Prosieben Sat 1 Media

Good morning, ladies and gentlemen. Welcome to our Q1 2024 Results Conference Call of Proceben Z1 Media SE. Today's conference is being recorded. Today's call is hosted by Mr. Dirk Verlander. Please go ahead, sir.

Thank you, operator, and good morning, ladies and gentlemen, also from my side, and welcome to Proceben Z1's Q1 2024 Results Conference Call, which will be hosted by our CFO, Martin Mildner. During the presentation, Martin will take you through the financial and operational performance of the group and comment on our full year outlook. As you probably know, we already published preliminary quarterly figures on May 14, which have been confirmed by our actual results today. As always, the presentation will be followed by a Q&A session. With this, I now hand over to Martin.

Thanks a lot and good morning everyone also from my side and thanks for joining our Q1 2024 results call. Before we go into the details, let me give you a quick overview of our key financial highlights in the first quarter, which we summarized on page number four of our presentation. As expected, we closed the first quarter of 2024 with revenue growth across large parts of our portfolio. Overall, our group revenues increased by 6% year-on-year to €867 million. Our entertainment business and our non-core activities each contributed about half of the group's revenue growth, while the ongoing strong growth in our segment commercial ventures offset the unsatisfied performance of our segment dating video. The advertising business, which is particularly important for us, continues to recover. This positive trend was driven by higher TV core advertising revenues on the one hand, And the continued strong growth of our digital smart advertising business in the DACH region, on the other hand. Especially, Join has continued to grow strongly. Join's award revenues increased by 50%, while advertising revenues across the entertainment segment grew by 5%. This shows that we managed to monetize our digital reach better and better. Groups adjusted EBITDA. increased by 35% to 72 million euros, despite significant higher program expenses. This increase is not only a result of our revenue growth. We are also seeing clear effects of our efficiency measures with respect to our cost structure. At the same time, the commerce and venture segment more than quadrupled its adjusted EBITDA, driven by the digital platform and commerce assets, Verivox and Flaconi. So to sum it up, in 2023, we set a new course both operationally and strategically. These measures are now paying off. We are developing full in line with our full year targets and therefore we are able to confirm our outlook for 2024, which we communicated already in March. With this broader summary, let me now guide you through all of our financials for the first quarter of the year. Let me start on page 6 with our group level. As already announced on April 15, when we published preliminary figures, the start of 2024 has been very promising for ProSiebenSat.1, underscoring the effectiveness of our strategic approach. Group revenues increased by 6% to €867 million. Reflecting the continued positive trend in our advertising business, and the strong growth in the commerce and venture segment. As I already mentioned before, our non-core activities, i.e. commerce and ventures and dating and video combined, contributed about 50% to group revenue growth. On a currency and portfolio adjusted basis, we saw a revenue growth of 7%. The group's adjusted EBITDA grew by 35% on 19 million to 72 million euros. despite the announced significant increase in our program expenses. This significant development in earnings reflects both the group's revenue growth and our consistent cost management. Last year, ProSiebenSat1 group took targeted cost measures to make the organization leaner and more efficient. The cost program was fully implemented at the end of October last year, meaning that the resulting savings effects will materialize in the course of 2024 and were already clearly visible in the EBITDA of this quarter. Our adjusted net income has significantly improved by 22 million euros, mainly reflecting the development of the adjusted EBITDA. Our adjusted operating free cash flow saw a significant increase of 63 million euros to 38 million euros. Let's turn to page 7 and take a closer look at our entertainment business, which is our most important segment. Revenues in the entertainment segment increased by 5%, both on a reported basis and on a portfolio and currency adjusted basis. Entertainment advertising dark revenues increased by 5% in the first quarter of this year. TV core advertising revenues grew by 4% in Q1 2024. after already being close to the previous year's level at the end of last year. At the same time, digital and smart advertising revenues continued to grow by 9%, mainly thanks to our streaming platform JOIN, which contributed the lion's share of these revenue streams. JOIN increased its avort revenues by 50% year-on-year in Q1 2024. This shows that ProSieben.Eins is increasingly monetizing its digital reach. Our distribution revenues grow by 9% in Q1 2024 due to a higher reach and increased HD penetration through full coverage on all major distribution platforms, as for example our most recently announced deal with Deutsche Telekom on the Magenta TV. Revenues in other businesses grow by 18% in Q1. This increase was mainly driven by the export business of our streaming platform JOIN. Adjusted EBITDA in the entertainment segment improved by 47%, or 14 million euros to 45 million euros despite the announced increase in programming expenses. At 242 million euros, programming expenses in the first quarter were 8% or 18 million euros higher than in the same quarter of the previous year. With a clear focus on exclusive local content and the associated increase in programming expenses, we aim to strengthen our market share in