Adevinta ASA

OSE:ADE

Earnings Call Transcript 2021-Q4

[Operator]

Good day, and thank you for standing by. Welcome to the Q4 2021 Results Investor Presentation. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Rolv Erik Ryssdal. Please go ahead.

[Rolv Erik Ryssdal, Chief Executive Officer]

Thank you, operator. Hello, everyone, and welcome, and thank you for joining this presentation of our Q4 results. First of all, I hope that wherever you are, you and your close ones are healthy and safe. And although, we see the sanitary situation improving globally, we need to remain cautious.Now this presentation is about the Q4 results. But as you all have seen from the press release, we shared some other news this morning, and that is that I have informed and agreed with the Board that I will retire as CEO and leave the business by February 2023, when the group will release its annual results. I'm turning 60 this year, and I believe that now is the right time to start to plan my departure from the company. I'm doing this in a planned manner, ensuring stability for the company. Now in this conference, our Chairperson, Orla Noonan is here with us today, so we can get back to this topic if there are any questions during the Q&A session. But now let's get back to today's focus, and that is the Q4 presentation.On the call with me is the whole executive team of Adevinta. Together with Uvashni, I will take you through the main highlights of the quarter and our financial performance as a combined group with the former eBay Classifieds group. Considering the successive changes and planned changes in the group's parameter, we will ensure this is clear for you. Uvashni will get back to this in fine detail, but I'd like to highlight that their consolidated financial KPIs refer to continuing operations as per applicable accounting standards.Now I will not go through the disclaimer, I invite you to read it, and I will start with an overview of the key highlights of the quarter before going into details of the business review. Uvashni will do a review of the financials. I will conclude the outlook, then Antoine, Patricia, Gianpa, Zac, Renaud and Nicki will join us for the Q&A session.Following our merger with eCG last summer, we have been working at pace to bring the 2 companies together. At the Capital Markets Day, we unveiled our 5-year growing at scale strategy with ambitious and credible targets to create value for the group and its stakeholders. We have now started to execute on our strategic goals with a strong focus on growth value levers in core markets. Here, I'm specifically referring to our core verticals, motors and real estate as well as fast-growing transactional services. I'll give more details on the achievements later in the presentation. We have launched a sales process for Australia and the South African assets and a maturing a reflection on other noncore markets. We are progressing on our transformation into a more efficient, integrated organization. The money and time we will save from working at scale will be invested into our product teams, adding value for customers and users. This, together with the many integration initiatives that were initiated in Q4 allows us to confirm that we are on track to reach our synergy targets. And Uvashni will discuss this in more detail later in the presentation. Now moving on to operational performance. I will focus first on traffic, which is a key driver. Across our various marketplaces, we see positive developments. Looking at this from pure visit metrics standpoint, in our 2 largest markets, you can see here, France and Germany, you may think that traffic development is soft with Leboncoin only flat compared to Q4 last year and Kleinanzeigen, slightly down. Now actually, this trend reflects the impact of changes in content rules, which reduces the tracking capabilities. So we're not comparing apples-to-apples here. This is an industry-wide phenomenon, not specific to Adevinta. According to our estimates, traffic continued to grow year-on-year, and we also see positive trends across the board despite the high comparables from Q4 2020. We also continue to see strong traction in the adoption of the transactional services with 2 relevant examples. Leboncoin and Kleinanzeigen, where we see growth in the number of transactions of respectively, 60% and more than 300% compared to the same period 1 year earlier. And as Gianpa explained at the Capital Markets Day, this is a growth opportunity, but it also contributes to the vibrancy of our platforms as an indirect benefit.Now let's dig into our 2 core verticals. And you can see we have presented a few slides for you here about motors and real estate. Now starting with motors. It's not a secret that the industry is going through an unprecedented situation that derives from the global chip supply crisis. That has a direct impact on the used car market and on dealer listing volumes. In France, they're down 9% in Q4. And in Germany, they're down as much as 24% in Mobilia year-on-year. But this is a temporary impact and we expect it to unwind later in 2022. What is very encouraging is to see that we have better conversion rates with dealers showing better performance in both markets. So this demonstrates our strong market position and the quality of our solutions for car dealers. This also legitimatizes price increases that allow us to partly mitigate the short-term volume effect. Now a longer-term market recovery, combined with further product development and price development will drive improved monetization for leading platforms like ours.In real estate, our situation is different in France than in Germany. In France, we see similar trends as in motors with professional listings declining year-on-year under the effect of supply pressure and strong demand. Similarly, conversion is better and the higher added value of our solutions allow us to increase prices. In Germany, we continue to gain market share and increase agent penetration. Hence professional listings are up 8% year-on-year and leads grow even faster. We still have a lot of room to grow here, and we're making sure that we continue to bring further value to our agents, ultimately leading to increased monetization as well. Overall, our operations are trending well, especially in core markets, and this is reflected in our quarterly performance.In Q4, at comparable scope, which is including -- which excluding Australia and South Africa and past disposals, we generated 6% revenue growth despite the headwinds in motors. Excluding motors, revenue growth would have been approximately 11%, and that means for the core classifieds, 16% growth in Consumer Goods, 12% growth in real estate and 28% growth in jobs. Transactional revenues increased by more than 40%. The number of transactions increased to actually much more than that, as I said before, but the subsidies we implemented, especially in France, lowered associated revenues. Let us get back to that later. Advertising revenues for the group were flat year-on-year. They were up 3% for core markets as the strong performance in Kleinanzeigen was offset by overall lower car manufacturer advertising spending. Although not included in our consolidated numbers, our JVs continued to show strong performance, especially OLX Brazil that posted 41% year-on-year growth at constant currency. Total consolidated EBITDA was down year-on-year. This is down to some extent, driven by higher share-based