Prosieben Sat 1 Media

Good morning, ladies and gentlemen. Welcome to the Q3 and nine months 2021 results call of ProSieben Sat1 Media SE. This conference is being recorded. Today's call is hosted by Mr. Dirk Voigtlander. Please go ahead, sir.

Good morning, ladies and gentlemen, and welcome also from my side to our third quarter 2021 results conference call. As in previous quarters, today's conference call will be hosted by Rainer Beaujean, Chairman of the Executive Board, and Ralf Gehrig, Deputy CFO of ProSieben Z1. During the presentation, Rainer and Ralf will take you through the financial and operational performance of the third quarter and the first nine months 2021. Rainer will then comment on our increased financial targets for the current financial year. The presentation will be followed by a Q&A session.

With these opening remarks, I now hand over to Rainer.

Good morning also from my side and welcome to our analyst and investor call on our third quarter 2021 results and the first nine months of this year. Let me start with a very positive message. ProSiebenSat1 has posted a quarter of records and clearly improved its profitability throughout the year. This is a result of our successful strategy based on the synergistic setup of our three segments. We are very happy with our performance closing the third quarter even stronger than expected. Especially important and proof of the directions we are steering the business. Also, our most important key performance indicators, such as adjusted operating free cash flow and ProSiebenSat1 return on capital employed, are improving considerably. Please let me remind you that the ProSiebenSat1 return on capital employed is an important KPI to measure our success. let's have a look at the important moments of this quarter. We will begin with a short overview of what shaped our past months, followed by an update on our operational highlights. This time, we will put the focus on our entertainment activities. Not only did we post significant growth in Q3, but this gives us the opportunity to show you the future prospects of the segment. Afterwards, We will cover our group financials and end this presentation with a closer look at the overall market development in our outlook for the full year. Let's start on slide number three. Based on another strong quarterly performance, we set the course for further growth and raised our financial targets for 2021 again. ProSiebenSat 1 continued to grow dynamically in Q3, posting a significant revenue increase of 15% to 1 billion 55 million euros. These are the highest third quarter revenues in the history of our group. At the same time, our adjusted EBITDA rose by 9% to 162 million euros. Driven by a strong advertising business, our entertainment segment continued to grow notably. Revenues increased by 15%, the segments adjusted EBITDA by 11%, thus improving our earnings. Please note that we not only exceeded the 2019 level of our advertising revenues in the German-speaking region, but that we recorded the highest advertising revenues in a third quarter ever. Our dating segment continued to benefit from the first-time consolidation of the meet group in September 2020, and our commerce and venture segment delivered another quarter of strong organic revenue growth. As I have already highlighted, our financial performance continues to improve strongly, and my executive board colleagues and I are pleased that we are making progress in achieving the targets we set out when we took on our current roles. We said that we would refocus on cash flow generation and the ProSiebenSat.1 return on capital employed with success. Our adjusted operating fee cash flow has grown by 100 million euros this quarter year on year, as Ralf will talk about in more detail later. And our ProSiebenSat.1 return on capital employed has increased to 13.6%. clearly ahead of our target of more than 10% for 2021, and therefore a strong indication to reach our mid-term target of 15% for the Group, much faster than expected. At the same time, we reduced our financial leverage to 2.5 times. Furthermore, we have set up our financing in a more stable, long-term oriented way, In October, we prepaid €900 million of our existing term loans and used the proceeds of a new promissory loan in the amount of €700 million for this purpose. Against this backdrop, we reduced our cross-debt accordingly while taking advantage of the ongoing attractive conditions in the debt capital markets and further extending and diversifying our debt maturity profiles. Based on our further good performance in the advertising market, we are again raising our full-year targets. We will talk about that in detail later. Slide 4 shows how dynamic Q3 revenue increase in the amount of €134 million is allocated across our portfolio. We are very pleased with the development of our entertainment segment. As discussed, Our advertising revenues in the region of Germany, Austria and Switzerland now are not only above pre-corona level, but also reach a new Q3 record fueled by the further strong demand from our advertising customers. In our dating segment, the reported revenue growth of 53% underlines how ProSiebenSat.1 is benefiting from the meat group. The commerce and venture segment continues to recover strongly after COVID-19. Most importantly, the segment's organic revenue plus of 15% is driven by all of its verticals. Let's now take a closer look at entertainment, dating, as well as commerce and ventures and their operational progress. Starting with the entertainment business on slide six, we get a pretty good idea of the current dynamic in the TV advertising market in Germany. According to Nielsen, almost all key TV advertising industries grew their spending in the third quarter and the first nine months of the year. Most notably, the services and finance industries left the COVID-19 restraints behind and started to pick up their spending. And it comes as no surprise that there is now catch-up potential in the automotive industry, which is currently being challenged by supply shortages. In other words, TV clearly continues to be the medium of choice for marketers to generate both attention and reach. On to slide number seven. In this positive market environment, our Pro7.1 advertising business continued to grow even stronger and faster than expected. In the German-speaking region, we recorded a strong increase of 21% in advertising revenues in the third quarter. Our biggest growth drivers are the food, finance, as well as healthcare and pharma sectors. With this performance, We are also 13% above the respective period in 2019 and thus our pre-Corona level. Our nine-month period still reflects the lockdown-influenced first quarter and is marginally below our 2019 results. Slide 8 gives you a quick snapshot of how ProSiebenSat.1 continues to lead the German market. With a gross advertising revenue share of 37.7% in the third quarter with regard to the last 12 months, we are clearly the number one in the market. This is also true for the TV audience market with a share of 25.6% based on the past 12 months. These figures also speak for the attractiveness of our content and