Scout24 SE

XETRA:G24

Earnings Call Transcript 2021-Q1

[Operator]

Good day, everyone. Welcome to the Scout24 Q1 2021 Results Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Ursula Querette. Please go ahead.

[Ursula Querette, Head of Investor Relations]

Welcome, everyone, to Scout24's Q1 2021 Results Call. My name is Ursula Querette, and I'm Head of Investor Relations at Scout24. I have Tobias Hartmann, our CEO; and Dirk Schmelzer, our CFO, with me on this call. Tobias will kick off the presentation with a summary of our Q1 performance and how we are executing on our strategic agenda. Dirk will then cover the Q1 2021 financials in detail and will provide an update on our 2021 outlook. We will then have time for your questions.As usual, You can find today's presentation slides on our website under Financial Reports and Presentation. There, you can also find our Q1 2021 statement, which contains a detailed discussion of the Q1 results and the corresponding financial table. If you are using the web link we provided beforehand, you can see the presentation slides live. This session will be recorded and a replay will be made available as quickly as possible after the event.Please be aware of the disclaimer on Page 2. And let us now turn to Page 3, where I hand it over to Tobi.

[Tobias Hartmann, CEO & Chairman of Management Board]

Thank you, Ursula, and welcome, everyone. Let me start on Page 3. On a very positive note, we saw strong momentum in the first quarter of this year and we delivered a higher-than-expected revenue growth of 5.2%, which also led us to increase our revenue outlook for the full year 2021. Dirk will talk about that later. This revenue growth was fueled by the double-digit growth of our residential real estate partner business. An increasing customer base is successfully using our realtor Lead Engine product to source and win new sale mandates, leading to more real estate transactions. And through our newly acquired immoverkauf24 channel, we have enabled around 390 sales transactions in Q1 where we received part of the agent commission.One year ago, this commission share business did not yet exist at Scout24. On the rental side, we improved our services for home seekers to help them with successful rent transactions. Accordingly, our Plus products revenue increased by 28% year-on-year. While acknowledging our success, let's not forget the challenges we faced at the beginning of the year. The most salient were the newly enacted Bestellerprinzip, COVID-19 with ongoing lockdown measures across Germany and the lack of supply of real estate for sale and rent.Our positive revenue development in Q1 clearly demonstrates that we managed to turn these challenges into growth catalysts in a market asking for greater digitization and convenience. Let me give you an example. While we saw a somewhat reduced agents listing activity on the back of Bestellerprinzip and COVID-19, we continue to invest into our membership addition. Through these, we are offering an even more efficient and complete product set for our partners and ultimately help them drive transactions.To this effect, we also accelerated our Lead Engine product. These initiatives paid into our strategic agenda and our goal to build a comprehensive network marketplace where we offer digital products along the value chain of real estate sale and rent transactions. The development of our key performance metrics on Page 4 shows that this transactional focus is translating into growth. The reduced EBITDA margin is a function of the changes in the revenue mix and the investments we are making into growth products. Dirk will explain this in greater detail. A key driver of our revenue growth was the increasing Realtor Lead Engine revenue. This is derived from homeowners contacts we refer to agents. The price for those leads depends on the quality. On the top of the funnel, we counted around 27,400 homeowners referred to agents via different acquisition products, which is 55% more than in the prior year quarter.As the migration of our residential agent customers to the new memberships are still ongoing, ARPU grew at only 1.1%. However, we are confident that this will accelerate in the second half of the year. I already mentioned the customer growth of 4.4% in the effect of COVID-19, lack of supply and the Bestellerprinzip have on