Adevinta ASA

OSE:ADE

Earnings Call Transcript 2023-Q1

[Operator]

Good afternoon, this is the Chorus Call conference operator. Welcome, everyone, to Adevinta's First Quarter 2023 Results Investor Presentation. [Operator Instructions]

At this time, I would like to turn the conference to Mr. Antoine Jouteau, CEO of Adevinta. Mr. Jouteau, the floor is yours.

[Antoine Jouteau, executive]

Thanks, operator. Good morning, everyone. Welcome and thank you for joining today's presentation Adevinta Q1 results and progress. I'm very pleased to be in New York today with our CFO, Uvashni Raman, to share our results.

We have scheduled several days of our road shows here to meet with our U.S. investors immediately after the release of our first quarter results, which explains the unusual timing of our results release this quarter.

We will go back to our usual morning release for our future results at the end of August. We are pleased to report a strong financial performance and good operational progress. We will also be taking the opportunity to update you on our projects to verticalize Adevinta's operations as we seek to align our operations more closely with our growing upscale strategy and unlock the group's full potential.

Uvashni and I will be joined by the rest of the Adevinta's executive team for the Q&A session. Overall, we delivered strong financial performance with 15% growth in total revenue in core markets. EBITDA margin was strong at 33.4%, up 1 percentage point year-on-year despite the business mix evolution and the impact of French DST.

This has resulted in strong cash generation, allowing us to further deleverage the business and to pay down debt again this quarter. We can confidently confirm our full year targets for 2023. We continue to lay the foundation for a stronger, even more efficient and innovative organization.

And we are making good progress in the verticalization of our operations announced in November 2022, focused on realigning our organization with our strategy. This will allow us to deliver more value to our stakeholders. At the same time, we'll keep focusing on delivering on our operations daily with key achievements of the product and commercial side in our key strategic pillars, mobility, real estate and transaction, with the continued financial discipline mindset.

Delivering more value to all of our stakeholders is the reason why we have initiated our verticalization project. This will allow us to better leverage our scale. We will become the largest inventory of secondhand goods in the world.

We will share more features and expertise across our core markets and in turn, we will reduce our time to market. We will allocate resources more efficiently and boost innovation. This is how we will be able to deliver more value to our customers and users whose experience will be improved.

Our employees will have wider and more attractive career and development opportunities. Overall, we aim at enhancing the usage of our secondhand trading platforms and enabling circular economy. With this come strong ambitions for sustainable growth that will create value for our shareholders as well.

Let me share now some key achievements and upcoming milestones. The definition of the target operating model progressed well with the key design principles defined in line with the group's strategy in January. In the second quarter and second half of this year, the detailed organization design and key processes we'll review -- will be completed and the engagement with employee representatives will be launched.

Our objective is to transition to our new verticalized organization in 2024. Some of our marketplaces are also evolving at the moment. I'm sure that you have already seen the news about the rebranding of our German generalist platform, Kleinanzeigen.

Kleinanzeigen is the #1 classified business and the true household brand in Germany with exceptionally strong underlying metrics. Kleinanzeigen is not only widely known in Germany. But more importantly, the majority of the population use the platform.

The [ brand boost ] consideration score of close to 90% and 56% of online Germans visits our platform every month. With almost 90% of our visits coming from mobile, Kleinanzeigen is a full mobile-oriented platform. Kleinanzeigen's success is based on 3 main pillars: [indiscernible], we have an enormous reach with more than 36 million unique users per month.

We have impressive supply levels with more than 50 million ads and we have 15 years of experience in online classifieds. It's all there in abundance.

Resilience, Kleinanzeigen is [indiscernible] classified platform in terms of audience and reach, demonstrating the strength of the brand and how firmly it is [ ensured ] with the German audience.

And simplicity, Kleinanzeigen offers a biased-free expense open to anyone with instant availability of millions of products across a diverse range of categories. Following the acquisition of eBay Kleinanzeigen by Adevinta, the rebranding to Kleinanzeigen is a natural transition.

Last week, the company said goodbye to the old fashion logo and hello to a modern brand identity. The new logo symbolizes sustainability and circular economy. Again renamed Kleinanzeigen with one exception.

We are not only the market leader of re-commerce but also a serious alternative to traditional e-commerce. The new design has been implemented successfully across all platforms. As part of the changes, Kleinanzeigen has responded to long-standing user feedback, requesting a dark mode for its apps, which has been received very positively so far. Let's move on to more innovative products introduced in the quarter across all marketplaces.

Our utmost priority is to bring value to our users and to our clients. In mobility, we continue to enhance our offering with a new product feature of Follow a Dealer at Mobile that adds value to both consumers and car dealers and where consumers can now follow their favorite car dealers and receive notifications when new listings are added.

Another example of product innovation is the launch of a car inspection service pilot at Marktplaats. In real estate, at Leboncoin, we initiated the first steps of our financing proposition with the launch of a borrowing capacity simulator on [ adview ].

In transactional services, Subito launched its shop-to-shop solution, where buyers now have the option of picking up purchases at shops and lockers of 2 shipping carriers, reducing shipping costs and improving user experience.

At Leboncoin, we deployed our bundled purchase solution, allowing users to buy multiple items from a single seller. Both are only a few examples but there are many others. I will now focus on traffic, which is a key indicator in our industry.

Both Leboncoin and Kleinanzeigen continue to show an impressive performance with visits up by 48% and 28% compared to 3 years ago and even positively for evolution compared to last year. This is, of course, demonstrates the strength of both brands. In Mobile, we hold a very strong #1 position and we continue to maintain our competitive advantage when we compare web and app visits with our main competitor.

However, it is inevitably impacted by the motor market environment, temporarily weaker but we believe the potential remains intact. Now let's dig into our 2 key verticals, starting with mobility. While the new car supply is showing signs of recovery, we expect the recovery in dealers' inventory and used car transaction to be staggered versus the new car inventory recovery.

As a consequence, for now, supply volume remain weak globally and more specifically in Europe, although we have observed differences from one market to another. In Germany, the total number of listings, driven by an increase in the time to sell a car continued to develop positively, increasing by 14% year-on-year, heading more towards prepandemic levels.

In France, listings are down 4% in the first quarter as the total number of listings continues to be driven by high demand and continued supply pressure. In the meantime, we are able to actively mitigate the volume impact through our own business initiatives such as price increases, alongside product enhancement and increased added value for customers.

In the quarter, ARPA in France has increased by 21% year-on-year. Average -- and average revenue per listing at Mobile has increased by 15% year-on-year. At Mobile, we successfully implemented a new pricing adjustment on April 1, 2023, resulting in average dealer price increase of around plus 15%, which will continue to drive increased monetization.

Meanwhile, Mobile continues to innovate in the space of leasing, finance, C2B and much more. The overall macro environment continues to be challenging with rising inflation and interest risk, low consumer confidence ultimately affecting the property market with consequences of the number of listings available on our platform, although to different degrees in France and Germany, largely due to the different market positions we hold.