advertising products which we have greatly developed over the past months. This brings me to slide number nine. We are further progressing on our local content strategy, which helps us to maximize our reach and to improve our monetization. As you all know, we further invested in attractive and relevant content with the most prominent example being the German Bundesliga. We will talk about that in a moment. But we also lift up to our live local relevance strategy with an extensive information campaign in the run-up of the federal elections in Germany and clearly fulfill the social responsibility that comes with our reach. Plus, our 7.1 Entertainment Group secured exclusive first access rights to all TV developments of Talpa concept. Talpa is internationally renowned for big entertainment shows. Among them, our all-time hit, The Voice of Germany. Allowing us the first pick on all future formats, this deal is a real win for our content strategy and further demonstrates that we continue to rely on partnerships when the idea is convincing. Advertising. By unifying the previously different booking logics of TV and digital, our customers are now able to run their advertising campaign across our entire TV and digital offerings. including our streaming platform join and the digital channels of studio 71 running the first major total video based on sea flight campaign on our channels in q3 gives an idea of the potential of such a fully integrated advertising solution distribution Year-to-date revenue plus of 7% until September in our distribution business demonstrate that this business has become a steady source of income over the years. And we are strongly participating in the increasing IPTV and OTT market by securing or renewing deals with third-party platforms. Examples are Magenta TV, Sky OTT Germany, HD Plus OTT and Roku. The Deutsche Telekom deal also includes the extension of our reach in ultra-high definition and an advertising cooperation regarding addressable TV and data-based offers. That's important because it now enables us to intelligently market Magenta TV's reach. Platin puts the German Bundesliga in the spotlight. I was always very outspoken about the fact that we are able to monetize our soccer rights. Let me now show you how we made use of our entire entertainment ecosystem to do so. Our soccer coverage goes far beyond simply broadcasting the nine live matches per season on TV. What did we do with the three matches that we aired until now? First of all, we recorded exceptional market shares, 27.7% at the opening game of the Bundesliga on free TV. We maximize this reach by extending our TV program with new formats such as the RAN Bundesliga Flash, by streaming the matches live on JOIN as well as the RAN and ZEIT1 apps and websites, and by further activating the digital space, for example, via weekly web shows on YouTube and Facebook Live or the live vertical broadcast of one match on our TikTok channel. For these, New sports environments, our sales team secured five strong advertising partners and monetized the linear and digital spaces through multiple special advertising forms. This all was possible because we extensively used the synergistic setup within our entertainment sector. From rights acquisition to editorial and sales, all areas worked closely together to provide soccer fans with a first-class experience and advertising partners with a big stage for their messages, all multi-channel. This is exactly how we will also stage and monetize our further sports offerings, be it American football, motorsports or esports and gaming. Let's move on to our dating business. On slide 11, you can clearly see the important role that Parship Meet Group is playing for ProSiebenSat.1. the reported dating revenue increases of more than 100% compared to the pre-corona 2019 level, both in Q3 and the first nine months. This reflects the first-time consolidation of the Meet Group 2. This revenue development is, amongst others, supported by two factors. First, the strong performance of our video as a platform service, short VPaaS, for which we were able to win three additional brands the third quarter additionally we have five further brands in the pipeline for the fourth quarter v-pass is the technology that enables our live video product and also includes a whole package of capabilities such as moderation talent management a format variety as well as a gifting model for monetization second the continuous positive development of our e-harmony business Growing both in the US and internationally, eHarmony is on its way to become the largest brand in our matchmaking portfolio. Onto our commerce and venture segment, slide number 12, please. Also in our third segment, the remaining COVID-19 impacts are becoming less and less or are completely gone. Two examples. Our experience provider Jochen Schweizer MyDays raised its voucher sales in the third quarter by 13% year-on-year. And second, our car rental comparison business Silver Tours increased its revenues by more than 50%. Looking at the graph on the slide, you can see that we are performing not only better than last year, but also exceeding the pre-crisis figures of 2019 with a plus of 10% in Q3 and 11% in the first nine months. And we are further creating value in this segment as our new investments as well as disposals on the next slideshow. On the one hand, we have secured new deals and follow-on deals with startups or early growth companies. Among them, Grover, a leading European consumer tech subscription platform, which we are supporting via a media for equity deal. We also launched the first 360 degree campaign on our minority investment urban sports club, a sport and wellness platform, and are now actively developing the brand with our high reach and advertising expertise. What do these companies have in common? a highly digital business model combined with a strong ability to grow their businesses via advertising. On the other hand, we decided to sell all of our shares in Amorelie to Ecom Group, one of the biggest players in the European sexual wellness market. We have been working with Amorelie for seven years. Following a media for equity investment in 2014, we acquired the majority stake in 2015 and expanded our shareholding to around 98% in 2018. Over this time, our media power and operational know-how were essential to build the Amorelie brand in the German-speaking countries. However, we no longer considered ProSiebenSat.1 to be the best owner of Amorelie with regard to the further internationalization and thus the next development step of the company. Also, The topics of product design and product sourcing in countries like China and India are not the core competence of ProSieben.1. We are great at building brands, but are also prepared to sell companies once they enter the next development phase. Our focus is on investments that can be further developed through synergies with the entertainment business or even international platform businesses such as Parsha Meat Group. And herewith, I hand over to our Deputy CFO, Ralf Gierig, who will explain to you how our operational progress is reflected in our group financials.