listing, which were down 4.1%. Traffic on ImmoScout measured in sessions was up 1.8% to 107.7 million per month. Due to a change in the provider, we did not include the number of unique users for Q1 2021. In summary, we delivered growth across all relevant KPIs, and this against a strong Q1 2020. Especially the revenue growth of 5.2% is a strong performance, and this will further accelerate as our growth investments translate into accelerated revenue growth. Our investments and the execution of our network marketplace agenda not only translated into attractive growth. On Page 5, you can see the impact also in our revenue mix shift. From one-off listing revenues to recurring agent and consumer subscription revenues and leads. This upgrade in revenue mix proves that we are moving closer to the real estate transaction. Through our enhanced membership additions, the largest and orange portion of the graph, we are strengthening our partnership with the agents. We want to be perceived as a business and transaction enabler rather than a cost center by them. The acceleration of the Lead Engine product also pays into exactly that. The revenues are included in the amber portion of the graph, which represented 14% of ImmoScout24 revenues in Q1 2021, up from 10% the year prior.The consumer subscription revenues depicted in teal, composed of strong growth products such as TenantPlus, BuyerPlus and LandlordPlus. They grew by 28% year-on-year to make up 14% of the total ImmoScout revenue in Q1. Please be reminded that the growth of the Plus product as well as the growth of the Lead product is being pushed by a respective marketing invest. With this revenue shift, we are gaining both in quality and continuity. We are increasing the recurring portion of our revenue. Orange plus teal, which increased from 67% in Q1 2019, over 69% in Q1 2020 to 71% in Q1 2021. At the same time, the one-off listing PPA revenues decreased from 20% in Q1 2019 to 18% in Q1 2020 to 13% in Q1 2021. This development has been accelerated by the free-to-list initiative which we started at the end of March last year. We have been using this slide for some time now. So it nicely shows you that we are developing from a pure classifieds play into a comprehensive ecosystem. And this transition will be further accelerated by the acquisition of Vermietet.de, which we announced yesterday. With Vermietet.de, we will apply a similar playbook on the rent side as with immoverkauf24 on the sales side. With immoverkauf24, we took the realtor Lead Engine product to the next level. The impressive 95% revenue growth in Q1 from EUR 3.8 million to EUR 7.5 million was largely driven by immoverkauf24, contributing EUR 2.5 million towards that increase. Similarly, Vermietet.de will take the LandlordPlus product to the next level. With the listing services of LandlordPlus the right tenants can be found. With Vermietet.de landlords will be able to comprehensively manage the entire life cycle of the tenancy. Let me give you some facts on Vermietet.de. The company was founded in 2016 by Jannes Fischer, who will remain in the company as Managing Director. Vermietet.de is a, if not the, market-leading digital platform for private landlords in Germany, with a few hundred thousand registered rental objects. The platform offers its customers a comprehensive SaaS toolkit to manage all property-related processes such as tenant relationship management, preparation of utility bills, assembling tax declaration data or obtaining information on the market value of the properties under management. With the integration of Vermietet.de, we will substantially extend our product offering within our rental journey, and this comes with a great advantage. We are accelerating our product development efforts in this space by approximately 3 years. Already by the end of this year, our private landlord customers will benefit from first synergies of both platforms. This acquisition is an important milestone on our way to build a comprehensive market network because the rental market is key in Germany. 3.2 million rental transactions are handled per year compared to 626,000 sale transactions. With this, I'm handing it over to Dirk, who will dive deeper into our Q1 financials, which will include immoverkauf24, but, of course, not yet Vermietet.de.

[Dirk Schmelzer, CFO & Member of Executive Board]

