Scout24 Se

Good afternoon everyone and welcome to Scout24 first half and second quarter 2024 earnings call. My name is Philipp Dinwall and I'm Vice President Group Strategy and Investor Relations at Scout24. With me on the call today are Tobias Hartmann, our Chief Executive Officer, and Dirk Schmelzer, our Chief Financial Officer. Tobi will start the presentation and Dirk will dive deeper into our first half and second quarter 2024 performance. As always, we will conclude the call with a Q&A session. You can find today's presentation on our website under financial reports and presentations. This session will be recorded and a replay will be made available as quickly as possible after the event. Turning to page two, please take note of the disclaimer. Tobi, now over to you.

Thank you, Philipp, and welcome everyone. Let's move to page three of our presentation and take a look at the results and highlights of the second quarter and first half of the year. I am happy to share that we delivered a strong set of second quarter results as our core business continues to show strength. We are progressing to execute our strategy and to develop our three-sided marketplace towards interconnectivity. Starting off with revenues, I am particularly pleased to share that we have now achieved double-digit revenue growth for the 11th quarter in a row. We managed to grow revenue by 14% in the second quarter and 13% in the half year. We accelerated growth in the second quarter exactly as we said we would. Revenue growth in the second quarter was again driven by excellent performance in our core agent membership business as well as accelerating growth in our private subscription business. The great performance in our core businesses was somewhat offset by the continued soft demand for leads as well as normalizing growth for our private PPA business. Let me call out a few key points and highlights. Our membership business grew revenues by 9% in the quarter, driven by a mix of customer growth and product upgrades. We are excited that we attracted new customers in this challenging market environment. Customer growth in the membership business was 2.4% in the second quarter, even higher than in the first quarter. Our leading and increasingly interconnected product portfolio, combined with the strength of the ImmoScout24 platform and brand, offers agents unmatched return on invest. By the end of June, our customer base has grown even further, now exceeding 22,400 customers. Our sales teams are doing an excellent job and our momentum is strong. We are executing well against the strategy and targets we communicated at the Capital Markets Day earlier this year. Our private subscription business was another highlight in the second quarter. We managed to successfully build on the growth momentum from the first quarter and we accelerated new customer acquisition even further in the second quarter. The customer growth rate of 27% for the quarter is the highest rate we have seen since 2022. Growth was spread across our subscription portfolio products. By the end of June, we now have over 440,000 customers. The strong growth in our core business was offset by continued muted dynamics in other revenue lines due to slow recovery of transactions in the German market and normalizing PPA growth. Moving from revenues to ordinary operating EBITDA, we are very pleased to show continued operating leverage. Ordinary operating EBITDA grew strongly by 14% during the first half of the year and 11% for the second quarter. This resulted in a margin of 60.4% for the first half, representing 30 base points expansion, despite the consolidation effect of Sprengnetter. Adjusted EPS rose by 11.4% to 1.37 euros in the reporting period, slightly less than ordinary operating EBITDA. This is due to additional DNA charges. We are pleased to confirm our guidance for 2024 with 9% to 11% revenue growth and an ordinary operating EBITDA margin of about 61%. And finally, I would like to announce that starting with our Q3 results, we will implement a new simplified segment reporting, which mirrors the updated strategy from the Capital Markets Day this year and better reflects how we operate internally. Dirk will elaborate more on this. Before we continue, let me just spend a minute on the state of the German real estate market. While interest to buy real estate is increasing as rates are stabilizing, this has yet to manifest itself into a sustained recovery in number of transactions. While the number of properties for sale is still high, as measured by number of listings, buyer leads remain the critical currency in the market. Mortgage volumes have started to recover, but this was from a very reduced level, possibly as low as 50% of the volume from the previous market phase. Our depiction of the German real estate market during the capital market stay as a resilient market is still valid. It is resilient, but recovery is slow. For our core product suite, this is generally a favorable market environment, but demand for seller and mortgage leads is still low. In terms of our customer base, the residential agent is doing okay, but there are other buckets of professional customers, such as commercial, new home builders and developers, which are still facing very challenging market conditions. In terms of outlook, we are hopeful the market will continue to improve somewhat in the second half of the year. When it does, our leads businesses and transactional assets offer growth upside, while our core business will remain a strong and predictable growth driver. Now, let's turn to page four for a short summary of our key second quarter metrics. On a group level, our revenue for the quarter reached €139.5 million, reflecting a 14.4% growth year on year. This marks a meaningful acceleration versus the first quarter growth rate of 11.7%. Ordinary operating EBITDA came in at €87.0 million, up 11.2% year on year. In the professional segment, Subscription revenues increased by 14.5% to 80.3 million euros. This was mainly driven by continued strong membership growth and the impact of the Sprengnetter consolidation. As I mentioned earlier, we are very pleased with the momentum in this business. In the second quarter, we continued to gain 2.4% new customers. During the month of June, we continued to grow this number, and we now have over 22,400 professional customers. Professional ARPU increased by 5.7% to €1,132, driven by strong growth in core membership and softness from seller leads. In the private segment, subscription revenue was exceptionally strong with a 26.7% growth, expanding the already strong performance from the first quarter. Subscriber growth was at 27.1%, also accelerating again compared to the first quarter. We ended June with over 440,000 subscribers. Turning to page 5, let me elaborate on our H1 results. We saw strong growth across the board, with group revenue for the first half reaching 275.6 million euros, growing 13.0%. The ordinary operating EBITDA of the group came in at 166.5 million euros, growing 13.7% and reflecting a margin of 60.4%. Within the professional segment, subscription revenues grew strongly by 13.1%, totaling 159.5 million euros. This was driven by the strong performance of our core membership products throughout both quarters of the year. In the private segment, subscription revenues grew 23.3% compared to the previous year, reaching 42.2 million euros. This growth was the result of a strong performance in both quarters. To conclude, I would like to summarize as follows. We've had a strong first half, delivering solid double-digit revenue growth, operating leverage, and margin expansion. Our core businesses continue to show excellence and perform very well. This is based on our market leading product suite driven by a scalable platform and our unique brand experience. We continue to grow our customer base quarter by quarter, both on the private and professional side. The second quarter was another proof point for that. Our interconnected three-sided marketplace continues to demonstrate its unique value by growing content, including listings and users across all dimensions. Our ImmoScout24 app user base increased as well in the quarter. On the German real estate market, while we do see buyer interest returning, we are not yet seeing a lasting recovery in the number of transactions. We are well on track with both our financial guidance for 2024 and the targets we communicated at the Capital Markets Day. And with that, I'll hand it over to Dirk.