In France, professional listings increased by 7% year-on-year, driven by a slowdown in the number of transactions, which can be explained by the rise in interest rates and the tightening of credit access condition on the demand side for all properties. We continued to improve our monetization.

ARPA increased by 17% year-on-year, which continued to benefit from the successful launch of enhancing subscription packages in September with high added value for professional clients. In Germany, professional listings are up with an impressive 101% increase year-on-year.

This is explained by the market dynamics where the demand for houses for sale is decreasing significantly and shifting partly towards houses for rent due to the current economic situation. As a consequence, professional listings stay longer in our platform.

The second driver is our gain in market share and increased agent penetration. The number of professional clients increased 18% year-on-year to 9,000. We still have a lot of room to grow in real estate and we are making sure that we continue to bring further value to agents, ultimately leading to increased monetization.

In transactional services, we continue to see very strong traction in product adoption with strong double-digit growth in all markets and even triple-digit growth at Kleinanzeigen. During the quarter, we had a strong promotional activity with the launch of successful shipping promotions in France with Leboncoin, Kleinanzeigen in Germany, Marktplaats in Netherlands, and in Spain, which had a positive impact on both the number of transactions and the adoption of the service. In the quarter, we also continued to improve and to launch new products in all our core markets.

I will now hand over to Uvashni for the financial performance section.

[Uvashni Raman, executive]

Thanks, Antoine and good morning, everyone. Overall, our financial performance for the first quarter of 2023 was underpinned by the continued acceleration in revenue growth driven by exceptional growth in mobile.de and transactional services.

We prioritized investment and cost management that offset the impacts from the changing business mix and the French DST. Group revenues grew 14% compared to last year to EUR 435 million. The 14% growth refers to comparable revenues. What this means is that we restated revenues for the markets that we exited between last year and this quarter. These included InfoJobs Brazil, Belarus and Mexico.

Turning our focus to core markets. Revenues grew 15% with progressive acceleration quarter-on-quarter. Online classified revenues improved by 18%, supported by strong double-digit growth in mobility. Real estate also posted double-digit growth in the period, while the jobs vertical saw a steady performance. This, despite lapping tougher comps in Spain, our largest contributor in this vertical and the current market context.

Transactional revenues grew by 62% year-on-year, with strong performance in all core markets. Advertising revenues, on the other hand, were down 3% year-on-year, as a result of the overall weaker advertising market, especially in automotive display advertising. This was, however, partially offset by good performance in Italy and Kleinanzeigen in the quarter.

Moving on to EBITDA. Reported EBITDA amounted to EUR 145 million, up 16% year-on-year, representing a 34.4% margin. This performance was driven by the positive top line evolution as outlined earlier, lower marketing investments not only driven by different phasing but with spend discipline and ROI prioritization. Cost management on other discretionary spend considering the current market context also contributed.

This was partially offset by an anticipated controlled increase in personnel and other costs. This increase in personnel costs were in 2 areas. Firstly, we have also built up ahead of the implementation of new operating models for support functions and product and technology teams, as previously announced.

And secondly, the annualization of the previous year's investment in product enhancements and in sales and customer support operations, particularly in legacy eCG markets to support new business models. Direct costs for transactional services, delivery and payments also increased in the quarter, in line with adoption of the service and revenue growth. And finally, a EUR 3 million expense booked in the quarter related to the French DST also impacted our profitability. Excluding this DST impact, EBITDA improved 19% to EUR 148 million compared to the first quarter of 2022, representing a 34.1% margin.

I will now provide further detail on the different markets beginning with France. Revenues in France grew 10% in the quarter. Online classifieds revenues grew 8% year-on-year, mainly driven by real estate and mobility. Real estate double-digit revenue growth benefited from the successful launch of enhanced subscription packages in September with high added value for professional clients.

Also contributing to a 17% year-on-year ARPA increase, mobility revenue growth in the quarter was driven by the 21% ARPD increase, which more than offset the effect of declining professional volumes.

Jobs and holiday rental revenues were down year-on-year. In advertising, we saw the continued impact of reduced agency and programmatic activity, resulting in a 9% decline in revenues year-on-year. Transaction revenue, on the other hand, was up 48% year-on-year on the back of volume growth.

Reported EBITDA was EUR 56 million, up 2% year-on-year, supported by the positive top line development. This improvement was partially offset by, firstly, an increase in direct transactional cost, whilst improved delivery pricing structure, the wallet solution, the introduction of buyer fees for the fashion category and the new cap on shipping eligibility partly offset the volume-related increases.

And of course, the expense of EUR 3 million in French DST that I mentioned previously. Finally, we saw a slight increase in personnel due to investments in product and technology development. EBITDA margin on the other hand, deteriorated by 3.5 percentage points year-on-year. mainly reflecting the business mix change with an increased share of transactional services and one-off promotions to drive adoption, a decreasing share of high profitability advertising revenues as well as the DST expense.

Moving on to Mobile. Revenues in Mobile improved by 32% in the first quarter of 2023. Online classifieds revenue and value-added services increased by 36% year-on-year, benefiting mainly from the recovery in dealer listings and the successful implementation and execution of dealer price adjustments in April last year, in combination, of course, with increasing value for customers. Average revenue per dealer listing increased by 15% year-on-year. Revenue from private sellers also posted a strong performance in the quarter, supported by ARPL. Advertising revenues decreased by 10% compared to the previous year, with the impact from reduced spend by OEMs continuing due to the current market context.

EBITDA improved by 38% in the first quarter, mainly driven by the positive top line development and operating leverage. This was partly offset by an increase in personnel costs as a result of the annualization of our investment in product enhancements and in sale and customer support operations as we roll out new business models.

Marketing expenses reduced in the quarter, down 12% year-on-year. This drove the 2.5 percentage point increase in Mobile's EBITDA margin year-on-year. In the EU market, revenues on a comparable basis increased by 12% in the first quarter, led by strong performance at Kleinanzeigen, Spain and Italy.

Online classifieds revenues were up 15%, supported by double-digit growth in the verticals, especially mobility, consumer goods and real estate. Advertising revenues were slightly down year-on-year. Transactional revenues continued with strong momentum and more than doubled compared to the same period last year.

In line with top line evolution, EBITDA improved 11% compared to the first quarter of 2022. Thus, the performance was despite an increase in personnel expenses, particularly in Kleinanzeigen and Marktplaats as we continue to manage and prioritize product development and sales and customer support in growing business models.

Transactional costs also increased, driven by higher volumes and by promotional campaigns to drive adoption of the service. EBITDA margin was flat year-on-year despite the unfavorable revenue mix evolution. I would now provide more insights on revenue development for the largest market in the segment. Kleinanzeigen grew 16% in the period and reached EUR 62 million. This was driven by significant momentum in real estate with further market share gains, consumer goods with strong performance from small and medium businesses and in mobility.

Advertising posted a positive growth in the quarter, mainly driven by lower comps as the start of the war in Ukraine severely impacted the advertising business last year. Transactional revenues doubled in the period, benefiting the -- their first shipping promotions in March.

