Adevinta ASA

OSE:ADE

Earnings Call Transcript 2022-Q4

[Operator]

Good morning. This is the conference operator. Welcome everyone to Adevinta's Q4 2022 Results Presentation. [Operator Instructions]Mr. Antoine Jouteau, CEO of Adevinta, will host today's conference. Mr. Jouteau, the floor is yours.

[Antoine Jouteau, executive]

Thanks, operator. Good morning, everyone. Welcome, and thank you for joining today's presentation of our Q4 results and progress. If I look back at 2022, I'm very proud of what we have achieved as a Group. We reached out our financial targets. We made a very strong progress in the execution of our Growing at Scale strategy with a clear focus on creating more value for our users and clients for our employees and for our shareholders. Together with Uvashni, we will go through both the key achievements and the rest of the executive will join us for the Q&A session.Before we start, I wanted to comment on today's management announcement. Uvashni has decided to step down in autumn 2023. This will allow us to organize our succession. A global search for a replacement has been initiated. Uvashni has been the CFO of the Group since its creation in 2019. I'm very thankful for her contribution in [ heading ] the new Adevinta and setting up for success as demonstrated by our 2022 achievements.We have delivered on our all financial targets for 2022. Revenues in our core markets grew by 10%, delivering double-digit revenue growth in the current macro environment is an outstanding performance and reflects the strength of our market positions and business models, as well as our relentless focus on customer value and product innovation. Total revenues grew by 8% to EUR1.644 billion.Our EBITDA before share-based compensation reached EUR579 million, in line with our full year guidance, and this despite the negative impact of the French digital service tax. While continuing to invest in product and technology, we operated with strict financial discipline to protect profitability and mitigate the effect on margin of our evolving business mix.Total EBITDA reached EUR548 million, corresponding to a margin of 33.3% for the full year. We have exceeded our synergy targets for 2022, delivering more than EUR35 million in run rate synergies. Finally, we continue to deleverage the business, thanks to strong cash generation of EUR437 million, which allowed us to pay down almost EUR320 million of debt during the year and reduce our exposure to rising interest rates. So in summary, a strong 2022 financial performance.We also delivered on our strategic targets, starting with the optimization of our organization. Our previously announced strategic portfolio review is now completed. We are now launching the sales process of Hungary, which was the last remaining business under assessment. Business integration is also on track on the functional side, and we have implemented the main milestone. Since the beginning of the year, we have had a new leadership team with new vertical responsibilities to align the business more closely with our strategy and facilitate execution.We have also initiated discussions and workshops with the project team, functional experts and senior management to design the future vertical organization. While transforming the Group, we kept a very strong focus on operational excellence. We increased monetization in mobility and real estate with higher customer penetration and successful price increases, alongside product improvements and increased customer value. We continue to develop new solutions and scale our transactional services across all our platforms while maintaining cost discipline at all levels.Finally, regarding our sustainability targets, we put in place our data collection process, which will support the establishment of the 2023 baseline to set the GHG emission target for full year 2024. We enhanced our culture inclusiveness at all levels of the organization. And we established a global cyber security program, ensuring the confidentiality, integrity and usability of all IT systems and data. Following the brief overview of 2022 achievements, let me go through the last quarter of the operational developments.Our utmost priority is to bring value to our users and clients. In mobility, we continue to customize our new online buying and selling service at Mobile launched at the end of September with flow improvements to enhance the user experience and process optimization. In real estate, at Kleinanzeigen, we launched a new C2B seller lead feature, which allows private sellers to get connected with local real estate agents.On transactional services, Marktplaats launched the DHL integration in November with pickup points. It's the first time users on the platform will be able to ship by using pickup points and DHL is the second shipping partner to be integrated on the platform. Those are only a few examples, but there are many others.I will now focus on traffic, a key indicator of our industry. Both Leboncoin and Kleinanzeigen continue to show an impressive performance with visits being up more than 30% compared to Q4 2019 and even a positive evolution compared to Q4 '21. 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's inevitably impacted by the motor markets environment, temporarily weaker, but we believe the potential remains intact.Now let's dig into our 2 key verticals, starting with mobility. As we have now experienced for more than a year, supply volumes remained very weak globally and more specifically in Europe, although we have observed differences from one market to another. In the last few months, demands have also trended differently in France and in Germany. Overall, balance between supply and demand is what drives the evolution of dealer listing volume on our platforms.In Germany, [indiscernible] listing are back to growth, up 9% year-on-year, mainly driven by market demand evolution, which is heading more to pre-pandemic levels. In France, listings are down 10% in Q4, mainly driven by the lack of supply, while demand remains flattish. 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 18% year-on-year and average revenue per listing at Mobile has increased by 14% year-on-year.In real estate, we have 2 different situations in France and in Germany that derive to a large extent for the different market position that we hold. In France, listings remained flattish as the real estate market remained dynamic in the quarter. We continue to improve our monetization. ARPA increased by 8% year-on-year, which benefited from the successful launch of [indiscernible] subscription packages in September, we have added value for professional clients.In Germany, professional listings are up with an impressive 97% 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 on our platform. The second driver is our gain in market share and increased agent penetration. The number of professional clients increased 20% 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.Moving on to transactional services. We continue to see very strong traction in the adoption of the product. More specifically, Leboncoin and Kleinanzeigen's number of transactions grew 27% and 149%, respectively, compared to the same period 1 year ago. In Benelux, Italy and Spain, we also see the number of transactions growing month after month with triple-digit growth for Italy and Spain. In Q4, we took advantage of key events such as circular Monday, football World Cup, Christmas to launch promotional activities, which also contributed to the strong ramp-up of the service. We continue to scale to improve and to launch new products in all our core markets.I would like now to double-click on France, where we have seen a strong development of the transactional services. In Q4, we achieved a new record level of transaction with fewer promotional days than last year. This record level of transaction benefited from the launch of our wallet at the end of August, which already represented 7% of our Q4 transactions.This growth in transaction volume is reflected in our revenue performance, which also benefited from a plus 16% growth in AOV driven by some of the changes for shaping eligibility that we implemented in the summer and by the successful launch of the installment solution in October, which already accounted for 10% of transaction at the end of Q4.The combined effects of higher transaction volume, the expansion of the wallet rollout and an improved delivery pricing structure enable transactional services to be break-even at the end of the year. Going forward, we will continue to bring new developments to the solution with expected positive impact on profitability.I will now hand over to Uvashni for the financial performance section.