Thank you, Rainer. Good morning, ladies and gentlemen, and a warm welcome also from my side. Let me now continue with additional remarks regarding our financial performance in Q3 and the nine-month period for 2021, starting with a revenue overview for the group and our three segments. ProSiebenSat1 Group continued to grow dynamically in the third quarter of 2021, recording a significant increase in group revenues by 15% to 1,055,000,000 euros and thus achieving the highest third quarter revenues in the group's history. In particular, the group's advertising business has continued to improve strongly with notable double-digit percentage growth. At the same time, Other business areas also contributed to this considerable revenue growth, which demonstrates that the group's diversified profile and yet synergistic setup is paying off. On a nine-month basis, revenues increased by 19% to 3 billion 41 million euros. Organically, i.e. adjusted for currency effects and portfolio changes, Group revenues recorded an increase of 15% in Q3 and 16% in the first nine months of 2021. Entertainment segment revenues amounted to €728 million in Q3 2021, an increase of 15% or €95 million versus prior year. On a portfolio and currency adjusted basis, Revenue growth was also significant and equalled 17%. We have managed to strengthen our market position in an overall growing advertising market that, after a strong increase in the second quarter, has continued to recover dynamically from the COVID-19 effects of the previous year. This set advertising revenues in the entertainment segment in Q3 2021 were 18% above the previous year's level and at 12% significantly higher compared to Q3 2019, the pre-COVID-19 level. Entertainment advertising revenues for the German-speaking markets even grew by 21% in the third quarter and by 13% compared to the pre-COVID-19 level in Q3 2019. With this, our advertising business also notably outperformed the broader European market, which recent data points of advertising agencies and other broadcasters suggest. The nine-month period was also characterized by the recovery of the COVID-19 effects. Entertainment advertising revenues increased by 15% and entertainment advertising revenues for the German-speaking markets by 16%. The distribution business continued its solid and predictable revenue growth with an increase of 7% in the first nine months, driven by HD subscriber growth and overall more comprehensive distribution agreements, as Rainer just explained. There was also a dynamic development in the content business, which led to a 20% revenue increase in Q3, resulting from the production business. Other entertainment revenues declined by 23% in Q3 2021 versus Q3 2020, amongst others, due to the deconsolidation of the hosting provider Mylock in September 2020. Dating segment revenues increased strongly by 53% or €44 million to €129 million in Q3 2021. This was driven by the first-time consolidation of the Meet Group in September 2020. On an organic basis, revenues were almost stable at minus 2% in both the third quarter and the first nine months of 2021. There are a few points to notice, mainly relating to our matchmaking business in Europe. First, especially the first quarter of 2021 was still negatively affected by the lockdown measures in the German-speaking countries. Also, 2020 was a record year, setting a high base. As a result, Q2 and Q3 2021 faced particularly strong comparable figures from the previous year. Just to remind you, in Q2 2020 the matchmaking business was up by plus 13% and in Q3 2020 it was up by plus 11%. This compares to a multi-year trend in the mid single digit percentage range and illustrates the strong tailwind we had from the pandemic last year. Last but not least, we would like to highlight that the pro forma revenue growth in the first nine months of 2021 was 9% after about 33% in the same period last year that notably benefited from the pandemic. This being said, the two-year revenue CAGR of the dating business in the first nine months has been about 20%, which demonstrates the strong underlying financial performance independent of the COVID-19-related tailwind the business enjoyed last year. Commerce and Ventures revenues were almost at the previous year level and amounted to 198 million euros in the third quarter of 2021. Please note that the prior year's level still included a 31 million revenue contribution of WinStar Medical, which has only been deconsolidated in December 2020. Adjusted for this portfolio change and the currency effects, segment revenues grew by 15% in the third quarter. Here, the online beauty provider Fluconi continued to be a meaningful revenue growth contributor, both percentage-wise and in absolute terms. Significant growth rates were also recorded, among others, by the online car rental platform Billiger Mietwagen, as well as the experience and leisure business Jochen Schweitzer My Days. Lastly, the advertising business in this segment grew very satisfactorily by 25% in Q3 2021, driven by seven ventures and the continued growth of Better.com and Mark Guru. For the nine-month period, the segment posted a 14% organic revenue growth. Please turn to page 16. As a result of the before-mentioned dynamic revenue performance, the group's adjusted EBITDA improved further compared to the previous year. On a quarterly basis, it increased by 9% and amounted to €162 million. On a nine-month basis, though, it even improved by 43% to €470 million, refracting the revenue growth of the high-margin advertising business especially in Q2, but also in Q3 2021. The entertainment segment increased its adjusted EBITDA by 13 million euros to 128 million euros in the third quarter. In the first nine months, adjusted EBITDA improved by 41%, mainly as a result of the aforementioned dynamic development of the advertising business in Q2 and Q3 2021, respectively. In addition, Segment earnings were supported by growing content and distribution revenues. This was partially offset by a notably increased programming spend. While programming spend increased by 21% to 259 million euros in the third quarter, it grew by 9% to 748 million euros on a nine-month basis. As Rainer mentioned before, we are currently making use of the very positive advertising market environment in order to strengthen all our platforms with attractive local and live content and to strengthen our overall reach. For example, we invested in sports rights such as the German Bundesliga and the Formula E. In addition, we have spent more on German fictional formats as well as primetime reality formats. The adjusted EBITDA of the dating segment recorded an increase of 6 million euros to 25 million euros due to the first-time consolidation of the meet group in September 2020. On a nine-month basis, adjusted EBITDA for the dating segment grew 71%, also benefiting from the first-time consolidation of the meet group. In the commerce and venture segment, adjusted EBITDA decreased by 25% in Q3 2021, primarily reflecting the deconsolidation of WinStar Medical, which still contributed an adjusted EBITDA of 5 million euros in Q3 last year. On a nine-month basis, however, adjusted EBITDA was almost stable and amounted to 33 million euros despite the deconsolidation of WinStar Medical. WinStar Medical had still contributed an adjusted EBITDA of 15 million euros in the first nine months of 2020. Please turn to page 17. Let me now continue with additional comments about other P&L items below adjusted EBITDA. Despite an increase in adjusted EBITDA, both reported EBITDA and EBIT have been below prior year's level. The only reason for this decline is last year's disposal gain for our hosting business MILOG in the amount of 35 million euros, which led to a higher reported EBITDA and EBIT figure in the previous year, but which has been excluded from adjusted EBITDA as reconciling item accordingly. This caused a meaningful swing in reconciling items by 31 million euros from plus 25 million euros last year to minus 6 million in Q3 2021 and affected reported earning metrics. The increase in reported net income in Q3 2021 and especially in the first nine months of 2021 is due to the increase in operating profit as well as valuation effects recognized in H1 and which have also been excluded from the adjusted net income. Adjusted net income almost doubled in the third quarter of 2021, increasing to 58 million euros. On a nine-month basis, it grew strongly by €122 million to €158 million. The meaningful increase largely reflects the very positive development of adjusted EBITDA and an improvement of underlying financial result. For example, due to lower interest expenses following the repayment of senior notes earlier this year. And already today we can say, Applying our dividend policy, the dividend for fiscal 2021 will increase on the back of the emerging significant increase of adjusted net income for the current year. Let me now conclude this page by highlighting the substantial improvement of the adjusted operating free cash flow. This key figure of the group increased by 100 million to 134 million euros in Q3, and by 236 million to 303 million euros in the first nine months of 2021. The positive development of the adjusted operating free cash flow reflects the group's high earnings growth and also underlines our effective cash flow management. Let us now have a look how this translated into a change in financial leverage and net debt on page 18. Strong free cash flow and net inflows from M&A in the past 12 months resulted in the group's net financial debt decreasing significantly by 377 million euros to 2 billion 111 million euros at the end of Q3 2021 versus Q3 2020, despite the distribution of the 2020 dividend in the amount of 111 million euros. The dividend payment also explains the net financial debt increase compared to the end of 2020. Please be reminded that in Q4 2020, we received net cash disposal proceeds from the disposal of WinStar Medical. Hence, Q3 2021 represents the last quarter in which this positive effect is reflected in the year-on-year comparison. Gross debt was also significantly reduced by €950 million due to the repayment of the senior notes in the amount of €600 million in January 2021 and the repayment of prior years' temporary RCF drawdowns. Against the background of the improved earnings in the past 12 months and the significantly reduced net financial debt, the leverage factor clearly improved at the end of the reporting period, decreasing to a factor of 2.5 times compared to 3.7 times at the end of Q3 2020, which was still heavily influenced by COVID-19 impacts. This being said, we now expect the year-end financial leverage to further improve to below 2.5 times, as Rainer will outline in the outlook section. Let's move to the next page. As you are probably aware, we announced on October 8, 2021, that we refinanced part of our bank term loans of our syndicated facilities agreement by issuing promissory loans in the domestic Schulzschein market. Generally, ProSieben.Eins Group uses various debt financing instruments for the purpose of its group financing. The latter is regularly adjusted with respect to volumes and maturities. As such, in October 2021, we successfully placed promissory loans in the total amount of 700 million euros with tenors of 4, 6, 8 and 10 years and respective volumes of 226, 346, 80 and 48 million euros at very attractive terms. Following this, the company prepaid 900 million euros of its existing term loans under its senior facilities agreement in early October by inter alia applying the full growth proceeds from the new 700 million euro promissory loans. With the refinancing, the group reduced its term loans from 2.1 billion euros to 1.2 billion euros, while further extending and diversifying the debt maturity profile. With this, I hand back to Rainer.