In Spain, revenues grew 11% in the period and reached EUR 56 million. Contributing to this performance was the strong performance in all 3 verticals in online classifieds, up 13% year-on-year and the further ramp-up of transactional services benefiting from promotional campaigns.

Advertising revenues, on the other hand, were down 9% year-on-year, driven by lower vibrancy. Benelux revenues grew 5% in the period and reached EUR 38 million. Revenue growth in online classifieds and transactional services was partly offset by the lower advertising revenues, which continued to be impacted by the weaker economic environment.

In Italy, revenues grew 22%, mainly driven by the strong performance in mobility, real estate and consumer goods and continued strong momentum of transactional services. Advertising revenue improved year-on-year driven by higher programmatic performance.

Let's now move to the international markets, which not only includes Canada. International markets showed a 10% year-on-year decline in revenues at constant parameter. Canada posted a 3% revenue decline in online classifieds, primarily led by Jobs and Real Estate. This was partly offset by mobility. Advertising performance continued to be soft, driven by soft display advertising.

Reported EBITDA was broadly stable year-on-year. The top line evolution and slight increase in personnel costs, driven by Canada, offset by a reduction in marketing expenses and other cost optimization saw the stabilization of EBITDA. The EBITDA margin thus improved 6.3 percentage points year-on-year.

Next slide is about OLX Brazil. which we do not include in our segment reporting. However, we believe it's important to continue to drive the market with visibility on the asset. OLX Brazil increased by 7% year-on-year in local currency and reached EUR 39 million. This performance should be seen in the context of the macroeconomic environment, which is affecting our activities, particularly in the Real Estate business. EBITDA was almost 4x higher than last year in local currency and amounted to EUR 40 million. This development was driven by a strong decrease in marketing expenses and lower personnel expenses mainly due to a headcount reduction and other efficiencies, which was completed without compromising operations. The EBITDA margin for the quarter was at 36%.

I will now move on to the next slide covering Other and Headquarters, which comprises Adevinta's HQ costs as well as global enabling functions and product and technology costs. The Other and HQ EBITDA increased (sic) [ decreased ] by EUR 2 million compared to last year at EUR 47 million. This evolution was driven by the continued buildup of the global activities and capabilities due to the implementation of new operating models for the support functions and product and technology teams to drive operational efficiencies and accelerate value creation.

This was partly offset by the larger share of cost allocation to the markets to reflect the global teams supporting those markets. As a percentage of revenues, central product and HQ costs, were down year-on-year at 11%. Moving to the other P&L items below EBITDA, depreciation and amortization increased by EUR 8 million in the quarter, mainly driven by the reassessment of useful lives of certain trademarks.

Other expenses amounted to EUR 16 million in the first quarter of 2023, with the main driver being the eCG integration and the verticalization project of the organization. Net financial costs were up EUR 32 million, mainly due to the variation in foreign exchange gains on the loan in BRL issued by Adevinta to OLX Brazil.

Tax expenses for the group were up EUR 20 million as Q1 2022 benefited from an adjustment of an income tax provision related to the Mexican operations and the use of tax losses in the previous periods. We saw strong cash generation in quarter, up EUR 39 million compared to last year.

Some of the more material movements for EBITDA to cash include a negative change in working capital, due to noncash items and provisions related to the 2022 employee bonus payments and some prepaid expenses that relate to global contract for cloud and CRM providers, as well as some media campaigns, tax payments of EUR 3 million.

CapEx, which is essentially the capitalization of development costs represented about 6% of our sales in the quarter, and share-based compensation was amounted to EUR 12 million. This has resulted in an adjusted net cash flow from operations of EUR 84 million.

In the quarter, we managed to pay back EUR 80 million of our long-term loan in euro. This is in accordance with our financial policy and associated leverage targets and in line with our prioritization strategy around reduction of floating debt repayment. At the end of the quarter, our senior secured leverage ratio was at 3.4x.

We will continue to focus on deleveraging and will further optimize our debt structure to mitigate the impact of rising interest rates. We reconfirm our target to reach a reduced leverage ratio of below 3x net debt-to-EBITDA by the end of fiscal year 2023.

Liquidity remains strong as our total cash position at the end of the April was EUR 51 million and we have a further undrawn facility of EUR 450 million. We continue to implement cash optimization measures to reduce our operating cash requirements. Looking now at our debt maturity profile, we also have some ways to go before the maturity of our debt.

So we do not have to repay debt before November 2025. With this strong position and a good balance between investment and cost control, we believe we have the right ingredients to take advantage of market upswings or have the levers to pull if further deterioration in market conditions occur.

Moving on to the next slide. As explained in the previous quarters, we are taking measures to mitigate our FX and interest rate exposure. Regarding interest rates, we continue to reduce our floating interest rate exposure by prioritizing floating interest rate debt when it comes to deleveraging.

Our floating to total debt ratio is now at 31% compared to 38% a few quarters ago. With this deleveraging strategy, we expect our interest rate expense to remain roughly flat in the first half of the year despite a rapid increase of reference rates. Regarding exchange rate exposure, we hedge every material transaction and we try to minimize the FX risk by keeping FX cash at operational minimum and by hedging our M&A proceeds where possible.

In summary, an operational performance translating into a strong financial performance for the group in the first quarter, building on the momentum and reaping the benefits of controlled investment actions in previous quarters.

I will now hand over to Antoine, who will take you through the outlook and conclude.

[Antoine Jouteau, executive]

Thank you, Uvashni. In conclusion, we saw a strong start to the year for the group where we delivered strong financial performance and made significant progress in the execution of our business and strategic road map.

In the next quarter, we will continue to focus on preparing for the implementation of our vertical organization, while continuing to invest in our products and our people. We expect to generate low double-digit revenue growth for core markets and to reach consolidated EBITDA in the range of EUR 620 million to EUR 650 million. This will allow us to reduce our leverage to below 3x net debt-to-EBITDA by the end of the year.

Beyond 2023, we continue to see many further opportunities. Our financial ambition for the business remains strong, with annual revenue growth ranging between 11% and 15% until 2026 and EBITDA margin between 40% and 45% from 2026.

This compares to the 33% level we were at in the full year 2022, so a significant improvement expected over the next 4 years. Our priority remains to create value for our users and customers, our people and our shareholders.

I will now open the Q&A session. The rest of the Adevinta management team will join and we are now available to answer your questions. Operator, please.

[Operator]

[Operator Instructions] The first question is from Joe Barnet-Lamb of Credit Suisse.

[Joseph Barnet-Lamb, analyst]

Excellent. Yes. First question for me. One of the drivers of the 1Q margin expansion year-on-year was lower marketing and you specifically flagged sort of different phasing. Can you give some more detail on which markets saw particularly suppressed levels of marketing in the period?

I know you did mention the [indiscernible]. And then beyond that, you quantify the EUR 10 million as a reduction year-on-year in Slide 17. I don't think you've given a comment on full year marketing expectations. So could you give a little bit of color on your full year expectations and the cadence through the year?