[Uvashni Raman, executive]

Thanks Antoine, and good morning everyone. I'd like to echo what Antoine said, our overall financial performance for the last quarter of 2022 was underpinned by the continued acceleration in revenue goals compared to the quarters of 2022, previous quarter to 2022, driven by Mobile.dE, balanced investment and cost management as we navigated the current uncertain markets, lower share-based compensation also contributed. These elements offset the impact of the business mix evolution and the French digital services tax, or DST.Consolidated revenues grew 11% compared to the last year to EUR431 million. The 11% growth talks to comparable revenues. What this means is that we restate revenues for the assets we exited during the last year and Q4 2022. These assets include InfoJobs Brazil, Kufar and Mexico.Turning our focus to core markets. Revenues grew 13%, with continued acceleration quarter-on-quarter. Online Classifieds revenues improved 15%, supported by double-digit growth in mobility. Real estate performance was steady with high single-digit growth in the period. Jobs continued to perform strongly despite lapping tougher comps in Spain. Transactional revenues grew 60% year-on-year, with strong revenue growth across core markets. Adevinta's advertising revenues were down 5% year-on-year as a result of an overall weaker advertising market, especially in automotive display advertising.Moving on to EBITDA. Reported EBITDA at EUR145 million was up 16% year-on-year, representing a 33.6 percentage point margin. This performance was driven by the positive top line evolution, lower marketing investments driven by phasing, spend discipline and prioritization, cost management and other discretionary spend considering the current market context and the lower impact of share-based compensation.This was partially offset by an anticipated increase in personnel and other costs. This increase in personnel costs, albeit prioritized was in 2 areas. Firstly, the phased buildup of resources to fuel product development and new business models, for example, online buying and selling and transactional services; and secondly, a buildup of resources ahead of the implementation of our new operating model for support functions and product in check, as we previously announced.Direct costs from transactional services, including delivery and payments, also increased in the quarter, in line with the adoption of the service and revenue growth. And finally, a EUR3 million provision booked in the quarter related to French DST also impacted our profitability. Excluding this DST impact, EBITDA improved by 18% to EUR147 million compared to the fourth quarter, representing -- of 2022, representing a 34.2% margin.I will now provide further detail on the different segment performance beginning with France. Reported revenues in France grew 9% for the quarter. Online Classifieds grew 6% year-on-year, mainly driven by real estate and mobility. Real estate, high single-digit growth benefited from the successful launch of subscription packages, which were enhanced in September with higher value add for customers, especially the professional clients and also contributed to an 8% ARPA increase.Mobility revenue grew in the quarter was driven by an 18% increase of ARPD, which will more than offset the decline in professional volumes. On advertising, we saw the continued trend of reduced activity from media agencies and programmatic resulting in slightly lower revenues. Transactional revenues, on the other hand, were up 50% year-on-year on the back of volume growth and a 16% increase in average order value.Reported EBITDA was EUR54 million, up 3% year-on-year, supported by the positive top line development. This improvement was partially offset by the provision for the DST that I mentioned previously and increasing professional personnel costs in the quarter and investment in further product and tech drove this, and we also had the one-off impact of an exceptional inflation bonus grant.Direct transactional costs also increased in line with revenue growth. However, the improved delivery pricing structure and expansion of the Waters rollout, both with the positive impact on margin, partially offset the impact of the higher transaction of volumes on direct costs. The reported EBITDA margin deteriorated accordingly by 2.5 percentage points year-on-year. Excluding this DST, absolute EBITDA improved by 8% compared to the fourth quarter of 2021, with a broadly stable margin compared, despite the unfavorable impact of the business mix, driven by an increase in transactional revenue.Moving on to Mobile. We saw strong revenue performance in Mobile.de, up 24% in the fourth quarter of 2022. Online classifieds revenues increased by 29% year-on-year, benefited mainly from the recovery in dealer listings and the successful implementation and execution of dealer price adjustments in April in combination with increasing value for customers.Average revenue per dealer listing increased 14% year-on-year. Revenue from private sellers also posted a strong performance in the quarter, supported by higher ARPL, average revenue per listing. Advertising revenues, on the other hand, decreased by 7% compared to the previous year, with the impact from reduced spend levels from OEMs continuing due to the current market context.EBITDA improved by 34% in the fourth quarter, mainly driven by the positive top line development and operating leverage. This was partially offset by an increase in internal resources as we continued the phased investment in product enhancements and in sales and customer care operations to support new business models such as online buying and selling and leasing.Marketing expenses decreased in the quarter, down 10% year-on-year as a result of the higher comps. This saw EBITDA margin for Mobile.de improved 4 percentage points year-on-year. Revenues on a comparable basis in the European market segment increased by 9% in the fourth quarter, led by strong performance in eBay Kleinanzeigen, Spain and Italy. Online classified revenues were up 15%, supported by growth in all verticals. Advertising revenues, on the other hand, were down 6% year-on-year, impacted similarly by the weak economic context, leading to lower spend by advertisers.Transactional revenue continued the strong momentum and almost doubled compared to the same period last year. In line with top line evolution, EBITDA improved by 9% compared to the fourth quarter of 2021. This was partially offset by an increase in personnel expenses, particularly at eBay Kleinanzeigen with further investment in product development and sales and customer support, in line with the revenue growth of our business and transactional services. Transactional costs also increased, driven by high volumes and by promotional campaigns to drive the adoption of the service. EBITDA margin was broadly flat year-on-year despite a change in revenue mix driven by the transactional growth.I will provide now more insight on revenue development for the 4 largest markets in the segment. eBay Kleinanzeigen grew 11% in the period and reached EUR64 million. This was driven by significant momentum in consumer goods, with strong performance from small and medium businesses, real estate with further market share gains and in mobility. These developments partially offset the decline in advertising revenues due to the weaker environment we see. Important to note though that despite this decline, eBay Kleinanzeigen's advertising performance was, in fact, stronger than the overall German market. Transactional revenues more than doubled in the period, benefiting from recent product launches and campaigns to drive user adoption.In Spain, revenues grew 9% in the period and reached EUR54 million. Contributing to this performance was the strong performance in all 3 verticals in online classifieds, up 10% year-on-year. Advertising revenues contributed to the trend in other markets was up 2% year-on-year, driven by new client acquisition and the further ramp-up on transactional revenues also contributed.Benelux revenues grew 4% in the period and reached EUR39 million. Revenue growth in online classifieds and transactional services was partly offset by the lower advertising revenues, impacted like other markets by the weaker environment. In Italy, revenues grew 13%, mainly driven by the strong performance in mobility and consumer goods and the continued strong momentum we saw in transactional services. Advertising revenues were down year-on-year, driven