Scout24 SE

XETRA:G24

Earnings Call Transcript 2019-Q2

[Operator]

Dear ladies and gentlemen, welcome to the analyst conference call of Scout24 AG regarding the presentation of the H1 results 2019. At our customer's request, this conference will be recorded. [Operator Instructions] May I now hand you over to Britta Schmidt, who will lead you through this conference. Please go ahead.

[Britta Schmidt]

Thank you very much. Dear all, welcome, everyone to Scout24's H1 2019 Earnings Call. I have Tobias Hartmann, our CEO; and Dirk Schmelzer, our CFO, with me on this call. Tobias will give you some insights on our strategy and will lead you through our operational achievements during the first half year of 2019. Dirk will continue with our financial performance during the first half year of 2019. Let me now hand over to Tobias.

[Tobias Hartmann, CEO & Chairman of Management Board]

Thank you very much, Britta. A warm welcome to everybody as well from my side. Thank you very much for joining today's call. Before going through the details of our strategy and operational achievements, let me tell you why I'm so excited about Scout24. First, our business is stronger than ever. Second, we have a clear plan to create long-term value for all our shareholders. And thirdly, we have the right team in place to execute against that plan. Let me tell you how our teams have delivered and why we are convinced to stay on track. First, we are very pleased with our trading performance in H1 2019. We have delivered meaningful revenue growth against other single vertical classified peers. This is the highest half year revenue growth ever for Scout24. Besides, we have improved AS24 EBITDA margins by almost 700 basis points over the past year. Secondly, myself and the rest of the management team are fully focused on creating further growth and shareholder value while serving our customers and consumers in the best possible way. We have notably strengthened the management board with the appointment of Thomas and Ralf to the management board and the arrival of Dirk as our new CFO. This is an important step to be able to scale and take our company to the next level. We are now focused on implementing the necessary processes to ensure Scout24 can continue its trajectory of strong, sustainable and profitable growth. Thirdly, we have ambitious plans as a team and a defined strategic road map we announced on July 19 shows how we plan to tackle them. We are strengthening our 2 core classified verticals to improve our organizational focus and capabilities. Furthermore, we are conducting an operational efficiency review. I am pleased to report that as a result of the findings, we aim to improve our ordinary operating EBITDA margin by 200 to 300 basis points by 2021 at group level. Lastly, our conviction around the strength of the business means that we are now looking to expand our capital return policies. We have decided to return EUR 300 million to our shareholders by way of a share buyback program, which we will initiate in September. We are also revising our leverage guidance and feel that a business with cash generation capabilities like Scout24 can maintain a leverage level of up to 3.5x. Dirk will provide you with some additional color around this later in the call. So looking at what we have achieved with our current share price performance, I'm convinced we are on the right path with our strategic road map to unlock the untapped potential of our 2 leading online classified platforms. As I already told you earlier in March, the teams of ImmobilienScout and AutoScout over the recent years have revolutionized and digitized the classifieds business with impressive innovation capabilities. Two leading online marketplaces have emerged, both are state of the art, data-driven and tech-enabled platforms. By accompanying buyers and sellers throughout their real estate and car transactions for over 20 years, we have developed in-depth know-how of the markets in which we operate and gained significant trust not only amongst our consumers but also across our agent and dealer partners. Our understanding of our partners and their needs has also grown steadily. To date, we have a unique set of assets that we can draw on to offer more personalized and relevant services. As a result, we can serve jointly and successfully both our consumers and partners delivering enhanced systems, value-add insights at providing overall a much better user experience. The more touch points of data we generate, the more value add we will provide to our consumers and partners, subsequently enabling us to improve our monetization capabilities. This is our current and future foundation for additional services that we can provide to support and guide the decision-making around mobility and living. We have demonstrated impressive growth and innovation over the past 5 years, underlined again by our Q2 2019 results. I am convinced that we can further unlock untapped potential in our 2 leading online classified platforms. Both Scout24 market networks are at the forefront of digitizing the steps across different consumer and customer touch points. So let me reiterate our ambition. We want to make our core verticals, ImmobilienScout24 and AutoScout24, the leading market networks and powerhouses in their respective geographies. On July 19, we announced our strategic road map to enhance long-term value creation for all our shareholders. One of our key initiatives is to strengthen our 2 core verticals even further. We will integrate the relevant products and services of consumer services into our powerhouses, ImmoScout and AutoScout. Firstly, this enables us to further lever our relationships with consumers and partners. Secondly, thanks to a more streamlined approach, we will reduce organizational complexity to execute faster and better. Thirdly, it will further drive accountability of management and their respective teams. Lastly, this step will also enable us to create additional flexibility for strategic options, which may materialize in a consolidating classified environment. These strong foundations underpinned by our current operational performance and supporting our continued transition towards fully network marketplaces with additional opportunities to monetize our customer and consumer base. This makes us even more confident to deliver long-term sustainable and profitable revenue growth. To further drive our profitability, we are concurrently conducting a review aiming and analyzing and benchmarking our operating model, processes and resource allocation. We are confident this could lead to a recurring efficiency improvement in our ordinary operating EBITDA margin by 200 to 300 basis points by 2021 at group level. We will provide more details on our strategic road map and share our long-term guidance at our Capital Markets Day on November 26 later this year. But let's get back to our current performance. We have set ambitious targets, and we have delivered the best half year results ever in the company's history. As pointed out before, we are actively engaging with all our shareholders, and we continue to deliver against our commitments. During our Q1 call, we indicated that we saw for the first time the revenue growth of ImmoScout24 residential real estate partners at a double-digit rate. In Q2, this growth has accelerated to a very strong 12.5% growth year-on-year. This is the highest year-on-year growth in residential real estate over the last 3 years. To put things into perspective, this is equivalent to an acceleration of nearly 15 percentage points since H1 2016. We will use this strong momentum to continue levering our product offering and value proposition with our customers. I will give you some additional insight and share