linear TV and the growth of JOIN. The negative cost effect was more than offset by the positive revenue development of the high-margin advertising business and lower costs due to the efficiency program implemented last year. Please now turn to page number 8. where we are now coming to our segment Commerce and Ventures. This segment recorded a very dynamic revenue growth of 20% on a reported basis and even 23% on a portfolio and currency adjusted basis. Thanks to an improving market environment, our advertising business within this segment, especially 7Ventures, increased by 4% in the first quarter of 2024. The digital platform commerce business, which is mainly related to the Newcom group, grew by 23% in the first quarter. The main growth drivers were the beauty and lifestyle business with Flaconi and the consumer advice business with the online comparison portal Verivox. Both businesses achieved significant double-digit revenue growth. Verivox grew dynamically in a healthy market environment following the easing of the situation on the energy markets, while Flaconi also developed very positive despite continued consumer restraint. And I'd like to mention again that this development has to be seen in light of the already strong revenue growth developments of both companies during the last year, 2023, where Verivox was growing over the entire year by more than 100% and Flaconi by more than 20%. The decline in the experiences business is due to the deconsolidation and its following exit of Regionio in June 2023. Its contribution to revenues in the first quarter of last year was 2 million euros. Looking at the development of adjusted EBITDA, Commerce & Ventures increased its previous year's figures from 4 million euros to 17 million euros, which is an increase of more than four times. This was mainly driven by the revenue performance of Verivox and Flaconi. Another positive factor was the deconsolidation of Regiondo, which had contributed a negative result in the previous year, 2023. Let's now have a look at the performance of dating and video on page nine, which was, as I already said at the beginning, again, not satisfying for us. Revenues of the dating and video segment totalled 107 million euros, which means a decrease of 9% on 10 million euros. Dating revenues decreased by 12%, partly due to the challenging competitive environment, but in addition revenues were impacted by the effects from the German Fair Consumer Contracts Regulation, which was introduced in March 2022. This particularly affects the subscription models of the Parship and Elite Partner platforms and had not yet had a full impact in the same quarter last year. At the end of the first quarter of 2024, we assume that all affected contract terms will now reflect the effects of the German Fair Consumer Contracts Regulation and as of today, we do not foresee any further effects resulting from regulatory decisions. In the video business, we managed to narrow the year-on-year decrease to 4%, representing an 18% subsequent growth compared to the last fourth quarter of 2023. Focusing Livebox on our owned and operated brands has had a good start to the year, with revenues from virtual goods growing by double-digit year-on-year. The adjusted EBITDA of the dating and video segment decreased by 21% in Q1 of this year. This year-on-year decline reflects the segment's revenue performance, in particular the high margin subscription model in the dating segment. The Parship Meat Group had already responded to the revenue situation last year with cost adjustments and measures to increase efficiency. and was therefore able to somewhat counteract the revenue decline, especially in the video business. Here, advertising campaigns and promotions for owned and operated apps MeetMe and TACT supported growth, while streamer incentives lead to higher broadcaster fees. However, the already mentioned efficiency measures helped to mitigate the decline in revenues. So let me continue with comments on the financial leverage and net debt development of our group on page 10 of the presentation. At the end of the first quarter, the group's net financial debt amounted to 1,553,000,000 euros, which represents a reduction of roughly 130,000,000 euros compared to the end of Q1 last year. Our financial leverage ratio improved to 2.6 times at the end of the first quarter and is therefore at the lower end of the targeted range of 2.5 times to 3.0 times for the financial year 2024. On the right hand of our presentation, you can see the debt maturity profile of ProSiebenSat1. As it shows, we use various debt financing instruments for the purpose of the group financing. This group financing is regulatory adjusted with respect to volumes and maturities. In this context, in April 2024, we extended the raised majority, i.e. 353 million euros, of the term loan tranche of the syndicated loan, which previously matured in April 2026 by a further year until April 2027. The remaining part of this term loan tranche of 47 million euros remains still due in April 2026. Let's now take a closer look at the operational performance starting again with our core business, entertainment and JOIN. Our entertainment platform JOIN performed quite well or very well I would say in Q1 and set a new record for the second time in a row. JOIN once again showed double digit growth in all KPIs. First, an increase in monthly video users of 42% to 6.5 million. Second, The viewer view time in minutes grow by 21% to 9.2 billion. Thirdly, joint's A-word revenues increase by 50%. On the one hand, this success is driven by distribution deals such as with Magenta as already mentioned. These deals are increasing joint's reach. On the other hand, the performance of joint is driven by lighthouse formats that attracts large audiences. One example here is of course German's Next Top Model. The format has been watched on JOIN more than 1 million viewers in March. And we won't stop