by the softer programmatic performance and the KTG.it shutdown.Now let's move on to international markets, which is effectively Canada in the fourth quarter of 2022. This market showed a 9% year-on-year decline in revenues on a comparable basis. Canada posted a 1% revenue growth in online classifieds, led by mobility. This was offset by a soft performance in advertising, driven by lower vibrancy and soft direct display revenues. Reported EBITDA was up 11 million -- sorry, EUR1 million year-on-year. Following the exit of Mexico, whilst the EBITDA margin improved by 10 percentage points year-on-year. In Canada, lower EBITDA year-on-year reflected the top line evolution, an increase in personnel costs, offset by a reduction in marketing expenses and other cost optimization.On the next slide, OLX Brazil, which we do not include in our business segment reporting. However, we do believe it's important to continue to provide market visibility on this asset. OLX Brazil increased revenues by 5% year-on-year in local currency and reached EUR41 million. This softer performance compared to previous quarters should be considered with a backdrop of political and macro uncertainties, national elections and the higher interest rates. We did, however, see transactional revenues double over the period.Advertising revenues on the other hand were down year-on-year, impacted by the market environment. EBITDA was up 137% compared to the last year in local currency and amounted to EUR5 million. This development was driven by a strong decrease in marketing expenses and lower personnel expenses, mainly due to a headcount review and optimization. This headcount reduction was done ensuring operations were not compromised. The EBITDA margin for the quarter was 13%.On the next slide, I will cover other and headquarters, which comprises Adevinta's headquarter costs, as well as central product and technology costs. The central product and tech and HQ costs and EBITDA was flat compared to last year at negative EUR47 million. The continued buildup of global capabilities due to the implementation of the new operating model for the support areas and product and technology teams to drive operational efficiencies and accelerate value was offset by the larger share of cost allocations to the market, reflecting the global team support of those markets and the lower share-based compensation.On the right-hand side of the slide, we have the main cost lines that are part of the central product and tech costs. As you can see, our cloud and infrastructure and data costs together represent 45% of our central product and tech costs, while our central P&T capabilities represents 36% of our total central product and Tech cost. As a percentage of revenue, central product and tech and HQ costs were down year-on-year.Moving on to other P&L items below EBITDA. Depreciation and amortization increased EUR80 million in the quarter, mainly driven by the reassessment of useful lives of certain trademarks in Q2 2022. Share of loss of joint ventures and associates in the quarter decreased EUR17 million compared to the same period of 2021. This is mainly driven due to the results in Brazil, where we saw a EUR16 million related decrease in deferred tax assets after reassessing the recoverability. An impaired loss of EUR1.7 billion has been recognized, and I will explain this in a few minutes.Other income and expenses amounted to EUR14 million, with the main drivers being the integration expenses related to the eCG acquisition. Net financial costs were up EUR7 million, mainly due to FX losses on the loan in BRL issued by Adevinta to OLX Brazil. The Group reported a tax income of EUR1 million in the quarter, which mainly reflected the decrease in deferred tax liabilities due to the impairment of intangible assets, partly offset by the derecognition of deferred tax assets in the Dutch tax group due to the updated forecast of taxable income.I will now spend some time to explain the impairment that was triggered in the quarter. The assets concerned required eCG classified markets and to a small extent, our Hungarian assets. As a reminder, the book value of the eCG business was determined as part of the purchase price allocation exercise that took place at closing of the transaction, some 12 months post signing of the deal. Also important to bear in mind that 80% of the purchase price was paid in shares. At the time of closing of the transaction, Adevinta's share price had increased 48% compared to the share price at signing of the deal, resulting in a significantly higher goodwill attributable to the business where accounting rules calls for the closing share price to be used.Subsequently, the macroeconomic uncertainties and rising inflation during 2022 has triggered a significant increase in market interest rates and equity risk premium. The direct consequence of that was a significant increase in the weighted average cost of capital that Adevinta uses for discounting cash flows when estimating its recoverable amount of its cash generating units during impairment testing exercises performed early. This explains the vast majority of the EUR1.7 billion impairment that we booked in Q4.More importantly though, the mid-to-long term outlook that we have for our German assets have improved since the acquisition, mitigating the level of total goodwill impairment. Other drivers, of course, was the outlook we took on the noncore assets, Canada and Hungary. Overall, a non-cash accounting adjustment that is not related to business performance or outlook of our core efforts.Moving on to cash generation. We saw strong cash generation in the quarter. Some of the more material movements from EBITDA to cash include a broadly flat change in working capital despite the DST payments related to -- in 2022 for EUR11 million, tax payments were EUR9 million, cash tax, which is essentially the capitalization of development costs and represents circa 6% of our sales in the quarter and the share-based compensation, which amounted to EUR4 million in which I've covered previously. This results in an adjusted net cash flow from operating activities of EUR140 million.In the quarter, we managed to repay EUR75 million of our term loan B in accordance with our financial policy and associated leverage targets. This is also in line with our strategy to prioritize floating debt repayment. In 2022, we repaid circa EUR320 million of debt, only possible due to the strong cash generation. At the end of the quarter, our senior secured leverage ratio was 3.5x. We continued to actively manage our debt position. We will continue to focus on deleveraging, and we'll further optimize our debt structure to mitigate the impact of interest rates rising. Our target is to get to reduce a leverage ratio of below 3x net debt to EBITDA by the end of the fiscal year 2022.Liquidity remains strong, and our total cash position at the end of December was EUR70 million, and we have further undrawn facilities of EUR450 million. Throughout the year, we have implemented cash optimization measures that have resulted in a reduction in operating cash requirements of around EUR50 million. This allows us to operate with significantly lower cash levels. As a comparison, in 2021, our average cash hold was around EUR200 million versus the EUR70 million at the end of December 2022.Looking at our debt maturity profile, we have some ways to go before the maturity of our debt, and we do not have to repay debt before 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 on the back of further deterioration in market conditions.As explained in previous quarters, we are also taking measures to mitigate our FX and interest rate exposure. Regarding interest rates, we continued to reduce our floating interest rate exposure by prioritizing interest rate debt repayment. When it comes to our deleveraging. Our floating debt-to-equity ratio is at 33% compared to 40% a few quarters ago. With this deleveraging strategy and hedging actions, we saved EUR17 million in interest expense in 2022. Regarding exchange rate exposure, we hedge every material transaction, and we try to minimize the FX risk, we keep FX cash at an operational minimum and we hedge all M&A proceeds where possible.In summary, we saw good operational performance translating into a strong financial performance for the Group in the fourth quarter, wrapping up a solid full year '22 performance despite the tough market backdrop.I will now hand over to Antoine, who will continue with the outlook.

