Adevinta ASA

OSE:ADE

Earnings Call Transcript 2020-Q1

[Operator]

Good morning, and welcome, everyone, to Adevinta's First Quarter 2020 Results Presentation. Mr. Rolv Erik Ryssdal, CEO of Adevinta, will host today's conference that is being recorded. Mr. Ryssdal, the floor is yours.

[Rolv Erik Ryssdal, Chief Executive Officer]

Thank you, operator. Hello, everyone. Welcome, and thank you for joining today's presentation, our Q1 results. First of all, I do hope that wherever you're located, you and your close ones are healthy and safe. Our daily lives and our business environment have changed dramatically in the last 8 weeks. Since the very beginning of the crisis, we have been working very closely as a management team to adapt to this new normal. We have been meeting virtually every day and are taking collective decisions in the best interest of our employees, our business partners and our shareholders. And I would like to stress that the whole executive team is present on the call today, so Uvashni, Ovidiu, Gianpa and Renaud from their respective homes in Barcelona, Antoine out of Paris and Nicki out of London. We have opted for a new setup for this quarterly results presentation, but as usual, Uvashni and I will go through the presentation. And together with the rest of the executive team, we will be available to answer your questions. I will not go through the disclaimer, which I invite you to read, and I will jump directly to the quarterly business review. As we have stated in our communication on March 29, we have seen a deterioration in our operational KPIs and performance during March. However, I would like to stress that we had a solid start to the year, good development in most of our markets in January and February. Classifieds revenues were up 18% in the first 2 months of the year, and advertising trends were improving. In March, revenues were significantly impacted by COVID-19. EBITDA margin fell 590 basis points. Of course, the main reason was the decline I just described due to COVID-19. But part of the year-on-year increase -- this decrease was expected with the dilutive impact of acquisitions; increased investments in product and tech at both central and local levels; and by the setup of corporate functions following the IPO, which we didn't have at the same time last year. As we make our business decisions, we try to ensure that we consider all stakeholders and time horizon. We have to be reactive and move quickly by preserving our operations for the long run. Our people are, of course, our #1 priority. We have closed all our offices and have applied strict safety measures as from day 1. We have organized remote work for our employees. We're keeping close contact with the local teams, and we're monitoring their well-being on a regular basis. I would like to take this opportunity to thank them and congratulate them as they adapted very quickly to this crisis. They demonstrate every day very hard work and strong commitment while handling their personal lives in a totally new manner. I'm very proud of what they have been achieving despite the tough conditions. It is also our duty to ensure the continuity of our service, and we have managed to do so. Our clients are facing extreme difficulty in their operations. In order to support them and help to mitigate, over time, the impacts on their business, we're responding through tailored solutions to their needs. There is no one-size-fits-all approach. Across our various markets, each client is unique, and we're adapting to their individual constraints. We have extended the duration of apps, providing longer visibility for our clients while preserving the level of available content on our sites. This crisis has induced quick responses and measures, but we've always balanced those with our long-term development strategy. We have the ability to continue to invest in our business. We also see some emerging or changing consumer trends. We continue to position ourselves as the online classifieds partner of choice for our clients and users through the improvement of our offering and the maximization of our services benefit.So in this very special time, where people have been locked in, our online platforms continue to touch millions of people every day. We have responsibility that goes beyond ensuring the health and well-being of our people and running our business well. Our teams have remarkably come up with many solidarity initiatives that contribute to local communities. I will not go through all of them, but you can see some examples on Slide 6. In France, we launched #lebongeste to help bring people together despite social distancing. The hashtag makes it easy to offer free assistance. In Shpock, we launched a partnership with Parcel2Go to offer door-to-door, contact-free deliveries on secondhand goods. Those initiatives confirm our full commitment even under the most difficult circumstances. Now I would like to dig into the business performance of our main markets individually, starting with France. We benefited from a solid performance at the beginning of the year, but COVID-19 started to impact revenues from mid-March. Reported revenues grew 19% versus 7%, excluding the contribution of L'Argus acquisition. Display advertisement is well at the beginning of the year but were hit by a big drop in March. Same was the case for manual insertion fees and premium options revenue streams. Cars and real estate verticals benefited from subscription-based revenues. The EBITDA margin was down 7% year-on-year. Part of this decrease is explained by the drop in revenues in March. But part of it was expected as L'Argus acquisition has a dilutive impact of the margin, especially in the first year of consolidation. We expect that effect to diminish in the next years. We continue to invest in product and technology to further improve our offerings to our users and customers. We have deployed transactional solutions, leading to better UX and new opportunities for revenue generation. In France, we benefit from leading positions and market shares in both real estate and cars. Approximately 90% of revenues come from professional clients, and a large portion of them are subscription-based. On March 16, a full lockdown was announced by the government, and the impact on our KPIs was immediate. Traffic was down 30% to 40% in the second half of March, but we saw less severe impact on leads. However, since early April, trends have improved with traffic having now close to fully recovered compared to the pre-COVID levels. Those trends are important and positive as they predict the postcrisis recovery.Nevertheless, of course, our clients are facing a tough business environment. The wide action plan has been implemented to mitigate the impact and help our customers. We are supporting our clients throughout the crisis with various measures such as deferred payments or discounts based on their own situation and on a client-by-client approach. Sales team have been very efficient reaching out to them to understand their needs and react accordingly. We're also adapting our cost base with cuts in marketing spending and hiring fees notably. We are applying governmental measures when possible. Part of our staff is now on part-time redundancy, mostly in the sales team, which necessarily have a lower level of activity at the moment. However, our product and tech teams continue to work full-time as it is key for us to continue to enhance our offering and be prepared for the next phase when activity resumes for our clients and users. Our priorities have been around automation and user experience as well as the deployment of our P2P solutions in the consumer goods and cars. A lot of successful deployments were made in the car vertical. New features like the prefilling ads based on car plate numbers, for instance. We have launched a new performance offer for car dealers that allows us to improve ad efficiency through automatic ad bumps based on artificial intelligence. And this has been very well received