Thank you, Tobi, and a warm welcome also from my side. Tobi already talked about our key financials at group level. Slide 7 presents the segment view with a very positive outcome for our largest segment, residential real estate. Here, revenue increased by 8.5% to EUR 68.8 million. This growth was mainly driven by the revenue from our professional customers, which grew at a double-digit rate. by 11.3%. Main reason was the strong pickup of the Realtor Lead Engine product, which led to revenue increase of 95%, including immoverkauf24. Revenue from consumers increased by 2.5%. This means that the loss of revenue due to free-to-list was overcompensated for the first time by the growth of our Plus product subscription revenue. The latter grew by 28% year-on-year. The ordinary operating EBITDA margin of the Residential Real Estate segment came in at 61.7%, which is 3.3 percentage points below the previous year. On the one hand, this reflects the foregone private listing revenues and on the other hand, the changed revenue mix due to the higher growth products, including immoverkauf24. The Business Real Estate segment revenue declined by 3.8% to EUR 17.2 million due to the pandemic-related decline in revenue with business real estate agents. The Business Real Estate margin fell by 1.7 percentage points year-on-year to 71.9%. The Media & Other segment revenue decreased by 1.8% to EUR 7.6 million. We are now increasingly offering advertising space as an internal agency to our core customers. FLOWFACT recorded declining revenues due to the ongoing shift in the payment model while the growing business of ImmoScout24 Austria had an opposite effect. The ordinary operating EBITDA margin of the Media & Other segment fell by 6.3 percentage points to 33.6%. All segments combined, we achieved a revenue growth of 5.1% to EUR 93.7 million, and this against a strong prior year quarter, which was largely unaffected by the pandemic. However, the change in revenue mix, combined with a stable absolute ordinary operating EBITDA resulted in a lower margin 61.3%. Let us now take a closer look at the customer and ARPU development on Page 8. We have strengthened the relationship with our professional customers during the pandemic, and we put a lot of effort in the improvement of the product suite. Once the agents have fully migrated to the new membership and the pandemic is fading, we will increase our focus on ARPU growth again. The number of residential real estate partners grew by 4.8% year-on-year to 17,474 partners at the end of Q1 2021. The ARPU rose slightly by 1.1% compared to the strong prior year quarter. As Tobi mentioned before, our focus in the first half of the year is more on a successful migration than on pricing. At the end of March, the migration rate was at 66%, 6 percentage points up from the 60% at the end of February.The number of business real estate partners also increased by 2% to 2,804 as of March 31, 2021. The business partner ARPU for the first quarter was at EUR 1,758, down 2.9% year-on-year. This decrease is mainly due to the decline in revenue with business real estate agents while revenue with developers and new homebuilders increased slightly.Turning to Page 9, let us go through the main ordinary operating items affecting our margin development. Own work capitalised increased to EUR 5.6 million in the first quarter with a stable capitalization ratio of 6%. This ratio reflects our continued product enhancement activities. Examples of product investments we made in the quarter include further developments of the home seller hub, the Plus products, the memberships and the location analysis. The total ordinary operating cost increased by 12.5% year-on-year to EUR 44.3 million. This increase is mainly related to the change in revenue mix towards more transactional products. It includes the additional cost of Immoverkauf24, which was not yet part of the Scout24 group in the year before. While immoverkauf24 contributed EUR 2.5 million to our revenue in Q1. This contribution was not yet profitable. For example, the 16.6% increase in personnel cost is mainly due to the integration of immoverkauf24 employees. More full-time equivalents at ImmoScout24 and post carve-out dissynergies are adding to that. The growth in other operating costs by 24% can be broken down as follows: Additional online marketing costs. These are primarily acquisition costs for our high-growth lead products. Increasing selling costs for the growing Plus products also had an effect.External personnel costs due to the additional call center activities as well as investments in FLOWFACT. Finally, this synergies contributing to the rising other operating expenses. As the operating effects increased more strongly in percentage terms than revenue and own work capitalized, our ordinary operating EBITDA remained stable year-on-year at EUR 55 million, and the margin decreased by 3.1 percentage points to 58.7%. On Page 10, you see the items below the ordinary operating EBITDA line. Nonoperating costs increased by 9.9%, mainly due to the higher share-based compensation. As a result, the reported EBITDA declined slightly by 0.6% to EUR 52.3 million in Q1 2021. With the year-on-year improvement in the financial result, but rising tax expenses, profit after tax from continuing operations fell by 8.2% to EUR 24.4 million in the first quarter of 2021.Based on the volume weighted average number of shares of 97.8 million, this results in a stable EPS for the continuing operations of EUR 0.25. By the way, the declining number of shares reflects the share buybacks affected over the last year. It does not yet reflect the capital decrease following the recent tender transaction, which brings me to the next page. With Page 11, let me update you on where we stand with our capital return road map. The key pillar of our capital return road map was the up to EUR 1 billion buyback tender transaction, which we successfully completed in April with an acceptance rate of 82%, translating into EUR 794 million of cash returned to shareholders and a corresponding decrease of our share capital. Right after settlement of the tender transaction, we started with the up to EUR 200 million ordinary share buyback via the stock market. As of end of last week, we already bought back over EUR 83 million with that program. Our AGM will take place on 8th of July, where we will propose a dividend for 2020 in the amount of EUR 68.5 million. The amount per share depends on the total amount of shares without treasury shares at that time. As of the end of last week, we had 85.2 million shares outstanding, excluding treasury shares. In relation to the proposed dividend amount, this number of shares would result in a pro forma dividend per share of EUR 0.80. Post the ongoing share buyback program and the 2020 dividend, we had around EUR 500 million undistributed AutoScout24 sale proceeds left. Against this background, we will seek shareholder approval at the upcoming AGM for an additional authorization to buy back shares in the amount up to 10% of the existing share capital. Now let's turn to Page 12 and our updated outlook. Based on the growth momentum we have seen in Q1, we are increasing our group revenue outlook for the year from a mid-single-digit percentage growth rate to a mid- to high single-digit percentage growth rate.For our residential real estate segment, we are upgrading the 2021 revenue outlook to low double-digit growth. Taking into account the corona impact, we see the Business Real Estate segment with a low single-digit growth rate for the full year. Our outlook for Media & Other is unchanged. Here, we expect a declining to flat revenue development. On the back of the current growth opportunities and the respective investment into our product suite, we are a bit more conservative regarding the ordinary operating EBITDA margin for the group. Hence, our revised full year margin outlook of up to 60% versus prior outlook of around 60%. Please be aware that this updated outlook excludes the effect from the Vermietet.de acquisition. With this, I hand it back over to the operator and your question.

