Scout24 Se

Good afternoon, everyone, and welcome to Scout24 third quarter and nine months 2024 earnings call. My name is Philipp Lindvall, 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 with an overview of our quarterly performance and Dirk will dive deeper into our nine months and third quarter 2024 results. Let me just remind you that we have now completed the first full year since the consolidation of Sprengneta on July 1st, 2023. This means there is no longer any inorganic revenue contribution from Sprengneta. I also want to remind you that starting with our third quarter results today, we are now reporting in line with our new segment structure, which we announced during the last earnings call. 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. Please take note of the disclaimer on page 2. Toby, now over to you.

Thank you, Philipp, and welcome everyone. Let's turn to page 3 of our presentation and review the key highlights. Revenue growth was 8.5% in the third quarter of 2024, contributing to an overall increase of 11.4% for the first nine months of the year. Growth was driven by continued strong performance in our core agent membership business and a very strong momentum in our private subscription segment. Our membership business grew revenue by 9.0% during the quarter, driven by a combination of customer growth and product upgrades. We continue to win new professional customers, achieving 2.5% growth in our membership business during Q3. This marks an acceleration compared to the second quarter. The number of customers amounted to 24,728 during the quarter. By the end of September, we have grown the base even further, now approaching 25,000 customers. Our interconnected product portfolio and the strength of the InmanScout24 platform continue to provide unmatched value to agents in this increasingly complex real estate market. Our private subscription business also remained a key growth driver in the third quarter with 27.6% growth. We continued to add subscribers at an impressive rate, growing 24.7% in the quarter and reaching an average of 460,000. Growth was based on continued strength across the product portfolio. At the end of September, our customer base has surpassed 470,000. a new all-time high. We are very pleased that our newly formed business unit transaction enablement grew 2.9%. This was driven by strong performance of our data and valuation business, CRM software, as well as ESG products. Demand for seller leads stabilized while demand for mortgage leads remains soft. Our operating leverage accelerated in the quarter with 16.1% growth and 4.1 percentage points margin expansion. These improvements are due to continued focus on efficiency gains and the successful execution of our interconnectivity strategy, which is improving product usage. Adjusted EPS rose by 16.0% to 75 euro cents during the reporting period. Turning to financial guidance for 2024. Based on the strong business performance in the first nine months of 2024, we are very pleased to narrow the current guidance to the upper end, both for revenue growth and OOEBDA margin. Based on this guidance update, we are well on track to deliver our fourth consecutive year of double-digit revenue growth. This is a track record we want to continue building on as we move into 2025. Before we continue with the quarterly numbers, let me provide you with a quick update on the German real estate market. The real estate market for residential sale transactions is in recovery mode. Interest to acquire properties is increasing. Nationwide contact requests on Immoscout24 increased by 9% in September compared to August. In Germany's major metropolitan areas, they rose by 28% year-on-year. However, transactional volumes remain lower than historical levels as buyer affordability is still down compared to the low interest rate environment. As inflation is starting to come down and the ECB has started to lower interest rates, there's reason to be optimistic that the residential sale market will continue to gradually recover as we move into 2025. For our customers active in the commercial, developer, or new home building space, the market remains more challenging. There are also reasons to believe that those markets will benefit from lower inflation and interest rates, but... It is too early to call out the recovery here. Overall, the current market environment is favorable for Scout24. The decline of the gray market, higher complexity of selling real estate, and increased importance of buyer leads are trends that will continue to persist as we enter 2025. With our unmatched product portfolio to tackle this new market environment and complexity, we are confident to continue our growth path. Let's turn to page 4 for a brief summary of our key third quarter metrics. Revenue for the quarter reached 144.0 million euros, reflecting a 8.5% growth year-on-year. Ordinary operating EBITDA came in strong at 90.7 million euros, an increase of 16.1% year-on-year, representing a margin of 62.9%. In the professional segment, subscription revenues rose by 9.0% to 74.5 million euros due to continued strong growth with residential agents. In the private segment, subscription revenue continued to perform exceptionally well with a 27.6% increase, building on the already strong performance from the second quarter. Subscriber growth reached 24.7%. Turning to page 5, let me now elaborate on our 9-month results. Group revenue reached 419.6 million euros, reflecting an 11.4% increase. The ordinary operating EBITDA of the group came in at 257.1 million euros, up 14.5%, representing a margin of 61.3%. With these results as a basis entering the fourth quarter, we are well on track to achieve the upper end of our guidance. In the professional segment, subscription revenues showed healthy growth of 9.5%, reaching 219.7 million euros. This was driven by the strong performance of our core membership products throughout all three quarters of the year. In the private segment, subscription revenues grew by an impressive 24.8% year-on-year, totaling €65.8 million. As I commented before, this growth is driven by broad-based strengths across the product portfolio. Let me wrap up by putting our strong results into a broader context of our strategic framework. We are well on track to deliver a strong 2024, which marks the first year on the back of the capital markets day we had in February, where we outlined our updated strategy and financial targets. With our narrowed guidance towards the upper end, we are off to a great start executing on our strategy and targets. Our strong financial results are an outcome of our interconnectivity strategy starting to bear fruit. Let me highlight just a couple of examples to make the point. At the Capital Markets Day, we said we were confident that our agent membership products will continue to see high demand based on our new level of interconnected products we provide in the new memberships. Agents now consume much more of the ImmoScout24 product universe than just the listing insertion. Examples include valuation products, energy certificates, modernization calculator, and many more. The growth rates we achieved in our membership business so far in 2024 illustrate the point that we have permanently raised the bar for this business. And we are very excited about our plans and momentum entering 2025. We also said at the CMD that we had great know-how turning new products into subscriptions. Living Plus is a good example of this. We now have more than 19,000 subscribers and we are closing in on 1 million euros annual revenue run rate for this great new product. For Seekers, we said that we wanted to increase information and transparency around property data. To that end, we have added a fair price label for our listings. This is essentially pulling valuation data from Sprangnet API and comparing it to the price asked from the agent. For Seekers, we have also integrated AI filters on listings, and we are one of the first classifieds in the world to do so. Interconnectivity also generates internal cost efficiencies as we become more productive. As you can tell, we are very excited how we are executing and how the strategy is coming together. While we clearly still have much to do, we are confident to close out the financial year 2024 on a high note, and we look towards the upcoming year with a high level of confidence. And with that, I'll hand it over to Dirk.

