Scout24 SE

XETRA:G24

Earnings Call Transcript 2018-Q3

[Operator]

Ladies and gentlemen, welcome to the Scout24 AG Conference Call. At our customer's request, this conference will be recorded. [Operator Instructions] May I now hand you over to Christian Gisy, who will lead you through this conference. Please go ahead, sir.

[Christian Gisy]

Thank you very much, Laura. Good afternoon everybody and welcome to the third quarter presentation 2018 on Scout24 AG numbers. With me on the call, Britta Schmidt, Diana Apostol, and [indiscernible]. Starting on Page 3, key financial highlights. We had a strong organic revenue growth. We have obviously a sustainable profitability and what you see always is robust and visible cash flows. The numbers obviously this time are for the first time including FINANZCHECK.DE after the transaction was closed and we are recording them since 1st of September 2018. For the first 9 months of 2018, we record an organic double-digit revenue growth of 10.1% for the group, obviously excluding FINANZCHECK. Including FINANZCHECK's revenue EUR 3.3 million, which is a consolidated revenue. If we take the unconsolidated revenue, we'd be talking about EUR 3.8 million for the month of September. Revenue growth is 11.1 year-on-year. If we do a pro forma like for like basis of the FINANZCHECK acquisition and apply the numbers also for 2017, would have seen a 9 month revenue increase of around 11.2% year-on-year with FINANZCHECK's contribution about 28% year-on-year to 2017 towards 2018. Margin, as you see, has improved without FINANZCHECK for the first 9 months towards 56% on a like for like basis, again, taking into consideration the IFRS, the 16 adoption, the increase would be 0.8% lower so that we would have a like for like margin of 54.6%. Cash contribution on a like for like basis means excluding capital expenditure resulting from the application of IFRS 16 as well as FINANZCHECK and one of CapEx relating to the office relocation in Munich increased by 16.3% to 92.2% and respectively by 12.7% on a reported basis.If we move onto Page 4, in ImmobilienScout, we are seeing that revenue growth is further accelerating Q2 2018 along with our guidance and what we said around the half-year 2018 call. As you can see, we are on track with IS24, with around 6% revenue growth for the first 9 months, which is not only fully in line with guidance and we also see an acceleration to around 7% growth in the third quarter of 2018. During the first half of 2018, we already indicated an acceleration growth rate for the second half of 2018, which is obviously now materializing.Growth again was mainly driven by revenue with residential and business real estate partners. As you know, our other revenue line where we record partially our product listings is quite flattish and will remain flattish going forward. To give you a bit more color on our residential business, the revenues with residential real estate partners in total, which are also including professional CPA, accelerated by about 2.5 percentage points compared to the first half of the year in the third quarter, recording now a growth rate of around 9% for the third quarter. Contractual residential revenue grew even slightly stronger to 9.4% year-on-year in the third quarter of 2018, which underpins the acceleration within the third quarter that we mentioned in half year one of 2018. Obviously, growth in contractual revenues is driven by a combination of low churn and obviously solid customer growth. However, this is obviously now getting a bit -- slightly lower than the first half, what we basically also guided to, as well as price enforcement and obviously, product upsell.Guidance for total residential revenues was around 6% to 8% and officially, we are full on track to achieve that guidance. Revenue with business real estate partners accelerated as well in the third quarter using a solid mid-teens growth rate for this quarter. When we say mid-teens, we mean rather 16% and 15%. The EBITDA margin was 66.7% for the third quarter, which is slightly below Q3 2017. Nothing to worry about. The guidance is very clear and rock solid at 68%. Those are timing differences so nobody should worry about the EBITDA margin in Q3 of 2018. If we turn the page to 5, again, a sort of disclosure around our VR achievements. As you see, VR penetration has gone up from 29.3% to 30.1% in the third quarter. So again, a solid acceleration compared to the quarters before.The overall absolute value added product sets, revenue growth is driven -- is driving more than 60% obviously of our absolute revenue growth generated at IS24 already. The premier listings product are selling for about 70% of total absolute revenues generating IS24. Obviously, the other ones are the display and the lead gen products. On Page 6, we are taking into consideration that there is uncertainty in the market around a discussion that was started somewhere middle of August that then became a bit harder in September and I think it's wise for us to basically give you, the person not located in Germany, an update of where we believe we are standing at this point in time. The current environment, at the moment there is no legislative paper in place yet. Excuse me. And there is no information of further steps by the German government