some examples in a few minutes. For AutoScout24, we mentioned we were on a very solid double-digit growth path for both our revenues with dealers in Germany and the European core countries. In Q2, we delivered, again, outstanding revenue growth in both geographies, growing well above mid-teens levels. Revenues with German dealers grew about 20% year-on-year, whilst our market share and listings remained stable. Revenues with dealers in our European core countries grew by 18% year-on-year, fueled by an ARPU growth of over 20% year-on-year. This underpins our strong value proposition in the German and European market. Here as well, I will give you further insights over the course of the presentation. Ordinary operating EBITDA margin for Consumer Services in Q1 2019 stood around 13%. We stated we have intentionally invested into consumer acquisition, especially with FINANZCHECK in Q1 2019 to spark future growth. This is exactly what we did and H1 2019 margin now stands at around 22% for Consumer Services, while revenue growth remained strong with close to 15% on a like-for-like basis. Finally, during the Q1 2019 call, we clearly indicated that we wanted to be a key player in a consolidating online classified market environment. We have built on former successes and laid a new foundation with our road map to strengthen our core verticals, ImmobilienScout and AutoScout. The streamlined setup with only 2 core verticals will not only drive further innovation power, but also enable us to be more focused and more agile. Jumping now into the details of our H1 2019 results. I have stated before, we are building our strategic road map on strong foundations. We continue to be the most relevant player in real estate and mobility for both our partners and consumers. Based on our extensive offering of more than 3 million listings on both platforms, we attract a steadily growing consumer base with a monthly average of 213 million sessions on our core platforms. Our increasing mobile share without -- with 8 out of 10 consumers engaging with us on the go by now provides evidence our products and services are designed to meet an increasingly mobile target audience. We cater to the increasing demand for exploring real estate and mobility options, while on the move with a stringent mobile-first strategy. Lastly, our apps are on average downloaded more than 300,000 times per month. These are important stuff. Not only our traffic is at record levels, we have as well strengthened our #1 positions based on listings in German real estate and core European automotive. We offer at least 50% more listings on our platforms than our next competitor. In German automotive, we have a solid and stable #2 position, an evidence of our strong value proposition to our German dealer partners. The strong performance provides a solid basis for continued revenue growth, combined with increasing profitability. Revenue growth is at record high levels, with close to 20% reported growth in the first half year of 2019. On a like-for-like basis, i.e., adjusted for acquisitions and divestments in 2018, we delivered 14% revenue growth year-on-year, fueled by both platforms and all service offerings. As indicated before, we remain committed to drive profitable revenue growth. Our margin in Q2 2019 yields close to 55%, an increase of 7 percentage points compared to Q1 2019, bringing the first half 2019 margin to around 51%. Our organic ordinary operating EBITDA margin stands at a record high level of 57%. Cash conversion for the first half year stands at 93%, underpinning our robust and growing free cash flow generation capabilities, which are supporting our capital allocation policy as outlined before. All our 3 segments are contributing to this outstanding performance. ImmoScout24 like-for-like revenue growth stands at around 9% year-on-year, a significant acceleration versus last year. Both revenues with residential and business partners grew at a double-digit rate year-on-year in H1 2019, with residential real estate revenues showing the strongest trajectory over the last 3 years. AutoScout24 revenues grew by 20% like-for-like year-on-year, driven by strong ARPU expansion and our market-leading positions in the European core countries, but as well our solid #2 position in Germany. Revenue growth of Consumer Services remained strong at 15% year-on-year, combined with significant margin expansion, especially in Q2 2019, bringing the H1 2019 ordinary operating EBITDA margin to around 22%. Dirk will later share additional details on our financial performance. Let us now take a closer look at the different segments, starting with ImmoScout. As the market leader, we are committed to designing the right products and solutions for our partners. Their success is our success. A strong evidence for our effort is the development of our residential real estate partner base. Based on our enhanced and tailored product offering paired with a simplified return on invest driven sales approach, we have been able to partner with a growing number of residential real estate agents since mid of 2017. We have increased our partner base during this time by around 13% or more than 1,700 partners with our contractual residential real estate partner base being now larger than at the beginning of 2016. We see the growth now slightly coming down as we reach high penetration levels, still year-on-year growth in H1 2019 stood at 3.8%. Our customer-centric products, not only for professional agents but as well for our private listers, are one engine to drive outperformance compared to our next competitor and to manifest our market-leading position. As of June 2019, we offer 1.9x more listings than our next competitor with a very marginal decline despite contracting markets, a total number of listings compared to a mid- to high single-digit decline of our competitors' listings year-on-year. Our other engine, which is driving operational and financial performance, is traffic. This is a strong indicator for consumer satisfaction. We continue to be the most relevant real estate classified portal for consumers. So we are the clear market leader. Our sessions grew 9% year-on-year in the first half year of 2019, an acceleration by 7 percentage points compared to the first half year 2018. Total sessions per month stand on average at 96 million now. Our visitors continue to be highly engaged with a total time spent of 529 minutes on average per month. Across both metrics, we have, again, outgrown our competitor. We now have a 2.8x lead in total time spent in H1 2019 compared to 2.6x as of H1 2018. As stated in the communication around our strategic road map, we continue to leverage our strong foundations to better monetize our customer base. Our value-added product solutions are one great example. Being designed to meet the needs of our customers, they contributed significantly to our success in the first half year 2019 with a growth of around 17% year-on-year. This indicates the substantial future monetization potential. The share of VR revenues as of total ImmoScout revenues stood at 31.5% in Q2 2019, slightly below Q1 2019. This is largely driven by slower growth of VR revenues compared to membership growth within our business partner revenues. Residential VR revenues as of residential revenues increased by a very solid 0.3 percentage points quarter-on-quarter. The development of contractual, residential and business real estate partner ARPUs is a further data point showing the success of our sales and product teams to deliver the most value to our partners' businesses. Contractual residential real estate partner ARPU grew 5.1% year-on-year, accelerating to 7.1% year-on-year in Q2 2019. Business real estate ARPU performed strongly with a 13% growth