by our professional customers. Now moving on to Spain. We also saw a good start to the year with January and February cumulative revenues up double digits, driven by strong performance in both customer acquisitions and price increases in cars. Real estate was a bit softer with a slowdown in macro environment and current -- and contraction in a number of houses transactions. The jobs and advertising segment were the most impacted by the crisis in March. Despite the COVID effect on revenues, our EBITDA margin improved 70 basis points year-on-year. We've taken strong cost-cutting measures in March to adapt to the situation. In Spain, a high portion of our clients are small and medium businesses. Overall, close to 30,000 real estate agents and 13,000 car dealers. The share of subscription-based revenue is high at approximately 80%. At the start of the lockdown in the second half of March, we saw a strong decline in traffic, down 45% on some of our sites. But we have already seen a good recovery in traffic throughout April. We have decided to adopt a reactive approach to manage our clients' requirements and applied a tailored commercial strategy by segment and by customer. As I mentioned on the previous slide, we have taken some very strong actions to reduce our cost base such as marketing expense cuts, hiring freeze and selective temporary working hours reductions. We also continue to invest in product and tech with strong focus on professional tools and improvement to user experience, like, for example, the new page format on the Fotocasa website or the image-recognition option for ad listing on coches.net. We've also started experimenting with a payment and a delivery solution. Moving on to Brazil. We see that the revenues in euros have been affected by the depreciation of the Brazilian real. The local currency revenues were up 8% year-on-year for OLX and 4% for InfoJobs, while in euros, we see a decline of 6%. We have taken measures to improve ARPUs by strengthening the product proposition for professionals and optimizing pricing. However, the rollout of new pricing has been put on hold and partly reversed during the COVID lockdown. Advertising revenues were performing well during the first months of the year with strong improvement in in-app programmatic advertising, but during the COVID lockdown, we saw a drop of approximately 30% in advertising revenues. OLX subscription revenues continue to be affected by payment rates for manual payment slips. We have shifted to a prepaid model and are attempting to migrate customers to automatic payments methods like credit cards. Such payment methods have also proven more resilient during the COVID crisis. Online sales of optional products dropped approximately 50% at the beginning of the COVID lockdown but has since partly recovered. Most Brazilian states have implemented COVID lockdown measures since the 16th of March, resulting in a drop of 30% to 35% in traffic. Since then, we've seen a gradual recovery of traffic, recovering to pre-COVID levels during April. Supply and revenue metrics have also recovered but are still significantly below pre-COVID levels. We see that the recovery as a result of our clients gradually digitalizing their business with the help in finding ways of continuing transactions during the lockdown. Beyond driving digitalization, we also support our clients with tailored discounts and payment terms as well as the extended listing duration. We've also adjusted our cost base, cutting nonessential spend in order to preserve cash and compensate for reduced revenues. Similarly to Spain, multiple clients are small and medium-sized businesses, which is a reflection of the general fragmentation of the market. Approximately half of the OLX revenues are from subscriptions with the rest coming from optional classifieds products, advertising and partnerships. During the COVID crisis, we see strong demand in most categories, in many cases, above pre-COVID levels. We're accelerating the implementation of the transactional model with payment and shipping in order to facilitate trading at a distance. We're also continuing to invest in trust and safety and in improving the professional client experience. We recently announced that OLX Brazil has reached an agreement to acquire 100% of the shares of Grupo ZAP. The transaction is still subject to approval by the Brazilian competition authorities and is expected to close in the second half of 2020. We believe that combining these highly complementary, horizontal and vertical platforms will allow us to accelerate innovation as well as boost growth of the overall market as a shift towards online and our businesses as we will have a more complete value proposition. We strongly believe in the potential of the real estate classifieds market in Brazil, which is still relatively immature when compared to international benchmarks. The deal will be equally funded by both shareholders with Adevinta shares representing approximately EUR 290 million. We have closed a new debt facility and fully hedged the FX risk of the transaction on a field-contingent basis. Last segment now, Global Markets. In this segment, we have a wide range of assets that operate in very different markets and have very different maturity profiles. Let me just remind you that we have adjusted our reporting structure to fully align Global Markets reporting with management reporting. As of now, we include 100% of Willhaben or also in 50% on joint venture and revenue and EBITDA of the Global Markets segment. This is consistent with the way we report the OLX Brazil performance. This has no impact on consolidated figures as Willhaben's contribution is then eliminated in our total numbers like for OLX Brazil. Revenue in Q1 Global Markets was down 6% on a reported basis, but if we exclude the currency impact, underlying revenues were actually down 4% year-on-year. We saw positive development in the start of the quarter, the classifieds revenues growing 10% in January and February. Advertising revenue growth was still negative, but trends were improving compared to 2019. In March, we saw revenue contraction as most of the markets in which we operate moved into national lockdowns. Italy was, of course, particularly affected, given their exposure to advertising and the longer duration of the lockdown, which started earlier than in other markets. EBITDA contribution remained positive, but margin declined to 5.3%. We have nevertheless started to benefit from strong cost-cutting initiatives such as cuts in marketing spending, hiring freeze, the renegotiation of large contracts and temporary redundancy plans. As you can see on Slide 17, reactions to the COVID situation varied across markets. Traffic decline was up to 40% in Italy and Hungary, and Willhaben is down 25%. Operational KPIs have then since started even to -- come back even to above pre-COVID levels in the case of Willhaben. On the business side, we have put a lot of effort into staying close to our users and customers. Across all our horizontal platforms, we have run extensive communication campaigns to inform users about the lockdown and have bundled listing and price vouching of critical items like face masks. We have seen accelerated growth in on-site transactions in Shpock and Jofogas. And consequently, we have rapidly deployed the shipping options in Subito and some of our other horizontal marketplaces. With regards to our professional customers, we have been very focused on preserving the relationship and the content of our marketplaces. We have supported them with an additional product, payment delays and discounts as needed, in general adopting a one-to-one rather than a blanket approach. Going forward, we will continue to focus on maintaining cost discipline, working closely with our professional customers and target their product development efforts, a functionality that removes frictions for our users such as payment and delivery options. So I will now hand over to Uvashni for the financial section.