and/or a possible timeline for the introduction of a law. The total property sales commission ranges in Germany, including VAT, between 4.8% and 7.1% and is obviously paid across Germany very much depending on the federal state. Eleven out of 16 federal states, the commission rates a total of 7.14% is applicable. And what is further to be noted is in 11 out of 16 [indiscernible] states, the agent's commission today already is flipped between the buyer and the seller at a 50/50 percent rate.That means that basically the [indiscernible] conceived in some respect is already existing in those states. So this is something that should give you comfort for those of you who have not -- were not familiar with basically the situation in Germany so far.What are the latest developments? For the first time now, a representative of the CDU, which is still the biggest party in Germany, and after two lost elections, they have now still officially opposed against the [indiscernible]. In an interview with [indiscernible], the lady is responsible for consumer and also real estate belongings, and she made very clear that basically CDU is not in favor of [indiscernible]. Secondly, [indiscernible], which is probably not only the largest but the one that is probably to be taken serious franchise in Germany, so the large agent franchise company has published an open letter to Mrs. Merkel to advocate the commission split in all federal states of 3% excluding VAT, which would basically cement what is already existing in 11 of the federal states today.The Ring Deutscher Makler, which is an association of agents or ring of agents is threatened with a clear constitutional complaint against [indiscernible], not a burden of the seller [indiscernible] binding [indiscernible] commission between buyer and seller in line with industry association convictions. And therefore, they are more than happy to basically get onto a constitutional complaint and they have reserved for themselves a law firm called [ Galvile and Woop ]. For those that are familiar with Germany knows that those guys have been able to not only strike let's say good court rulings for other companies that have been, or other areas they have been representing.Nevertheless, also we, and you know that from our product and pricing logic that we introduced already three years ago, are prepared for those various regulatory developments. Obviously, our Scout24 product strategy and the product suite is designed to support agents in a potentially changing regulatory environment and we foster an active discussion with our partner base about potential next steps. Our sales force that has been implemented in the second half of 2017 is not only well equipped about, but obviously, also very well trained to support this process.And obviously, we have also experience in handling difficult and challenging regulatory changes. And remember, the introduction of the [ shell ] advocacy for rental property in 2015 had an impact on agent numbers, but didn’t have an impact on revenue. So if gives a clear indication that we know exactly how to handle elements like the [indiscernible].Turning the page and moving on to the further successful story of AutoScout, it is again recurring double-digit revenue growth, again, net income the mid-teens area. We are happy basically for the revenue we guided towards EUR 180.5 million towards year-end. We see revenue increase by 16% in third quarter 15.6% in the first 9 months of 2018. Why did we see an acceleration in Q3? This is mainly led by dealer partners in Germany who, with a price increase, where the third quarter reflects the pricing adjustments that we have done, especially in Germany, but partially also across the other geographies. And obviously, it also reflects further success of MIA products.Ordinary operating EBITDA margin increased quite considerably compared to the third quarter and also to the first 9 months of 2017. Again, we are heading towards the guidance of 52% and very confident that we'll be able to hit this guidance. AutoScout is on Page 8, providing clear benefits to our partners. As you can see, the penetration rate of MIA product has decreased slightly in the third quarter. This is to be explained with a dynamic revenue expansion on the back of the price adjustment that have happened in those areas. So they have grown at a disproportionally faster pace than MIA revenues have. And the other thing that also is to say is the third quarter was a bit slower on the [indiscernible] sales revenue side where we didn't focus so much on because we were very much focused on the price enforcement to make sure that basically price enforcement is happening and churn still remains very low at rates of 1.5%, 1.6% to AutoScout.Consumer Services has been a success story across the last couple of years and that was also the reason why we decided to show it as the third vertical. As all of you know, we acquired FINANZCHECK.DE in the third quarter of 2018 and it is now reported in the consumer -- 24 Consumer Service segment and that would be reported in the finance revenue line.The Q3 2018 and 9-month 2018 numbers include FINANZCHECK for the month of September. As I've said before, we've seen an internal revenue contribution of 3.3%. the external revenue contribution would