year-on-year. As mentioned at the beginning, I will give some additional insights on how we continue to leverage our strong foundation in product and value proposition to our customers. We have recently enhanced our membership product with a new product feature, top list all. Further, we improved our VR product value proposition with a new product feature, image boost. Both products follow a very simple principle. The more property the agents list, the more exposure the agent gets because relevance matters. The top list all feature ensures agents have all their listings presented within the top-tier of our VR product ladder. In doing so, agents improved the ranking of their listings in the search list by an average of 36 positions and subsequently drive an average of 60% more inquiries from potential buyers when compared to the previous standard listing membership. During the past 3 months, we have seen the top list all membership emerge as the most popular choice of membership, with 51% of active contract renewals opting for the top list all membership. Further, the top list all membership outperformed the standard membership offer in revenue growth contribution to ImmoScout by 91%, a testament that customers recognize the value that the top list all membership product provides. With Image-Boost, the more VR product the agent buys, the more we promote the agent to our home seller audience on site. This increases exposure of the agent directly with home sellers in their local markets, driving targeted home seller traffic directly to the agent's profile in our REALTOR directory. The inclusion of Image-Boost within the VR product ladder provides a win-win-win outcome in the market. Home sellers achieved an optimized outcome because of higher selling price and reduced time on market when marketing with VR. Agents marketing with VR are promoted by the Image-Boost feature and ImmoScout drives increased demand for the purchase of VR. On several occasions, we discussed already that winning the mandate is the most important need for agents in the current German market. As such, our newest membership offering, which was launched in August 1, provides both top list all and Image-Boost features within. Both products address the agent's need to win mandate by raising the visibility of an agent listing stock within search list and directly promoting agents to home sellers throughout the on-site experience. One additional product underpinning our ambition and pushed to a fully networked marketplace with consumers is our home seller hub, which we launched in April this year. We know that around 8% of our total web audience are home owners who are willing to sell within the next 12 months. This corresponds to around 1.1 million unique visitors per month. We are guiding these potential home sellers towards our home seller hub, which provides relevant information and market transparency at one place, enabling home sellers to evaluate the market and decide on next steps. As soon as home sellers are ready to transact and sell, we will support them in their process, introducing them to local agents, providing guidance on the sales transaction or even connecting them with a potential consumer searching for exactly that object. All operational KPIs demonstrates we are meeting the needs of our consumers with this product proposition. Since the launch in April, we have seen strong organic traffic development with more than 50% growth month-over-month. We have a bounce rate 30% lower than average. And as of today, more than 130,000 registered home sellers. To summarize, we are the only player in the market which provides all ingredients for maximum success of our partners. We have the home sellers with around 1.1 million home sellers per month searching on our site, a solid growing number of registered home sellers and an additional 1 million-plus users per month on our ImmobilienAtlas product. We have proven marketing tools such as our VIA product suite that drives performance for our home sellers. And through our consumer insight data, we are able to connect our homeowner base meaningfully for the relevant agent value proposition. Based on these strong fundamentals, ImmoScout continues to grow. Revenue growth is like-for-like at 9% year-on-year, coming from 5% in H1 2018. Our partner count is on high level with our contractual partner base being higher than back in 2016, translating into strong ARPU growth with 5% growth in residential real estate and 13% growth in business real estate. Our listing gap as of June 2019 stands at a record high, with total listings 1.9x higher than our next competitor's listing. Traffic remained strong with a year-on-year growth of 9% and 16% on mobile. Ordinary operating EBITDA margin stands at 68% in H1 2019 and 70% in Q2 2019. Margin expansion, especially in the first half of 2019, is impacted by our investments to prepare for Bestellerprinzip, the continued rollout of our realtor lead engine product and as well as our investments into testing different concepts for our private listings product. Let us now focus on AutoScout24 and the operational performance indicators of our German platform. We recorded 22,413 dealer locations by end of June 2018 compared to 26,751 as of June 2018, former '19 then '18. Due to the sale of our commercial vehicle platform, TruckScout, we have transferred around 1,070 customers by end of June 2019. Furthermore, as pointed out during our full year 2018 call, we have deliberately decided to optimize our dealer partner base. We want to focus our activities on dealer partners which provide value to our audience, i.e., provide at least 1 listing or more to the platform. We started this initiative on July 1, 2018, i.e., the H1 2018 number is not yet affected by this initiative. Since July 1, 2018, around 2,400 dealers were removed from the platform, the vast majority in the second half of 2018. Additionally, we see a tendency towards the consolidation in the dealer market in our market data. An average of 60% of our overall churn in the last 12 months was driven by non-influenceable factors like shutdown of a business, mergers, et cetera, which therefore, could not be fully compensated with new acquisitions. However, the total lost revenues through influenceable and non-influenceable churn in the last 12 months summed up to around EUR 700,000, i.e., less than 1% of our total German dealer revenues. This is as well reflected in our strong revenue and ARPU growth. Listings in H1 2019 declined by around 6% year-on-year. However, listings share compared to our competitor remained stable at 0.9x. The listings decline is in line with market development. On the demand side, we continue to grow our audience with 8% or 4 million sessions year-on-year in the first half year 2019. Based on our mobile-first approach, investment into our app and the strong interest of consumers to engage on the go, mobile traffic has increased by 16% year-on-year. In summary, we continue to be a strong #2 player in the German automotive classified market. In our core European countries, we again manifested our market-leading position. As pointed out at the beginning of the presentation, we have increased or stabilized our listing share to our next competitor in the respective markets. We continue to have significant listing advantages with at least 50% more listings on our platforms. Our overall dealer listings increased by around 4% in a stable to slightly declining market environment. Like in Germany, we continue to grow our audience with a 9% year-on-year growth, driven by strong growth in mobile sites and apps, representing now 80% of the total traffic. As well for AutoScout24, we continue to leverage our strong operational foundations to drive monetization. In H1 