Thank you, Tobi, and welcome, everyone. Let's turn to page six, where you can see the year-on-year revenue growth and ordinary operating EBITDA margins for our professional and private segment over the first nine months, which both grew double digits in revenues. The professional segment achieved an 11.1% revenue increase. The ordinary operating EBITDA margin decreased by 0.1 percentage points to 62.5%. This is still a good achievement considering that last year's numbers did not yet include Sprengnetter until July. We saw a strong demand for Plus subscriptions in the private segment. resulting in a 12.4% revenue increase. The ordinary operating EBITDA margin for the private segment increased by 6.2 percentage points to 58.1% as we continue to scale the business and make high return marketing investments. Let's turn to page 7 for a closer look at the professional segment. In the third quarter, revenue in the professional segment grew by 6.5%, reaching 103.4 million euros. This growth was primarily driven by the strong performance in our core membership products, for which revenue increased by 9% in the quarter and 9.5% for the nine months. We are very pleased that we continue to expand our agent customer base, achieving a year-on-year growth of 2.5% in Q3. APU in the professional segment grew by 6.4% from €943 to €1004. slightly slower than revenue from subscriptions. This development was driven by new customers generally coming in at a lower ARPU and a more challenging market situation for our commercial customers. The transaction enablement revenue line reached an inflection point and grew by 2.9% in the third quarter of 2024, supported by the gradual recovery of the real estate market. ordinary operating EBITDA in the professional segment improved significantly by 11.3% in the third quarter of 2024. As a result, the ordinary operating EBITDA margin expanded by 2.7 percentage points, reaching 63.6%. This positive development is due to successful execution of our interconnectivity strategy, leading to an increased gross margin and increased internal productivity. On page 8, let's take a closer look at the private segment. In the third quarter, the private segment grew by 13.8%, reaching 40.7 million euros. Growth was fueled by the continued strength of our Plus subscription portfolio, particularly driven by Tenant Plus, as well as positive developments in Buyer Plus and a still small but steadily growing contribution from our newly launched Living Plus products. The average number of private customers rose by 24.7% during Q3, reaching 470,507 in September. Subscription revenues for the first nine months of 2024 increased by 24.8%, reaching 65.8 million euros. Ordinary operating EBITDA in the private segment grew significantly by 31.1% in the third quarter and 25.9% for the nine months, supported by the scalability of our subscription business. As a result, the private segment's ordinary operating EBITDA margin expanded materially to 61.3% in the third quarter, an increase of 8.1 percentage points. Let's turn to page 9 to review the main ordinary operating items. Operating effects for the third quarter decreased by 1.8% compared to last year. Over the nine-month period, expenses rose only moderately by 5.5%. These positive developments reflect the progress we see around interconnectivity, which generates scale benefits and productivity. One example of this are our marketing costs, which continue to decline as more and more product sales are triggered from within our ecosystem user base, drawing from our strong brand and traffic. The rise in operating effects on a nine-month basis stemmed mainly from higher personal costs and increased other operating expenses, which were mainly driven by more external labor and professional services. Ordinary operating EBITDA grew by 16.1% in the third quarter, which marks a meaningful acceleration compared to the second quarter. This led to a 4.1% point expansion in the ordinary operating EBITDA margin for Q3 and a 1.7% point improvements over the 9-month period. These strong margin improvements are driven by continued revenue growth from our higher margin products as well as a positive trend in cost management. Overall, we are pleased with our current cost structure and our ability to effectively manage costs moving forward. You can expect us to remain focused on driving business growth while continuing to enhance profitability in the coming quarters. Let's turn to page 10, where you see the items below ordinary operating EBITDA. Non-operating effects increased by moderate 6.2% in the third quarter, returning to more normalized levels after the strong increase in the first half of 2024 due to the higher accruals for share-based compensation. On the nine-month basis, non-operating effects remain 41.4% higher year-on-year. Reported EBITDA improved by 16.8% to 85.3 million euros in the third quarter, slightly ahead of ordinary operating EBITDA. Moving now to items below reported EBITDA. DNA came in at 11.5 million euros in the quarter, increasing by 24.2% due to increased amortization of internal completed projects, as well as DNA related to PPA from the Sprangnetter acquisition. DNA in the third quarter was lower compared to the second quarter, in line with comments we shared during the last earnings call. We expect DNA to stabilize at current levels for the fourth quarter as well. The third quarter reported net income grew 8.4%. Growth was negatively impacted by strong financial results in the third quarter last year, which was fueled by positive one-offs. Earnings per share for the