here. We continue to focus on our ambition to establish JOIN as a leading, freely available entertainment platform for everyone in the German-speaking countries. The upcoming launch of JOIN in Switzerland in June of this year marks the next step on our way forward. And our strategy is paying off. JOIN is in the center of our digital activities. and we are working with full speed on its expansion. This is why we are investing more in local and live content. With exclusive programs, we are sharpening our brand profile and we are strengthening our market position against multinational streaming providers. Over the course of the year, we will, as already indicated and reflected in our full year outlook, increase our programming expenses by around 80 million euros. In the first quarter, the programming expenses were up by 18 million euros. Our investments in local content are already showing results. In primetime, which is particularly relevant for the advertising market, the audience share improved to 20.1%. At the same time, we recognized an incremental increase in net reach with our top programs via Join. So, please turn to the next page. What's truly important, our local focus is appreciated by our viewers. We want to build on this success by introducing new reality and comedy formats in the upcoming months, such as the vampire comedy series The Upir with Farim Yardim. And we offer several successful formats, such as the Landarztpraxis, now already in the second season. However, we also have to try out certain local formats first in order to now how they are received by our viewers, and we realize that some of them are less successful, like Das Küstenrevier, in English the coastal area, or Gestrandet in den Flitterwochen in English, stranded on honeymoon. Both formats did not perform as well as expected by us, but we are consistently working on it. Our content pipeline is full of great new formats. We will show them on our TV channels as well as on our streaming platform JOIN. On JOIN, They add significant reach and they also allow for platform-independent consumption no matter where and when our viewers want to watch their programs. Let's now move again to our commerce and venture portfolio. Over the last year, we have transformed our portfolio in order to increase revenue but also adjusted EBITDA. And we did this with clear success. Today, we see a positive trend across the commerce and venture segment. In Q1, the segment grew very significantly and profitably. Especially, the digital platform and commerce portfolio with Verivox and Flaconi is performing really strongly. Both assets generated double digital revenue growth. While Verivox developed profitably in a sound market environment, Flaconi outperformed the growing online beauty market in Q1. This was not least supported by a brand campaign and improvements we made to our products. Based on the last 12 months, Verivox achieved revenues of €179 million and Flaconi exceeded the €400 million mark for the first time with €410 million. This represents a record figure for both companies and reinforce our belief that the same process we have initiated will be successfully implemented. As you all know and as discussed heavily before our annual general meeting last month, we are pursuing an active portfolio management with a clear aim of realizing synergies within the group on the one hand and realizing the value of our large majority but non-core business-related investments such as Verivox and Flaconia on the other hand. The proceeds from these kinds of disposals would significantly reduce the groups in debt and our financial leverage ratio. At the same time, this balanced financial situation will allow us to invest even more in our core business activities. With this, let's turn to the dating and video segment. In our dating and video segment, the focus of our live streaming business helped us to a good start to the year. After two challenging years, we saw an improvement in our owned and operated apps business in February and March. This growth in our video revenues is driven in particular by a significant number of streamers who have switched from competitors' platforms to our own apps. So let me conclude the presentation with our outlook for 2024, which you can see on page 16. When we look ahead to the following months, we have to take various effects into account. For example, the major sport events, the Summer Olympics and the European Football Championship. They will not be broadcasted by ProSiebenSatRheinz. In addition, there is a seasonality resulting from the different comparative figures for the previous year. After a weak first half of 2023, ProSiebenSat1 has gained significant momentum towards the end of the year 2023. Even though the market and economic environment remains challenging, we are confident about the year 2024. Our strategy works. We close the first quarter in line with our full-year targets. After a strong start to the year, we will continue to focus clearly on the strategically relevant business areas relating to our entertainment portfolio, and we will continue our consistent management of cost, cash flows, and last but not least, the management of our portfolio strategy. What does it mean to our numbers? We continue to aim for a full-year consolidated revenue of around 3,095,000,000 euros with a variance of plus minus 150,000,000 euros. At the same time, we expect an adjusted EBITDA of 575,000,000 euros with a variance of plus minus 50 million euros, therefore on the midpoint of the previous year level. As a conclusion, we therefore confirm our outlook for the revenues and earnings, and the same applies to all our other important financial KPIs. Needless to say that our outlook does not include any potential impact of our portfolio strategy with respect to any divestments and any other acquisitions. I'm now looking forward to your questions and hand over back to Dirk, I think.