2019, we achieved record high-growth rates in dealer ARPU and as well as dealer revenues, with Germany and European core countries achieving a dealer partner ARPU of over EUR 300. Revenues of our value-added product suite amounted to 17.8% share of total dealer revenues in AS24. Please note, this share is adjusted for the share of OEM revenues since the beginning of 2019 being recorded as part of dealer revenues. The comparable like-for-like Q1 2019 is 17.4%. At the beginning of the presentation, I mentioned that our market networks are at the forefront of digitizing the steps across different consumer and customer touch points. Our online car purchase product is a lighthouse product. We are the first German, if not European, classified platform offering such a service. This product is not only digitizing a very analog transaction, but as well providing strong benefits for both our consumers and partners. Consumers benefit from convenience, sale prices and full transparency and trust and quality with a 14-days return option. Our dealer partners, on the other hand, benefit from selling at a fixed price with maximized lead conversion and a faster and more efficient way of selling their stock. As of today, we have around 100,000 cars to be purchased online and around 0.8 million users weekly on online buyable cars. The concept of a market network is not limited to offering our consumers the option to purchase their car online, but also ensuring our customers can sell as fast as possible with the best support. For our dealer partners, it means to not only offer them the option to sell their stock through AutoScout but as well to source throughout AutoScout. We have taken our former express sale product to the next level to meet the expectations of all market participants. The slide shows the easy 4 steps of our direct sales process. Our approach provides consumers with a fast and transparent way to sell their car. Dealer partners, on the other hand, benefit from a fast, auction-driven process based on full transparency on the car condition. AutoScout remains on its strong, sustainable growth path to revenue growth on continued high level of 23% in Germany and 18% in Italy, Austria and Benelux. The dealer partner count is impacted by our cleanup initiative, removing dealers from the platform, which do not provide value to our consumer base. Adjusted for this effect and for the discontinuation of TruckScout, the dealer partner base is healthy and provides a solid base for further monetization. We are successfully building a more engaged and mobile-driven audience with traffic up 8%, respectively, 9% year-on-year; and mobile growth, 16%, respectively, 24% year-on-year. Looking at the performance of Consumer Services, we are really pleased to see the development of the different subsegments, fueled by leveraging several consumer touch points. All relevant KPIs have seen a significant increase since the end of last year with premium subscribers increasing 30% year-on-year the number of property valuations by more than 40%, the number of mortgage leads sent to financing partner by 20%, and the number of car financing leads sent to financing partners and dealers by 25%. We are a highly relevant market network partner for extended consumer services. Not only the operational KPIs are performing well, but as well revenues with a like-for-like growth rate of around 15% partially fueled by the consolidation of FINANZCHECK. FINANZCHECK's organic business is performing well with brokered loans growing by around 10% year-on-year and brokered loan volume growing by 15% to around EUR 770 million. As stated during our Q1 2019 call as well, FINANZCHECK is not a mere price comparison portal, but a tech company with strong data algorithm capabilities when it comes to scoring and matching the right user with the right financing offer. This strong capability leads to a continuous increase of the average loan amount, which has reached around EUR 19,000 in the first half year of 2019 compared to around EUR 18,000 in the first half year of 2018. With FINANZCHECK, users can now compare suitable financing arrangements via AutoScout and be referred directly to our financing partners. I will share some further insights in a second. But the strategic rationale behind the acquisition of FINANZCHECK is far greater than that. We are gaining an even better understanding about consumer journeys. So for example, when a user will most likely start with a new car search, this know-how around consumer interests and needs, coupled with the AutoScout brand, enables us to align our offering and build bridges to future consumer touch points. Pro forma revenue contribution of FINANZCHECK to the Scout24 group, this means excluding internal revenues and adjusted pro forma for IFRS 15 effect, grew by a solid 25% year-on-year. Please note, the like-for-like numbers are not including the pro forma adjustments for IFRS 15 in 2018. At the beginning of this call, I talked about our deep knowledge of the market, our consumer and partner needs. Our day-to-day purpose is to deliver enhanced systems, value-add insights and providing overall a much better user experience. Our premium membership product delivers exactly that. Finding an apartment to rent in Germany is really a pain, if not a nightmare, especially in the larger cities. Most contact requests will remain unanswered driven by large demand. Landlords, on the other hand, are complaining about the sheer number of inquiries or inquiries not at all matching their criteria. Our premium membership significantly enhances the user experience of the consumer. You get insights on chances to rent a specific property, has access to an up-to-date and privacy protected application package will get early access to property listings and as an additional advantage given the instant deposit commitment. For the landlord, the application package offers a standardized, validated and, therefore, better comparable insight on a potential tenant. By setting criteria for applicants, the lead quality is significantly improved and the number of requests decreased. Based on our leadership position and technology capabilities, we will continue to optimize the premium membership, further reduce inefficiencies and shape the future rental markets. Finance Boost is another innovation we brought to our dealers recently. This is one of the products stemming from integration of FINANZCHECK in to our AS24 funnel. It aims at strengthening the value chain for dealers by integrating the dealers own financing options into various touch points of the consumer journey on AutoScout24. We have enabled our users to now search and filter, not only by total price of a car via financing rate. For dealers using finance boost, we displayed the financing rate on the cars list page and very prominently on multiple touch points on the detail page and prequalify every lead via solvency check. Furthermore, we removed any other financing options from the dealer's page, including all online comparison portals for car loans. For instance, for dealers working with Santander Consumer Bank, we provide the option to receive all financing data directly into their Santander financing back end. We've analyzed the dealers using finance boost will get 10% more financing leads. Another story of success on identifying partner needs in executing against this. Before I hand it over to Dirk, who will lead you through the financial update, let me reiterate what I said at the beginning and why I am excited about Scout24's prospects. Our business is stronger than ever. We have a clear plan to create long-term value for all our shareholders, and we have the right team in place to execute against that plan. With that, I'll hand it over to Dirk.