[Uvashni Raman, Chief Financial Officer]

Thank you, Rolv Erik. Rolv Erik has taken you through the operational and market-specific financial results. I will go through our consolidated key financial indicators and provide some detail on revenue, EBITDA and our liquidity position. Total revenues, including JVs, were up 8% to EUR 188 million in Q1. The revenues were negatively impacted by changes in exchange rates. Excluding the exchange rate impact, we were up 10% in the quarter. Although we had a solid start to the year, March revenue performance, due to the COVID-19 lockdown, did impact on overall growth for the quarter. EBITDA and cash flow were both at EUR 43 million, down 14% and 16%, respectively, year-on-year. The main drop in revenue is due to revenue and sustained investment in product development at the central and business level. Performance on revenue. We saw a 13% growth in online classifieds and a 5% decrease in advertising in the quarter. The classifieds revenue growth was nevertheless driven largely by sustained performance at the beginning of the year in France and Spain as well as contribution from acquisitions, specifically L'Argus. This performance was significantly hit by the COVID situation in March, but I'd like to point out the good performance in the first 2 months of the year where classifieds revenue grew 18%, and trends were improving in advertising with a 5% increase year-on-year. As a consequence of the growth in classifieds revenue, the share of advertising revenues decreased to 17% in Q1 from 19% in the same period last year. On the cost side, we have taken measures to adapt our cost base to the current situation. As a reminder, close to half of our costs are personnel and related costs. Although we've decided to freeze hiring for an unlimited period of time, there are some exceptions when we believe positions are critical for the long-term development of the company. We are also benefiting from government support in most countries where we apply temporary redundancy scheme when our teams cannot be fully operational. This has been applied in product and tech teams where we are still working at 100%, even though the teams are working remotely. 10% of our cost base are IT-related expenses, which include license fees and infrastructure costs. These expenses are necessary to continue to operate and deliver our service at full speed. Marketing and advertising expenses represent 20% of our operating costs. As Rolv Erik mentioned earlier, we have decided to cut or delay marketing campaigns. The remaining 20% of our costs include third-party services, office rental, facilities management and sales commission as examples. We've also been very active renegotiating large contracted suppliers. Of course, travel expenses and corporate events have been canceled and are contributing to our savings efforts. Overall, we believe we have taken appropriate measures to reduce costs. We've nevertheless paid strong attention not to hurt our long-term growth opportunity in this process. Both revenue and cost performance impacted our EBITDA. Year-on-year EBITDA decreased EUR 7 million to EUR 43 million. Growth in France and Spain in EBITDA offset the decline in Brazil and Global Markets. The COVID impact was significant, but some of the decrease was anticipated. The increase in headquarter and other, just as a reminder, this includes central product and tech costs. As we mentioned earlier, we have accelerated investment in product and technology development, both at the central and business level. This includes the investment in the transactional model ahead of revenue generation.We have set up corporate functions that did not exist in Q1 2019 following the IPO of the group. During the quarter, we also incurred costs that are one-offs relating to some IPO transition and setup costs and some reorganization costs. This was approximately EUR 2 million and will not reoccur. Overall, our corporate and other headquarter costs were in line with the indications we provided in Q4.Now I'd like to take you through a couple of nonoperating elements contributing to the financial results. As a result of the agreement entered into by OLX Brazil to acquire Grupo ZAP in Brazil for approximately BRL 2.9 billion, which will be funded equally by each joint venture partner, Adevinta has entered into a series of derivative instruments to hedge the foreign currency exposure of the acquisition and fixing the euro amount to be paid. As hedge accounting is not applied to the currency hedge, the change in fair value of these derivatives has resulted in a noncash, unrealized foreign exchange loss of EUR 42 million in Q1. So moving on to the digital services tax, or DST. With no agreement reached in EU, DST has been implemented in France and Italy. Spain is still working to the legislative process on this. We are still of the view that not all our revenues should be included to determine the threshold limits in France. We continue to work with the tax authorities to determine the right outcome. To conclude on the financial section, I'd like to highlight the strength of our balance sheet. Our leverage ratio stood at 0.6x at the end of March, leaving us with more than adequate room in terms of covenants. Cash generation in Q1 led to a net cash position of EUR 88 million at the end of the quarter. As you know, we renegotiated our bank facilities in February, providing us with additional EUR 400 million liquidity. In April, we raised a further EUR 225 million bilateral facility to support the acquisition of Grupo ZAP that is expected to close in the second half of this year. Overall, we have the muscle to navigate through the crisis and to continue to invest in the business for the long run. In summary, a solid start to the year with the COVID-19 lockdown impact in March tempering the Q1 performance. Our financial and liquid position remains strong. I will now hand over to Rolv Erik to comment on the outlook.