compensation charges following the eCG acquisition. We also increased marketing efforts on low 2020 levels as we had not received investment in most markets following the pandemic. Overall, I'm pleased with the strong 2021 performance. We achieved despite the motors headwind, double digital growth -- double-digit growth in both revenue and EBITDA, with an underlying EBITDA margin, excluding share-based compensations schemes at close to 37%.Now let me go further and deep dive more on the segments highlighted in our quarter. In France, the real estate market remained dynamic in the period with a new record in transactions in 2021 with the continued decline in supply due to part sales and lack of sellers. In the car market, we continue to see a decline in transactions in the country as a consequence of the chip shortage, which is impacting dealer inventory. We did quite a lot of product innovation. We launched face-to-face payments for private users and extended payments for professionals. We optimized our face-to-face payment solution consumer goods and continue to deploy our verticalization strategy with the new product developments in both in motors and real estate.Now as I have explained in the previous slides, the current market dynamic in real estate and motors have a direct consequence on listings in France, but we have been able to mitigate this impact by continuous growth in ARPA. This last year our significant ARPA growth has been mainly driven by our subscription business model, ensuring secure monthly revenue from clients and by optimized pricing and packaging strategies, allowing to mitigate potential volatility-led lost volume in some categories. I think the most important thing is that we have delivered more value and efficiency to our users and customers through product innovation.In Transactional Services, we have made significant investments in product and tech and marketing over the last couple of years to drive user adoption. We see that investments are now paying off. And this quarter was a quarter of record. The number of transactions increased by 61% year-on-year with 42,000 transactions on average per day in the quarter of our new P2P solution showing promising results. The combination of increased number of transactions and reduced investment in marketing is expected to bring us close to breakeven level for transactional service by the end -- as run rate by the end of 2022. Now in Germany, while macro indicators keep robust, the number of car transactions continue to decline 90% year-on-year with dealer supply, as we've seen on an all-time low due to the chip shortage and the decline in sales of new cars. At the same time, demand remains high, driven by the overall market situation and car prices are trending up. We are also doing innovations here, and we launched 2 market tests in the quarter to understand demand and consumer behavior around built-to-order new car leasing, which is very popular in Germany and around online buying and selling services. We also continued to optimize our consumer-to-business proposition and our financing solution, while we continued to further improve the experience for users and professional clients. Regarding our product and packaging strategy, we launched an initiative is moving towards more sophisticated packages and pricing models.The motor industry is going through a truly unprecedented situation which we in industry of service, believe is highly temporary. And looking back at the last 20 years in Germany, we've never seen such a low number of new car registration. And this is a direct consequence of lack in inventory and has knock-on effect on used car market and professional listing. At Mobilia, the number of dealer listings is significantly down year-on-year, as you can see from this graph. Of course, this leads to softer revenues as our business model in Germany is highly correlated with volumes. We're able to partly mitigate this with highly value-added for our clients and increasing prices. Now the important thing here for the car market is to look ahead. And you will see on the next slide there that market specialists are pointing to a recovery in the car production as from the second quarter of this year. This is expected to drive a pickup in dealer listing in the second half of the year. And we will continue to enhance our offering and optimize pricing and packaging strategy, we expect to see an acceleration in financial performance in Mobilia at the back end of this year.Now moving on to European markets, with the focus on the largest assets starting with the eBay Kleinanzeigen. So like in France, the real estate market environment remained dynamic in Germany with a high level of transactions with the continued decline in supply. We continued to develop our transactional services over the period with the launch of a shipping solution with DHL with new visibility features. We also increased the number of SMB subscribers up to 8% year-on-year, while we launched new pricing and packaging for the solution. In real estate, we further grew our subscriber and agent base and continued to gain market share. Then let me also add that in December, we closed the acquisition of the Kleinanzeigen, the [ TE ] domain. So this will allow us then to have a smooth transition from the eBay brand.In Benelux, a strict lockdown was in force mid-December due to the increase of COVID cases which impacted the vibrancy of our platforms. We continue to increase our SMB seller base and to increase pricing, resulting in steady growth of B2C monetization. In Spain, we have served a great recovery in the jobs market with the highest level of employment since the real estate bubble. As a consequence, we reached an all-time high Q4 revenue and client record. In real estate in Spain, we continued to deploy our product and packaging offerings with triple-bundle solutions. And in Italy, we saw strong growth momentum for a new transactional solution TuttoSubito, and we launched a new marketing campaign to support use reduction.In Canada, our motors and advertising revenues continue to be challenged by the muted car supply environment. Kijiji launched digital car retail platform, which is actually the first-to-market platform with motors end-to-end transaction capabilities in Canada. In Mexico, we saw growth in real estate agent accounts. We also developed joint commercial and advertising offerings continuing to -- across our 2 brands, Vivanuncios and Segundamano. Now in Australia, we saw some continued mobility restrictions that led to softer traffic development. Strength in motors was driven by continued upselling to dealers to the Autotrader Group joint proposition.Now finally, about OLX Brazil, there are some headwinds in the Brazilian economy with the COVID infections, has put some strain on the economy. And that's, of course, affecting the motors market, but we are generally very positive about our situation in better position in Brazil, especially the way we're positioned in real estate, where we see very good opportunity and runway for growth in the years to come, and we're constantly launching new product innovation. And in the quarter, we launched ZapWay+, which is kind of an end-to-end transactional solution, which includes financial services, and we completed the development of the Zap+ product. So that looks good for Brazil.All right, so that was the operations. I will now hand over to Uvashni for the financial performance section.