[Dirk Schmelzer, CFO & Member of Executive Board]

Thanks, Tobi. So let me now directly move on to Page 27, please, where we start on the upper left chart, where you can see the 19.7% reported revenue growth in half year 1 2019 translated into a 13.6% like-for-like growth and 18.9% in Q2 or a 13.1% like-for-like growth. We have seen a slight slowdown in AutoScout, but that was expected, as well as market- and timing-driven slight decelerations in finance and display advertising revenues. For the group, however, ordinary operating EBITDA stands at EUR 154.5 million at the end of June 2019. To note, this is the first time in history more than EUR 150 million in the half year have been achieved. And that's despite significant investments taken into FINANZCHECK. The margin stands at 51.2% organic at a record high level of 57.3%. Like-for-like, this is an increase by 0.4 percentage points. The Q2 margin is at 54.6%. And this is a strong margin uptake of close to 7 percentage points quarter-on-quarter. Organic margin stands at 59.4% in Q2 2019. So let's now directly move to the respective verticals. Page 28, please. We are very pleased with ImmoScout's continued acceleration, especially in revenues with residential real estate partners, growing 12.2% year-on-year in half year 1, 2019 and 12.5% in the second quarter of 2019. The acceleration of around 6 percentage points compared to half year 1 2018 growth is driven by solid growth in residential partners and strong ARPU growth of 7.1% in the second quarter of 2019 or translating into the half year 2019, 5.1%. The revenue with business partners is a solid growth trajectory with 13.2% growth in half year 1 2019 compared to 2018 in the same period. This is fueled by strong ARPU growth of 13% year-on-year. Ordinary operating EBITDA margin stands at 68.2% in the first half year 2019, an expansion of nearly 2 percentage points compared to Q1 2019 due to Q2 2019 margin standing at 69.9%, so very close to the guidance we gave out. Year-on-year margin expansion rate, slightly slower than revenue growth rate as we continue to invest into the next-generation product suite. This is, as Tobi outlined earlier on in the presentation, the preparation for Bestellerprinzip. Our REALTOR lead engine products to cater to the most urgent need of agents in the current market environment, and investments into our consumer and private lister base. Please turn to Page 29 now. There you can see that AutoScout continues to deliver on its growth potential with dealer revenues in Germany growing at 23.1% year-on-year in half year 1 2019, and our European core countries growing at 18% year-on-year. Both Germany and the European core countries are driven by continued ARPU expansion due to both price adjustments and continued value-add product sales like the [indiscernible] product, data-driven marketing campaigns, expanding the dealer's reach and visibility on social media. Other revenues are slightly declining mainly due to divestment of AutoScout Spain into a joint venture and the like-for-like revenue growth at 5.5%. Next page, 30, is displayed the consumer service performance in the first half year and the first and second quarter 2019. Consumer Services revenues and margins are affected by the consolidation of FINANZCHECK since September 2018, and the investments we made into FINANZCHECK consumer base in Q1 2019. So as announced, margin increased significantly by 16 percentage points in the second quarter 2019 compared to quarter 1 2019. So we see quarter 1 2019 margin at 13.3%, whereas we see 29.8% in the second quarter of 2019. The revenue growth remains strong, with reported 55% or like-for-like 14.6% year-on-year increase. Finance revenue growth is, of course, fueled by FINANZCHECK, reflecting a growth of 25% year-on-year. Service revenues with a strong growth rate of 33.3% year-on-year are benefiting from the ongoing success of our premium membership product, which is actively solving consumer problems like finding a flat to rent. Third-party display revenues continue to deliver a strong growth rate of 5.6% or 8.7% like-for-like, despite the weak and slightly declining advertising market. We now go on to the ordinary operating cost on Page 31. Those costs are on a reported basis increased by 30%. Again, this is largely driven by the consolidation of FINANZCHECK. Organically and excluding AutoScout Spain and classmarkets, 4 factors influenced these effects. First of all, higher marketing costs to support new product launches. Secondly, revenue-related selling costs, mainly driven by our credit check product. Thirdly, personnel cost increases, mainly driven by salary adjustments. And fourth, increase in IT costs due to the ongoing migration of our data centers into the cloud. If you now move to the below EBITDA items with me on Page 32, you can see that nonoperating costs in half year 1 2019 mainly comprised personnel expenses of EUR 22.9 million, which included expenses from share-based payments of EUR 21.5 million, and costs attributable to M&A transaction and post-merger integration. Share-based payments have been adjusted in the second half year closing according to IFRS 2 on the basis of an increased share price as well as new program participants. Please note that these payments do not really -- that these costs are not reflected in our payments, but rather you can see them on the balance sheet due to the share price increases we've seen. D&A include EUR 3.8 million depreciation, resulting from the adoption of IFRS 16. Remaining increase is driven by higher CapEx investments in the prior periods you have seen. The finance cost in half year 1 are including interest payments of EUR 5.4 million, amortization of capitalized financing fees of EUR 1.8 million and expenses from revaluation of derivative instruments, both noncash items of EUR 1.9 million. Finance income in the first half year 2018 includes gain from derivative instruments in the order of EUR 1 million noncash. Last but not least, Tobias already said that we are following a review of our capital structure. And on Page 33, you can see the capital and debt structure of the business as of 30th of June 2019. You can see that since the first quarter, we have had in the first half year a total repayment of EUR 53 million towards the RCF II and our bond/Schuldschein [ volume ]. The corresponding decrease of interest margin is due to a strong performance that led to a leverage step down below the 2.5 leverage agreed with the banks. If you follow me to the next page, I will also give you our view on the optimized priorities for cash. Based on the new road map to further drive revenue growth and profitability, which Tobias outlined at the beginning of this presentation, we expect robust and growing free cash flow generation. Over the recent months, we have engaged actively with our shareholders. Having carefully reflected on their feedback, we have sharpened and optimized our capital allocation. As a first priority, we will continue to reinvest into growth. Any potential M&A activities will be undertaken in a disciplined manner with a focus on value accretion and strengthening of the market position of its 2 verticals. We will, therefore, focus our activities on the real estate or automotive classifieds market. It is our second priority to return cash to shareholders. Our existing dividend policy with 30% to 50% payout ratio of adjusted net income over time remains intact. In addition to returning cash by way of dividends, as announced on July 19, we will implement an up to EUR 300 million share buyback program. This program is expected to be initiated early September and to be completed over a period of maximum 12 months. Finally, our last priority with regards to capital allocation is the repayment of our debt using cash which is not reinvested nor returned to our shareholders. We are also revising our leverage guidance and fears that a business with a cash generation capabilities like Scout can maintain a leverage level of up to 3.5 points (sic) [ 3.5 times ]. We believe that leverage to be appropriate in light of our strategic plan and based on feedback of all our shareholders. I would now like to point you to the last slide, outlook for the full year 2019. As you have heard from Tobias and me, we are on a very good track to achieve the previous communicated guidance, which is a revenue growth group like-for-like low to mid-teens; a revenue growth of ImmoScout between 9% and 11%, like-for-like; a revenue growth of AutoScout between 12% and 14% like-for-like; and a revenue growth of consumer service between 15% and 17% like-for-like. On ordinary operating EBITDA, the margin is expected to come in between 52% and 54%. Currently, we stand at 51.2% and expect -- and have seen a strong acceleration in Q2 2019. Confirming guidance on IS24 up to 70% and Consumer Services margin of up to 30%, driven by confidence and continuous trend. Very confident to reach AutoScout24 margin of up to 54% despite product investments that we are undertaking in the second half year of 2019. Thank you very much. And I would like now to hand over to the moderator to take questions.