[Operator]

[Operator Instructions] Our first question comes from Craig Abbott from Kepler Cheuvreux.

[Craig Abbott, Head of Mid and Small Cap Research, Germany]

Yes. Just 2 to begin with. First of all, on Vermietet.de I just wondered if you could provide us some sort of ballpark financial metrics. I mean, I saw they have 70 employees. I mean, would sells of around EUR 10 million be realistic? And if you could give us some indication of their profitability, that would be very useful. And then on the margin guidance, I'm just trying to see if you could maybe provide some feel for the scale, i.e., you're now guiding for mid- to high single digit revenue growth. And obviously, it depend on mix -- product sales mix and so forth. But If we assume between 4% sales growth and 9% sales growth, I mean, is there any kind of indication you could give us and sort of what -- which directional thinking there?

[Tobias Hartmann, CEO & Chairman of Management Board]

Craig, this is Tobi. Thank you for your questions. Let me kick it off on Vermietet.de. While this may seem a rather small acquisition in terms of number of employees or so, the strategic value is really of the outmost importance to us. The company was founded in 2016, again, and it perfectly fits into our journey, in this case, the rental journey. And we will apply a similar play to what we did in sale for the sale journey, where we acquired immoverkauf24. So year-on-year, this really -- it helps us propel our thrust towards transactions and customer or consumer relationships going through the landlords and really offering something that we don't have in play today. With that, I can turn it over to Dirk to give a bit more color in terms of financials that we will not disclose today.