have been EUR 3.8 million for the quarter -- for September of 2018, yielding a negative EBITDA of about EUR 0.3 million, which is both ahead and below our expectations. So for the revenue is ahead of expectation and also the negative EBITDA is roughly better than what we had expected and what the market was at the time of the acquisition partially anticipating, which I think was probably sort of a wrong anticipation.On Consumer Services itself, revenues grew mid-teens organically both in the third quarter 2018 and in the first 9 months of 2018. Obviously, again, fully in line with our guidance that is projecting 12% revenue growth year-on-year organically. Obviously, we have been also able to increase on our operating EBITDA margin by some percentage points, even if we conclude the small negative contribution of FINANZCHECK, you also see that we have a margin that is well above the previous year's period, which again gives you a clear confidence that the guidance that is out for revenue and for EBITDA will achieve with high confidence.Just to remind probably also on FINANZCHECK because this topic has been touched before. Our expectation around the revenue impact for the last 4 months of the year was around EUR 12 million and we were seeing a negative contribution to EBITDA in the low digit million range. Again, here, we are very confident to hit both of those numbers.To give also more of an insight, as we have declared during our half year results. FINANZCHECK on Page 10, the amount of brokered loans has gone up. The amount of brokered loan volume has gone up and obviously, revenue has come up. What I think is interesting to see is that basically, the amount probably or the number of loans has not grown as strong as in the past, but the volume coming out of those loans is much higher, which means that those loans are nowadays also because of the size of it, yielding a different commission that allows us to basically drive the underlying ARPU from 570 euros to 630 euros, which again gives you a clear indication of how successful the business is running at the moment.Again, to probably recap, it's a great fit with our Consumer Services vertical and we're seeing very smallish first positive elements out of this. It will enable us to jointly collect the dots along the car and homebuyer consumer journey, which is super important because this gives us the opportunity to stay tuned and connected with the consumer. I mean FINANZCHECK in itself has a very high growth profile in a healthy, probably larger than 80 billion German consumer loan market, which is something that in itself already has -- speaks for growth. And we are more than happy to basically have been on site, especially because they have a highly valuable proprietary insight that would help us to strategically align our offerings by building bridges to future consumer touch points.And I think the first really resolve to be seen probably we are able to show around February, March of next year when the deep integration to the AutoScout [indiscernible] will then be mostly achieved. Coming to the cost side of the business. We have increased cost base on the personnel by 12.4% including FINANZCHECK. Excluding FINANZCHECK, it would have been 10.9%. Most of this has to do partially with new hires. We increased staff of around 7% year-on-year, which means about 77 FTEs. Obviously, we have, and we said this during a couple of other calls, we are also paying our employees in a very competitive manner to make sure that, again, there is also retention included as talent [indiscernible] at the moment.Marketing spend increased organically by around 5% due to investment in products and FINANZCHECK would account for the remainder, which is about EUR 1.3 million. Including FINANZCHECK, we still see significant operating leverage with growth rates that are being below revenue growth rate. IT costs are increasing. This is mainly to deal with the cloud usage. We are making use of the cloud more and more and this is something that is good for the company, because also in terms of IT security because it's something that is protective to us.Over the cost base, therefore, increase by around 6% in the first 9 months. Excluding FINANZCHECK, we would see an increase of about 4% like for like if we would take into consideration IFRS 16 like we headed into 17 would be probably around 7%. EBITDA margin is at 55.4%. If we would exclude FINANZCHECK, it's 56% so we are on a pretty good trajectory and very confident to achieve our margin guidance, including and, well, excluding FINANZCHECK. Below EBITDA items, non-operating items include EUR 1.6 million of extraordinary income and EUR 5.9 million of M&A related activities. We have, again, also included EUR 8.3 million of share-based compensation There of EUR 1.4 million related to the management programs and EUR 2.1 million related to employee participation programs that were introduced in 2016 and 2017 respectively.In the 1st of July 2018, a new long-term incentive program was introduced. Costs relating to this new long-term incentive program came in at EUR 4.8 million for Q3 of 2018 and then second, we give further insights on the program. Depreciation includes EUR 4.7 million due to the adoption of IFRS 16, which then translates obviously into the