[Operator]

[Operator Instructions] And the first question we've received is from William Packer of Exane BNP Paribas.

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

It's Will from Exane BNP. Firstly, could we -- just a bit more detail around the new -- I'm not quite sure if it is target or guidance on EBITDA margins in 2021. Is the 200 to 300 basis points, I assume is an improvement on where consensus is? Or is it an improvement versus today? A bit of clarity there would help. And additionally, how should we think about the progress between IS24 and AS24 in the context of the strategic review? Is it mostly 1 of those 2 divisions? Or is it mixed across them? Secondly, just to confirm on IS24, the limited operating leverage in the second quarter, is that because of the additional product investments? Or was there some incremental marketing as well? And how should we think about operating leverage in that division going forward. And then finally, the AS24 results in H1 were very impressive but the full year guidance remains unchanged, which I think implies a reasonably sharp slowdown in the second half. Does that reflect your greater caution on ARPA at the next round of price increases for AS24? Or are you just being conservative?

[Dirk Schmelzer, CFO & Member of Executive Board]

Will, thank you very much for the questions. To start with the first one, the 200 to 300 basis points we got out of the benchmarking and cost reduction projects are coming on top of consensus. Secondly, you were asking around the strategic value we are undertaking.

[Britta Schmidt]

I think what Will actually asked was the split of the 200 to 300 bps, how will they be split between Immo and Auto?

[Dirk Schmelzer, CFO & Member of Executive Board]

Sorry. We have undertaken the cost benchmark project here. And I think you can expect an equal split between both assets in your models here, Will. Yes. Also, operating leverage going forward on IS24, as I said earlier on with regards to the benchmarking, I think you can expect additional operating leverage coming in on IS24 along which we guided for the second half of 2019. And you were also asking with regards to AutoScout and the impressive performance we've seen in the first half year were. We are optimistic that we will continue to perform very well in the second half with AutoScout, but what we've also seen is that a large part of the price increases that we are planning are only due in the second half of 2019. And therefore, we have decided not to increase our guidance on that to keep it a little bit more balanced.

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

So just to come back on a couple of things. So firstly, when you say to keep it a bit more balanced, do you mean it's later in the half so therefore the impact will be seen more in 2020 after the price increase? Or do you mean you're going to -- you are more cautious about the price increase?

[Dirk Schmelzer, CFO & Member of Executive Board]

We are more cautious about the price increase, Will, as -- of course, in the initial guidance, this price increase has been baked in. And therefore, we have to see where we come out by the end of the year.

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

That's helpful. Just very finally, in terms of the ramp-up to get to this new 200 to 300 additional basis points of EBITDA margin, should we expect it's a gradual process each year? Or is it -- so we get an improvement in 2020 and then another step in '21? Or does it all come in '21? What's the shape of getting there?

[Dirk Schmelzer, CFO & Member of Executive Board]

Will, I think we should wait to the Capital Markets Day to give you a little bit more flavor on how the ramp-up with -- will happen on the businesses. And -- but in the end, I think we gave a clear guidance on where they would come in, in 2021.

[Operator]

The next question we've received is from Chris Johnen of HSBC.

[Christopher Johnen, Analyst]

First, maybe could you give a couple more comments on the strategic review of AS24? I think there's -- so far, pretty much just one line. I mean what are your general thoughts here that you can share?

[Tobias Hartmann, CEO & Chairman of Management Board]

Yes. This is Tobi. Happy to take that one. It is a continued evolution of what we unfolded and shared with our July 19 strategic road map. We have commenced a review of various options, i.e., given industry and market dynamics, what's the best option for AutoScout in the future? This could be a range of options, it could be the sale of AutoScout, it could be keeping AutoScout on the current operations, it could be a partnership with AutoScout, it could be a separate listing of AutoScout. So anyway, I think it's pretty clear that there's a range of options, and that's what we are evaluating.

[Christopher Johnen, Analyst]

Okay. And will we know more by the CMD? What do you think?

[Tobias Hartmann, CEO & Chairman of Management Board]

Yes. We gave a clear press release statement that we will update at the capital markets. That doesn't necessarily mean that we will have a conclusive decision, but it means that we will update the market by November 26.

[Christopher Johnen, Analyst]

Okay. That's clear. And then there's -- I mean a couple of -- I don't know if they're allegations. I had a couple of questions with respect to the last tender offer, whether there were any higher bids on the table. Question on what has changed in, let's say, 2 months' time where you on the one hand, the board okayed a tender at EUR 46. Now a couple of months later, buyback initiated at EUR 49. I mean is there any sort of comment you want to give on those particular items?

[Dirk Schmelzer, CFO & Member of Executive Board]

Yes. Happy to comment on that. I think there's a substantial difference between what happened at the time versus where we are today. Back at the time where I think we were at the forefront of writing about the Bestellerprinzip. We had some significant uncertainty in the market about the Bestellerprinzip. We had a number of investors that thought it could be a great option. And back at the time, we recommended a potential offer. But then I think 2 things happened. One is we still don't know exactly but obviously, Bestellerprinzip got pushed back. That's a fact. And then I think number 2 is that financial markets have obviously developed strongly. And so it has reiterated the strength of some of our peers and across the entire financial markets. So I think that's what's changed. And that's what we're addressing now. And that's why we came up with a strategic road map.

[Christopher Johnen, Analyst]

Okay. And then 2 quick ones on the operating side for a change. First, is there anything more you can share on the 3 private listings that you've introduced for parks on IS24? Last quarter, you said it was a bit too early to comment. I mean how are you seeing that product? And then with respect to AutoScout, the direct sale offering, if I'm not mistaken, currently this is very minor, maybe 1% to maybe 2.5% of revenues at the direct sale offering deliveries, I think, in Germany or on the group level. I mean how -- what's the ambition here? What do we need to know? You're obviously investing in it, but I'm not sure if there is any real ambition to compete with the other one, for example.

[Tobias Hartmann, CEO & Chairman of Management Board]

Yes. Thank you, Chris. First question on private. We'd like not to comment on that because there's a lot of competitive intelligence in there. But I think to give you a pretty good broad overview in terms of what we're doing also with the various initiatives on product development side there. And be very bullish about the future business of IS. On the direct sale, we just launched it. Obviously, we wanted to share that. It's too early to really state anything in public in terms of revenue expectations. We need to certainly hone in on the product, get first market feedback, listen to the consumers and our dealers how it's working, sharpen it, improve it. But we're just glad that it's out there because it took a lot of effort. And we just launched it. So once we are in a position to have further evidence, we'd absolutely share more detail. But it's too premature at this point.

