help us to support the... German entertainment business, and if we find the right format for that. First, we have to finish our analysis, and then we have to see what fits, what doesn't fit, and then we will take the next step.

That's great. Thanks.

And we will now take our last question in the queue from Nisla Nezer from Deutsche Bank. Please go ahead.

Great. Thank you. I just have two final questions, if I may. The first is on the new com sort of portfolio monetization. You are selling several assets and we've seen that actually happen this year. I'm curious to understand if at some point you will consider sort of leveling up again and acquiring businesses to sort of strengthen that new com portfolio again, maybe the early stage ones like you did, you know, several years ago. So just some color around how you're thinking about even padding up the new com portfolio going forward would be great and which sectors you would be considering moving if you do want to go down that path. The second is on your attempt to get digital money back into Perseben as opposed to the traditional linear TV advertising money. Apart from JOIN, what other sort of strategies are you considering to get that shift and win that sort of advertising budget? And how much could we expect next year in terms of investments into those digital avenues when it comes to sort of video streaming? some color there would be great. Thank you.

So a lot of questions. I try my best to answer them all. Perhaps you have to ask again. So first of all, portfolio monetization, it's both ways. You have seen, for instance, when we looked on our portfolio partnership meet, we bought the meet group to strengthen our portfolio. We look very carefully on the Nucon portfolio, which fits to TV. and which doesn't fit. I give you one example, even if the experienced business is struggling currently, you know, we know that the experienced business is very relevant to TV, because when we would show Germany's Next Top Model, let our models jump out of the plane, make great photos out of that, and this would have, that Jochen Schweitzer, our brand there, is supporting that, you know, we have a lot of bookings the next day, so at the end, you know, this is very TV correlated and is very helpful in that. So we look on this portfolio more or less, you know, what helps, what is good. And we also further invest, and you always should look on our minority investments here, you know, because the path, and I try to explain that in my speech, you know, from media to revenues, media for equity deals, which is the first step, there we take a minority stake. Next step, we figure out if TV really is helpful to support these kind of assets. And if this is the case, we invest further on. We also put in cash. And that's how NuCom was created or the assets were created in the past. And we also will follow this path going on further. We have the seven ventures business and the accelerator business. In Germany, we are one of the biggest investors in But not with poor cash, with our strong TV advertising business where we take the free capacities, put that on the assets, figure out if they are supported by it and based on that, and this is a very intelligent business model which was developed I think five to six years ago, which we consequently will follow. And then we have to take WinStar as an example. It's not only that it's internationalization. At the end, you also have to look on the product, the portfolio, and so on. And therefore, if you're not coming out of pharma, it also will be difficult to manage it. Same when inventory gets more and more important for something like Flaconi. Then automatically, you have to ask yourself, what are your talents? Where are you good at? And our... where we are very strong is brands building up consumer brands really investing into that you know our marketing power you know and that's our asset and that's what we want to do and that's what we look at and so we also will acquire but we are not acquiring with cash we are acquiring with our media with our free media capacity on TV and therefore we want to have you know, percentages in companies, and that's how we create value. I think it's very intelligent and it's very successful, as you could see in the past, and I've given you three examples, you know, with Parship Meat, with WinStar, as well as with Flaconi, and there are others, you know, and that's clearly the way also going on further. Join. Join. Join is one piece, and that's also in our chart presentation when you look on this universe there, in our digital world. We also have contracts with other platforms where our 7.1 media sales team is working with, where we also market these platforms, and also the distribution business is part of our our strategy and you have addressable TV, you have all this kind of business model in the digital work which Ralph has said before has taken us to this digital growth of above 25% year on year and that's also the offsetting effect against the decline which you have in the poor linear TV caches and that's the reason why we always look on the overall advertising And these are the upsetting effects which you want to do. Hopefully that answers the question.

It does. Thank you very much.

Thanks.

And we have a pop-up question. Would you like to take it?

No, I think we will follow up after the call. So, ladies and gentlemen, that was our last question for today's call. As always, my colleagues in the Investor Relations team and myself will be available for any follow-up questions shortly. So thank you and goodbye.

Thank you. That will conclude today's conference call. Thank you for your participation. You may now disconnect.