And then the second question, I was just coming on OLX Brazil. I mean the EBITDA high improvement is spectacular. You give some explanation on the side -- the slide, that obviously is a huge improvement. You flagged sort of reduced marketing and personnel sort of costs. But could you talk a little bit about how sustainable that is without impacting the core business? And sort of what -- any expectations or views you can give with regards to profitability at OLX Brazil going forward?

[Antoine Jouteau, executive]

Thank you for your question. And also thank you for hosting us today. Uvashni, maybe you can give us some answer to this question?

[Uvashni Raman, executive]

Yes. So in terms of the marketing spend, yes, we saw a decreased marketing spend in Mobile. But across the board, what we've looked at in Adevinta is, we really looked at prioritizing marketing. And we've relooked at it through a lens of ROI and where we are also looking at it in terms of product development.

So across all of our markets, we saw a reduced spend. In some areas, we did increase spending. However, it was in line with what we were expecting from a product perspective. So no clearly -- no clear direction as where exactly it was but we -- let's just say the way we look at marketing now is very different than we've done in the past, really coming at it from an ROI perspective.

When it comes to Brazil, yes, marketing spend was reduced but there were a couple of things that we did in Brazil. And Ajay, if you want to dive in at any point, please do. But from a Brazil perspective, I'll start with marketing. Similarly, we looked at marketing spend relative to what we wanted to bring to market this year versus what we wanted to do in terms of reengagement of that business on a very different level.

So we've cut back on marketing based on the fact that we don't expect and anticipate large product developments in the current period and the investment in areas where we really want to drive some of that. We also pulled back on some of the new revenue streams that we were looking at and in terms of the current context. So we see marketing spend decline there.

How sustainable it is, definitely, we will look at marketing quite differently again within Brazil, similarly to the way we look at it in the other Adevinta businesses. So sustainable to an extent that we are doing it in a very different way, from a people perspective and people reduction perspective. The key thing there is, we did say over a period of time that with the consolidation of the Grupo ZAP within the business, we were going to look for synergies and efficiencies.

The other element of it is, what we are looking at is, when we were growing the business at quite a high rate, we looked at how the business has been structured. So structurally, we changed it quite differently. So you'll see some of the benefits of that synergy bringing together those 2 businesses come into play.

And we do believe we are now getting to an optimized level. We will see further efficiencies come through this year. And then after that, we will see the business actually scale up going forward as well. So some of that EBITDA development, we believe, will be consistent.

[Joseph Barnet-Lamb, analyst]

Just one -- and our pleasure to host you. One -- sorry, Uvashni. Carry on. Sorry.

[Uvashni Raman, executive]

No, you asked something on Canada, right?

[Joseph Barnet-Lamb, analyst]

I did not answer any -- ask anything on Canada. But as a follow-up, I was just going to ask what's -- no, sorry. Just at the group level, I totally understand you won't sort of give guidance on marketing in any individual country, given the sort of competitive reasons. Is there anything you can say with regard to sort of group level marketing and the cadence through the year or not?

[Antoine Jouteau, executive]

We -- you know that what we have started to do is that we have implemented a strong ROI model across the portfolio. So that's the guidelines we gave to the team everywhere. But also, we are spending money where we think that it's important. For example, we are investing now in the new brand of Kleinanzeigen in Germany that will continue to do during the next months that is healthy because that first, it's a very strong platform but also during this as it's needed to continue to invest.

So that's important. But globally, we have this financial discipline. We are adjusting. We are more frugal that in the past. That's true. We are investing only in the areas where we think that we have ROI, on transactions, on mobility where we think that we have the ROI. But globally, you're right, we are more frugal than last year.

[Operator]

The next question is from Christopher Johnen of HSBC.

[Christopher Johnen, analyst]

Yes. First, on your competition with eBay. Obviously, they changed their business model in Germany, basically allowing private individuals to list everything for free. I'm just curious what sort of impact, if any, you have seen on your C2C business. I think the focus of ours only been on the cars and real estate part, plus transactional.

[Antoine Jouteau, executive]

First -- I think, first, it's important to come back to the fact that the Kleinanzeigen is a very strong brand today, with more than the 46 million users, a well-known C2C brand. Everybody is using it in Germany. Do you know that the competition has always existed in this market. That's a new competitor but not so different that what we are facing already. But what is important, it's all the opportunities we are facing now on this market. We are investing in transaction. We have opportunities on real estate. So far, we don't see any impact but we are very focused and continue to develop this strong asset that has a lot of potential for the future.

[Christopher Johnen, analyst]

Perfect. Can I have another follow-up on that? I'm just curious, first, whether you aware of any decisions by eBay to roll this sort of, which seems to be a bit of a German-only strategy, into other European markets? Is that something that you're aware of?

I'm also wondering in terms of product innovation on Kleinanzeigen, I know you've probably been quite busy with the rebranding and that makes a lot of sense. But it seems that there hasn't really been anything major in quite a while. I mean -- I hope the dark mode introduction in 2023 isn't really a highlight this year.

So I'm just curious, does the verticalization project need to conclude first before we see a more significant step because I think innovation is happening probably more in other parts of the businesses than in Kleinanzeigen. But happy to correct me if I'm wrong.

[Antoine Jouteau, executive]

I will answer to the first part. So we don't have any information about eBay strategy. I think you should ask to them this question. On the second part, I think maybe I could ask Paul to give you more color on what we are doing. We are doing a lot of things in Kleinanzeigen, not only repainting the app. But maybe, Paul, you can give more example of that?

[Paul Heimann, executive]

Yes, sure. Happy to do that. Thanks, Antoine. Thanks for the question. So overall, we've done quite a significant amount of product changes and rolled them out in the last couple of months, next to the rebranding, which obviously, with a good amount of work, just to give you a couple of examples on the product side.

So one of the things that we've done is implement shipping recommenders. So that makes it very easy for sellers to pick the right shipping options. So based on AI, we identify the object that someone is shipping and then we recommend the right parcel size depending on shipping carrier that you use. That's just one of the examples, which by the way, also helps to improve the profitability for our transactional service because we're recommending exactly the right size of parcel.

But also, if you look on the more pro business sellers, we have done a lot on the self-service. We've provided a pretty major update to our statistics module for professional customers on the advertising side. So they get a very deep view on the value that we're generating with our one third-party [ PLA ] product.

Then in terms of consumer goods, we have done a lot in deeper integrating the transactional offering into our chat. So you can, for example, now within the chat, direct offer similar in how you are -- how you would be doing it in re-commerce context. And then if you think about real estate, we have iterated our C2B seller lead feature, added new entry points.

We built a price estimation tool. We have implemented new features, new agent branding. We have also collaborated quite a bit with Leboncoin team in France on things like our smart [indiscernible]. On C2C, we have some -- carried out quite extensive user research and tackled some of the bigger pain points in our real estate seeker user journey.