[Rolv Erik Ryssdal, Chief Executive Officer]

Thank you, Uvashni. Now looking forward, the economic outlook will remain uncertain. The countries in which we operate have already turned into recession, and the time horizon and pace of recovery are unpredictable. In the coming months, this will continue to affect the group's revenues and profits. The second quarter of 2020 will likely be the strongest hit with half of the quarter spent on the full lockdown in the group's main markets. However, we are already seeing good signs of recovery in our markets with trends in operational indicators improving strongly throughout April. With extra balance sheet and sufficient liquidity, we are prepared for this recovery phase. We have continued to invest in product and technology to improve our offerings and solutions. This will allow us to strengthen our already leading position. New consumer trends will emerge, and we will make sure that we'll benefit from them. This is why I remain confident about our long-term objectives. Many consumer trends will accelerate as a consequence of the crisis with increasing online penetration and the need for safer and more convenient digital user journeys. Consumers will expect that all their user journeys can be done digitally, whether they buy a secondhand table, a new or a secondhand car or a new home. That is why we have developed a fully transactional service in leboncoin and in Shpock, and we'll continue to roll it out in other countries. This worked also with our professional customers, helping them to develop digital transactions for cars and houses. And there are more things we can do for them. Car deals, for instance, will they still need a big program if we give them a great online store? And we can also help them trim their personnel costs if we deliver fewer but more qualified leads. Same goes for real estate brokers. We also expect secondhand products to become even more popular. Many people will have less money in their pockets and would want to buy secondhand, which is also a more socially responsible way of consumption. But personal credits may be harder to obtain, so we should help tailor make financial offerings with partners. This creates new opportunities both for us and for lending partners we can work with. We are thus adapting our product roadmap accordingly with strong focus on transactional solutions, digital user experience and value-added pieces we're offering. Our professional clients will more than ever need to maximize the efficiency of their ad spending. We're thus keeping on improving our professional tools and their efficiency, including with increasing use of our data and machine-learning capacity. I believe that we are well equipped to weather this storm. Of course, performance is impacted by the current situation, but with leading positions, strong fund relationships and product and tech capacity, we're well positioned to continue to grow and also seize new opportunities during the recovery phase. At the same time, as we keep growing our own businesses, we'll follow the development in our industry closely and intend to play an active role in industry consolidation. Together with the rest of the management team, we remain confident about the group's sustainable and profitable long-term growth profile and our ability to create value for all our stakeholders. Now that concludes our presentation. The whole executive team is now available to answer your questions. So operator, please.

[Operator]

[Operator Instructions] Our first question comes from the line of Lisa Yang from Goldman Sachs.

[Lisa Yang, Equity Analyst]

I have a few questions, please. I guess it's great to see that traffic has already recovered back to pre-COVID-19 level. I'm just wondering if you could give us a bit more color to the number of listings. What happened there? Are you also back to sort of pre-COVID level? And the second question relates to display advertising. Could you also maybe comment whether you've seen any change in the trends there? I guess the numbers from Google, Facebook were quite good. So I'm just wondering do you think this could potentially accelerate a structural shift away from display to display or it could pick up pretty quickly. Thirdly, in terms of the measures that you have taken to help your customers, could you just confirm whether it will mostly impact April? Or do you feel as you extend those measures, do you feel that you need to extend these measures to potentially May or even June? Basically, when do you expect to resume your commercial policy from the pre-COVID-19 level? And the last question, if I may. Could you maybe comment on the M&A opportunities that might arise in this environment that we've seen some of your peers like process, cleanup their portfolio, doing a few in-market consolidation deals? I'm just wondering like how do you see the opportunity for Adevinta as well in the short term.[Technical Difficulty]

[Operator]

Ladies and gentlemen, we experience a momentary interruption in today's conference. Please stand by.