[Antoine Jouteau, executive]

Thank you, Uvashni. In conclusion, we have delivered a strong financial performance in 2022 despite a soft macro environment and unexpected headwinds such as the French DST. In 2023, we will pursue our profitable growth journey. With solid business for [indiscernible] to deliver more value for our customers and increased monetization and strong operational and financial discipline. We expect to generate low double-digit revenue growth for core markets and to reach consolidated EBITDA in the range of EUR620 million to EUR650 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 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 able to answer to your questions. Operator, please?

[Operator]

Thank you. This is the conference operator. [Operator Instructions] The first question is from William Packer with BNP Paribas.

[William Packer, analyst]

Will Packer here, Three for me, please. Firstly, could we talk about the German used car backdrop a little bit. Can you comment specifically on the pricing dynamics among the used car dealers and the GPU backdrop? I suppose the context would be put through some very substantial price increases recently, whilst your customers had this big GPU tailwind, how is that GPU developing? And is that a factor in perhaps pricing less aggressively in the future? Or is that too cautious?Secondly, could you talk through what drives the range of your EBITDA consensus? Is it as simple as -- it depends on the ad outlook, which is obviously a high gross margin business. Any color there would be helpful. And then final question is on the European segment margins. Should we expect margin dilution because of the transactional mix shift in investment?

[Antoine Jouteau, executive]

Will, thank you for all your questions. I think, A.J., you can handle the first question on Germany.

[Ajay Bhatia, executive]

Will, on the German market, so GPU, as you know, was very strong last year. GPU, we can see that GPU will moderate this year. At the same time, if you look at the mix of how the Mobile price curve looks, we are more expensive at the lower end in terms of small dealers, and we are much less expensive at the higher end. So if you actually look at our price increase, we did a very moderate price increase, in fact, quite a small price increase for the small dealers and our price increase for the large dealers was much larger. And it simply is reflecting the fact that we want to link to value, and we want to link to that gross margin that you mentioned. So your comments are very well.But at the same time, we have this deeper thinking around where pricing can be increased versus where pricing can be moderately increased, and that's what's reflected in our current price increase. Your question about future price increases, GPU remains pretty solid through this year as well. And I believe we will continue our price increases into the future, but we will link them to value. So there is a lot of product development plan this year that is going to be value generative for the dealer. So I'm very conscious of that. We, in fact, have an ELP day today discussing some of this as well.

[Antoine Jouteau, executive]

Maybe Uvashni, you can comment on the range of the EBITDA?

[Uvashni Raman, executive]

Yeah. Some contributing factors to that range is really in the current uncertain context, is the mix between effectively your advertising revenue and your transaction mix as well that's coming through. The other element is there is still some uncertainty around certain elements in the market around supply, pricing elements, etcetera. So we have the ability to price. We are looking and watching that very carefully as well. And then with regard to transactional revenue mix, of course, the transactional costs related to that and delivery elements on that. That is why we've just put in the range because it could have a significant impact on the long term. And it's a similar range we saw in 2022 anyway.

[Antoine Jouteau, executive]

Paul, do you want to handle the last one on the European segment and the margin going forward?

[Paul Heimann, executive]

Yeah, sure. So thanks, Will, for your question. So just let me quickly reflect a bit on the margin in EU. So overall, it was broadly flat year-on-year. And what we saw is that, as you know, we saw advertising revenues, which are highly profitable going down year-on-year. And at the same time, the transactional revenues, which are margin dilutive almost doubled in that period. So there was a bit of an unfavorable effect from those two, but we compensated that with very strong top line growth in the online classifieds revenue in line with 15% year-over-year. Looking into the future, we think that we can continue broadly along those lines. So we see a lot of opportunity to continue to grow our -- online classifieds revenues, and we expect the margin to remain ballpark in the direction that we're currently in.

[Operator]

The next question is from Marcus Diebel with J.P. Morgan.

[Marcus Diebel, analyst]

Marcus here. Three questions from my side. Antoine, one question on this long-term ambition. Now you talk about 2023 to '26 annual revenue growth of 11% to 15%. At the last Capital Markets Day, at the time, Adevinta was guiding for up to 15%. And my impression was also that you kind of endorsed this once you took the CEO helmet. Is that right? And now the question, why has this falling to 11% to 15%? And what happened really here? Because clearly, used car prices should come down, which would be helpful for your business.That would be just helpful to clarify why now 11% to 15% and not the 15% anymore? And the second question is on leverage. You actually -- previously, the range for '23 was also 2x to 3x. Now it's around 3x. So what happened here on leverage that would be interesting? And then the last question, again for Antoine is just on portfolio. After Hungary now also being solved, do you feel that there's anything more to do? I mean in terms of portfolio, Canada continues to be core. Everything else was pretty much sold. Yeah, how do you think about portfolio from here now and after everything that Adevinta has already achieved in regards to portfolio.