So actually, we are quite far away from not doing anything. It's a significant amount of work that has gone into the product over the last few months. And we will obviously continue that with a focus on our key areas like transactions, like real estate and also our mobility integration with Mobile. So we are working on all fronts and we feel quite confident about what we have been doing in the last few months and what's in our plan for the next quarter.

[Christopher Johnen, analyst]

That's very clear. Sorry, go ahead.

[Antoine Jouteau, executive]

No. Just a final comment maybe on that. You know that Adevinta, we are a innovative company and we -- even if we are starting to verticalize the business, it doesn't mean that we are stopping what we are doing everywhere.

We are transforming and we are delivering a user and customer value at the same time. So we are doing both. That's important for us to continue to innovate and to continue to serve the customer expectation. So it's -- and it's everywhere. It's in Germany, in Spain, in the Netherlands, in France, everywhere, we continue to deliver at the same time that we are changing the organization. I think you had another question, right?

[Christopher Johnen, analyst]

No, I was just curious if it was possible to get any idea how the C2C listings did for Kleinanzeigen in Q1?

[Antoine Jouteau, executive]

I think we are not disclosing this level of detail. I think on the quarterly basis, I think we continue to be positive on that overall. So that's -- that means that -- that's showing that Kleinanzeigen is a solid asset, growing in terms of traffic, growing in terms of content. So I think that's a signal that we continue to gain some market shares everywhere, especially in Germany.

[Operator]

The next question is from Marcus Diebel of JPMorgan.

[Marcus Diebel, analyst]

Three questions from my side. The first one, also on Kleinanzeigen, the property business, clearly strong increase in customer, 18%, up to 9,000. Could you maybe talk a little bit about who these customers are? Particularly, are they mostly private or mostly agents? That will be interesting.

Then secondly, on the kind of like rebranding exercise on Kleinanzeigen. Should we think about it as a larger kind of like one-off event in the second quarter? And if so, if you could maybe tell us how much you actually spent in branding and advertising correspondingly to this? And then thirdly, is on pricing, in mobility.

Could you remind me when is kind of like the new value-based pricing coming through? And where are we in that journey? Just trying to understand when kind of like this initial change is getting annualized, but I think it --do you still talk about, I think, in a few quarters.

[Antoine Jouteau, executive]

Yes. Maybe on the first question and maybe I will ask also Paul to complement what I will say. But on Kleinanzeigen, the property market, as we commented before, is growing significantly.

As you noticed on our slide, we have a tremendous growth during the last -- I would say, the last 24 months. Now we are reaching 9,000 agents. That's a significant progress compared to the past. I think now we are on the top 3 real estate portal in Germany.

We are growing on the C2C side. We are by far #1. But now on the B2C side, we're on the podium. So it's showing that the, all the progress we are doing on that market on both sides, on C2C and on B2C. But of course, it's a young market. We are just starting to go on that path but it's a promising market for the future.

But as you know, it will take some time to improve the product and to be ready to continue to monetize it for the future. On the rebranding, we have started our marketing spend during the last weeks. We will continue, of course, we cannot disclose, of course, what we will do. You can imagine because we have some competitor that they will be happy to hear what we will do.

But of course, we will continue to sustain the rebranding of Kleinanzeigen. That is a strong asset for us. Part of this investment will be below the EBITDA and it's a one-off that will not continue next year, of course. But of course, we'll give you more detail during the next quarters when we will be able to disclose it.

And on the last part, that was the question about pricing, right, on mobility. So as you know, our pricing strategy, we have different timing depending on the different assets. In Germany, we have done a price increase in April by 15% in average.

In France, it was around 15% or so in January. In Spain also, it's double digit for this year. It was also implemented in January. So I would say that the Motors market is more fixed on the first quarter where we are implementing, our new pricing offer, whereas on real estate, for example, for France, it's implemented in September.

It's a different thing, right? And it's completely based on always the value we want to bring to our customers, we synchronize always new products that we are bringing to real estate agent or [indiscernible] as the same time that we are doing this price increase. So proof of ROI and price increase.

[Operator]

The next question is from Giles Thorne of Jefferies.

[Giles Thorne, analyst]

My first question is back on Kleinanzeigen and real estate. And I wanted to test the scope of your ambition here. Momentum is obviously very good but do you see yourself able to replicate what Leboncoin did to [indiscernible] in France? Or is the window to that type of opportunity closed?

And then my second question is for Ajay. I think Ajay is on the line there somewhere. It's been, I think, 8 months now since you've been executing and refining the online car buying and selling proposition. And over time, Ajay, do you like that model more or do you like that model less?

[Antoine Jouteau, executive]

Okay. Before that, I give the answer to Ajay, I will answer on the first one. I think what we think on the real estate market. First, it's a promising market, usually generalist, when we are already monetizing the Motors category on Kleinanzeigen thanks to a strong bundle that we are selling to the car dealers in Germany.

So the Motors business is monetized globally, in Germany in the same effect. On the real estate, it's different. We -- as we said that we have started to invest on the real estate user experience during the last months. We are continuing to develop the tools that the real estate agent needs to monitor and to develop their business on Kleinanzeigen.

It takes time. But you're right, it's a strong potential. The liquidity, what we are calling the liquidity, is going up on Kleinanzeigen. It's a good sign. We have started by the C2C, exactly that what Leboncoin has done at the beginning.

And now that the B2C is coming, that's a good sign but it will take some time. So you should not expect in the short term a strong acceleration but it's a promising market that we are planning to invest on the product side, mainly to deliver more added value.

So if it's more, I would say, midterm market for us that the short term because we need to do some product improvement to deliver the right tools for our real estate agents. And on the Ajay questions, I think Ajay is the best person to answer to that. Ajay, you are in Brazil, so you can answer. Yes.

[Ajay Bhatia, executive]

Thank you, Antoine and thank you, Giles, for the question. It's a very good question. So from my perspective, firstly, we are totally committed to digital retail. As Adevinta mobility but also as Mobile, we're totally, totally committed to this. Which model will succeed is still to be known. And for me, the question really is, which model scales as well. And our current model, there are some struggles in terms of its scaling.

So I wouldn't say that this is the model that will scale without any changes to this model. So we will be looking at some changes to the model. But we are committed to digital retailing.

[Operator]

The next question is from Pete Kujala of Morgan Stanley.

[Pete-Veikko Kujala, analyst]

It's Pete from Morgan Stanley. You mentioned there a little bit on the pricing on the Motors side. Maybe just to recap, so the French average revenue per dealer, did you say that pricing that you did like 15%, so is there some like ARPU uplift also coming from the churn in dealers because I think dealers were down like 8%. So is it, smaller dealers are churning out? Just checking.

[Antoine Jouteau, executive]

So what we said on the pricing part in France, for example, we said that in average, the price increase was around 15%. As you know, when we are increasing our prices by 15%, you don't have automatically this impact on the ARPA.

The price is not automatically in the ARPA. And the reason is that some of the customers, they are downselling and some of them, they are upselling to other products. So overall, what we are calculating, the ARPA was going up the 20%, including the price increase plus the upsell that, as you know, we are pushing our customers to have more premium packages, more advanced product.