[Gianpaolo Santorsola, Chief Executive Officer of Spain & Brazil]

Maybe Antoine could start answering the first question of Lisa about listings. Antoine, do you want to start?

[Antoine Jouteau, CEO]

Yes, I will do it. Regarding the first question about the traffic and the impact on the listing. So first, we were impacted by the beginning of the year's crisis in terms of traffic during the first days. And now we are almost recovering a very good level in comparison with before COVID and in comparison with last year. Listings, the impact is different. We expect some delays on this recovery, but we are already seeing a very positive sign during the last 2 weeks. And we expect that will grow during the next week, and it will be exactly the same for the rest of the countries of Adevinta. Regarding the second point on advertising. Advertising, the situation is, as you know, most of the advertisers in the world have cut their investment during this period like we did in Adevinta, and we expect some recovery when we will exit, obviously, the crisis. And most of the revenue will come from programmatic revenue, and programmatic revenue is more resilient on this crisis. And from the major agency, we don't know yet because major agencies are depending for the biggest advertisers in each country. But what we can say is that already, the programmatic revenue will come in back soon. And the third, regarding measure from the customers. The main impact now is for April and also for May because we have reacted quite quickly at the beginning of the crisis to be close to our customers. It was not a global measure for our customers. It was one by one because each case was special. So what we did is a specific measure like payment delays and specific offers, and it was -- globally impacted April, but it's complex now to give guidelines for Q2. So we will come back to you for Q2 results, not now. And for the M&A, I think Uvashni can handle it.

[Rolv Erik Ryssdal, Chief Executive Officer]

Yes. We're back here now. I'm sorry, I was kind of thrown out here. But -- so I gave an answer on M&A, but you probably didn't hear it. So what I said, Lisa, there is that, yes, of course, we'll continue to pursue opportunities in that space. And what we've always said is that in-market consolidations is very attractive, and you saw a number of deals we did there recently. And we'll continue to look for more things in that space as well as on the wider picture.

[Operator]

We'll now move to our next question from Adrien de Saint Hilaire from Bank of America.

[Adrien de Saint Hilaire, VP & Head of Media Research]

I hope you can hear me well. My first question is given the figures you have given for January, February and the Q1 numbers, it seems that classified revenues in France were slightly positive in March, maybe about flat in Spain. Does that tell us anything in terms of the Q2 revenue growth for the classified revenues for these 2 countries?

[Rolv Erik Ryssdal, Chief Executive Officer]

Uvashni, do you want to answer that?

[Uvashni Raman, Chief Financial Officer]

Yes, sure. I think what you got to understand, Q2 is going to be a tough quarter because the impacts of the COVID in April would probably be much more pronounced than you would see -- you saw in March. So I think from a trending perspective, probably we would say we have a better May and June. But definitely, March -- April will be impacted.

[Adrien de Saint Hilaire, VP & Head of Media Research]

Okay. And back to your point, Antoine, about the number of clients. I'm not sure I understood your question. Have you seen any loss in customers as a result of bankruptcies or potential churn to other platforms in the recent weeks?

[Antoine Jouteau, CEO]

What we can say in France is that it's too soon to give some guidelines on this. What we know is that now most of our customers, they have benefit from the government measures. For most of them, they have used some temporary measure on their teams. So at this moment, most of the companies in France are crossing this crisis like we do in the good condition because the French government has set up a very good condition to help them. And we will see the next month what will be the impact. On our market, we are monitoring closely on real estate and on the car market to assess what will be the impact. We are very close to the association of the car dealers and association on real estate. They are giving some guidelines, but I think it's too soon to give concrete numbers. We will see mostly the impact before the end of the year, I think.

[Rolv Erik Ryssdal, Chief Executive Officer]

And just to add there. Some smaller real estate brokers or car dealers [ which quite say is ] problems, but I think it's important to stress that we don't think it's going to impact market share. They're very loyal to leboncoin.

[Adrien de Saint Hilaire, VP & Head of Media Research]

Understood. Maybe one last question perhaps for you, Antoine. I'm not sure I understood why the margins in France were down that much in Q1. Is it related to timing? Or is there anything else? I understand the impact from L'Argus, but still, I think the margins were down something like 200 basis points. Is it just seasonality? Or is there something else?

[Rolv Erik Ryssdal, Chief Executive Officer]

Uvashni?

[Uvashni Raman, Chief Financial Officer]

Yes, I can take that. Yes, there's a couple of things in there that -- we are investing in product and tech on the transactional model in France ahead of some of the revenue generation, which we expect to come through in -- or it was expected to come through in the second half of the financial year. And there were some additional costs around marketing. There's probably some element of seasonality, but more especially around increase in product and tech development.

[Operator]

We will now take our next question from Sarah Simon from Berenberg.

[Sarah Simon, Analyst]

Yes. I've just got a few. Firstly, can you give us an idea how the jobs advertising was impacted in the second half of March in France and in Spain? Secondly, you talked about varying different kinds of concessions to your customers. If we look at the U.K., there's obviously been kind of Rightmove doing 75% off for 4 months. Can you give us an idea of you're, a, making offers as generous as that in any of your markets? And b, can you just confirm, so where you're giving people delays in terms of not having to pay, that's presumably just a cash impact rather than impacting your revenue growth rate. I assume you would still be kind of booking the revenue on a monthly basis. And the final question was on display. Is your display advertising mostly sold on a cost-per-thousand basis? Or is it more performance marketing?