Thank you, Ralf. The figures just made it clear our strategy is leading our company successfully into the future. Slide 21 visualizes this perfectly. If we look at the last 12 months, our group revenues clearly exceed the pre-crisis level of financial year 2019 by about 400 million euros. Although the pandemic had the strongest negative impact in the entertainment segment, its revenues were above pre-COVID-19 level in the last 12 months. Our Entertainment Dach advertising revenues were only approximately 1% below the level of the financial year 2019, and our diversification efforts with the content distribution and the International Studio 71 businesses drove our revenue growth. As for the group's adjusted EBITDA, the last 12 months figure is still below the level of the 2019 financial year. This is mainly due to the COVID-19 impact and the different revenue mix in the entertainment segment, whereas the adjusted EBITDA of dating and commerce and ventures combined increased by a total of 39 million euros versus financial year 2019. A fact that just underlines the importance of these two segments for ProSiebenSat.1's long-term success. We are optimistic that the group's earnings will continue to improve going forward, also taking into account the continued investment in our businesses. And with these figures, we are well on track to achieve our new financial targets. Please turn with me to slide number 22. Against the backdrop of the further strong development of our advertising revenues in the third quarter of 2021, we have decided to again increase our full year 2021 financial targets compared to the outlook that we published on July 19th, 2021. In total, we are now targeting group revenues of 4.5 billion euros with a variance of plus minus 50 million euros. This corresponds to an increase between 10% and 12% compared to the previous year. The range of the revenue target figures continues to depend particularly on the development of our advertising revenues in the region of Germany, Austria and Switzerland in the context of the further course of the COVID-19 pandemic. Following the strong third quarter, we now assume a growth of 9% to 11% and thus a better than previously expected development. Based on these revenue assumptions, we now anticipate a group-adjusted EBITDA for the full year 2021 of around 840 million euros, with a variance of plus-minus 10 million euros. Looking at the midpoint, this corresponds to a year-on-year increase of 19%. We are further using the positive advertising market environment to increase our investments in local programming in order to expand our reach across all platforms and thus also create the conditions for further advertising revenue growth in the future. Accordingly, and as announced in the context of our annual press conference on March 4th, program costs for the full year will amount in total to about a billion euros, with over half of its relating to local content and will be in total up to 50 million euros above the previous year. The increase of our revenue in adjusted EBITDA target ranges also has a positive effect on the group's other most important financial performance indicators. We now assume that the adjusted operating free cash flow for the full year should improve by at least 100 million euros compared to the previous year. Due to our consistent management and the improvement of our relevant key earnings figures at the year end of 2021, we now anticipate a financial leverage ratio below the upper end of our 1.5 times to 2.5 times target range. As for the adjusted net income, we now expect this figure to be significantly above the previous year's figure of 221 million euros. Accordingly, The dividend payment to the shareholders of our group would also increase. And as you know, we measure the mid-term financial success of our company on the basis of the ProSiebenSat.1 return on capital employed, which we introduced as our key figure for the entire group in 2020. Against the background of the improved operating performance of our company and our consistent sustainable management, we now target a ProSiebenSat.1 return on capital employed of more than 13% in the financial year 2021. For the group as a whole, this key figure is expected to exceed 15% in the midterm. Looking at the last 12 months return on capital employed, which is at 13.6% as of September 30th, we are well on track to exceed this midterm return on capital employed target ahead of expectations. This positive development is the result of our clear and focused strategy. All in all, disregarding the deconsolidation of Instamedical, our increased financial targets made clear that we are about to return to the pre-corona level of 2019. And the current market environment is providing a further boost. Perhaps one or the other should also take a look at the guidance improvement from the beginning of the year. At the midpoint, our new revenue and adjusted EBITDA targets are 250 million euros and 90 million euros, higher than the forecast we were still expecting in March. We are outperforming our German competitors, especially in the entertainment segment, clearly showing how strong and well positioned ProSiebenSat.1 is. In addition, we create additional value through our two other segments, dating and commerce and ventures. On to slide number 23. With regard to our investments, we have defined strict criteria across all segments in order to ensure financial soundness of all projects, but also guarantee our continued focus on synergies within the group. For example, we ensure that expansion and new investments will pay back in general within three years, and generate a return of at least 18%. Strategic projects are usually expected to be amortized within five years. Furthermore, projects must have a close connection to a TV or should be a platform business to maximize our synergy potential. Overall, these criteria contribute to our 15% return on capital employed group target and our sustainable growth objective. As you can see on the slide, this is very consistent to what we have done over the last two years. Now looking further into our future, I want to raise your focus on an annual survey on slide 24. Media usage in Germany reaches a new high for the second time in a row following last year's record. Germans spend 13 hours a day on mass and individual communication. This equals an increase by around 20 minutes each. TV thereby continues to dominate the media consumption as medium number one, accounting for 37% of the average daily media usage, a figure that has remained stable compared to last year. And it plays a special role in triggering consumer activities. These results not only underline that TV is indispensable for marketees, but also ProSiebenSat.1's strong positioning as leading player in the German TV market. With our strong digital offerings, we are thus present in the two most important advertising markets and especially expand our position in the growing internet content market. If we now look at the future development of these markets, you can see that we are in a great place to continue a strong monetization in our entertainment segment, especially as private consumption is considered to develop much more dynamically in 2022 than this year. The overall advertising market is expected to grow by 5% next year after increasing by 11% in 2021. And I've already been able to show you today that we are well positioned to take advantage of these positive February prospects. To sum up today's presentation, we are making good progress on our profitable growth path and we are confident that we will continue to do so in the future. First, our strong performance throughout the year and our once again increased financial targets prove that we have successfully and on our own left the COVID-19 crisis behind. Second, even more, we are on track to exceed our midterm ProSiebenSat.1 return on capital employed target ahead of expectations. This is the result of our consequent execution of our value-creating strategy. Third, we will continue to leverage our leading position in German-speaking entertainment markets to generate substantial cash flows and profits. Fourth, in order to boost our organic growth, we intend to invest further in all three of our segments, entertainment, dating, and commerce and ventures. And fifth, based on our successful strategy, we will continue to focus on the improvement of our cash flow as well as our ProSiebenSat.1 return on capital employed. And last but not least, partnerships continue to play an important role for us in every segment to drive our success story. whenever it makes sense for both parties, as well as all of our stakeholders, and whenever the partnership enriches our business. With this, we are guiding ProSieben.Eins into a value-creating future backed by our own strengths, our digital focus, and our synergistic group setup. Thank you for your attention, and we are now ready for your questions.