[Uvashni Raman, Chief Financial Officer]

Thanks, Rolv Erik, and good morning, everyone. Before I head into the Q4 results, I think I'd like to just zoom out and look at the full year 2021 numbers. Looking at the combined numbers, that includes the eCG and Adevinta numbers, we delivered solid revenue growth at about 10% despite the motors headwinds. Effectively, what that means is if we had to take out the motors, we had a 12% year-on-year increase. That's a solid performance. Although our JVs are not included in our consolidated numbers, OLX and Willhaben combined revenues are up 54%, a phenomenal performance. Our reported EBITDA was up 10% year-on-year. In the quarter, we have introduced a new KPI, underlying EBITDA, and we've done this in order to ensure comparability with some of our competitors as we see. And this underlying EBITDA number includes -- or is before we exclude our share-based compensation. This effectively speaks to our underlying operational performance. Moving on to the Q4 results on the next slide. In our Q3 announcement, we said that we would see an acceleration in underlying revenue, excluding Mobilia and to some extent, motors. And we've seen that. But I know in the quarter, we've had a lot of changes with our scope and our parameters. So what I'd like to do is take you through the bridge on those changes. If you look at the combined numbers we disclosed ahead of the capital markets, we have now excluded Australia and South Africa from the numbers as we now account for them as discontinued operations. We didn't announce that we will be divesting those assets. In order to get a full comparability to our scope, we also restated the comps for revenues for those assets we had divested in Adevinta. And that gets to your Q4 2020, excluding disposal number of EUR 371 million. That is the comparable basis on which we'll take our numbers forward.Now for Q4 2021, we reported EUR 394 million, which represents a 6% increase year-on-year despite the Motors headwinds. Mobilia revenues actually decreased 6% for the quarter. Excluding Motors, the revenue growth would have reached 11%, which shows the acceleration we talked about within our other classifieds verticals. As expected, in line with our ambitions that we set out in the CMD, transactional services were up 41% year-on-year. Advertising revenues were flat with a strong growth in eBay Kleinanzeigen offset by lower performance in other markets that were more exposed to become manufacturing marketing spend. As you know, with listing down, our OEM spend on marketing has reduced in the quarter. Moving on to the next slide. Group EBITDA, excluding the impact of discontinued operations, decreased 9% year-on-year. This reflects the temporary mix evolution where we see a growing share of transactional services relative to our classifieds business, especially driven by the Motors' underperformance. During the period, we saw a strong increase in marketing effort compared to the lows of 2020. Some of our markets had more than less than 50% spend compared to 2021. Personnel costs increased by EUR 18 million year-on-year, this was a large extent due to a noncash accounting of share-based incentive plans that were up EUR 6 million in the quarter. Transactional costs increased by EUR 4 million compared to last year as a result of the higher adoption rates we saw. We also had some promotional campaigns on shipping fees in France in the quarter as well as impacting their numbers. All in all, EBITDA reached EUR 124 in the quarter or EUR 139 million before share-based compensation. This represents a 35% underlying EBITDA margin.Now I will deep dive in some of our core markets, starting with France. Reported EBITDA or reported revenues in France grew 8% in the fourth quarter. Online Classifieds grew 10% year-on-year, driven by real estate with double-digit growth in revenues as a result of positive ARPA evolution, which were up 18% year-on-year. We also improved the product development and produced higher value-added professional higher value add for our professional clients. Motors revenues grew in the quarter at driven by ARPD growth. Revenue from transactions were up 29% as Consumer Goods transaction volumes grew. This was partially offset by discounting campaigns on shipping fees that drove the adoption of the service. We've always said in the early stages of transactional, we want to drive up volume. And what we are seeing signs, even when you remove that discounting, we are now maintaining those volumes, which is a positive moving into Q1 2022. EBITDA remained stable compared to the fourth quarter. We had a few one-off items in the quarter that impacted on your EBITDA margin performance EUR 2.5 million related to the cyber attack, which is a one-off. This will normalize in Q1 2022. As we expected, we invested in marketing and product and technology resources to further develop and build out our new models. We saw an increase in transactional costs, as I've said before, because of the higher volumes and the campaigns. As a consequence of the volumes, we see the volume impact, but we don't see that consequence on revenues, we will see that going forward. EBITDA margin contracted 4% year-on-year accordingly. If you took the one-off effects of the cyber attack and some of the discounting we had on our transactional services, EBITDA margin for France would have been at 47%. In Mobile. Mobile was challenged in the quarter. As Rolv Erik alluded to, we have seen a drop in listings. With the Mobile, a drop in listings has a direct consequence in revenue. That revenue drop moves directly down into EBITDA. That's where you see some of the operating leverage lost as your top line decreases. The volume impact on listings was down 24% year-on-year. This was, however, successfully mitigated to an extent by a 14% listing price increase we saw in August 2021. We also saw C2C performance much better and higher revenues from our C2B lead generation product as well. Advertising revenues continued to be impacted by the low car production and its knock-on effects effectively on OEM spend, down 23% year-on-year. This volume impact translates into a 7 percentage point impact on EBITDA margin. Moreover, we also doubled the marketing spend that was at an all-time low in 2020 quarter Q4. This headwind that we see within Mobile is reversing and will reverse. As Rolv Erik showed, we expect the run rate of margins for Mobile in the fourth quarter of 2021 to be much better than we see heading out of Q4 2021.Moving on to our European markets. The European market segment saw a growth of 12% compared to the fourth quarter of 2020, supported by a very strong performance in eBay Kleinanzeigen, Spain and Italy. Online Classifieds revenue grew up 11% and display advertising grew 10% year-on-year. This as well driven by eBay Kleinanzeigen. The transactional revenues grew doubling during the period, in line with our strategy outlined in the CMD. EBITDA offset was there. We increased just 1%, but the positive top line evolution was partly offset by a 50% increase in marketing spend, especially in Italy, Spain and Benelux, to reinforce our positions after several quarters of us reducing investment during the COVID context. Personnel expenses in the period was in line with business development and future growth. EBITDA margin contracted 4.4 percentage points accordingly. We are, however, are quite positive about our European markets opportunity, and we will see that acceleration going into Q1 2020 -- 2022 and further. I will now provide some more insights on the revenue development for the 4 largest market segments. In eBay Kleinanzeigen, revenues grew in the quarter, up 20% year-on-year and reached EUR 54 million. This was driven by a strong performance, both in advertising and online classifieds where consumer goods revenues were supported by growing contributions from the small and medium businesses. Real Estate and Jobs revenues also saw a significant positive evolution while motors revenues declined slightly to market -- due to the market environment. In Spain, revenues grew 14% compared to the fourth quarter of 2020 to EUR 49 million, driven by strong performance in online classifieds, up 15% year-on-year. The jobs vertical outperformed at 31% year-on-year growth in revenues. It also reached its all-time Q4 higher in revenue in Q4, it also achieved a record client numbers in Q4.The Motors vertical continued to see strong revenue growth performance plus 10% year-on-year. This fueled by higher dealer penetration and that was despite the market softness we see currently. In real estate, we continued to see recovery also driven by increased penetration and