[Rolv Erik Ryssdal, Chief Executive Officer]

Maybe, Gianpaolo, you can go for Spain on jobs?

[Gianpaolo Santorsola, Chief Executive Officer of Spain & Brazil]

Yes. Yes. So for -- speaking for Spain, the job market is clearly affected, and we've seen already a reduction in the number of new contracts signed during the month of March. InfoJobs is the most cyclical among our brands in Spain. It is relevant to mention that in jobs, that our customers and readers operate typically under annual contracts. So the correction on our revenues might be delayed, and it will be -- depend on the development of the economy post-COVID. Latest forecasts show that the unemployment rates might reach 20% in 2020. At the same time, the government is betting a significant bounce during 2021 in terms of GDP. And we know that job creation and revenues from job classifieds are strictly positive to GDP growth. So yes, in terms of content and offering, the impact is significant. InfoJobs is more cyclical than car and real estate. But our contracts are annual, and we are working with our product teams to develop products that can make our revenues more resilient. Antoine, maybe you want to comment on sales.

[Antoine Jouteau, CEO]

Yes. So on the job market, this is not our -- the biggest market for us, but what the job market is facing now is a difficult situation. Of course, the macro economy is very negative. GDP will be negative during Q1, and most of the small companies and small businesses will be impacted and have been impacted during the last weeks. For example, in France, more than 10 million people are benefiting from the unemployment measures given by the French government. So there is quite a big impact. And we expect, of course, that the unemployment rate will increase during the next weeks. We expect figures from Pôle emploi for April, but we expect very bad figures. In parallel of that, we have launched some offers to sustain this activity to help recruiters, and we will continue to do this during the next month. Regarding the...

[Sarah Simon, Analyst]

And then your -- sorry, are your revenues here more annual like in Spain? Or are they more kind of just volume-based through the year?

[Antoine Jouteau, CEO]

We have both. We have a subscription offer with yearly deals. And we have one-by-one purchase on the site. So of course, the subscription -- yearly deals are more resilient to resist. But we are not giving any guidelines market-by-market on this. Globally, our subscription part of revenue is 50% of -- globally for France. It's not only on this market. On the customer part, maybe I can -- on the tenant delays, you're right. It's mainly cash impact. So it's -- we get some delays to our customers to delay their invoices. And regarding the merger by customer, it's -- what we have decided is we are proposing one-by-one solution. We decided to because some of them, they are asking for payment delays. Some of them, they are asking for publishing more volumes. Having some specific offer for what we have decided is a one-by-one approach, not a global approach. And it was different from our competitors. But quite soon, during this crisis, we have contacted our biggest customers to have the discussion with them, to be close to them and mainly to prepare the recovery period, help them to sustain this crisis and to restart with them. So we will announce during the next weeks offers to sustain our main markets and to help them to restart. And on display, you have asked about the different business model. We are not giving any guidelines between CPM and CPC. But globally, we are using both, and it depends by country and by market. But globally, we are using both CPM and CPC model.

[Rolv Erik Ryssdal, Chief Executive Officer]

Correct. We did a rather big change in France in display advertisement in February when we shifted -- the supplier shifted from Maxus to Google, and we have actually seen a better -- we saw a better trend in the period after.

[Operator]

We will now move to our next question from Andrew Ross from Barclays.

[Andrew Geoffrey Ross, Research Analyst]

I've got 3 as well. The first one is on Daft. I was hoping maybe you could give us a bit more of an exact timing as to when you're expecting the approval. I mean are we thinking in the second half, late in the second half? Anything that would be helpful. Second question also on M&A. I mean Rolv Erik, you said that you're still looking at a wider picture when it comes to M&A. So I wondered if there's anything more that you could add as to how you see the wider picture evolving, and I guess, in the context of ad play do you have anything of equity given where the share price is? And anything you could say on the eBay situation would be great. And then third question, I understand you don't want to give a guidance for Q2, but it would be very helpful if you could give us a bit more color as to what you've seen in April either in terms of revenue growth or in terms of kind of the net price discount you've offered in April because it's quite tricky at this point to calibrate how we're thinking on Q2.

[Rolv Erik Ryssdal, Chief Executive Officer]

Right. So let me try to answer those, Andrew. So the acquisition in Brazil, we've said second half of the year, and I think it's hard to be more precise. But I expect it to happen in the second half of the year, probably more likely in the third quarter than the fourth. So the situation in Brazil is that the competition authorities are also using home offices. And -- but so far, we've understood that there is not any delays in the process. And we have not seen either any negative reactions to the proposed acquisition. So third quarter, possibly fourth quarter would be my best guess. Then when it comes to the M&A, yes, we'll continue to pursue in-market consolidation. And as I said last year when we listed Adevinta, that we see this as a license to expand. And as you know, we've done several things last year, and we'll continue to look for more opportunities. And then I think you'll understand that it's hard for me to comment on specific situations. So I'd rather say that I think we have the full backing of our owners and our Board that ships -- that Adevinta should continue to expand and play an active role. And that's what we're doing, and that's what we're working on. Then when it comes to the guiding for second half, I think it's too early to say anything based on April trends. But obviously, we're hoping that -- we're happy with what we're seeing in terms of traffic recovery, and we hope that things will approach a more normal pattern so that there'll be a positive trend in third and fourth quarter. But it's -- we still have to wait to see how the economic conditions in the countries develop.