balance sheet. Effective tax rate is at 29% driven by one off effect in 2018. The respective nominal tax rate is at 31.5%. Page 13 gives you insight into our new long-term incentive program. This program is aimed to replace the existing MEP that was introduced in early 2014 until middle of '15 and which is running out for -- which is running out in 2019 and only valid for a limited amount of people that are still in that program.The new long-term incentive program, as I said before, is starting on the 1st of July 2018, comprises about 90 participants as of today, including the new CEO that will be joining us at a certain point in time later on the 1st of January 2019. As you can see, the long-term incentive program has a large focus on performance. If you benchmark this program against other programs, especially in the German market, you will see that basically the performance piece is much larger than in other programs where the retention piece would probably rather be 45% to 50%, which I think speaks for our confidence and for the ability also of the business to basically drive performance.The target achievements are basically from 0 to 200%; 100% target achievement implies at least double-digit revenue growth and profitability growth. Obviously, we have as a search metric a relative share price performance compared to our peer group. As you can see below, the peer group is consisting of our main comparables in the [indiscernible] space across Europe.The retention piece is at 35% of the overall program. The total impact over 4 years is valued according to IFRS 2 and stands at about EUR 60 million, which is an assumption that basically the program hits 100% target. If basically the target is over-achieved, there's also an overachievement in the payout, which then would mean that basically the employees would get more. Obviously, shareholders and the company will therefore also derive much more money than at target.The share-based payments overall, including this new [ LFIP ] are reported as part of the non-operating items and its valuation is too significant and driven by the share price development rather than operational activity . So that's the reason why we're recording all the share-based payment in the meantime below the line. The program itself has a -- so on the retention side, the program is vesting over a quarterly period over 3 years and respectively 4 years. So first payout is after 3 years. Second payout is after 4 years and obviously, the same applies to the performance piece, whereas there is no quarterly vesting. There is cliff vesting after 3 and 4 years with the targets having at least been met at the bottom range of what has been said. Capital structure. It increased obviously in the third quarter due to the transaction of FINANZCHECK. Obviously now, we are again in deleveraging mode and as you can see, we are expecting our net debt to ordinary EBITDA ratio to decrease towards 0.6x to 0.7x by the end of 2018. Obviously, if you look into the margins that we're paying, I think that all the capital structure, the recapitalization of the business has again shown great success and has enabled us to basically save quite a lot of money on interest payments. With all this cash, we have obviously had -- always had key priorities. Obviously, our main aim is to reinvest in growth, which is partially M&A activities or grow adjacencies business. Obviously, it's return cash to shareholders as we have shown this year. Our dividend payout ratio is between 30% and 50% of adjusted net income over time and then it's also about repayment of debt. As you can see, our target leverage ratio has not changed. We're still aiming for 1 to 1.5 over time. I think 2018 is a key year where you can see that basically, we have met all the two criteria. We have made a large acquisition. We basically returned money to our shareholders and by the end of the year, we are repaying debt. So it basically is a clear statement of the company that we have clear priorities for our cash.Outlook for the year has not changed. Obviously, we are happy for ImmobilienScout to show revenue growth of between 5% to 6%. On AutoScout, we're expecting at least EUR 180.5 million of revenues. Scout Consumer Services organically should deliver at least EUR 87 million of revenues. The applicable ordinary operating EBITDA margin for ImmobilienScout we believe to be at least 68%. Obviously, AutoScout24 will be around 52%. Scout24 Consumer Services we expect it to increase by at least 1 percentage point towards last year. That means that on an organic level, Scout24 Group should grow revenues between 9% and 11% and on EBITDA margin, it should grow between 56% to 57.5%.Again, the contribution of FINANZCHECK is expected to be around EUR 12 million. This is certainly a conservative number, but it is what we are seeing for the year. Including this into the Scout24 group, we're expecting revenue growth of between 11.5% to 13.5%. The FINANZCHECK negative result is expected to be around 14%, which then basically has an impact on the EBITDA margin and we're expecting therefore the Scout24 group to achieve an EBITDA margin of 54.5% to 56%. This is in short what has happened throughout the last 3 months of 2018 and we are proud of our numbers and happy to take your questions.