[Antoine Jouteau, executive]

Marcus, thank you. Thank you for your question. I think this range corresponds to the annual growth rate, not the average of the period. So it means that some years, we will be closer to 11% and some closer to 15%. So we expect some acceleration in the outer years. But with the context we have, I think it's an ambitious but more realistic range.

[Marcus Diebel, analyst]

Just makes perfect sense, because that's what I thought, yeah, it basically means that you think, obviously, the 11% is more the number for '23-ish and then you see further acceleration, right? I just wanted to clarify, but I think it's what you're saying.

[Antoine Jouteau, executive]

Yeah, we try to segment and to split the next year to give you more visibility. The visibility I have now is the short term. But now I'll try to give you the ambition on the long-term. So it's why I'm correcting the initial Capital Market Day that has been done in another world, another context. I try to be more realistic now, but I'm still very ambitious for the future, accelerating our transaction, continuing to grow on motors and real estate. So I'm confident on that, but I'm more realistic. And I think it's not a surprise that I'm adjusting that. Second part of your question, Uvashni you want?

[Uvashni Raman, executive]

On the -- yeah, no, the 2x to 3x hasn't changed. We said below 3x. So not 3x, below 3x will be the 2023 target. So it's still in the range that we had told you before, so I haven't changed that at all.

[Antoine Jouteau, executive]

And regarding the last question about the portfolio, we just said -- announced that Hungary, we are in the process now. About Canada, your question about Canada. You know Canada Kijiji is a strong brand. We believe in this brand. We know that we have to adjust the operation -- the execution of this company within this company. So we are focusing now to reactivate some positives on that. And regarding the joint venture, there is no move. So that's the date now. I think we are more focused in Europe, as I said before, focused on delivering a strong growth. But now the portfolio adjustment is over.

[Operator]

The next question is from Chris Johnen with HSBC.

[Christopher Johnen, analyst]

First, coming to France. I'm just curious if you can give a little bit more color as to what we can expect here. It seems difficult to see margins increase if the advertising market remains difficult and a lot of the incremental growth is really coming from the transactional services. So I'd be curious to hear what we can sort of expect from classifieds here next year. Whether there is any sort of other moving parts that are important with respect to profitability in France?Then my second question on Germany. I mean, you -- on the slide, you said the midterm sort of business outlook for the German assets improved. A little bit more color here would be helpful. And related to another question on eBay Kleinanzeigen in particular. I mean it is my impression, and correct me if I'm wrong here that you've been quite busy over the last quarters with lots of integration stuff and not really a lot has happened in Germany.I mean I see the product development now with the seller lead stuff. But I still get the feeling that this has been a little bit overlooked. I'm just curious where do you stand here as far as is the integration done? Like is there going to be more product focused? Yes, that would be interesting.

[Antoine Jouteau, executive]

Thank you for your question, Chris. Paul, do you want to handle the global situation in France?

[Paul Heimann, executive]

Yes. Yeah, happy to do that. So let me give you a bit of color on France. So overall, we saw, given the macroeconomic weaknesses, a pretty strong quarter with 9% year-over-year growth. What we saw is very strong results, mostly on the subscription packages. But due to the overall supply shortages, what we also saw some softness in the sort of volume-driven revenues. For example, with lower professional premiums in motors, also lower valuation revenues, also slightly lower [ CDC ] revenues on motors and a similar situation in real estate and jobs.So to simplify everything that's bound to the listing volumes was impacted by the overall market context that we see in the supply shortage both in motors as well as in real estate. But when we look forward, what we see is that we will be able to continue to benefit from the resilient mobility as well as the real estate business. So we see a lot of opportunity for us to continue to drive value to our customers. And alongside that, also drive ARPU growth and up-selling and basically drive price increases. And the way we look at it is that we will be more than able to offset the foreseen decline in dealer and agent listings with our ability to drive pricing and deliver value to our customers.Then maybe a bit of color on sort of the margin. So what we've done in France is a couple of things that also impacted the margin specifically in Q4. So we have done a lot of additional investments in product and technology to drive our transactional evolution there. We also saw a slight increase in marketing costs year-over-year and maybe a bit of color on that. So Q4 is by far the busiest quarter in terms of marketing activity. And then as you pointed out, we see this dilutive impact of the transactional services. But Antoine already mentioned, we managed to break even on transactions in France in Q4, and we have a quite optimistic outlook with the product developments that are in the pipeline to be able to continue that trend and achieve our midterm ambition of 20% margin on the transactional business.

[Antoine Jouteau, executive]

Thank you, Paul. Maybe you can continue on commenting on the product development in Kleinanzeigen, right? That was the.

[Paul Heimann, executive]

Yes. So what I can tell you is that we focused a lot in Kleinanzeigen on scaling the team. And I can tell you that we have every single person that sits here with me in the [indiscernible] office is going above and beyond driving the product evolution. I think that's also very nicely shown in a couple of examples. So first of all, you've seen the evolution in real estate, which is pretty strong, where we have been able to drive subscription packages significantly where we managed to get our subscriber number up to 9,000 based on significant product improvements in the real estate space.We also continue to work very closely together with mobile on sort of our combined offering for German car dealers -- so we also drive a significant amount of value to our overall mobility play in Germany. And then if you look at the transactional evolution, we managed to grow transactions significantly and that is almost entirely based on product improvement. So we integrated DHL -- we launched Buy Now proposition, which is now already very, very popular amongst our customers, and we managed to drive the adoption up significantly of the transactional offering in Kleinanzeigen.So I can guarantee you that there is a very strong focus on product evolution. And if you look at each individual path across real estate, across transactional journey, across the mobility piece that we do together with [indiscernible] as well as the SMB offering that we have that had phenomenal growth -- all of this is driven by strong progress on the product. So believe me that we are fully focused on delivering value to our users with our product.

[Antoine Jouteau, executive]

Very good. Thank you, Paul. Ajay, do you want to comment on the situation on the motor market in Germany?