[Operator]

The next question is from Craig Abbott of Kepler Cheuvreux.

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

My main question on the AutoScout side has been answered, but just to get back to the Bestellerprinzip which you mentioned, it appears to have been pushed back. There was a Parliamentary debate in May, but it's gone quiet since then. And there wasn't much mention from your side either. So I just wondered if you could give us a general update on what your thinking is there and kind of what -- hello?

[Tobias Hartmann, CEO & Chairman of Management Board]

Yes. Please.

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

I'll just continue. And if you could give us an update there on what your thinking is. And also feel for about what do you think your potential risk exposure could be. And also you mentioned that you were developing products in IS24 in the first half to deal with the Bestellerprinzip when and if it comes. And I just wondered if you could -- I realize there may be a market intelligence as you, but if you could give us any kind of indication of what kind of products that could mean and to maybe kind of quantify what that impact might have been on the margin.

[Tobias Hartmann, CEO & Chairman of Management Board]

Yes. Thank you very much, Craig. Great question. So on the Bestellerprinzip timing, we don't have a certain timing. Nothing is for sure. We do believe that in some shape or form, it will materialize, most realistically, at the very early of 2020. That's what we think. But other than that, we don't have any other facts to point at. In terms of product, what we did, how to prepare for it, we've spent a significant amount of time with our teams and the core pillars around Bestellerprinzip are really embodied by our home seller hub and also the realtor lead engine that we talked about during the presentation earlier. Both of these products have been tested extensively, and we saw a great success, and we shared some of the data with you. So we think we are ready for it.

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

So when you say you think it will come in early 2020, do you think it will come in the form of it shifting completely to a seller pays? Or do you think it will be more likely still to be the 50-50 option?

[Tobias Hartmann, CEO & Chairman of Management Board]

We believe still that it's probably going to be the 50 option, but I would like to reiterate that we don't know. So this is the pure we think, we believe, but we don't know for sure. But that's at least from what we believe will happen based on the evidence that we have.

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

But the 200- to 300-basis-point margin increase that you've thrown out there now as a target for 2021, that's regardless whatever scenario comes?

[Tobias Hartmann, CEO & Chairman of Management Board]

This is obviously, as we've already pointed out always, this is pre-Bestellerprinzip. So any of the scenarios are like-for-like to be compared. And since we also used to report without Bestellerprinzip and gave guidance without Bestellerprinzip, that's the same what we applied as a logic for the 200 to 300 basis points on top.

[Operator]

The next question is from Lisa Yang of Goldman Sachs.

[Lisa Yang, Equity Analyst]

A few questions, please. To get to your 3.5% target for leverage longer term, just wanting your thoughts around the use of cash and how you're going to get there and the mix, especially between the buyback versus M&A. The second question is on your ARPU growth in Germany at AS24 of 44% in the first half. Could you give us the split between price and product, how should we think about the second half? And given that strong increase in ARPU where are you now in terms of gap versus mobile? And the last question is on the M&A fees. Just wondering if you could give us a bit of your estimates in terms of how we should expect the M&A fees to be for the year.

[Dirk Schmelzer, CFO & Member of Executive Board]

Lisa, thank you very much for the questions. First of all, on the guidance of 3.5%, we deliberately choose the term up to 3.5% because it really depends on M&A targets that we're having on the one hand and how our share buyback program will go through because we have certain limitations with regards to the acceleration of the share buyback and that will highly influence our leverage going forward. And we don't comment on any M&A spend we will have, and you will hear from that in the due course when we have targets ahead of us. On M&A fees, I mean M&A fees in the first half 2019 and especially in the second quarter 2019 were mainly driven by the takeover offer we received from Pulver BidCo, and you cannot -- or most likely will not experience that going forward. However, that's not depending on us. And hence, we won't give a guidance on that. The last one on split between price and volume, we would not disclose that because for competition reasons.

[Lisa Yang, Equity Analyst]

Could you maybe specify what are those limitations on those share buyback that you're mentioning and how that could affect potentially your future buyback beyond the EUR 300 million you announced?

[Britta Schmidt]

So Lisa, I think there are 2 things. We have an approval from the AGM to buy up to 10% of our shares and there's a market abuse regulation in place, MAR. If you want to have any details, let's catch up later.

[Operator]

The next question is from Vivek Ghiya of Bank of America.

[Vivek Ghiya, Research Analyst]

One quick question. What kind of penetration can we assume for VIA EMEA products in a stable scenario? I mean obviously, both of them are growing nicely, but if you can give us an indication what -- how should we think about where the peak is.

[Tobias Hartmann, CEO & Chairman of Management Board]

Thank you. We don't disclose VIA EMEA penetration rates, so...

[Britta Schmidt]

So not the target. I think you are...

[Tobias Hartmann, CEO & Chairman of Management Board]

We don't disclose the target. So...

[Vivek Ghiya, Research Analyst]

But can we look at some of your peers like REA or somebody to get an idea as where it could approach? Or how should we think about?

[Tobias Hartmann, CEO & Chairman of Management Board]

It -- they have a somewhat different nomenclature and whatever is packaged there. But yes, you can take a look at them. But again, we don't share an outlook in terms of target penetration.

[Vivek Ghiya, Research Analyst]

Got it. And one more quick question. Can you give us an idea about churn trends in IS24 residential real estate agents? What have you seen in the second half -- on the second quarter and early third quarter probably?

[Britta Schmidt]

Vivek, so overall, our agent number has increased for both residential real estate and business real estate and churn rates remain on record low levels.

[Operator]

The next question is from Andrew Ross of Barclays.

[Andrew Geoffrey Ross, Research Analyst]

I've got a few. So first one on the strategic review. Can you give us a sense as to what you think the dissynergy is if you were to sell AutoScout, if any? Second question on FINANZCHECK. I think you talked about that may be slowing a bit in Q2 or certainly the revenue from finance partners slowed a bit in Q2. Can you give us a bit more color as to why? And just give us confidence that FINANZCHECK is going okay.And then third question, Tobi, you've talked a lot about the strategy on IS24 from an organic perspective, but I'm wondering whether there's any thoughts you have got on the inorganic side. And clearly, you guys keeping some cash for M&A headroom if you want to spend it. So maybe you could give us a sense about what you think is interesting for IS24, I guess, new markets, new verticals, mortgages, et cetera. Any color there would be very helpful.