Thank you, Tobi, and welcome, everyone. Before I start off with the financial deep dive, I would like to make a comment regarding our new segment structure, which will be in place from the third quarter and onwards. As Tobi outlined, the updated segment structure is a natural evolution to make our financial reporting consistent with our updated strategic framework announced at the Capital Markets Day earlier this year. Essentially, we are updating our external reporting based on how we operate internally. According to this new structure, we have two segments instead of three. In addition to harmonizing with our internal operations, we also simplify reporting for everyone's benefit. For those of you who have read our half-year report, you will find details, explanations and pro forma disclosure of the new segments in there. For today's presentation, we will however focus on the current segment structure, hence all numbers and elaborations for this presentation are based on the current reporting structure. Let's go to slide 6, where you see the year-on-year revenue growth and ordinary operating EBITDA margins for our three business segments in the first half of the year. We are pleased that all segments continued to grow double digits during the first half. The professional segment grew revenues by 14.4% in the first half of the year, driven by strong performance in core memberships and the acquisition of Sprengnetter. The ordinary operating EBITDA margin decreased by 1.4 percentage points to 64.9%. This was still a good achievement considering that we absorbed the impacts of the Sprengnetter consolidation this year and the low level of marketing cost last year. As Tobi has already explained, we saw strong demand for PLUS subscriptions in the private segment, driven by the rental market conditions. This development was tempered by normalizing growth in PPA as revenues maintained on a high level. Overall, this resulted in a double-digit increase in revenues of 10.7%. Ordinary operating EBITDA margin for the private segment increased by 3.6 percentage points to 54.4% as we continued to scale the business. The media and other segment experienced a 10.1% increase in revenues. Growth was driven by all three verticals, our Austrian business, CRM business and third-party advertising. The ordinary operating EBITDA margin for the media and other segment showed an improvement of 0.6 percentage points, reaching 43.8% due to profitable growth and efficiency in our CRM portfolio. On a group level, we delivered a margin of 60.4% for the first half while absorbing the dilution from Sprengnetter. Let's turn to page 7 for a closer look at the professional segment. Revenues in the professional segment in the second quarter grew strongly by 16.1%, reaching 89.9 million euros, accelerating from the first quarter. Growth was driven by strong performance in our core membership products, which grew 9.1%, The consolidation of Sprengnetter drove reported revenue growth. Despite the challenging real estate market environment, we managed to continue expanding our agent customer base with a growth of 2.4% year on year. Professional Abo increased at a rate of 5.7% in Q2, slower than the overall subscription revenue from 1,071 to 1,132 euros. Core APU remains strong, but is offset by the declining SellerLeads business. As we have communicated previously, the professional pay-per-add revenues are negatively impacted by the ongoing strategy to migrate customers into updated membership contracts. However, the pace of decline improved slightly in the second quarter. The ordinary operating EBITDA margin declined year-on-year both in the second quarter and the first half, as last year's numbers did not yet include Sprengnetter. The second quarter last year is a difficult comparable, but a professional margin of 66.5% is a great testament to our focus on profitability. On page 8, let's take a closer look at the private segment. Overall, the private segment grew by 12.2% in the second quarter, reaching 39.8 million euros. For the first half, revenues reached 77.9 million euros and grew 10.7%. Growth was driven by continued strengths across our Plus subscription portfolio, including our main growth driver, Tenant Plus, but also stabilized Buyer Plus developments and a small contribution of our innovation efforts around Living Plus. The average number of private customers grew 27.1% for the first half, reaching an average of 436,000 at the end of the period. For the first half of 2024, subscription revenues increased by 23.3%, totaling 42.2 million euros. PPA revenue growth further normalized in the second quarter, growing by 2.3% year-on-year as we are lapping the strong growth in listings. The gradual normalization of PPA growth rates during 2024 is something we flagged during earnings calls end of last year. The private APU decreased slightly by 0.3% in the second quarter as more customers are opting for the longer duration subscription products. Other revenue declined by 10.8% in the second quarter, driven by lower demand for relocation leads and credit checks. This is partially due to our targeted effort to focus on selling potential customers, not just a credit check, but a full subscription product. The private ordinary operating EBITDA margin expanded to 57.9% in the second quarter, up by 3.3 percentage points, driven by scale in our subscription business. Let's turn to page 9 to review the main ordinary operating items. Our own work capitalized decreased by 7.9% year on year in the second quarter to 5.5 million euros. This