[Ajay Bhatia, executive]

Yes. No. Thanks, Antoine, and thank you, Chris, for the question. So on the motors market in Germany, Germany is -- I would say firstly, demand has moderated over the last little period. Mobile is going through what I would call a bit of a purple patch at the moment. The comps on last year are more comfortable for us. So we're seeing very strong growth at this point. And while I certainly see this growth continuing it won't be at the level that you see in this quarter for the longer term, right?But at the same time, I'm bullish because I know that from an international comparison perspective, the percentage of gross margin that mobile charges today is significantly lower than our international peers. So I'm bullish on this market. We will link this market, however, to a lot of product development and value creation over '23, '24 and '25. So dealers will see a benefit, which will allow us to continue the trajectory of growth that the team aspires to. So look, overall, I would say, demand is moderating, and we know that GPUs will moderate, but we also understand the shape of GPUs for different dealers, and we will link the value to that. So we are okay overall.

[Operator]

The next question is from Giles Thorne with Jefferies.

[Giles Thorne, analyst]

First question is on Consumer Goods transaction. We've seen the Head of Adevinta Italy speak about 75% attach rates for generalist ads. So 75% of new generalist ads being on the transactional product, Subito. But you reported today that it was only 10% for Leboncoin France in Q4. So it'd be interesting to know why the big difference. And it would be also interesting to know what the attach rate looks like for Kleinanzeigen. Forgive me if it's in the presentation slides, and I missed it.Second question, still on Consumer Goods transactional, the interplay between shipping promotions and transaction growth felt very tightly correlated for most of last year, but that link appears to be breaking from Q4, namely you were able to grow payouts in France with half the level of promotions. So is this just the impact of Black Friday and Christmas and the consumer more willing to do this type of thing or do you see this as an early sign of a permanent change in behavior?And is this -- and is getting consumers just to change their behavior at the single biggest lever for reaching your overall profitability targets in transactional? And then finally, a less worthy question for Ajay. Data out of mobile points to a rapid return to growth in sales lead times into this year. The outlook statement is quite muted on listing volumes in 2023. Are you just being prudent?

[Antoine Jouteau, executive]

To be honest, I didn't understand very well your first question. Could you just repeat it?

[Giles Thorne, analyst]

Yeah. In Italy, new generalist ads -- 75% of new generalist ads are on the transactional products. But in the slide, you mentioned it's only 10% for Leboncoin. Why the big difference?

[Antoine Jouteau, executive]

Okay. Maybe we'll take this offline, and we'll come back to you on that because it's -- let me come back to you on that, if you don't mind because it's a bit unclear. Yes.

[Paul Heimann, executive]

[indiscernible] Antoine? Yeah, I can try. I think I'm also not entirely sure what you mean, but I might try. So I think there's a difference between how much of the total inventory is eligible to transactional so to the offering, and that is the number that you quoted on Subito. And the second rate that you mentioned is how much is eventually then traded through our transactional proposition, right? And if you look at what -- how many -- what percentage of total inventory is available to transaction that ranges between 60% and over 90% depending on the market that you look at.So overall, a lot of the inventory is eligible to be transacted through our transactional services. There are some limitations for example, very high-priced items, for example, depending on the market you look at and also the local regulations and the providers that we work with, but it ranges between 60% and 90%. And then again, the second piece is how much is eventually traded and Leboncoin is around 10% or higher actually than that. And that's the metric that we work on to drive the adoption of the transaction proposition going forward. But does this clear up your question maybe?

[Giles Thorne, analyst]

Yeah. I think I mean, yeah, that's useful color.

[Ajay Bhatia, executive]

Antoine, you want me to take the next one?

[Antoine Jouteau, executive]

Yes, please.

[Ajay Bhatia, executive]

And thanks Giles, I love reading your reports by the way. So on the listings volume, the story is a little bit more complex than you see on the site at firsthand, right? So when you see this increase in listings, firstly, if you look at the new listings that are coming into mobile, they are flat to slightly down in terms of used listings, right? When it comes to time to sell, that is higher than sort of same time last year, although it's starting to moderate and flatten now in terms of time to sell. Time to sell is still less than pre-pandemic, by the way. But it is higher than, say, the first part of last year.So that is benefiting us in terms of increasing the number of listings on the site. But the shape of the listings is equally important. As I said earlier, we charge the small dealers more than we charge the large dealers per listing. So if we get a disproportionate amount of increase to the larger dealers, you don't see the same impact on revenue. So it's not a one-on-one relationship between listings and revenue is kind of what I'm trying to say here, right? But I'm also cautious of the fact that the new listings that are coming in are more flattish and that influences my commentary. And lastly, we as a management team don't want our business to be run by assumptions. We want our business to be run by actions we take. So our assumption is therefore flat.

[Giles Thorne, analyst]

Understood. Great. And sorry, to my final question, which was quite wordy on consumer goods transactional and the lower promotions you saw in Q4. Is there a change of behavior or is this just Black Friday?

[Antoine Jouteau, executive]

I think if you can answer to this question. So the profitability that we have announced earlier is based on a few things. One is we are optimizing or we have optimized a lot the way we were pricing our shipping. So this -- that was the first thing. The second thing is the way we are using the promotional on shipping. And I think the more we are learning, the better we are. And now we know that we should target and we have avoided the Black Friday because it's not sustainable for us. So we didn't do anything during this moment. But we are using now -- we are more a laser marketing approach, and we are using with a lot of concerns the way we are discounting our pricing.So I would say that the profitability now is an addition of pricing adjustment on the shipping plus more product features like wallet plus more installments. It's a sense business. So the more you are getting sense on your funnel, you are becoming -- you can become profitable. So the long term is that this knowledge now we will plug in other countries. But I think now we are confident to continue to be profitable on this activity in France. For the other countries, they need to educate their users. They need to gain market share. They need to increase their conversion rate, which is behind France. But really, we know now we have the playbook to become profitable on that, and we know how to use it.

[Operator]

The next question is from Andrew Ross with Barclays.