[Dirk Schmelzer, CFO & Member of Executive Board]

Craig, thanks Tobi for the no. We didn't intend to give you an update on the overall revenue and EBITDA projection. But the number of EUR 10 million for the 70 employees that you mentioned for this year, certainly a bit too high. So we don't see that negative EBITDA impact from the transaction. We'll give more color on that as we speak. But what we can say, adding to what Tobi just said is that this transaction really helps us to improve our position on consumer products, in this case, landlord products. So on the revenue side, don't expect too much maybe EUR 0.5 million from Zenhomes this year until the end of 2021. And on the EBITDA side, as I said, we will not guide this right now. The guidance you were referring to also on EBITDA margin is mainly based on the organic development of the business. And yes, you are right in pointing to the right things here. We have taken guidance slightly down where, as we said earlier on, 60% -- around 60%, we're now going up to 60%. From our perspective, this is a notch down -- 1, 2 percentage points down from previous indications. And the reason for that is twofold. First of all, we are making tremendous steps forward on our real estate product. And we saw that we want to invest more in that product. And this product has a gap between acquisition of the customer and revenue recognition of 9 to 12 months. And therefore, we decided to accelerate our marketing spend and investments this year, and we can harvest that in '22 and going forward. Secondly, what we see is consumer revenues going up, consumer revenues, to a large extent, coming in with a slightly lower gross margin than previous TPA revenues. As you have -- and we have guided previously, we said we want to continue our free-to-list initiatives. Therefore, we are giving up PPA revenues and we are ramping up consumer revenues. This time is the first quarter where we have basically overtaken our revenue loss from PPA and increased our consumer revenues to cope with that. So that is the reason behind our slightly lower margin guidance. And therefore, I would like to hand over to the operator again.

[Operator]

And we'll take our next question from Miriam Adisa from Morgan Stanley.

[Miriam Anuoluwapo Adisa, Equity Analyst]

Great. Firstly, just to get a bit more color on the ARPU dynamics within the residential real estate. Could you give some color on what you're seeing in terms of churn and also potentially, are you seeing any trading down between the tiers from agents that already migrated? And perhaps any color on where you are in terms of penetration? I understand that you're not focused on sort of driving up the ARPU at the moment, but it would just be good to get that color. And then also on the consumer revenue dynamics, was there anything in particular that changed in this quarter that drove that acceleration? Or is it simply just sort of lapping comps and also just the sort of normal growth in the business? Just wondering if there's anything specific there or sort of market-related that drove that growth?

[Tobias Hartmann, CEO & Chairman of Management Board]

Miriam, I'll start with the consumer revenue dynamics. What we've seen is we played around with different sorts of offerings, as you mentioned, the market is very, very tight. So the question is how do you mirror at the best pricing. So we've had different terms around pricing and subscription offers. We've made some good progress there. We've also actually launched and played around a little bit with an important segment, which students are having a hard time finding their right apartment. So that's also something. But aside from that, we can just honestly state it's a very solid product fit, and we are financing the product around pricing and terms. That's it. Dirk?

[Dirk Schmelzer, CFO & Member of Executive Board]

Yes. To add on that, I think when you were referring to ARPU dynamics, we're very happy especially when you compare our ARPU to the fourth quarter 2020. So you see significant uptake in the first quarter this year. Secondly, Miriam, you're referring to the migration initiatives we're having in place. I can now confirm, and I think we have that in the presentation as well. We are at 66% finished and will take the next 2.5, 3 months to finalize that. On customer numbers, you saw that we continue to grow financial customer numbers and we are very happy with that. And that also translates into low churn. Otherwise, we wouldn't be able to improve our customer base overall. So we believe that this has to do with the fact that agent satisfaction significantly improved over the last quarters, especially with the rate cloud migrations and the acquisition additions we put in place. We are now seeing very satisfied customers across the board, which also plays positively into a low churn.

[Miriam Anuoluwapo Adisa, Equity Analyst]

Yes. My question was more on within the -- within the 66%. What the sort of split is between image and base and then also sort of trading up and down between the tiers?

[Dirk Schmelzer, CFO & Member of Executive Board]

Yes. I mean, Miriam, we had some information around that earlier, but what you can see is certainly that the bulk of our customers is now in the image addition. And we are seeing slight improvements on the acquisition addition and most of the customers that are now automatically migrated by the summer will land in the base addition. And that overall certainly paid into an improved ARPU, right? Blended ARPU still increases. And over time, we're very happy with that product and the products that we have in here.