So that's the work of our sales force to push the customers and to push them to get more ROI and pay also more expensive packages. So it's why the price increase is part of the effort of growing the ARPA but not the only one.

Same in Germany, part of the average of new policy is, the growth is coming from the price increase, part is coming from the number of ads that is increasing on the platform, and's part is coming from the product that we are providing to the car dealers.

[Pete-Veikko Kujala, analyst]

Great. That's all clear. Then the second one is on Mobile. You did 15% on average in April. What's the feedback been from agents so far? Have you seen any kind of reactions from the customer base?

[Antoine Jouteau, executive]

Ajay, do you want to answer to that question?

[Ajay Bhatia, executive]

Yes. Sure. What I'd say is, feedback is never good on a price rise. But at the same time, from a cancellations perspective, cancellations stay in line with what we expected and in line with last year. But overall, the thing to point out is our relationship dealers are better than they were this time last year. And we're investing a lot in making sure that our relationships are robust and strong.

[Pete-Veikko Kujala, analyst]

Great. And then the last question for me is, can you give any kind of comments on your current view on the breaking to positive EBITDA, absolute EBITDA on the French transactional revenues?

[Antoine Jouteau, executive]

Yes. Thank you for the question. As we said during the last quarterly presentation, we said that in Q4, Leboncoin has reached the profitability. During the Q1, we have continued to invest on that market to expand our products. We have delivered new innovation, especially a focus on the wallet and allowing the seller to put more product and the buyer to be able to buy few items at the same time.

Plus we have invested in -- we continue to invest in discounting the shipping. We know that discounting the shipping is bringing us new users. And we are keeping this user for the future. So sometimes you will have a positive impact on our EBITDA. Sometimes we'll not see it because it depends on the -- of our discounting policy on the shipping side.

But overall, we continue to think that this business is a business that can be profitable, it can be in France because that's the most advanced market. In the other markets, it's a different situation where we are continuing to invest to get new users, to continue to improve our product for the future.

So I would say that sometimes you will have some bumps on that part but it's healthy because it's improving the liquidity of the platform, the efficiency of the platform. But when we want we become profitable on the ARPA.

[Operator]

The next question is from Adam Berlin of UBS.

[Adam Berlin, analyst]

I've still got 3 questions as well. First question is, how did you manage to grow Kleinanzeigen advertising in the quarter? You think that the advertising market in Germany was pretty weak and it seems to be in most other countries. So is that a one-off effect? So and what are the trends into Q2 on Kleinanzeigen advertising?

Second question is, you're struck by the difference in the trends in Germany and France in terms of listings. In Germany, both the property and the car listings are very strongly up, both year-on-year and Q-on-Q, whereas in France, the listings trends are kind of in the reverse.

Can you just help us understand a little bit about why Germany and France are having such different dynamics in the car and property markets? That would be helpful.

And thirdly, now that the first quarter is out of the way and you're into the second quarter, can you give us any more detail on the margin guidance for the year? Obviously, you said margins will be up but can you give anything more concrete on that?

[Antoine Jouteau, executive]

On growth on advertising on Kleinanzeigen [indiscernible], you know that we are comparing Q1 '23 with Q1 '22. And remember that, that was the start of unfortunately the war in Ukraine. So we had some [ drops ] on the [indiscernible] advertising revenue during Q1 in Germany but not only in Germany, it was across the different assets.

But -- so now in Q1 '23, you can see an improvement on that but the comparable of Q1 was lower. So -- on advertising, you know that it's a more volatile market. We are more cautious on this market than on the other, especially because we are dependent a little bit on the external providers but also with the context, the macroeconomics.

So we are more cautious. So we should not be too optimistic on that market and be more focused on the rest of the revenue line that we are growing on SMB in Germany. We are growing on transaction. We are growing on real estate. So I think that's the main area where we want to continue to grow.

And then to your question, the comparison between Germany and France, you're right. These 2 countries, they are in different stage of volumes depending on the vertical. On mobility, I would say that Germany is in advance on the Motors area.

The reason is that the new car market is more dynamic than the French market. But I would say that now the French market is improving compared to a couple of quarters. But you see already that Germany is in a more positive trend.

On the Real Estate, we are not really comparing apples with apples. The Leboncoin has a strong real estate position, established, I would say. The last 10 years, it is -- has a #1 position already on that market. Capturing the C2C and the B2C market having most of the real estate [indiscernible].

That's not the case of Kleinanzeigen. That is entering, I would say, to that market, not on the C2C side, where Kleinanzeigen already #1, I'm talking more about this B2C side. And this part is growing, is capturing because the real estate agent, they want to capture leads. They want to get more clients and they are using Kleinanzeigen to get that.

It's why we are going on the rental part, where the German market is switching now. The transaction are slowing down in Germany more than in France. And Kleinanzeigen is capturing the rental part, whereas Leboncoin is still steady. But we see some weaknesses already on the real estate market in France in terms of transaction. But if we are taking, for example, the forecast of transaction in France, we are talking about this year probably around 1 million transaction, which is pretty good year, even if it's slowing down, it's quite promising. And do you have any other questions?

[Adam Berlin, analyst]

Do you have a view on German transactions for the year?

[Antoine Jouteau, executive]

We don't have the transaction forecast. I don't think so. Paul, do you have any? I don't think we have transaction forecast on real estate market for this year.

[Uvashni Raman, executive]

No, we don't disclose.

[Antoine Jouteau, executive]

We don't disclose any of that.

[Ajay Bhatia, executive]

No, we don't have that -- that data we talked to, most of it is in Germany rather than in other markets in Europe.

[Antoine Jouteau, executive]

On Q2 -- on margin, as you know, we are not disclosing and we are not communicating on the -- we are just confident that this year, we will improve the margin. And the idea is to do it quarter-by-quarter. So that's the goal we gave at the beginning of the year, low double-digit growth on revenue and improving the profitability.

That's the commitment. It's starting pretty well, I would say. The year is -- the quarter is very solid. Hopefully, we will continue on that trend. But -- yes, that's the idea is, we continue to deliver financial discipline, delivering healthy revenue growth and it should improve the global profitability what was [ 33% ] last year, under the idea to improve it.

[Adam Berlin, analyst]

So just to clarify, are you saying that the margin should improve quarter-on-quarter through the year? Does that -- would that -- help me understand that?

[Antoine Jouteau, executive]

I think what I'm saying is that overall, the margin will increase. You will have a quarter that will improve, some of the other less, depending on the seasonality, depending on the volatility of some of our markets. But overall, the full year will be better than last year.

[Operator]

The next question is from Andrew Ross of Barclays.

[Andrew Ross, analyst]

And I've got 2, if that's okay. First one is to follow up on Marcus' question on eBay Kleinanzeigen, where I think you said that part of the investment is going to be below EBITDA. So did I hear that correctly? And if so, could you clarify what you mean and whether that -- if the rebranding spend is being treated as an exceptional?