[Dirk Schmelzer, CFO & Member of Executive Board]

Okay. Let me start off with the dissynergies of a split. Certainly, there are certain dissynergies in the G&A function. As you can imagine, overhead functions like HR, finance and legal need to be -- would need to be split up. I'm always talking here in the community. And also some IT dissynergies that we see from joint platforms at the moment. But the main part of the business is developed on different platforms. So that's as far as we would go from speaking of dissynergies. On FINANZCHECK, you are right. We were in June implementing the new user flow with a new GDPR, user flow here and therefore, we received some -- a little bit less of traffic and a little bit less of leads on the one hand, which was slight down. And on the second side, although we received less than we could have achieved in that period, we also experienced that a lot of our bank partners were in their back office, not able to process our leads that we sent to them, especially in the last weeks of June. Hence, this led to a slight revenue miss in June let alone, which we already catched up in July in the following month by doing some tweaks to the user flow on GDPR on the one hand and educating our business partners and bank partners on the organization of their back offices.

[Tobias Hartmann, CEO & Chairman of Management Board]

With regards to your question on IS24, a potential add-on M&A acquisitions or anything, there's nothing to report about at this point. We feel very comfortable with the approach that we are taking, i.e., learning more by extending the consumer journey, and that's certainly something that we'll take a closer look at. But other than that, there's nothing at this point in time to report about.

[Operator]

The next question is from Marius Fuhrberg of Warburg Research.

[Marius Fuhrberg, Analyst]

Looking at your non-operating items, these are immensely influenced by the share-based compensation, which is already higher than your initial expectations, I guess. What is your expectation now for the rest of the year for this item to develop? And also looking forward, what can we expect through '20 and '21?

[Dirk Schmelzer, CFO & Member of Executive Board]

As you pointed out correctly, we haven't expected the amount of nonoperating items on the long-term incentive programs. This is an item that will remain on our balance sheet for quite a while. So a noncash item. We will not guide with regards to that, but give you some more insights on the Capital Markets Day around how we plan with it and maybe that also gives you some feedback to feed into your models, how you deal with that, but we would not give a guidance around that.

[Operator]

The next question is from Nizla Naizer of Deutsche Bank.

[Fathima-Nizla Naizer]

I just have a couple remaining. The first is on the subscription business, which seems very interesting and fast growing. Just wanted to understand how fast do you think it could continue to grow over the next couple of quarters or years. And how large do you think it can become on a stand-alone basis given the supply-demand dynamics in Germany? And what are the economics here? How profitable is it in terms of a margin perspective? Is it above the Consumer Services average margin that we do see? Some color on the economics would be great. My second question is, you mentioned that you have -- you had a new membership model for the agents starting August 1. How much more expensive is it on average compared to the traditional membership for an IS24 product, just to see what sort of uptick you can get from that particular membership? And my last is more of an admin question, by when would you inform us how Consumer Services is going to be split between the 2 core verticals and what that sort of future would be for the 2 verticals and which goes where?

[Tobias Hartmann, CEO & Chairman of Management Board]

It's Tobi. Thank you very much. Regarding your first question around the subscription business, so first of all, thanks for sharing your enthusiasm about that. We view this as a highly strategic business because it's really adding to the whole flywheel that we talked about with the home seller hub. So looking at this from a near profitability as a separate profitability path, it's really hard for us. That's not how we look at it. We look at it as a part of the overall business that's really driving the consumer services in the ImmoScout world. And we do think we still have a long way to go there because we're just getting started. Imagine something like it's almost like your personal link in network that you're setting up, which you're getting hooked on and that you have extended through more content, through more relevance and you're spending more and more time because this is part of your wealth creation plan in Germany. This is near and dear to your heart, and we're just getting started there. So we don't tend to view this as a separate pure strict P&L but as our part -- an integrated part of the Consumer Services journey for IS. Your third question are when we will be able to share some details. We do that during Capital Markets Day. And then your second question around the IS24 membership package. I don't have that on top of my head. Dirk?

[Dirk Schmelzer, CFO & Member of Executive Board]

I think since we have a vast sort of different offers for our agents in place, you cannot call it sort of outline that product by product. Of course, you will see the growth and the growth expectations we have with regards to the membership model in our ARPU increases. And there, we also guided that we see a double-digit growth in ARPU by the end of the year. So in the -- towards the end of the fourth quarter.

[Operator]

The last question is from Patricia Pare of UBS.

[Patricia Pare, Associate Analyst]

My first question is on the online car purchase. I wonder whether you can talk a little bit more about how does the process work and what are you doing in terms of preapproving financing, working more closely with the dealers, your relationship with the logistics partners and so on and whether this is for new cars or used cars? And any other indicator you can give for what sort of level of interest you are seeing or how many cars have been sold online so far? And then just my second question is on the competitive landscape, whether you can talk about eBay's behavior in terms of pricing and product approach, closing property with Kleinanzeigen and in the auto segment with mobile.

[Tobias Hartmann, CEO & Chairman of Management Board]

Thank you for your questions. First question regarding our latest product launch, we are working very closely with a select portfolio of partners across the country to really understand to the best possible extent what makes them successful. We don't disclose numbers on number of transactions yet, as I stated earlier, because we've just launched it. And I'm fairly sure we have more learnings to come. And yes, you're absolutely right. We'd like to make it as convenient as possible, i.e., also using future financing options and really have it in a kind of a one-stop journey. With regard to your second question on competitive landscape, we -- again, we are closely monitoring the competitive landscape, but there's not much news that we are aware of with regards to what eBay is doing with its relevant classified businesses. So we're solely focused on doing the right thing on our own. And I think we've demonstrated that with the road map and with today's update.

[Operator]

There are no further questions, so I hand back to you, Ms. Schmidt.

[Britta Schmidt]

Thank you very much. So thanks, everybody, for joining the call today. Have a great day. And if you have any further questions, please do not hesitate to call the IR team or send us an email. Thanks. Bye-bye.

[Tobias Hartmann, CEO & Chairman of Management Board]

Thank you.

[Operator]

Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.