[Andrew Geoffrey Ross, Research Analyst]

Great. And just a follow-up on my last one. I mean are you able to quantify how much April is down?

[Rolv Erik Ryssdal, Chief Executive Officer]

In revenues, you mean?

[Andrew Geoffrey Ross, Research Analyst]

Yes.

[Rolv Erik Ryssdal, Chief Executive Officer]

No. I don't think we're able to -- we don't want to comment on that. I think as we said earlier that we haven't given any blanket discounts or a free month for the whole market. We're rather working on a client-by-client basis, case-by-case basis. So that is obviously also better for the economics, but I don't want to comment specifically on the numbers.

[Operator]

We will now take our next question from Catherine O'Neill from Citi.

[Catherine T. O'Neill, Director]

I wanted to ask about the discount level as well. I don't know if you can give any average level or at least give us some sense of what proportion of your customers are taking some level of a discount versus the payment deferral. I also wanted to ask a bit more detail about the transaction solutions, which you seem to mention quite a lot through the release. Can you provide more detail on what some of those initiatives are and which markets you're focused on rolling them out? And also on the sort of financial element of that, you referred to it being a lower-margin-type model but an exciting opportunity. At the same time, you still got the 15% to 20% revenue growth, 40% long-term margin. I just wondered how we sort of square the circle if transaction solutions are going to become a bigger part of the business.

[Rolv Erik Ryssdal, Chief Executive Officer]

Yes. So I think on the way we've -- the first part of your questions on discounts in our bigger markets, I think I'll hand it first to Antoine and then to Gianpa.

[Antoine Jouteau, CEO]

Go ahead, Gianpaolo.

[Gianpaolo Santorsola, Chief Executive Officer of Spain & Brazil]

In general, I think that for France and in general, Antoine has answered previously the same question to Sarah. Maybe we will not give you specific details on how much discounts we are giving to the customers because, as we said, the solution is on a one-by-one basis. But maybe what we can tell you is that Sarah was referring previously to the level of discounts to the Rightmove, right? So maybe it's fair to say that both in France and Spain and for the time being, we have gone for lower levels and shorter period of discounts, right? So we cannot give you like more detail about that, but you should not expect the same level of discounts, the same level of coverage. It's not for everybody, and also it's not 4-month long. So as a reference, it should be over the Rightmove, but we cannot give you more details.

[Catherine T. O'Neill, Director]

Okay. And you're quite sort of comfortable that you're able to recover back to the precrisis pricing levels. There's no suggestion that customers won't try and continue with maybe not that level of discount you're giving in April and May but some level of a discount into the second half.

[Gianpaolo Santorsola, Chief Executive Officer of Spain & Brazil]

We are optimistic in cutting -- our facility in Spain have also observed customers that are asking me to keep the current investment level because coches.net was their only shop that was still open. So it was the only place where they could still display their cars. So now the reaction is really being diverse customer by customer. And for sure, the speed of recovery will depend also on the demand and consumer spending on GDP development of the overall economy. But ultimately, we're not afraid of losing the market share in any of our verticals. And we believe that we are best positioned when the economy and the new normal comes to be able to start investing again.

[Rolv Erik Ryssdal, Chief Executive Officer]

Yes. And on transactions, Catherine, so we've launched the full transaction model in France during the Q2. Full transactional now will be launched all over Brazil, and we've done part of the transaction model in Spain. As for the other markets and also how we think around the transaction, I'll ask Ovidiu to cover that part. Ovidiu, are you there?

[Ovidiu Solomonov, Senior Vice President of Global Markets]

Yes. Thank you, Rolv Erik. I can go a bit through it. So on Shpock, we've been pivoting towards transactional starting last year. And now I think it's been validated by the market. We have very good user pickup in it. We launched door-to-door, and it's growing exponentially as we're looking at week-on-week growth. Now you're asking in terms of margin and impact, right? So what we're doing in Shpock with the transactional model, we're having a 7% take rate. And for us, this is critical because it's replacing monetization and consumer goods, which was done to advertising margin. So this is both better for the users, and it's a more interesting monetization lever for us. And we believe that the TAM on consumer goods, when looking at GMV and taking a share of that, is much more exciting. And then we have some transactional models in other countries as well, in Hungary with Jofogas, in Belarus with Kufar and in Chile with Yapo. And then in Subito, what we did, we're seeing kind of the user takeout, we launched rapidly integration with shipping providers. And that's a lead generation model. So we're selling quite a lot of leads. It's a pretty good integration. And then we're looking at the full transactional model towards the end.

[Rolv Erik Ryssdal, Chief Executive Officer]

Did we answer your questions today, Catherine?

[Catherine T. O'Neill, Director]

Yes. I just sort of wondered how to square it with the 40% long-term margin if it's a bigger opportunity but yet lower margin. I mean in absolute terms, it may be bigger, but lower margin. That's what I was wondering how to think about that.