is primarily due to the completion of various development and integration projects. As a percentage of revenue, we stood at 3.9%, both in the second quarter and for the first half. These developments are in line with our statements at the Capital Markets Day about continuing to focus on efficiency. In the second quarter, operating effects rose by 16.8%, outpacing revenue growth slightly, mainly due to the consolidation of Sprengnetter. For the first half of 2024, the increase was at 9.5% and thus at a slower rate than revenue growth, highlighting our focus and ability to balance growth and efficiency. Looking into our operating effects in more detail, I would like to point out the following developments. The increase in personal cost is mainly due to the consolidation of Sprengnetter. On an organic basis, personal costs were down for the first half of 2024. Marketing costs increased due to planned investments in brand campaigns. IT costs continued to decline due to efficiency measures and consolidation of vendors. Selling costs increased mainly driven by the Sprengnetter consolidation. Organically, they were down for the first half of 2024. For this first half of 2024, ordinary operating EBITDA increased by 13.7% and the corresponding ordinary operating EBITDA margin by 0.3 percentage points to 60.4%. Continued healthy revenue growth and a clear focus on efficiency cushioned the effect of the Sprangneta consolidation. Overall, we continue to be very pleased with where we are in terms of cost structure and ability to steer costs from here. you can expect us to continue to be focused on growing the business at increased profitability going forward. Let's turn to page 10, where you see the items below ordinary operating EBITDA. Let's go through the second quarter in detail, as we have quite a few non-recurring items impacting the P&L this quarter due to the positive developments in certain areas of our business. Non-operating effects were significantly higher than in the previous year. This was driven by higher accruals for share-based payments due to favorable share price performance and successfully closing out some of our long-term incentive programs. In addition, we increased accruals related to the Sprengnetter earn-out as the company is tracking well in line with upper-end EBITDA target achievement. As a result of the increased non-operating effects, reported EBITDA increased at a slightly slower pace than ordinary operating EBITDA and improved by 8.3% to 138.9 million euros compared to the first half of 2023. Moving now to the items below reported EBITDA for the second quarter. DNA increased as certain internally developed projects were completed and the related amortization schedule commenced. Timing effect between first and second quarter also had a slight impact. This means that the second quarter figure is not a baseline for the remainder of the year. Financial result was impacted negatively by 7.5 million euros non-cash one-off charges, mainly related to increased provision for the Sprengneter earn-out for the remaining 25% stake. The company is performing better than expected on an EBITDA level, which is the reason for the increased provision. Net financial expense related to our debt facilities was 1.4 million euros for the second quarter. Taxes increased as we benefit from lower tax rate last year due to the usage of certain tax losses carried forward related to previous M&A. To conclude, the one-off effects impacting second quarter are non-recurring in nature and due to the successful business performance, both on group and sprengneter levels. Therefore, adjusted EPS for the second quarter increased by 5.5% as higher DNA charges impacted the cost base. However, for the first half, adjusted EPS still increased at a healthy double digit rate of 11.4%. Moving to the guidance on page 11. Based on the strong financial performance of the first half of the year and our outlook for the remainder of the year, we are pleased to confirm our financial guidance for 2024. As a reminder, our guidance for 2024 assumes 9-11% revenue growth and an ordinary operating EBITDA margin of about 61%. As usual, I would like to provide you with our views and assumptions for the second half of the year. We have now leapt the Sprengnetzer consolidation since the consolidation on July 1st, 2023. To be clear, this means that there is no inorganic revenue contribution from Sprengnetter starting third quarter. For the second half, we are confident to keep our organic growth momentum from the second quarter. In terms of cadence of revenue growth, we expect the third quarter to be lower than the fourth quarter. In terms of business performance, we expect the following developments. Continued good performance in the professional and private subscription business. Transactional enablement still faces challenging market outlook. Having said that, we expect the revenue line to grow year on year, mainly due to the Sprengnetzer consolidation. We do not expect meaningful organic recovery this year. PPA private revenue levels remain at a high level, but we are not assuming growth compared to the 2023 revenue baseline. In conclusion, based on the momentum we are seeing in the core business and the improved organizational efficiency, we feel good about our prospects entering the second half of 2024. We will provide the next update during our Q3 2024 earnings call on October 31st. And with that, let's open the line for questions. We would appreciate if you could limit your questions to two per speaker. Operator, over to you.