[Andrew Ross, analyst]

My first question is to come back on used car pricing. So also one this morning you've talked about wholesale pricing being down 15% in Q4 against Q3, which is a pretty sharp decline. So I'm curious as to what change you observed in retail pricing across your platforms through Q4. And then talk a bit about what you're expecting through '23. I mean, clearly, there's [indiscernible] pricing declines but at what pace are you expecting and could that cause pressure on dealers?The second question is on advertising. Can you just update us on the Q1 trends and whether there's been any kind of further deterioration in January and February? And then third question is on the CapEx for '23. If you could help us with the guidance as to the percentage of sales you're expecting to spend on CapEx that would be helpful.

[Antoine Jouteau, executive]

Thank you for your question. Ajay, maybe you can give some color on the first one on used car.

[Ajay Bhatia, executive]

Yeah, Antoine and thanks, Andrew, for a good question. Andrew, on what's happening in the used car market. What we're seeing in the market in fact most markets, not just the German market is we're seeing prices have peaked. We haven't seen price declines yet in terms of used cars, but we have seen from a retail perspective, prices peak and they're not going up any further. So that's the first step. So in terms of what's the outlook for the year, we still haven't seen a significant recovery in supply.As I mentioned earlier, the number of new used cars coming on to the platform are flat to down. And that basically means that supply is still constrained. Demand is still high. Our overall leads on the platform actually went up in 2023. So if you think about there is intent that people want to buy cars, but there's not enough supply still available in the market. So we think that prices will stay flat through the year, contributing to a flat to probably slightly down margin for dealers in 2023.

[Antoine Jouteau, executive]

Thank you, Ajay. Maybe Alex, you can answer to the overall question on advertising the first trend of the start of the year.

[Alexandre Collinet, executive]

Yeah. Sure, Antoine. Hi Andrew. Thanks for the question. So basically, we expect Q1 display advertising to remain soft, especially on branding because most marketers are now shifting branding budget to more performance-driven campaigns in the current environment. The retail media part grows fast in terms of relative and absolute ad spend. We expect it to be EUR1 billion mark this year. But we are not waiting. We are also working on some advertising features like [ Le Cube ], where we have an audience extension offered on YouTube based on ABC data that allow us -- allow them to buy some video formats based on Leboncoin data that we can offer to our platform.We are also reducing our exposure to OEM spend because you know we have a strong exposure to those customers. And we are scaling up our 1P solution, which is called Ignite to grow selection for our users and offer retailers to benefit for Kleinanzeigen contextual [indiscernible]. So we are seeing the first results of those already in Q4.

[Antoine Jouteau, executive]

Thank you, Alex, for that. Maybe Uvashni on the.

[Uvashni Raman, executive]

Yes, Andrew, in CapEx, we would see the similar trends you see in Q4 around 6% of revenue.

[Antoine Jouteau, executive]

Is it answer to your question, Andrew? Yes.

[Andrew Ross, analyst]

Yeah, that's helpful. Thanks a lot guys.

[Operator]

The next question is from Adam Berlin with UBS.

[Adam Berlin, analyst]

I've got just one question for Uvashni. I'm just trying to understand the EBITDA guidance in a bit more detail because you've got EUR1.5 billion or so revenue in core markets growing say 11%. And then you got EUR40 million, EUR50 million of synergy benefit coming through. So all else equal EBITDA should be going up about EUR200 million, but it's only going up EUR80 million to EUR90 million in the midpoint of your guidance, which means there's quite a lot of additional OpEx coming into the business as well.And I can think of three things, right? One of it is going to be more costs associated with transaction revenue. There's going to be some inflation in salaries and costs and there's going to be some investment. Can you give us a sense of how the OpEx increase breaks down between those three different categories or is there other drivers of the big OpEx increase in 2023 that I haven't thought about?

[Uvashni Raman, executive]

Yeah, there's a couple of things that are influencing that. Firstly, you're right. There are some evolution in top line in terms of transactional mix. So that's contributing to that. Then you've got, of course, some of the run rate in terms of higher personnel costs coming from the highest we did last year that contribute to that. The other elements are we still -- we are investing in the new business models like online buying and selling and leasing, which is not coming with top line growth.So you're having some cost elements coming in there that you haven't seen the full revenue recognition coming through. And then we're ramping up in terms of transactional in other markets unlike where you've seen some breakeven come in France. We're still ramping up when it comes to Kleinanzeigen and effectively Subito as well. So you do see some additional costs coming through with not contributing to EBITDA at the moment. But that's why, over time, you'll see that margin improvement come in as these revenue lines turn to breakeven and start to turn to profitability as well.

[Adam Berlin, analyst]

So maybe if I could follow up and ask, so these investments are coming in, in 2023. Is that a continuing effect we're going to see in 2024, 2025? Are you kind of almost finished that process in 2023? And therefore, the OpEx growth going forward should just be about inflation and the transaction growth?

[Uvashni Raman, executive]

I mean we always will invest in new product development. But yes, you will find some of the bulkier elements around transactional revenue, etcetera, I mean transactional costs or transactional investment as the businesses ramp up on volume of course decrease. But there is always new development on product.We will also ramp up in terms of not ramp-up, but continue to invest with our online buying and selling tools and leasing as well because there is some development to be done there. But remember, our guidance says 40% to 45% margin by 2026, which means continuous improvement in terms of that progressive increase in our margin and absolute margin as well. So watch that space because even though you have the revenue uptick, I mean the cost increase, you're balancing it out to revenue uptick as well.

[Antoine Jouteau, executive]

Really, Adam, I think we are very focused on the -- a lot of financial discipline now to -- we are cautious on that. Everything is under control. And now the new vision and new ambition we gave is very ambitious because we'll continue progressively step-by-step increasing the profitability. We were doing 33% last year, and we are saying that we will go to the range of 40% to 45%. So I think you see that that will be progressive, but this is really our target to increase the profitability step-by-step from now, and it will start in '24 -- '23 and will continue in '24. Sorry, I'm already in '24.

[Operator]

The next question is from Daniel Haugland with ABG.

[Daniel Vårdal Haugland, analyst]

So I think we touched on some of my questions already, but maybe one to you Uvashni on what kind of synergy realizations are you incorporating in the 2023 guidance in EBITDA?