display advertising a slight improvement of 2% year-on-year. Overall, a very strong performance in Spain and a strong recovery from the lows we saw in 2020. Benelux revenues were flat compared to the fourth quarter of 2020 and its continued growth in consumer goods supported by higher revenues per listing and the small and medium business outreach campaigns. This was slightly offset by Motors revenue again due to the muted supply.Transactional revenues, again, in line with our growth on -- and strategy up year-on-year, while we did see an impact on advertising revenues. In Italy, we saw an uplift of 19% driven by double-digit growth in jobs and the motors vertical and by the strong momentum of transactional services that we launched in 2021. Overall, the performance within our European market, very strong, in line with our strategy on driving the effective transactional model and also a strong performance in underlying jobs and classifieds verticals. In our international markets, of course, our performance was impacted by advertising where we see a large impact on the Motors advertising segment. Our [ under ] client classifieds had a marginal growth of around 2%. EBITDA reduced 12% compared to the fourth quarter, landing at EUR 11 million, largely impacted by the top line.Moving on to the next slide. When we look at OLX Brazil, again, a strong performance, 41% year-on-year on a local currency basis. And this includes the acquisition of Grupo ZAP. On a comparable basis, this was up 23%. Revenues growth was driven by continued expansion of our cross-selling proposition, the triple-bundle strategy within real estate. And in motors, we increased revenues both on the private and dealer revenues. We saw a decline, of course, in EBITDA as we ramped up some investment in product and tech as we took advantage of some investment in marketing as well. We are still very positive about the position in Brazil, and we see strong performance heading into 2022.On other headquarters, we did see an increase of EUR 7 million in the quarter, but we believe now we've hit our run rate when it comes to HQ costs. We are building up capacity ahead of the eBay TSA, and I'd just like to explain that a little bit. In order for us to take on the services from -- that we have TSA and eBay, we have to build some capacity in terms of the HQ to take those on. As that we take those services on and as we build capacity, we're also looking for efficiencies within the other elements of our business. So looking at scale. So what you have is a ramp-up of cost before that scale efficiency comes in. We also have announced certain elements, which I will cover later on ahead of our synergy efficiencies that are coming through as well. We don't expect HQ costs to increase beyond the increase of run rate that we saw in Q4 2021. Talking about our synergies and our integration, we are on track when it comes to our integration and our synergy tracking. And I'm very positive and we are very positive of the outlook on attaining the actual target that we put out in our CMD and reiterate that we are on track to achieve the EUR 130 million that we announced. We made a lot of headroom and leeway in Q4 2020 or since the actual transaction closed. We de-duplicated the leadership which was very done already post the closing of the transaction. We've organized our global procurement organization, and we're already seeing huge potential from scaling our volume and combining our contracting, resulting in some really good commercial terms. We're also consolidating quite our supply base, and this, in turn, is leading to better pricing elements. Our physical office footprint is continued to be reduced, and we have plans in place to further optimize that in the quarters coming.We de-duplicated roles and structures in our overlapping geographies, especially in Mexico and Italy, and that has already been concluded. We also announced the proposed functional operating models, which are, of course, subject to a local work council approval, but that will actually drive the efficiencies that we would want to see coming through in the quarters to follow, especially at the back end of 2022 and then in 2023. System implementations, we have already in trained stood up and are standing up new ERP systems and reporting systems, processes, enterprise-wide architecture systems in preparation for the TSA. Therefore, you saw some of the ramp-up of the costs in the quarter in preparation of those TSAs that will come. And of course, we are now lining up our operating model so that we can start to then bring in the synergies, especially from our markets as well.One of the key things that is more of a qualitative -- quantitative than qualitative element, which you can't really put a number on is the collaboration and learnings that we already see deliver value for the business. Some of the key things is around transactional and we've started to see that the key learnings out of Leboncoin, we're actually bringing into the markets like Italy and Germany with Kleinanzeigen and accelerating that. I don't underestimate that. Some of the things that we are looking at in new product development when it comes to online buying and selling and new models and especially on the next wave of transactional, where we've created now a center of excellence and the collaboration that is happening there is really driving value forward.We have initiatives that we've implemented now that we'll see a value coming in Q1 2020. We will see the progressive rollout of our operating model. We will do the final stages of our preparation for the TSA exit that happened in Q1 -- Q2, early Q2. We've already announced, and we will launch the sale processes for Australia and South Africa towards the back end of Q1 2022. And the capabilities that we see from our discontinued platforms, we are moving into our local markets, then optimizing the central costs around the platforms as well. I had a great deal of work done since the closing of the transaction. And we truly believe that the scale element of that will start to come through in the next couple of quarters. Now I want to move on to some other P&L items, effectively on the slide, the Q4 2020 column in the table B -- in the table just refers to the IFRS reporting. Now IFRS reporting means that it's the legacy Adevinta parameter as we do not provide combined figures on an IFRS basis. Depreciation and amortization was up EUR 47 million on the year, and this is really entirely due to the amortization of the eCG intangible assets that we purchased as part of the purchase price allocation. The main amounts related to Mobile, eBay K, Marktplaats and Canada. Other expenses were up EUR 15 million compared to the same period last year, as a consequence of the increased integration expenses because of the acquisition and is in line with the -- with our announced number that we showed at the CMD of EUR 130 million. Net financial costs were up EUR 27 million compared to the period last year. This is directly due to the interest expense on the new financing incurred as we bought the business as well. Tax income improved by EUR 11 million, mainly due to the reduction in deferred tax liabilities that will relate to the -- effectively the amortization of intangible assets.Moving on to our financial position on the next slide. At the end of the quarter, we had a total cash position of EUR 231 million. This includes some of our restricted cash of about EUR 4.5 million. On our senior debt net leverage ratio according to the definition of our facilities, our leverage was at 3.7x at the end of the quarter. We are on target, and our target remains to be within the -- back to the 2 to 3x levels in the medium term. Today, we announced the launch of the share back of 10 million Adevinta shares that will be used to settle the company's share-based incentive plans over the next 3 years. The execution of [ NED ] purchases, of course, will depend on market conditions. I will conclude by saying we -- overall, we continue to see the resilience of our business. Our strong market positions and diversified portfolios provided for a steady year and year-on-year performance. The motors headwinds are temporary and our investment will stand us in good stead to benefit the accelerate and accelerate when the recovery expected in the second half of the year. The integration of our business is on track and we see visible benefits of cross sharing and collaboration. We are well positioned to deliver on our mid- to long-term targets as outlined previously, and we are confident in achieving that.I will now hand over to Rolv Erik, who will wrap up with the outlook and conclusion.