Thank you. Ladies and gentlemen, if you would like to ask a question at this time, please signal by pressing star 1 on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Once again, that is star 1 for your questions today. We will pause for a brief moment to assemble the queue.

Our first question today comes from Anik Mas from Exan Pariva.

Please go ahead.

Good morning. So my first questions are just related to dating. If you could maybe tell us what the organic revenue growth was of meat, and then also if you could tell us how much VPAS is expected to be making up in terms of revenues in absolutes by year end. Then second question is with regards to the TV advertising market. I think you just said 5% growth is expected for next year. Just was wondering where is auto advertising in there? Is that already fully recovered in that estimate or is that a potential upside here? Then you have mentioned in the call that Flaconi is still growing strongly. If you could maybe put a number to that as well as to its profitability. And last question, just on financial results, how we should think about it for this and next year. Thank you.

So let me start with the second one. This is a market statistic, the 5%, and therefore we don't have further details about that. So it's more or less only the reason to explain that the overall market is very positive for TV. And what I also would like to ask you for, and I think my IR department will share that if they haven't done that already, the media activity guide, you know, which explains precisely how the markets, how TV is doing in Germany and how the other businesses are doing is very interesting for all of you. And I think that would be a good read over the next days. Dating, yeah, you are asking a lot of questions which are very detailed. Let me give you a few points which I have to make overall because I'm pretty sure that also others will have a lot of questions to dating. First of all, the development in Q3 is mostly related to our matchmaking business in Europe. And firstly, especially the first quarter of 2021 was still negatively affected by the lockdown measures in the German-speaking countries. So if you recall, 2020 was clear record year and really setting a high base. And as a result, Q2 and Q3 2021 were facing particular strong comparable figures last year. And also to remind you, in Q2 2020, the matchmaking business had grown with plus 13%, and in Q3 it was, if I remember that correctly, I look in the face of Alf, I think plus 11%. Yeah, he says that's right. So this compares, in my opinion, to a multi-year trend, more in the mid-single-digit percentage range and illustrates. And that's exactly the problem. The problem is, you know, when normally matchmaking is growing mid-single-digit, then you have, you know, in a year like last year, a strong tailwind from the pandemic year. And that's clearly one of the reasons why you have to take two years together to come to the right average. And I will come to that in a second. Third, aside from the tough comparables, the performance at Parship and especially Elite Partner this year has also been impacted by an European Commission ruling, which has meant the loss of value compensation revenues when customers withdraw within 14 days. And looking ahead, and that's referring to your question, we can already see that live video including VPaaS is showing positive early indicators and this makes us very optimistic that we will return to better growth soon again. It is also worth noting that the US matchmaking business eHarmony has continued to grow strongly throughout the period and this is a result of growing first-time subscribers and an expansion of marketing channels as well as revenue benefits from customer auto renewals. So when you then take that all into account and you compare US matchmaking business eHarmony, which has continued to grow strongly throughout the period as a result of growing first-time subscriber numbers and an expansion of marketing channels, We believe that eHarmony will become very soon the largest service in the matchmaking business in full year 2021, and it will continue to meaningfully support the growth of the matchmaking business. So now I give you some numbers around the situation which we have. So Q3 2021 pro forma revenue growth was minus 5%, which compares, and I've said that at the beginning, to a strong plus 42% in Q3 2020. And when you then look on, and you know that had to do with the tailwind of the corona crisis. If you then take the two-year average in the compounded average growth rate, you end up with a plus 15%. And that's a little bit what you have to look at. because last year with Corona was a year which was good and great, but also in growth rates, it hurts you now a little bit, but overall we are very strong, and even in Q3, pro forma revenues growth has slowed down. It is still worth highlighting that dating grew overall 9% on pro forma basis in the first nine months, 2021. And again, when you take the first nine months in 2020, the number was plus 31%. And again here, when you then take the average for the two years, you have a number, a CAGR of approximately 20%. And that hopefully explains a little bit why we always push to look a little bit beyond the quarter. So you really have to look what was happening during the last two years. what is normally a good growth number for the matchmaking business, how good, how strong is the meet group, especially the video content in VPaaS, and as I already said in my speech, there is other to come, and that also shows you that we are very optimistic, we think it's a great business, it's performing well, and we are very happy with the dating business. So then to your question of Flaconi, I think Ralf, if you want to give that numbers. Yeah.