[Operator]

And we'll take our next question from Adam Berlin from UBS.

[Adam Ian Berlin, Director and Equity Research Analyst]

I just wanted to talk about the Realtor Lead Engine revenue. Two questions. The first is, can you share how much of the Realtor Lead Engine revenue you reported in Q1 came from these commission share-based transactions? You mentioned the 390 transactions in the quarter. How much of the total Realtor Lead Engine revenue comes from those versus just more normal lead revenue per lead model? And secondly, can you tell us a bit more about the pricing model for the commission-based transactions? We know the typical commission is around 4%. Roughly how much of that do you get out of that house transaction for those 390.

[Dirk Schmelzer, CFO & Member of Executive Board]

Maybe I'll start off with the revenue split. What I can confirm is that we have round about EUR 3 million in the first quarter of revenue from commission-based lease that we are giving to real estate agents. And this is -- this corresponds to what you just said Adam, to around 350 to 390 overall commission-based leads that we sold. Here, we can confirm, and I said that in my comments on the margin dilution at the beginning a little bit. This product is developing very, very well and paying into customer and agent satisfaction. And therefore, we also decided to put a bit more focus and also a little bit more capital allocation under this product as it pays out in the next [ year ]. With the rest of the question, it's more of a strategic nature. I will hand over to Tobi.

[Tobias Hartmann, CEO & Chairman of Management Board]

Yes. So on the exact split, we're getting from a particular commission. We've been trending upwards. It's probably due to the fact that agents are still facing very positive environment in terms of total price of a property that sold. We're seeing an upward trend and the scarcity value. And we've really formed a group of real estate agents now that are highly familiar with the product that you know that these leads that we provide are chartable within 6 or 9 or 12 months maximum, and this is how we price it. So there's a different price depending on how hot the lead is and what the expected turnaround time is. Think of it as following way, Adam, that there's instances where we are well maturing across the 40% share of the commission that we are taking. In some instances, even slightly above. That's where we're trending. Now I would not count on ultimately reaching up to -- pushing this too far over the 50% mark, but we feel comfortable where we are right now, and it's about increasing the volume rather than increasing the total pricing. Hope this helps.

[Adam Ian Berlin, Director and Equity Research Analyst]

And just one follow-up. Is all of the Realtor Lead Engine revenue that you're generating coming from immoverkauf24 or are we also now got Scout original products that are contributing to the Realtor Lead Engine revenue as well?

[Tobias Hartmann, CEO & Chairman of Management Board]

No. There's a split from the traditional Realtor Lead Engine revenues that are stemming from the ImmoScout24 traditional world, so to say. And then there's the immoverkauf24 world, which is really focused on turning that into a commission-based share. And that, as Dirk pointed out, is, call it, 2.5 to -- north of EUR 2.5 million for the past quarter, and the rest was from the traditional home run of immoverkauf24 Realtor Lead Engine business.

[Operator]

And we have a question from William Packer from Exane.

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

And apologies if you've already covered it. I joined the call late. My first question would be, could you update us on the cyclical momentum of the Business Real Estate division, how the underlying market of commercial and new home developers are doing? Just give us a flavor. You've clearly -- you've highlighted the revenue trends will be a bit weaker, but as we exit the latest lockdowns, it'll be interesting to see how things have developed there? And the second question was, It sounds like you've done a pretty good job adjusting your revenue model for private listings, whereby although paper advertising fees are down, you're compensating for that through other new products Could you just kind of update us what those key products are, what's doing well, how underlying private listings trends are going?