[Rolv Erik Ryssdal, Chief Executive Officer]

Thank you very much, Uvashni. So as outlined during our Capital Markets Day in November, we see big opportunities across all our businesses with large monetization runway in the core motor and real estate online classified, and the potential to do more in transactional also in the value chain with new business model. The integration of the business is progressing well and we remain on track to deliver on the previously announced synergies that will progressively contribute to accelerated growth and EBITDA margin improvement. As a result of that, we confirm our mid- to long-term targets for core markets communicated at the CMD.In the short term, we are facing temporary headwinds with low production levels in new cars globally that have knock-on effects on used cars listing and on the car manufacturer's marketing spend. And similar trends is what we expect in the first quarter of 2022 as observed in the fourth quarter of 2021. So throughout this year, the financial performance is expected to mirror the recovery trajectory in motor volumes, planned price initiatives and, of course, ramp-up of synergies. That, we believe, will result in progressive revenue growth acceleration and margin improvement quarter-by-quarter. This implies that we expect to exit Q4 2022 better than the full year 2021 trend, both in terms of revenue growth and margin profile. Overall, this will, as previously mentioned, lead to softer revenue growth in 2022 relative to our mid- to long-term ambition. Assuming a gradual recovery in motors market in the second half, we expect core markets revenue growth to be low double digit for the full year. We will continue to invest in our product development to capture future growth opportunities as we've proven and illustrated today and that we've done in France that's giving tangible results. Based on the above for 2022, we expect underlying EBITDA, consolidated EBITDA before share-based compensation impact in the range of EUR 575 million to EUR 600 million. Now that is to point that out, that's excluding discontinued operations, if I had included them, then the target would have been EUR 585 million to EUR 610 million. The share back compensation also just to point it out, represented EUR 40 million in 2021.I will now open the Q&A session. My colleagues from the executive committee and I are available to answer your questions. So operator, please go ahead.

[Operator]

[Operator Instructions] Your first question today comes from the line of William Packer from BNP Paribas.

[William Henry Packer, Executive Director of Media Equity Research]

Three for me, please. Firstly, on marketing investment, it was somewhat scaled back during 2020 and 2021 for rational reasons. Could you help us understand where for the new scope of the business, 2021 marketing spend was versus 2019 and where you expect it to be for 2022? How marketing-intensive do you need to be? Then second question is around the auto segment. It's absolutely a critical business in the portfolio and lots of new models are being explored by your classified peers. We've got Smile in the German market by AutoScout. We've got Autotrader's approach for digital retailing. We've got Cinch. We got Select by Car Sales. Could you kind of provide some commentary on how you think about the next stage of digital retailing, which models you see is right for your markets and when you'll need to start investing there? And then the final question is around kind of e-commerce momentum. We've seen some peers be it Shopify or Food Delivery talk to e-commerce tailwinds from the pandemic fading. How are you seeing that in the volumes in your pay-and-ship business? It would be interesting to see where you are on that maturity curve.

[Rolv Erik Ryssdal, Chief Executive Officer]

Do you want to take the first question?

[Uvashni Raman, Chief Financial Officer]

Yes, sure. In terms of our marketing spend, well, we expect the marketing to go back to pre-COVID levels. We don't expect a further acceleration in terms of marketing spend. So we really pulled back in 2020, as you said. We started to recover some of that in 2021. But I think in 2022, our expectation is no more than pre-COVID levels.

[Rolv Erik Ryssdal, Chief Executive Officer]

Right. On the second question, Will, yes, we're seeing that there's new models coming in the car market. And I think I mentioned also that we're doing experimentations with that. So we have, on the Mobile side, both experimented with the new leasing models for newer cars, that's very popular in Germany. We also have an experiment going and have been testing online buying and selling and we're also enhancing our C2B offering. So we are definitely doing that. I think it's fair to say that the pure online buying and selling will take some time but it's important for us to be there, and we're experimenting with that and then plan to roll out those capabilities. Now your third question, Will?

[Gianpaolo Santorsola, Executive Vice President of European Markets]

So I will -- it's Gianpa here. I understand -- sorry, you were a bit broken in the third question. It was about like e-commerce development and if it's affecting our transactional activity. Is it right?

[William Henry Packer, Executive Director of Media Equity Research]

How is the kind of -- how is the volume of transactions performing in Q4 and Q1 in the context of some of the -- your wider peers slowing in terms of the momentum as COVID tailwinds fade?

[Gianpaolo Santorsola, Executive Vice President of European Markets]

I'm happy to share Q4. I will not share Q1, as you know, but Q4 has been very, very good. You remember in Q3, some analysts had some concern about the volumes back then. And we said, hey, look, the transactional business is much more seasonal than our normal business, and we could see it in Q4, where we had a spectacular quarter in terms of transaction. Just to give you a number like we reached 5.7 million transactions during the quarter across the 5 core markets. That means 55% quarter-on-quarter. So we see activity ramping up, for sure. The market is -- and our business in this line is so immature that we have plenty of room to grow so we might still not be affected by changes in e-commerce, et cetera. But short answer is not at all. We are growing as expected and even a bit faster than expected as well.

[William Henry Packer, Executive Director of Media Equity Research]

Rolv, just coming back on question 2 around the new products for autos. When should we expect to see the kind of peak investment requirements for those products? Is that now and already in the 2022 guidance? Or is that something that will come in 2023 and beyond?