And then the second question is on pricing plans into the second half. I assume there's nothing planned in autos in Germany, Spain and France because you've done it all already in the first half but correct me if I'm wrong. And then maybe just talk us through what's planned in Real Estate and Jobs into the second half?

[Uvashni Raman, executive]

So Andrew, I'll take the first one on the eBay Kleinanzeigen or the Kleinanzeigen cost below EBITDA. As you know, the branding and change in name for Kleinanzeigen was part of the deal we had with eBay as we did the transaction. So we had the use of the name eBay Kleinanzeigen until June 2024.

So we had to then rebrand on the back of that. On the back of that, like with other costs and integration costs, we put that below the line. Therefore, it will be below the line and it will be a one-off from a rebranding perspective.

[Antoine Jouteau, executive]

On the pricing part, you know that, we have implemented our pricing on Motors in Q1, mainly in France, Germany and Spain and also in Italy and others. So the effect will be during the next -- the rest of the year.

Mobile, it was just the last month, so it will continue to impact the revenue for the rest of the year. That's exactly the same thing for the other countries. Most of them we have got yearly contract or subscription model, so it's, the pricing effect will continue during the rest of the year, until the anniversary of the price increase. On Real Estate, I cannot disclose what we will do.

Of course, you can imagine because we are in a competitive environment. As you know, we will do it in France and also in the other assets. We are still ambitious on that part because we believe that the added value we are bringing to our real estate agent is strong, so we continue to deliver more qualitative and quantitative leads, especially now the volumes are coming back also.

So we will be -- I would say, normally aggressive on that part. On jobs, it's a different situation. The job market is more volatile. The pricing power is low compared to the other markets, except for jobs in Spain. That has a strong leadership position that can do some pricing thing.

But except that, we are not planning to use the pricing -- our pricing power to do that. We are planning to use our product, our offers, our sales power to continue to increase that market.

[Andrew Ross, analyst]

Cool. Can I just follow up on the first point? How much is [ fee ] exceptional is going to be in Q2? And can I clarify that it's just going to be in Q2 and then will go to 0 after that? Or should we be expecting an exceptional to run through for multiple quarters as part of this rebranding?

[Antoine Jouteau, executive]

On that part, we are not disclosing that. It's too early. We are still adjusting also some staff. Of course, we will give you more information during the Q2 results.

[Operator]

The next question is from William Packer of BNP Paribas.

[William Packer, analyst]

Two for me, please. So firstly, just coming back to the exceptional marketing costs and ebay.de push. So if I was to summarize your update today, it's that ebay.de have kind of pivoted their strategy. They're pushing but thus far, you're not seeing any impact on your business.

And an undisclosed portion of marketing spend for the year will be treated as exceptional. Is there any help you can give us in terms of quantifying what that could be for the year? And what portion of marketing cost that would be? Or is it all eBay Kleinanzeigen marketing costs for FY '23 are now exceptional? Just some help there would be useful.

And then secondly, one of the key takeaways of the presentation is, the priority of verticalizing your portfolio and bringing assets closer and closer together from a technology perspective. And while some of your peers are doing that some are pursuing what's the opposite. We're now 2 years into the eBay deal. Could you just remind us of what you see the long-term advantages of bringing those assets close together are? And then what risks you see in terms of executing that and how we should think about that challenge?

[Uvashni Raman, executive]

Yes. Sure, Will. So in terms of the marketing costs, to be clear, there's 2 elements of market, in market, business as usual marketing, which will include some of the elements around marketing on that we have [indiscernible] and then the rebranding marketing.

There's a very clear distinction between the two. The rebranding marketing is the only one that is below EBITDA. The rest, that's above EBITDA and is part of the marketing costs within eBay Kleinanzeigen and EBITDA of the Kleinanzeigen as well.

[Antoine Jouteau, executive]

Will, on our marketing strategy, when we decided for our budget for next -- for this year, we knew already that we were planning to rebrand Kleinanzeigen. So it's -- it was already planned and we are exactly on the plan.

We are not spending more than what we were planning to do on the rebranding part. So it's on plan and it's really already included in our guidelines that we were planning to deliver this year. So we are not worried on that. Regarding your question on verticalization, I think the verticalization move is a natural move for us. We try to align our growing at scale strategy, which is verticalizing our business.

It means that we will -- we think that it's more interesting and more relevant to have an organization by industry and less by geography. Why? Because when you are comparing the different road map and the customer needs across our portfolio, the -- really, the alignment is very strong because we want to expand on the value trend.

We want to develop capability of real estate tooling. We want to expand on the transaction. We want to improve our AI capacity. So really, we have strong alignment by industry. And I would say that the geographical analysis is less pertinent than thinking by industry.

So that's the main reason why we think that we have lot of opportunities for us to explore, the thing we will have to do if we want to verticalize correctly is and this is what we already, we have started, is to have a strong, 3 strong business leaders that we have already to manage this 3 business lines.

And then we'll -- the idea is to combine our product and tech capabilities to have more product and tech capabilities, to reduce the complexity of our portfolio, to be able to accelerate and to use the powerful workforce of 3,000 product and tech people that we have in Adevinta.

This is already what we are doing. And we are doing it at the same time of delivering strong financial results. We are not stopping anything. The risk perspective, always when you are doing this kind of transformation, you have risk. But we are reasonable people, it's why we are doing the 2 at the same time.

If we are doing the 2 at the same time, it means that we are taking part of our road map to continue to deliver added value for our customers and in parallel we are switching part of the resources to do this transformation. We are aware of that. We try to find the right balance. We have already started in our job -- our job is always to reset, to merge platform, to kill platform, to create new one.

That's already what we have done during the last year everywhere. That's our job to be able to do both, this transformation that is necessary for innovation, for fighting competition and for grabbing new opportunities and financial results, that is the commitment of the management for the next 4 years.

[William Packer, analyst]

And -- I suppose what's difficult here for investors will be that rebranding expenses being exceptional kind of makes sense. But on the other hand, it comes at a time when it sounds like eBay.de will be pushing quite hard of their own marketing campaign.

So separating what's kind of ordinary course associated with the deal and what's incremental will be tough. Can you give us any kind of range for the kind of spend that will be exceptional related marketing spend for the year or even total exceptional costs? Just so we have the right thing in mind.

[Antoine Jouteau, executive]

Unfortunately, Will, we cannot. We don't disclose that, especially for competition reasons. We are in the middle of this deployment of the rebranding. Of course, when we will come back with the next quarter, we'll be able to give you the results of the quarter effects but for the next, we cannot.

I'm just saying that the rebranding was planned initially in our budget. And we are planning to grow and to improve the profitability this year. So that's still the plan. We have a new context of competition in Germany but that's something we're used to face in many countries. We are adjusting across the portfolio, our marketing budget.

We are doing some reallocation. So that's something we continue to do that, that I would say, the normal life of our business. And part of it, as we said, will be below EBITDA, that's the rebranding part. The other part is business as usual, I would say. But so far, what we see is that Kleinanzeigen rebranding is a success.