Yeah. Anik, Flaconi was doing quite well in Q3. We had a double digit percentage growth in the quarter.

So performance is really good. And I think you asked for financial results for the full year potential outcome.

I think we Reported for the first nine months, 53 million financial result. As you know, the two main components are interest and equity. And on a full year basis, it should be something south of 100, I would say. We have to reflect another quarter of joint equity result interest.

This is probably the best guidance I can give.

OK, thank you.

Thank you. We now move on to our next question from Julian Rock from Barclays. Please go ahead.

Yes. Good morning, Rainer. Good morning, Ra. Thank you for taking my question. The first one is, could we get advertising trends in Germany for October and, if possible, November? Second question is my usual one, which is, can we get smart advertising in Q3, either in Euro millions or year-on-year growth? Then third question, coming back quickly on dating, can you give us organic for meat in Q3? And then fourth question, sorry for asking four questions. You're raising advertising target to 9-11 from 3-7, i.e. four points more of advertising, which is 80 million. So you're not changing programming cost guidance, which stays at 1 billion, but your EBITDA goes up only by 20 million while the advertising revenue goes up by 80 million, but programming cost is flat. So what's happening to the other 60?

Thank you.

Let me start with your last one. The guidance is 1 billion, and we said at the beginning of the year that we perhaps we'll spend approximately 50 million more dependent on how successful our content is. If you would look on the German statistics currently you would see that we are outperforming all the others in that market and that our local and live and relevant strategy works out very well and therefore you know included in our guidance of 840 million euros adjusted EBITDA plus minus 10 million is also, you know, that we can go up or will go up in the content spending to the already announced in March, approximately 50 million, depending on our results. So overall, a very, very good situation. But by the way, it doesn't mean that we are increasing now every year with 50 million. So this number will stay, you know, around the billion plus minus 50 million, depending on the content which we have. And and the opportunities we have. So we are very consequent in our local live and relevant strategy. More than 50% of our content spend is already in this area. For those who also look on the balance sheet, you already see the decline there, and that also plays out, as I already said, two years ago. This company is managed consequently on operating free cash flow and is consequently managed on a return on capital employed. That's increasing our profitability and we are doing this since two years and it's getting better and better and we also want to do that going on further. Advertising trends, Germany in October, very strong for us. I don't know if it's for everybody the same. That's also a question to the others, but we can say as a market leader, For sure, we have taken the advantage of the good questioning. November, difficult to say currently. We are still on the basis, you know, have in mind that last year was a very tough camp in November. So this could also be a little bit of decline. December, we don't know. And that's the reason why we have given a guidance, you know, in mid. that the Austria, Switzerland, and Germany sales in mid should stay overall for advertising on the same level, nearly on the same level like last year, which was a very strong Q4. And that's what we have in mind here. There is a chance to be better. But, you know, we have to see first step, you know, how the development are and December will be decisive for that. We think October is very good. November seems also to be good. December, we don't know because, but again, when you see the questioning, when you see the statistics, when you see how important TV is, we are here very optimistic going on further. So then, Ralf, yeah.

Hi, Julian. On digital and smart, when I look at the German business, it was a very solid double-digit percent, low double-digit percent, I have to say, though, for the German business. And trends on a year-to-date basis are in line with what we are seeing for the other part of the entertainment business in the German-speaking markets. On organic growth for TMG in Q3, please bear with us. We are not commenting on this currently, but we will provide, obviously, information as soon as we can.

Thank you very much.

Thank you. Our next question comes from Richard Erie from UBS. Please go ahead.

Good morning, everyone. Two sort of, well, three major questions for me. Just firstly, going back to dating, could you update us on the planned IPO of dating and whether that's been impacted by the recent results? The second thing is that, obviously, dating is comprised of Plowship, eHarmony, and Amiqui. Can we try and get a better understanding of what actually is the growth rates of those three businesses within the dating business in q3 and what the expectations are for the full year and particularly in reference to looking at match numbers which were up 25 percent in third quarter and the guidance of being up 24 to 26 percent in the fourth quarter um and then lastly just coming back to flaconi ralph you set up double digits i don't know whether you can be a little bit more precise with that because historically this was a business that was doing close to 50% revenue growth. That had obviously slowed in the second quarter with some tough comps. I think that we would all like to understand is that double digits like 10% or is it actually significantly higher than that? And so if you can be a bit more precise around that guidance number or that reported number, that would be great.

Thanks.

As Ralf said, we won't give numbers for the dating business in detail because as you know, our preparation and that works together with the planned IPO where our ideas haven't changed and the numbers which we have are very positive going on further. As I said, you have to take the average for two years and when you look on the growth numbers, the perception going on further, this is a very good and very strong business. So we still plan to IPO this business next year. Again, our idea is here to give General Atlantic the opportunity to sell down several shares and we will stay as a long-term shareholder due to the fact that especially this business, creates high value for us as a group and also has a lot of synergies where we believe that has a high value. And that's the reason why we are very optimistic going on further.

With regard to the preferred equity that sits inside dating, which will be nearly probably up to 400 million at the end of this year, given obviously the increase in the coupon every year. What is the intention on that preferred equity? Is it to take that preferred equity out or roll that into a higher equity stake? Or maybe you can add some color on that.