[Uvashni Raman, Chief Financial Officer]

Well, I'll take that. We're starting to see some investment come into 2022. So it's already within the number we've guided you on so -- and progressively moving on from there. But I think we've already started to -- in fact, we had started somewhat in the back end of the quarter 2020 -- Q4 2021 already and progressively ramping through 2022. So it's already within the numbers and the guidance we've provided there.

[Operator]

Your next question comes from the line of Marcus Dietz (sic) [ Marcus Diebel ] at [indiscernible].

[Marcus Diebel, Research Analyst]

It's Marcus Diebel from JPMorgan. Also 3 questions from my side. First one to follow up on the question on more investments in you going transactional. Your comments Rolv, should we take them that '22 will be kind of like the majority of investments in that area? Or can we see a step-up next year? I think that was also what Will was asking, but I didn't get the answer fully. Is there basically kind of like an additional impact in '23? Just conceptually, I appreciate you're not guiding on that year. That's the first question. If you can just clarify. The second question is on share-based payments. Clearly, you took this out of your adjusted EBITDA numbers. The question is why now? And then secondly, if you can give us an indication here from current share price level, what you think share-based payments will be like in 2022, given where we are now in the share price? And then the third question is more on margins as well. Is there scope for a larger restructuring program as well here. I'm not asking for the eBay synergies, which you obviously highlight. But it feels to me that Adevinta has never really had an active restructuring and then cost-saving program in the divisions and is there scope for this in '22 and '23?

[Uvashni Raman, Chief Financial Officer]

So a couple of questions there, so I'll try and answer them. So in terms of the transactional investment effectively, if you remember how we outlined that in our Capital Markets Day, we saw investment in 2020 -- we saw a growth through to 2025, effectively of EUR 400 million and we saw progressive investments. So we'll see 2 years of big investment, which is -- we've already seen France, but in our rest of our markets will be 2022 and 2023. And then you'll see the benefit of that really hit here in 2024 onwards. So if you look at it -- and it's all included again in our long-term guidance, right, on mid- to long-term guidance. So 2 more years of investment before you really see that traction within your transactional revenues. On the EBITDA guidance on underlying earnings, excluding share-based compensation, I think there's a couple of factors there. Firstly, we see they are -- to be comparable in terms of the market and our market peers, we should be effectively showing that number. On the combination of the eBay -- or eCG business and ourselves, that number has become quite a big number on the combined group therefore, to really understand the underlying performance of the assets, I think you -- it would be -- we think it's a good indicator for you to have going forward. And that's the only reason that we brought it into play now. And in terms of the expectation on 2022 number, it will be circa in the same ballpark as you saw for 2021.

[Rolv Erik Ryssdal, Chief Executive Officer]

And on the third point, Marcus, so we have -- we are working with the realization of synergies. And in there, there's a big efforts to drive efficiency and as you may have seen, we have just launched a proposed model for the operating model for finance HR and central functions there. And then we've said that this is an important part to realize the synergies.

[Uvashni Raman, Chief Financial Officer]

And to your point as well, when we had identified synergies, that's why we are so confident about the synergies. But we are constantly looking at our cost base and trying to make sure that we drive efficiencies as much as possible. And one of the things we are seeing that coming out of the collaboration is a best practice across our businesses at the moment. So inherently, in the process of driving the synergies, we are now looking at even further elements of cost reductions and optimization. So it's not a program that we are doing, but we certainly are looking at every cost item across the group as we look to optimize margins. So that's an important thing to understand is this is not just -- and we don't believe that this should be a program. One of the things that the conversations we're having as well is continually improvement within the business, I think, is a core element of it. And that's something we will probably progressively implement within Adevinta, but we really are seeing a lot of traction across the group just by when we looked at the synergy elements of things. So I just want to give that confidence to you and the markets as well.

[Operator]

Your next question comes from the line of Miriam Adisa from Morgan Stanley.

[Miriam Anuoluwapo Adisa, Equity Analyst]

Three questions from me. Firstly, just on France. So I think you said around the sort of subsidized shipping fees, it wasn't clear actually if you were saying that this is a one-off or not. So if you could just clarify how you're thinking about shipping fees this year and how much you're willing to subsidize. Should we take that EUR 1.5 million as the run rate for this year? Or potentially could that increase? And any color you can give on margins for France this year as well would be helpful? And then secondly, on the transactional services. If you could share any KPIs perhaps the number of eligible ads, GMV or repurchase rate, how that's trended in Q4? That would be helpful. And then finally, just on the process for Australia, South Africa, and then also the strategic review, if you could give any update there. For Australia and South Africa, are you already starting to have conversations? Have there been any bids? Any update would be great.

[Uvashni Raman, Chief Financial Officer]

Okay. There's a couple of questions there.

[Rolv Erik Ryssdal, Chief Executive Officer]

There's a few questions there. First, on the -- in France, and that was a question on margin and 1 question on how the operations is going. And then there's transactional KPIs, you want to take that Gianpa and then there is the process for disposals.

[Uvashni Raman, Chief Financial Officer]

So on the French margins or the cost -- on transactional and Antoine, I'm kind of speaking on your behalf if you want to interject, please do if I say anything wrong, effectively on the French margins, yes, so there was some discounting on delivery freeze. And then the other element of discounting is new users to the platform using the actual transactional services, which we discounted both of them we do as promotional. What we're seeing, the discounting on new users is now being removed. So that's not permanent. The discounting on delivery fees, we do promotional during certain periods to drive up volumes that is at the discretion of the business, so it's not entrenched fully. That again, we do on a promotional basis where we really want to drive some value. So those, I would say, are not costs that you will incur on a recurring basis. On the operational front?

[Rolv Erik Ryssdal, Chief Executive Officer]

Yes. Antoine, do you want to give some color on the operational side in France and on transactions?

[Antoine Jouteau, Chief Executive Officer of Adevinta France]

Yes. everybody. So I think really, the transactional business is accelerating a lot in France. And the -- what we have done during the last Q4 is we were preparing Christmas period, and we were pushing strongly the volume and it's why we have implemented this promotion during this period with a very, very good returns that you saw in our presentation today, 61% growth year-on-year, but it's very good. So now we are starting and we are coming back to normal life. So with keeping our price at the right price, so without any discount. And we'll continue some promotional period during the year, but not permanently. So -- and we are very, very focused on our road map to continue to improve the production business for the next months.