We are reinforcing our position on the C2C markets. That's a very strong brand attraction from our users and customers is very good. We don't see for our new competitor any positive signs so far. So I would say that it's a little bit soon, right? But we need to get some more time but so far so good.

And we -- I think we have a very strong brand and a strong product for the next month and quarter. And the innovation is still high. So it's -- we are not worried. We are focused on delivering.

[Uvashni Raman, executive]

Well, the one thing to give you assurance is that we're not going to push just costs under EBITDA because increasing costs. There's a very clear guideline and a discussion we've had around reclassification of this below the line when it comes to rebranding.

We've got a very clear plan and that plan is very -- has to be maintained. We can't just push any costs into -- below the EBITDA rebranding. And that's a discussion in terms of accounting disclosure that we can't do.

So we're giving you the assurance that, that which sits below EBITDA is truly that we have planned and anticipated. And then any further changes that you may have in normal spend above EBITDA will be disclosed on a quarterly basis as we normally do, just to give you that reassurance.

[Operator]

The next question is from Markus Heiberg of SEB.

[Markus Heiberg, analyst]

So 2 questions for me as well. So the first one is on new car sales. The data that we're seeing in Europe and across the world is sort of encouraging. And now you have some more data into the year. You're looking at double-digit growth in new car registrations across most markets.

So the question is, what are the actual impact that you are seeing on new listings so far? And should we still expect there to be some 6 months lag or so, before we see that in actually massive increase in listing volumes because you are still quite far behind the inventories we had pre-pandemic?

And the second question is on the competitive landscape in Brazil because we are seeing some local players reporting good e-commerce revenues. And are you seeing any changes in the competitive landscape in Brazil? That's my question.

[Antoine Jouteau, executive]

Thank you very much for your question. Ajay, do you want to answer to the first question on the new car sales impacts and the potential impact in our liquidity in Germany and elsewhere?

[Ajay Bhatia, executive]

Yes. Thanks, Antoine and thanks, Markus, for the question. Yes, it's correct that new car sales are rebounding. But the thing to understand is the lag between new cars and used cars is a lot longer than 6 months.

If you think about when does a new car become a used car into the market, there's a couple of ways to do it. They go into fleet and then eventually fleets let go of those cars and they come into the used market, or someone owns that car and comes back. This is at least a 3- to 5-year cycle, not a 6-month cycle.

So that's one thing to be very conscious of. And the second thing, the increase that you're seeing in listings at the moment is more weighted towards demand slowdown than actual used car listings returning. So just to be conscious of those 2 things. And Antoine, did you want to answer Brazil or do you want me to do Brazil?

[Markus Heiberg, analyst]

Can I have a follow-up on the car registrations?

[Antoine Jouteau, executive]

Sure. There's no problem.

[Markus Heiberg, analyst]

So my question is also that if you get a new car delivered, you'll have to sell your old car. So you don't really see that impacts inventories as well? Or did I understand you correctly?

[Ajay Bhatia, executive]

So what we have seen there, Markus, is an increase in C2C listings in that regard. We have seen an increase in C2C listings but we're not seeing a very significant increase in B2C listing. So B2C listing increase is still low single digits, low to mid-single digit, whereas C2C listings are increasing.

[Antoine Jouteau, executive]

And on Brazil, you're right. I think the competitive landscape is moving. But as the other countries, no, it's not a surprise. Again, in Brazil, we have a strong asset that is quite powerful with OLX. That is -- has a leadership position on the C2C side, has leadership position on Real Estate, on Motor.

So this asset is -- you're right, expecting some issues because of the macro context but globally has all the asset, all the qualities to deliver the growth for the future. We continue to deliver good products to our market. We are not worried by the situation. We are just focusing on delivering and to continue to develop on the C2C side, on the B2C side also, in all of our markets.

[Operator]

The next question is from Catherine O'Neill of Citi.

[Catherine O'Neill, analyst]

Great. With 2/3 through 2Q pretty much, so I just wondered, if you've seen any kind of notable change in trends? I know you mentioned about advertising being fairly volatile. That's my first question.

Secondly, on the verticalization plan, I think on the slide, it mentioned sort of work council approvals and employee engagement. So I just wonder it's whether we should expect some cost synergies on the back of it or how we should think about the sort of work council approval requirements? And then finally, it's quite a sort of broad question but just wanted to get your thoughts on the impact of AI and the evolution of generative AI for your classifieds from a perspective of personalization but also from a cost perspective. And if you've got any examples of where you see opportunities to develop in areas where you're seeing there may be any threats?

[Antoine Jouteau, executive]

Thank you for your question. I will start by the working council question. So what we have done so far on our verticalization project was to prepare to redesign what could be a verticalized organization aligned with -- around mobility, re-commerce and real estate, and I would say, emerging verticals.

So that's the thing we have done with the management team during the last months to -- what we think -- what -- how do we put differently our resources, how we will operate this company if we verticalize the business.

Now we are entering to a second phase that is involving our people and to assess the impact for them. For that, we need working council participating to that process, that is mandatory, of course.

We are not worried by this process. It's just a normal process. That's something we are doing all the time. At this moment, we will start this consultation during the next weeks. But that's really business as usual process.

It's just part of our natural process for the next month, our method to involve now our employees in this dialogue. So we will start but it will not delay what we will do. It's just we need their opinion. And sometimes their agreement on that. But as we are presenting, I would say, a current plan that is [ unambitious ] but also that will bring opportunities to the employees. We are not worried by that.

Answering to your question on AI, I'm happy that I have this question because it's an important topic for us. You know we are already using some AI technology across our different platform and assets. We are using, we are already using it for many concrete business cases on customer support and ad reviewing on the search engine.

So this is already something that we are using as a tool. I think it will create a lot of opportunities for us for being more efficient, more accurate but also opening new opportunities in some of our business.

I think we are one of the digital [indiscernible] player as we're able to develop in this area. It's why also we are changing. We want to change the organization of this company because we want to shore up some capacity to be able to develop some proof of concept and to be able to develop some offers on using AI technology for our customers.

So that's also the verticalization project is focused on, I would say, switching some resources to be able to innovate and to grab this opportunity. And I think that's mainly positive perspective for us, also to improve the quality of what we are doing but also opening new doors. And regarding your first question, maybe I will let Uvashni answer to that.

[Uvashni Raman, executive]

In terms of the Q2 trends, I mean, for us, we're not seeing any material changes in terms of trends. But what you must understand and realize is we're going into tougher comps into Q2, Q3 and Q4, as we saw progressive improvements last year in terms of growth.

But fundamentally, the business, the trends we had anticipated are in check. So as we reiterated guidance around 2023, you would expect that, that trend will continue from our performance perspective but from a business perspective, no material changes.

[Antoine Jouteau, executive]

I think we are close to the end of this session, right? So first, I would like to thank you all of you for your questions. And thank you for your time, and I wish you a very good day, very good evening. Bye-bye.

[Uvashni Raman, executive]

Thank you.

[Operator]

Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones. Thank you.