[Rolv Erik Ryssdal, Chief Executive Officer]

Do you want to comment on the long-term margin picture, Uvashni?

[Uvashni Raman, Chief Financial Officer]

Yes, sure. Catherine, I guess, the transaction model is a different revenue stream. So from a revenue perspective, you kind of see growth. On the margin side, as it is -- classifieds is still a large portion of our total base, and we still see growth within the classifieds space. We believe that there still will be a balancing off, but transactional will have an impact maybe in the -- more the medium term relative to your classifieds. That's why we're still comfortable around the margin element of it. We still have growth that should come through from Brazil and Spain as well on the classifieds space. So we're pretty comfortable with that at this point in time with the classifieds growth still projected.

[Operator]

We will now move to our next question from Hubert Jeaneau from UBS.

[Hubert Jeaneau, Director and Research Analyst]

I think most of them have been kind of touched on so far, but I have 2 additional, if I may. The first one is around, I think, the product development. So you have mentioned that you're still investing in that area. So just wondering if you could give a little bit of color around what has changed in terms of prioritization of new product post -- I mean in this environment. And second question around your -- the acquisition in Brazil. And if you could comment a little bit around the synergies, both in terms of kind of revenues, OpEx and marketing that you're expecting from the transaction.

[Rolv Erik Ryssdal, Chief Executive Officer]

Right. So on product development and priorities, I think I'd like to ask Renaud to answer that question, and then Gianpa can cover the Brazilian question after that.

[Renaud Bruyeron, Chief Product & Technology Officer]

Yes. On product development, I think the first step, that was to react to the conditions, and most of the effort was on making sure that we were able to keep inventory, removing expirations of content, et cetera. So -- and supporting commercial activities to help our clients. Then in terms of properties going forward, what we're seeing, we're seeing that users, in general, will look for more convenience in the way they use the platform and also more safety. And that's why we're pushing even harder now in terms of investments towards transactional models. There's been developing wallets, digital payments, escrow and also shipping, as you saw with Shpock. We are looking for more than stretched shipping but also door-to-door, contactless shipping, if we can. And we're going to either ship those features or start experimenting in many of our markets in Q2. In addition, we're also working with improving our offering for professionals for their tools and making sure that they're able to manage the inventory more efficiently, and this means providing tools, analytics and insights on the inventory and the ability for them to optimize. Underneath that, a large effort is ongoing on data. And so this is something that we've covered previously in previous presentations. And those efforts are kind of nonstop and continue to make sure that we're able to move data around, analyze it and then turn this into insights or products with more and more machine learning deployments. In Q1, we had a record number of machine learning models put in production to support our products to aid automation or improve user experience. So these are kind of the main focus areas. It's not a radical change. We're just pushing even harder now as we see that what is happening with the virus is pushing our users towards more of those.

[Rolv Erik Ryssdal, Chief Executive Officer]

Thank you very much, Renaud. And I think I will hand it over to Gianpa to talk about Brazil and the acquisition.

[Gianpaolo Santorsola, Chief Executive Officer of Spain & Brazil]

Yes. So first of all, Hubert, I think the -- combining OLX and Grupo ZAP will allow us to cover our customer needs and our user needs in a much better way. So we believe the most important synergies will be our ability to expand and to accelerate the shift of the real estate agent business to online. Also, we believe that in terms of coverage, Grupo ZAP and OLX are pretty complementary because ZAP Viva Real is stronger in the Southeast and South part of Brazil, while OLX is stronger in the Northeast and in the North. Also in terms of customer base, usually, OLX is stronger with small and medium-sized agencies, while ZAP Viva Real is stronger in big agencies. So we believe that there will be a lot of benefits in terms of valuation that we can build for the industry, and for sure we will benefit also from that. We will be able to accelerate the digitization of the business. We also believe that this will ultimately translate also in synergy in terms of revenue potential. And also, one important part that we are really excited about is that we will also accelerate our speed in terms of product and tech development because Grupo ZAP Viva Real has around 150 people employed in tech, and we believe that this will strengthen significantly our ability to drive traffic to our website and to solve the needs of the kind of user customers through a differentiated offer of a generic vertical.

[Rolv Erik Ryssdal, Chief Executive Officer]

And I think the fact that we have the opportunity to create the leading sites in the market that will be very exciting for real estate in the years to come, we see that as a big opportunity in itself.

[Gianpaolo Santorsola, Chief Executive Officer of Spain & Brazil]

Hubert, you should consider that this is a pretty immature market compared to European benchmarks. So we see the potential mostly coming from the growth opportunity and the expansion in the market.

[Operator]

As there are no further questions in the queue, I would like to turn the call back to Mr. Ryssdal for any additional or closing remarks.

[Rolv Erik Ryssdal, Chief Executive Officer]

Well, if there are no further questions, then please don't hesitate to contact us later today. Marie, Uvashni and I and also other members of the management team will be available to answer questions. So I would like to thank you for attending today. I just want to wish you all the very best. Stay healthy and stay safe. We're running the business. We're in a good place, and we can weather the storms. So thanks a lot for your time, and have a great day. Thank you very much. Bye-bye.

[Operator]

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