No, this is, as I said, too early to talk about that. We will discuss it in that situation when it comes to the IPO. For sure, we have ideas what we want to do. But first of all, you know, it's too early to talk about that. So let's cross that bridge, you know, when we reach it. And currently we are not reaching it. So we have to do our homework. We have to see how the performances should finish strongly at the year end. And then we do the preparation and then we figure out. As we said in the past, for us as ProSieben, it would be ideal to use the financial year results for something for the IPO because you know, then we have three years in a row. We don't have to do all the double work and that gives you an indication when it could happen because this clearly defines the timeframe, but we are also not pushed, but we are very optimistic that this is happening because, you know, we see the positive momentum and hopefully I could make it clear in our presentation and also with the first answer I did that, you know, with the VPaaS business, with the growth which we see, also eHarmony matchmaking we have, and that's perhaps one of the reasons which is different to Match or the others. We have that specific situation in Germany with the European Commission ruling, which the others don't have, you know, which hurt the matchmaking business in Germany a little bit, and that's the reason why we were weakened there a little bit, but that's washing out in the future and therefore we are still optimistic in that area too.

Flaconi, you want to answer it, Ralf?

Yeah, I can do. So you want to have a more precise figure for Q3 revenue growth? It was 17%.

Thank you.

Thank you. We now move on to a question from Jerome Borden from Oddo. Please go ahead.

Yes, good morning. Two questions on my side. First of all, just to follow up on your cost prospect for Q4 for the TV business, should we see the same gap between the top line growth and the cost growth in Q3? Is it a good way to look at it? And could we maybe have a bit of color and a philosophy for next year? Secondly, also, just to follow up on Flaconie, could you just make a quick update on your strategic willingness for the asset? Keep it, sell it, take time, et cetera. Thank you.

Jerome, I take the first one.

Obviously, much will depend on the dynamics in top line. I mean, I think when I look at my table, we had... In program costs for the group, we had 336. And depending on top line development, the figure for this actual quarter could actually be below. But we will see how top line develops. Important to note again that our guidance for full year is fully reflecting what we will do with program cost.

Yeah, and Flaconi's strategy hasn't changed. And I know there were a lot of rumors at the beginning of the year, but we didn't have a process. We didn't open a due diligence room or something like that. Yes, I know that a lot of people are interested in this asset, and it is the same situation as before. If someone is interested, they can give us a call. We discuss. If the number they provide is good for us, then we talk, like we do with all the assets which we have. But, you know, clearly for us, we have very good shareholders. You can see that when you look on the growth, when you see the synergies between TV and the asset. But, you know, like for all the assets, take Amoreli now as an example. When it comes to further internationalization, when it comes to sourcing in different countries, then automatically, you know, the question is, after building up that brand, building up the positioning, putting all the systems in place. Are we anymore the best shareholder? And that's then exactly the time when we would discuss it. But currently, there is no further strategy than keeping it, letting it grow, and position it as a good asset.

Thank you.

We now move on to our next questioner. which is Connor O'Shea from Kepler Chevrolet. Please go ahead.

Yes, thank you for taking my questions. Good morning, everybody. Three questions for me as well. First question on just the advertising, come back on the advertising guidance, just to make sure something is not missing on that. I think you're up 16% on DAC through nine months and guiding 9 to 11 for the full year, which I think even allowing for the lower weight of Q2 last year implies a decrease in Q4, which doesn't seem consistent with your comments on the development so far in Q4, Rainer. It doesn't seem to be a negative impact on the election or anything like that, so just wondering if you have any extra thoughts on that. Second question on the program, just to come back on that, I think the numbers that Ralph gave Imply 65 million increase year-on-year through nine months. You're guiding for 50 million increase full year. So that would imply a decrease in Q4. So you may have answered that on the previous question, Ralph, but I just want to confirm that. And then finally on the dating business, could we expect that to improve sequentially in Q4 in terms of organic growth? quite naturally given that would be overlapping the consolidation of meat from last year and that would be considered organic where growth is better is is that is that a high probability outcome thank you yeah as I said for q4 guidance

for the advertising business, you know, for sure we have an uncertainty what's happening in December. We see currently Corona getting up again. So, and that's the reason why to be too aggressive is not our target here. We feel, as I said, very comfortable to reach these numbers and I'm, yeah, it's a good number. It's a strong number. And we had tough comp last year in November. November has to come in. December was also a very strong number, so we have to see if we are able to, if we can outperform November and December for sure, you know, it looks different. But, you know, we have given here all the number which we believe in and, again, have in mind, you know, where we come from. So we had a very good year. We are giving out better numbers than all the others, stronger numbers, and we stay optimistic that there is, you know, based on our positioning, a good possibility also. know to at least reach them so can't be more precise on that because we don't know it better currently we always give out what we know and um that's exactly what we want to do and i i i'm very i i would be very happy if we reach these numbers which we have given out and i think they're very strong so um and it's a one question runner is is uh in a normal year are the the weights of october november december within q4 uh

relatively even. Is there anything to say on that?

November is normally the biggest one. November is the biggest one and the most relevant one that has also to do with the pre-Christmas discussion and the decision in this year too. We don't know if the consumers or the advertisers decided to be in October due to the delivery problems of several of the shops and whatever because there are some problems and therefore some of them already started to advertise perhaps a little bit earlier we don't know we have to see we are booked out currently so I only can tell you that for commerce and ventures and the dating business sometimes an issue because you know normally I was using free capacity and this is not the case so you know we are increasing prices we are We're very strong, so I can't see a weakness. And that's our current situation. So as I said, we're very optimistic for the rest of the year. But we have to see how this will develop because it's not clear. It's not clear because the lead time has shortened. We discussed it several times during the last meetings. We are at four weeks sometimes, and that's the reason why I'm We have to see how December works. But November is most decisive because November is normally the strongest month in the last quarter. Program costs, perhaps you can repeat the questions again.

Yeah, just on the programming costs, I think maybe one more for Ralph. I think given the increase that you called out, it implies about 65 million year-on-year increase so far in nine months. And I think you're guiding for year 50 million increase. So that would imply lower spend in Q4, I guess, relative to the 336 million increase. number that's not called out. So is that, can you confirm that that is a reasonable expectation?

Yeah, I think already the question I received from Jerome was going in the same direction.

So yes, Q4 program costs could be below Q4 2020 program costs. I think that I can confirm.