[Antoine Jouteau, executive]

Uvashni, you want to answer to this?

[Uvashni Raman, executive]

Yes, sure. It's in line with our previously announced guidance on our synergies where we said that we will move to -- I think it's this year, about EUR90 million run rate synergies in respect to 2023, and that's still on track.

[Daniel Vårdal Haugland, analyst]

Okay. So maybe midpoint around midpoint on that for?

[Uvashni Raman, executive]

And what we did previously as well, what will hit EBITDA is around 50% to 60% of that in any one year as you hit your run rate.

[Daniel Vårdal Haugland, analyst]

Okay. And just on -- in terms of integration costs and other costs into 2023 as some of the other talk a little bit about here. If you just look on -- it seems like there will be an OpEx increase year-over-year. But in terms of other costs, etcetera, how should we think about that? Is basically most taken out mowin202 or should we also expect for '23?

[Uvashni Raman, executive]

Can you just repeat the question? Sorry, I didn't get that.

[Daniel Vårdal Haugland, analyst]

Sure, sure. So in terms of integration costs and other costs into '23, how should we think about that?

[Antoine Jouteau, executive]

For this year, you mean. So I think the -- we are planning to have lower than '22. So the integration this year will be lower than '22 than last year. But we are transforming this company also, and we are verticalizing this company. So I think now we have a holistic view. We try to control our cost base globally, and we are integrating our synergy, but we control our cost base. This is really important for us because, as you know, of the context, the macroeconomics are more uncertain than in the past. So for sure, the cost basis [indiscernible] we'll adjust if we need it, of course, but we continue to improve the profitability, and we are managing the company, including this transformation, including the integration now. We have a global view to be sure that we'll be able to improve the profitability in the mid long term. Sorry, we have time for one question, I think. One more.

[Operator]

The next question is from Markus Heiberg with SEB.

[Markus Heiberg, analyst]

I have two questions. So let's try to be a bit quick on those. But the first one is on Kleinanzeigen and the advertising trends you're seeing there because you have visit growth of some 3% year-on-year. In Q3, it was 6% year-on-year, according to your slides. But you're seeing now lower ad revenues year-on-year, whereas in Q3, you had higher and very strong momentum, especially due to the yield. So some flavor on that would be very helpful. And lastly is on your transactional in France and the take rate that you're seeing, excluding shipping. And how much is shipping of your COGS in France? So on take rate and in COGS in France would be very helpful, actually.

[Antoine Jouteau, executive]

Paul, you handle the Kleinanzeigen question.

[Paul Heimann, executive]

Yes, yes, yes, sure. Good question. So Q3 indeed was exceptionally high and that also drove a good performance on the revenue side. Q4, we saw, as you pointed out, traffic slowing down quite a bit, and that also resulted in lower advertising revenues overall. The majority of that is clearly to be attributed to the overall macroeconomic situation and the declining market trends. The good news is on Kleinanzeigen is that we still outgrew the market. So the market was declining about 10% according to data that we have, and we managed to actually go against that trend perform against that trend. What we're doing in Kleinanzeigen is we are in a transition, and Alex alluded a little bit to that.So we are currently -- the majority of the revenue is driven by a third party and we are in a transition to drive our retail media proposition. And Alex mentioned it, our internal tool Ignite to switch a lot of the revenues to 1P. So we are actively managing a transition in the market. And what we see now going into the year is a stabilization and a slight pickup. And we are actually -- we have a stable, slightly positive outlook in Kleinanzeigen given the transition that we are in and the market which is stabilizing.

[Antoine Jouteau, executive]

And about your last question, we are not supposed to disclose it, but just to give you an idea on that, Markus, on transactional is the shipping, it's 70% of our transactional cost in '22.

[Operator]

Do you have time for one last question?

[Antoine Jouteau, executive]

Yes.

[Operator]

The next question is from Silvia Cuneo with Deutsche Bank.

[Silvia Cuneo, analyst]

I have a few -- I'll try to be quick. So on the real estate in Germany, you mentioned you gained further market share with over 20% growth in professional clients. Can you please remind us of how many agents do you now have in the country and provide any color as to where these agents are coming from and if data apps are using more than one portal? Then just a question on the jobs vertical. In Spain, the performance was quite strong despite macro headwinds. Just wanted to ask Antoine since you revisited some of the CMD targets wanted to ask if you still are going to focus on motors and real estate verticals or is there more space for jobs given its performance and how you're thinking about this vertical?

[Antoine Jouteau, executive]

Thank you very much. Roman, do you want to answer to the real estate question in Kleinanzeigen?

[Roman Campa, executive]

Sure. So in Kleinanzeigen, yes, we have about 9,000 agents, and it's been growing quite well for the year. And when we look at how many is the number of agents and maybe in some of the other players, it's about 20,000 agents. So total market will be bigger than that, but that's kind of the maximum level of agents that any of the big players in Germany has managed to reach so far. And now we are growing on the smaller agents, probably, but the growth has been very good. The ARPU has been stable despite the super big growth that we've done during the year. And we feel there's still a long way to grow from that 9,000 agents that we have now and also to increase monetization in the market.

[Antoine Jouteau, executive]

Yes. Thank you, Roman. And regarding your question, Silvia, in our strategy that we have presented a couple of months ago, we said that we will accelerate on the transactional part of the consumer goods than on mobility and on real estate. Job was not mentioned. It doesn't mean that we are -- we don't believe in this market, especially because in Spain last year, the performance has been very strong despite the macro headwinds. I think we have space for jobs because it's a natural business for us.Now the question is how we'll approach the job market. Country by country, how we'll manage the generalist, how we will accelerate on that? What kind of product we want to deploy on this market. This is something where Roman and his team is starting to work and to define what will be our strategy on that. But at this moment, jobs is in our strategy is delivering EBITDA for Spain and for the other countries. And now we have to define exactly what strategy we want to deploy on that, but it's included in our long-term view.

[Operator]

This concludes our Q&A session. The floor is back to you for any closing remarks.

[Antoine Jouteau, executive]

Yes. I would like to thank you for the very good questions and feedback today. I wish you a very good day and talk to you soon. Bye-bye.

[Operator]

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