[Tobias Hartmann, CEO & Chairman of Management Board]

It's Tobi. Thank you for your questions. So on the Business Real Estate development there, I think there's a couple of things we can mention with you. It's still very mixed picture here due to the COVID situation. As you probably know, up until recently, Germany was still in full lockdown. So it's opening up now as we see vaccination process across the board. In terms of hard hit sectors, it's certainly the retail, restaurant and hotel sectors, which are currently still being supported by some sort of rent deferrals and assisted payments from the landlords and their counterparties. For office space, we see still a relatively stable trend. We even saw some prices increasing last year, and that trend is stable throughout 2021 so far. But due to the mixed outlook for the commercial real estate market, we -- as you saw, we expect low single-digit revenue growth for the Business Real Estate segment for 2021. There is, first, the tempt of new offerings and new product offerings in terms of sub-renting and subleasing and so forth and cutting it in smaller pieces of units, but it's fairly already still to give you a trend in to share a mature trend with you. So what are we doing about this? We've also focused on what we can do in terms of product and we are counteracting with some new product initiatives such as memberships for commercial agents addressing that and also pushing a little bit more focus on some of the new markets that we see, such as our Property Circle offerings. So that's pretty much the mix we see in the business real estate. And the other question, I would hand over to Dirk.

[Dirk Schmelzer, CFO & Member of Executive Board]

Will, yes, on your PPA question and consumer growth, we commented on this earlier in the presentation, we saw consumer revenues going up 28%, which translated in total to a 2.5% growth on the total consumer segment. Now that splits up into roughly EUR 20 million revenues in the first quarter and more than 50% of those revenues are now coming from the consumer products, which is Landlord, which is TenantPlus and Home BuyerPlus product that we're having.

[Operator]

And we'll take our next question from Erik Karlsson from CapeView Capital.

[Erik Karlsson]

This is Erik Karlsson from CapeView Capital. First of all, thanks for doing a phenomenal job for shareholders. I wanted to ask about the balance sheet. You still have a varied balance sheet despite having returned a lot of cash to shareholders. What type of balance sheet structure do you think is ideal for you to have? I'm not talking next month or quarter, but in 1 or 2 years' time.

[Dirk Schmelzer, CFO & Member of Executive Board]

I take the question, Erik. I think you're more referring to the leverage structure that we would -- that we are investing rather than the pure balance sheet structure. In this case, I commented earlier on that we are entering discussions with our banks in this summer. We have also, on a second note, asked our shareholders in the AGM and will ask our shareholders in the AGM to give us another 10% of capital that we can buy back. And lastly, we are looking at the M&A market. And I think the sum of all of that, we will come back to our investors by latest our Capital Markets Day in November or December, we will revert to you on that. But I think that at the moment, with the amount of cash on our balance sheet, I would agree with you and the underlying tone in your question and the capital structure is inefficient and the business can carry more leverage.

[Operator]

[Operator Instructions] We'll take our next question from Marius Fuhrberg from Warburg Research.

[Marius Fuhrberg, Analyst]

Yes. Just one last for me. With regards to the acquisition of Vermietet.de, do you expect synergies with for the Realtor Lead Engine as well in terms of the stronger pipeline? Or are those 2 completely separate things and do not interact with each other?

[Dirk Schmelzer, CFO & Member of Executive Board]

Maybe I'll start off and Tobi answer the strategic element of that. I mean as we presented, Marius, the Vermietet.de product is a pure rent product. And we are aware of the fact that with other comparables in other countries, the rental market in Germany is pretty high. And you saw that, it's about 5x in the amount in number of transactions than compared to the sale market. So for us, it's really important to get the synergies from the journey. So any landlord that is putting up a new listing for a classified that you want to -- a classified listing that you want to rent out his apartment or her apartment, we want to translate that into a long-term relationship. And that long-term relationship is provided, and as German, you know that there's a lot of headache around it. When you need to do additional cost turning that back to the landlord and everything else that you need to do around administrating a real estate in Germany. And that is taken fully away from the landlord into a cloud-based service. And that cloud-based service is Vermietet.de, and that helps us, as ImmoScout, to improve the customer relationship that we have with landlord from onetime relationship to a multiyear relationship. Sorry, Tobi?