Thank you. And by the way, this is no self-fulfilling prophecy to spend more or less. It depends on the format which we get. And, you know, as more local and live as possible, then we would like to go into it. And there are some shows coming up, and we have to see how they develop. And that also is relevant for the cost. So it's more or less on the program and the things which we reach with that. if we get the opportunity to do several live events on top of that what we already have planned then for sure we would be ready to do it because at the end that's the basis for advertising that's the basis for our performance that we have good content and a high reach and that's what is our that's our target and but we will stay in the declined lines, you know, which is a billion plus 50 million on maximum. Okay. Dating improvement in Q4. Yeah, that was one of your questions.

Yes, on the organic.

Yes, possible. Yeah, possible. Yeah, but, you know, and we can see currently that, you know, some of the businesses are taking up again, but it all depends, you know, how fast VPAS comes in. This is then for the video piece and on the other side, you know, the downloads and especially for the dating business that people start, you know, after they went out, you know, when it's getting darker again, you know, and they have the opportunity to meet that then, you know, for sure this is normally the basis for this kind of matchmaking business that you also have the opportunity to meet. and you know that's also a little bit relevant what is happening to corona and how this works out so there's a little uncertainty but we are further on as i said at the beginning optimistic for the dating business because this is a very strong and good business and we totally believe in it okay and with me we will see integrate into fully integrated in the organic for the whole q4

that has a better growth profile, that should work. Okay, okay. Yep, correct. Thank you. Thank you for your questions.

Thank you. We now move on to Adrian Dessenileo from Bank of America. Please go ahead.

Thank you very much. Thanks for the time. I have a few outstanding questions, please. First of all, back on the dating growth, you mentioned that it was 15%, I think, on a KGAR basis over two years. If I'm not wrong, I think it was about 20% in Q2. It's not exactly clear to me why things have decelerated, so if you don't mind coming back to this. Secondly, on your streaming strategy, are you happy with the developments around Join, or do you think that you could go back to, let's say, going on your own? And then back to the dating stuff, I think you mentioned you were willing to retain a stake, of course, in the business. Just curious if you're still willing to retain a majority stake or if you could use the process of the IPO to also monetize your stake in that process or if you're still willing to get a majority stake and if you could explain why you want to retain a majority stake.

Thank you so much, Rainer and Oz.

First of all, dating business, our clear announcement here was always that we keep our majority stake because we will have 53%. The main reason is also that we give GA the opportunity to step out. That's clearly the basis and we totally believe in that business and we also believe that it fits perfectly to our strategy. Coming back to your first question, which was dating growth, the average of 15%. Have in mind that in Q3 2020 was the highest comp of sales in that month. We had a growth compared to 2019 of plus 42%. And that's the reason why in Q3 2021 compared to 2020, we had minus 5%. And you know, that's the reason why I came on this average number in two years of approximately 15%. That's how we reached it. And this was really the toughest comp which we had last year on a monthly basis was clearly Q3. Third question, a streaming strategy. not my quote, I've learned that on the media days, you can love a business 100%, which you only own 50%. And, you know, exactly that's what we do. Because at the end, we do have here a business which perfectly plays into our windowing strategy. We are doing something different than the others do. We totally believe that for advertising, reach is relevant. So we do everything in our group, in our windowing strategy, with all the things which we have to increase our reach for the advertisers. Stickiness and reach are the ones which are the basis for the advertisers to come to us. And we are primarily advertising finance. Join also is primarily advertising. advertising finance. So for sure, we also have a subscription piece, but the subscription piece doesn't pay this important role like others. Yes, we have some previews, we have blackouts, a new series now also in joint plus, but this at the end is part of the monetization, but we clearly use the content which we acquire, linear and digital. to show that also on join and that's the reason as more we own local life and relevant as more opportunities we have to monetize it via join and that's exactly what we want to do so we really see join as our our channel in the b2c world and then for sure as you know because we were talking about that also in my speech with the seven percent growth and distribution business this is the b2b world and here we monetize the rest of our content on all kinds of platforms and you name it. So which kind of, and this is then similar to all the other streamers like Disney or TV Now or whoever, because here in the B2B world, for sure we do the similar thing. We have a distribution deal and sell our content via a distribution deal. And that has to do with household income at the end. Because when you look on the statistics, in our opinion, it will be very difficult long-term that people will have 8, 9, 10 subscription-based services. And that's the reason why we believe, as it's learned via YouTube, Facebook, and all the others, and in the future also with TikTok, that advertising is part of streaming and that's the reason why we believe that JOIN is a good positioned, well positioned product in the young target group which is the other main factor because our target is to position JOIN in the young target groups and that has to do with the situation that especially Advertisers are also interested in having a digital possibility and that plays together with all the formats like Seaflight and all this kind of stuff which we introduced new during the last two years to the market. When you look on the overall performance of our strategy in the entertainment segment, you can clearly see here that this plays out. That's the reason why we outperform the others in that piece and that has to do with this positioning. Unique. Different, but very successful.

Great. Thanks for the very detailed answer, Rainer. If I can just add a follow-up. You mentioned like mid-single-digit like-for-like growth in the dating business was the sort of historical trend. Is that also your best sense of the growth for next year?

No, we are not forecasting currently what is happening next year. And, you know, I was referring – to the matchmaking piece in the overall business because the matchmaking piece in the past was growing mid-single digit. And then we had this outperformance in the year 2020 via the Corona pandemic. Here we had growth of the business in Q2. The matchmaking business had grown via plus 13%. And in Q3 2020, plus 11%. And when you then see, you know, plus 13, plus 11, and compare that to the normal growth in such a business in the past of mid-single digit, that then you have to look for the two years on the average and, you know, for this kind of business. And then you see why the decline in that business, you know, overall on the performer numbers, you know, is huge. clearly based on that, compared and on top, influenced via the European Commission decision. And that's exactly where the reason for that is. So it's a one-time effect, a huge tail build in 2020, the European Commission decision, and that's the reason why I'm more optimistic for next year. But as I said, we cross that bridge. You know, when we reach it, this is not today. This is when we really go out and do the announcement.

Understood. Thank you so much.

Okay, ladies and gentlemen, this was the last question for today's call. As always, my colleagues in the IR department and myself will be available for any follow-up questions shortly.

Thank you and goodbye. Thank you. This concludes today's call.

Thank you for your participation, ladies and gentlemen. You may now disconnect.