quarter amounted to 69 eurocent, representing growth of 9.9% year-on-year. Adjusted net income for the quarter was up significantly at 14.4% and adjusted EPS grew by 16%, slightly less than ordinary operating EBITDA due to higher D&A expenses and the effects from the financial result. Turning now to page 11 to walk you through a bridge from reported net income to adjusted net income. This is an additional piece of disclosure we have added for this quarter. The purpose is to provide a clear overview of the adjustment items between reported and adjusted net income. We believe that this is important as our active M&A strategy and also the recent strong share price since 2023 has created differences between the two baselines. Let me call out a couple of points. Non-operating effects excluding share-based compensation were driven by increased provisions for milestone payments related to the Sprengnetter acquisition, as well as a revaluation of the remaining 25% stake. This increased provisioning impacted both M&A costs and the financial result. At this point in time, we do not expect to increase provision levels further. On the topic of share-based compensation, we discussed during the last earnings call that it will be higher this year than historically. The reasons are strong share price and business performance. For the nine-month period, we currently stand at 20.4 million euros. For the full year 2024, we do expect to remain within the 20 to 25 million euros range. Please note that the majority of positions I just discussed will not have a cash impact in the ongoing financial year. Turning to page 12 on the topic of cash flow. We believe that one of the core advantages of our business model is the strong cash generation. As we move from executing our product vision and growth targets to improve our profitability, we now add the third element focusing on our strong cash generation. This additional slide allows you to track our free cash flow generation on a quarterly basis. The strong and growing cash flow generation of the Scout24 financial model is an important part of our equity story, which we want to highlight. To simplify reconciliation, we are starting the bridge from reported net income and progressively building up to the free cash flow figure. Free cash flow for the nine months was very strong at 172.9 million euros, representing growth of 24% year-on-year. The strong year-on-year growth was driven by a combination of revenue growth, increased profitability and positive working capital changes due to the high amount of non-cash non-operating effects I mentioned on the slide before. Free cash flow conversion as percentage of adjusted net income and ordinary operating EBITDA for the nine-month period was at 111% and 67% respectively. Turning now to page 13, we focus on our leverage development and capital allocation strategy. At the end of the third quarter, our leverage stood at 0.4 times. which was slightly decreased since its peak earlier this year following the dividend payment. Leverage was reduced as our ordinary operating EBITDA continues to grow and we repaid some debt. We expect leverage to remain in the range of 0.4 times to 0.6 times in the upcoming quarter. We continue to deploy capital for our shareholders. In the third quarter, we bought back shares for a total of 21.8 million euros which is a meaningful increase compared to the second quarter. Let me wrap up with some key takeaways. Just eight months after our capital market stay, we are on track to deliver with guidance at the top of the range, implying double-digit revenue growth and a margin at the upper end of the range we shared in February. These results are not a coincidence. They are a combination of our unique strategy with our strong teams delivering high-quality operational execution. Revenue growth in our core business lines is getting stronger as a result of interconnectivity, and we expect to see these developments going into 2025. Our transaction enablement revenue line offers upside as the transactional markets recover. Executing on interconnectivity will also continue to generate cost savings, as organizational efficiency improves and marketing costs are reduced. Plus, more products draw on the power from within the ecosystem. On the M&A side, we have shown over the years that we have the ability to acquire strategic companies, integrate them well and continue to generate margin expansion on group level. Expect us to continue on this path. Moving to the guidance on page 14. As a reminder, our guidance for 2024 assumes 9-11% revenue growth and an ordinary operating EBITDA margin of about 61%. Based on the strong business performance in the first nine months of 2024 and our constructive outlook for the fourth quarter, we have decided to narrow the current guidance range to the upper end, both for revenue growth and ordinary operating EBITDA margin. In terms of outlook for the fourth quarter, we expect trends to remain broadly similar to what we have seen in the third quarter. In summary, with the momentum we are experiencing in our core business, a slow but steady recovery of the real estate market, as well as increased organizational efficiency, we feel very confident to close out the fiscal year 2024 on a high note. While it is too early to talk about 2025, we feel good about the momentum we are currently seeing in the business and expect to carry this into next year as well. We will provide the next update during our preliminary Q4 full-year 2024 earnings call on February 27, 2025. 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.