[Tobias Hartmann, CEO & Chairman of Management Board]

Yes. So it's very -- it's relatively fresh. So let's add some more color, as Dirk pointed out, if you want to play in the real estate arena in Germany, you've got to be present with a really powerful offering in the rental space. And to be clear, we did not have that in ImmoScout24. We were great in the search and discovery process, but then it lacked. It lacked in terms of value proposition. We're closing that gap strategically now because 3.2 million rental transactions per year versus 600,000 sale transactions per year. That is the lot where you want to play. And the best way to get to homeowners is to get to the landlords that actually own those homes and helping them to register their units to then establish the relationship with their tenants. And that's exactly why we're so excited about this acquisition. And we do have the playbook. We know how to integrate it, we know how to take the traffic and take it to the next level. So this is a really, really long-term play, but it's the right thing. And strategically, it's 100% right in our wheelhouse. So you'll definitely hear more about that as we are integrating the journey and as we are also then getting into a position how to monetize the relationships between the landlords and...

[Operator]

And we will take our last question as a follow-up from Craig Abbott from Kepler Cheuvreux.

[Craig Abbott, Head of Mid and Small Cap Research, Germany]

Yes. Just quickly, you did a great job in the first quarter, increasing the number of agent partners again in the residential real estate. And I just wonder if you could give us a feel for how significant you still see your growth potential there as being looking out over the next couple of years?

[Tobias Hartmann, CEO & Chairman of Management Board]

Craig, it's -- let me give you a try, it's Tobi. Yes, we are very happy about that because it's a reflection of despite the uncertainty in the market and the clear headwinds we have that -- we are very proud that we could add new customers. However, we should not count on huge customer growth numbers going forward. We do have a penetration rate that's pretty high. We are pretty well known as we know, in the brand, and we have a good sales force working the market. So it's not a poor pillar to assume that we can grow our customer numbers quarter-by-quarter in a meaningful way. However, I think what that shows is that this company and the entire organization is customer-centric and is customer focused. And this is what makes us happy because you've seen an improvement there across the board. We're tracking KPIs in a much more granular way. And this is a great barometer also in times when it gets tough. And we have tough times out there. Again, if you are in [indiscernible] you need to think about where to spend money and where to get a mandate from. We do have the right tools, but we also have the right culture, the right platform to engage with them. And so long story short, we are proud of it, but that's not the core pillar of growth in the future. It's about monetizing these relationships in the right way long term and making sure that they're really happy with what we bring to the table.

[Craig Abbott, Head of Mid and Small Cap Research, Germany]

Okay. And if I could maybe just 1 follow-up. Just getting back to sort of the thought process on the margin progression, again, ignoring Vermietet.de. But you mentioned that these new lead real state agent -- generator, excuse me, customers, many of them will first convert into commission sharing revenue over the next 9 to 12 months. And that's due to the other factors like the rollout of the COVID holidays and so forth that your ARPU growth should start to accelerate in the second half of the year, too. So all else being equal, moving into '22, should we expect in the margin progression then to pick back up a couple of basis points versus this year?

[Dirk Schmelzer, CFO & Member of Executive Board]

Thanks, Craig. I think in due course, we will give you an update on our margin and revenue projections for 2020. But as I've said on earlier occasions, this business is a digital business. This business is able to scale significantly. And therefore, we rather see margin going up than down. Having said that, taking opportunities in the market, like now getting landlords, real estate agents and home sellers on board in order to get them together in our market and investing into that. I think it's the right strategy going forward. And therefore, we have strong margin growth potential. But we also have a strong growth potential on most of our revenue lines and we will pay into that in 2022 as well.

[Operator]

And we have no further questions in the queue. I would like to turn the conference back over to Ursula Querette for any concluding remarks.

[Ursula Querette, Head of Investor Relations]

Yes. Thank you all very much for joining the call. If there are any further questions, don't hesitate to e-mail or call me. And let's talk in the coming weeks. Thank you, and bye-bye.

[Operator]

Once again, ladies and gentlemen, that does conclude today's conference. We appreciate your participation today.