[Uvashni Raman, Chief Financial Officer]

And just to finalize that, we did also say that we expect to break even on transactions in France this year. So it just shows that we are getting to that point now as we had outlined in the CMD as well.

[Gianpaolo Santorsola, Executive Vice President of European Markets]

And Miriam, on your third question, right, so I'm happy to provide like a number of transactions and also a bit more color on the revenues and also a bit more evolution on how transactions are moving in the key markets. But for the time being, we're not going really to share like detailed information on other KPIs around this also because this is still a pretty mature business for us, and we need to learn better how to -- how the trends move. But in general, we had 5.7 million transactions this quarter represents 55% quarter-on-quarter growth. To this, we had EUR 13 million of revenues linked to those that represents a 49% quarter-on-quarter growth. So as you can see and aligned with our strategy, volumes are growing faster than revenues because now we are actually favoring user adoption. That is our key strategic priority for this area.Then when I look at single market, right, number of transactions in France quarter-on-quarter grew by 61% with some promotions. In eBay Kleinanzeigen, the growth was 44% quarter-on-quarter without any promotion. In Spain, the growth was 64% quarter-on-quarter. And in Italy, it was a staggering 164% quarter-on-quarter. So very solid growth across all the markets. In general, the other information that I can give you is that we see stable AOV. So you should expect that this growth in transaction is translating almost 1:1 towards the GMV growth. Except a bit in Italy, where we are successfully gradually moving towards lower AOV because in Italy, the way TuttoSubito started, which was a very high AOV, and now it's stabilizing and slowly converging towards France numbers and Germany numbers.

[Rolv Erik Ryssdal, Chief Executive Officer]

Yes. Thank you, Gianpa. And your last question, Miriam was on disposals. And there when it comes to Australia and South Africa, we have received a number of incoming calls. We have done our preparations and the -- this is going as planned, meaning that we're launching this processes now officially in the -- during the first quarter. So that's what I can say about that. That's on track, but I can't say anything more as such.

[Uvashni Raman, Chief Financial Officer]

Just to add to that, Rolv Erik, the other strategic assets under review, we continue to work, and we will bring that to the market as soon as we have confidence around that as well. But the work is continuing in earnest.

[Operator]

Your next question comes from the line of Adam Berlin from UBS.

[Adam Ian Berlin, Director and Equity Research Analyst]

The first question is on the EBITDA guidance for 2022 that you've given. You've given a bit of a range. Is the bottom of the range and top of the range based on what happens with the recovery in auto inventory during the year? Or what are the other moving factors we should think about in terms of where in the range you end up for 2022? So that's the first question. The second question is about the level of investment in the next few years. So from your reported numbers, there was about a GBP 90 million increase in OpEx in 2021. And based on the guidance, it looks like there's going to be a bit of a step-up in that number in 2022 to something around EUR 120 million, EUR 130 million of incremental OpEx in 2022. As we go forward from 2022, is that the type of step-up of investment we should see every year? Or will the step-up investments start to come down and 2022 is really the peak in terms of incremental OpEx. Of course, we've got more impact from synergies going on in outer years. So if you can just talk through the dynamics because obviously, we have the forecast '23 and '24, and not just '22 when we update our models today. And then the third question is on Mexico and Canada, they're not core markets, but they're not held for sale. Can you just update us on the latest on those 2 assets? And have you tried to launch a sales process for those 2 assets?

[Rolv Erik Ryssdal, Chief Executive Officer]

Yes. So let's take the last question first. We have not launched any sales process for these and we're still contemplating what to do. We're doing a thorough strategic review of those 2 assets and are -- and the market and the market development. So we need to come back to that later in the year.

[Uvashni Raman, Chief Financial Officer]

So yes, when it comes to our EBITDA targets, firstly, I just want to want to zoom out and talk about how we actually built that. When we looked at it, we did a full bottom-up review when we built up the targets across all of our markets. And we considered all of the plausible risks and outcomes that we could possibly see based on the current environment. And we took an assumption view on the ranges we believe, based on our assumptions on recovery, yes, of course, in the market, and also other factors that may come in, in terms of the knock-on effects of that. So the bottom end of our range includes some of those factors in there and provide for some of our leeway around that. So you are right. We have considered that recovery in that. But remember, there's other factors that if we provide the flexibility as you see a recovery in order to then invest in marketing to take on some of the product development we see or to pull back investment as well as we see fit in line with recovery and in line with also a bit of margin protection.And then the OpEx evolution, the most -- the driving of your -- the drivers of your OpEx or evolution there is personnel, which is directly linked to ramping up on some of your product development and these are for new product lines, right? So early on, you asked -- you had questions around some of the new models, the online buying and selling, some of the leasing elements of things. So now especially when we see the acceleration in our motors vertical and the new models that are coming on, we are investing somewhat to be able to be relevant and provide product to the market. So that OpEx cost increase is really related to that, in line with what we expect is an increase in effectively our revenue uplift as per our guidance as well.

[Adam Ian Berlin, Director and Equity Research Analyst]

Sorry, sorry, that didn't answer -- so my question is, as we think about 2023 and 2024, will the OpEx level in the business be broadly in line with 2022 especially when you take account of the synergies that are coming? Or should we still expect to see large increases in OpEx in 2023 and 2024?

[Uvashni Raman, Chief Financial Officer]

Now you're absolutely right. As you see -- firstly, you're going to see operating leverage come through, right? Because your revenue uplift as we announced a 15% increase versus your low double digit you're expecting in 2022. So overall, you're going to get operating leverage, you're going to get a scale benefit there. Then you're going to get the overlay of your efficiencies that are going to come through from your synergies. So effectively, some of that increase you will have a bit of an offset, but not total offset depending on some of the new models we bring in. We don't expect an overarching positive, I mean, a doubling up of your expenses as you saw some of the ramp-up you see now. Remember, we've provided an EBITDA margin guidance of 40% to 45%, which then effectively illustrates the fact that your cost base is going to be some -- is going to scale according to your revenue base.

[Adam Ian Berlin, Director and Equity Research Analyst]

Yes. Just that guidance is for 2026, so that's why it's helpful just to get some commentary on the intermediate years.

[Uvashni Raman, Chief Financial Officer]

Yes. intermediate years, I think if you're trying to tell me, is my OpEx is going to go up EUR 100 million every year, no, it's not. The OpEx, remember, relates directly to investments. We said 2022 and 2023, transactional investments will continue. We'll bring on some other investments when it comes to new product lines in line with revenue growth. So effectively, I would say, basically maintaining it in line with revenue growth and seeing the -- and make sure that you're maintaining around margins, of course.

[Operator]

Your next question comes from the line of Matti Littunen from Bernstein.

[Matti Littunen, Research Analyst]

Two questions left. The first one is on the outlook for sort of car volumes. Now I noticed you had a chart on the sort of expected sort of car production volumes through 2024. But just be curious to hear how you see the car volumes developing beyond that? Do you have sort of a view you used to project internally in terms of what's going to happen to overall car volumes in the core markets? And for example, whether the shift to EVs is going to have an impact on the fundamentals of how cars move in the fleet and how that affects your business? The second one on the sort of trajectory of marketing investment for your competitors compared to the -- what you'd be saying. So if I understood correctly, you said that you sort of had record low levels of marketing investment during COVID in 2020, and in the early part of 2021. And then you ramped up to more normal levels towards the end of the year. Now as far as you can tell your competitors in the core markets did they follow a similar pattern? Or was there some kind of sort of difference there in terms of the approach taken during the pandemic?

[Rolv Erik Ryssdal, Chief Executive Officer]

So I'll start on the cars and then Patricia, you can add on. So what we said is that we've provided a forecast done by that industry expert I think the important part there is that you see that the pickup in production is expected to come gradually from the second quarter, and I think that will really benefit our business models as we're working, especially in Germany, it's quite listing dependent. At the same time, I think there are many things that we can do there to work further on a more dynamic pricing model and we're taking the first steps into doing that now. And also, the trends that we mentioned with providing a bigger part of the journey with online buying and selling, we think in the years beyond the '23 and '24 that, that will provide good new revenue opportunities and also allow us to go deeper into the value chain, for instance, on finance, insurance, et cetera, et cetera and warranties. So I think as we go towards a more integrated the buying and selling experiment, there are a number of new revenue opportunities for us to tap into. And perhaps you want to comment a bit on that also, Patricia?

[Patricia Lobinger, Interim CEO of Mobile.de]

Sure. So hello, everyone. I think what we'll see over time is a reduced dependency of mobility revenue on the listing volumes, and also on the production volumes, as Rolv Erik has said, we are capturing larger parts of the value chain with our transactional model, and we will continue to do so in the future. And this will then mean that we will have a reduced volatility depending on production volumes and also listing volumes going forward. And we will also continue to review our pricing and packaging to make sure that we support that journey.

[Rolv Erik Ryssdal, Chief Executive Officer]

Yes. And then I think you mentioned about the how the fleets will develop. Yes, I think there will be -- of course there will be an increasing number of electric vehicles, and you'll see that also in the big fleet management. I think the important thing that we -- and I think that the value chain in motors is going to be interesting to watch as some parts will be challenged. I think the important thing for us to see that the marketplaces will continue to have a very strong position because what we're seeing is that the dealers and consumers and also OEMs are really dependent on strong and good marketplaces that's why we have invested and continue to invest also in marketing, and that's why we will continue to develop in product development. And then I think through a number of new revenue pools that we can tap into.

[Uvashni Raman, Chief Financial Officer]

And then the last one on marketing spend and what we're seeing in our markets. And our cross sell our markets, what we are seeing is our competitors are spending much more than they've done even in the pre-COVID levels and effectively as they bring on new product lines and models marketing spend is at all-time high. We've increased marketing spend compared to 2020-2021. We increased it, but we are at similar levels to pre-COVID and we don't anticipate going further than what we have expected to spend in 2021 as well.

[Operator]

We will now take our last question from Catherine Mitchell from Citi.

[Catherine Mitchell]

I just had a question on your comments on the car buying and selling. I just wanted to make sure I understood clearly. Are you talking about you becoming a retailer, i.e., acquiring inventory and selling it? Or is this car buying and selling like digital products that you're offering to dealers? And if you're planning to sort of experiment on the retail side, how would you finance the inventory? And if you're not planning that and it's products to do this, could you maybe provide a bit more detail on that and how you think about the pricing structure around these things?

[Rolv Erik Ryssdal, Chief Executive Officer]

Sure. So Patricia, you can answer that, but the short answer to your first question, Catherine, no, we're not planning to be a digital retailer ourselves. Our plan is to be the dealer's best friend and facilitate that they can do digital transactions online.

[Patricia Lobinger, Interim CEO of Mobile.de]

I agree. And I think this is really important to us to support our dealers in bringing the transaction online and also to help them to capture all of the needed process steps. As you heard earlier in the presentation, we have been running a test in the fourth quarter to see how this is accepted with good results. And we're going to continue to explore that and are going to invest into this in this year. So we'll do this in a very strong collaboration with the dealers.

[Rolv Erik Ryssdal, Chief Executive Officer]

Sorry. And I think Gianpa had a point on consumer. But the thing is that if what we're helping the dealers with doing is something that many of them cannot do themselves. And I think that will allow us to tap into several of those revenue pools as I mentioned previously, especially on the financing, insurance and also warranty products, et cetera. So it will be a number of new revenue pools to tap into.

[Operator]

I will now hand the call back for closing remarks.

[Rolv Erik Ryssdal, Chief Executive Officer]

Okay. Then I would like to just thank everyone for attending. And of course, we're going to have a number of investor meetings today and tomorrow, and our IR people and Uvashni and I and the team we're here ready to answer your questions. So please don't hesitate to contact us. And thank you all for attending today. I'm looking forward to meeting you soon. Have a nice day. Thank you.

[Operator]

Thank you. That does conclude today's conference call. Thank you for participating. You may all disconnect.