[Operator]

[Operator Instructions] The first question is from William Packer of Exane BNP Paribas.

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

I wanted to dig into the Bestellerprinzip debate a little bit. Now, we have the Justice Minister quite vocally saying that they're interested in pursuing this as a potential regulatory option. So I just wanted to get your view on 3 questions. Firstly, how likely do you think it is that this regulation will be introduced? Now, you mentioned in the slide deck some factors that perhaps make it a bit less likely than media speculation. But do you think it's likely to come in or not likely? First question.Secondly, if we assume that the regulation is introduced, how big a headwind do you see it for the agent commission pool? Now, my data suggests around 70% of transactions are in states where the Commission is split 3%/3%. Do you expect that commission to halve the 3% or do you think that's too bullish, too bearish? Just some perception there as to what the impact could be on the commission pool.And then I suppose the final question is if we do see a meaningful impact on the commission pool, what levers doe Scout have to protect themselves and ensure that the very healthy growth that you’ve been delivering continues to get delivered?

[Christian Gisy]

So the likelihood, it's always difficult to assess, because as you know, it's a political discussion. In the end of the day, we believe that it will probably be introduced at a certain point in time. It's difficult to assess when it's going to be, but we are not -- we as a company basically are not afraid of it. And as you can see, out of those 11 states where the Commission already is split and where you have an introduction of the development already as of today, those are basically states where we today are already recording double-digit growth in residential space.So I personally believe that the [indiscernible], if it would come, would have no impact whatsoever to our company. The headwind of that, I think, is again a very, very, very low [indiscernible]. Because on the one hand, a seller could easily basically put the amount of commission on top of the purchase price and today, in this market, the buyer would have to pay.So in the end of the day, and that's basically part of the argument that other parties are using against Bestellerprinzip that Bestellerprinzip is not curing the overall problem, which is viscosity of supply. And basically, also, other side costs like duty stamp and so on that basically is affecting the side costs. So this is something that we are not really seeing.Obviously, if the commission pool is reducing and if you believe -- if you see where we stand today, we still have not, and this is partially the discussion that we have been having across last 1.5 years, and the acceleration that you see right now, our product suite and our product strategy is now really understood by the agent and starts to fit with the need of the agent. He understands this.So we believe that basically if the agent is threatened, he will reconsider all of his spend and he will see that his offline spend that still is 50% of the overall marketing spend today is absolutely unnecessary. And therefore, we believe that in the end of the day, this money will be shifted towards online, which obviously, will be shifted in Germany at least towards us because we are by far the market leader and dominant player in this space.

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

I've got a couple of follow-up questions on that. Firstly, in the slides, you talked to a CDU member Plaintiff Parliament that was skeptical around the introduction. Could you just confirm, my understanding is that the CDU do not have a party policy on the Bestellerprinzip. That's just 1 MP saying that; is that correct?

[Christian Gisy]

This is correct.

[Unknown Executive]

And there's nothing in the coalition agreement either on Bestellerprinzip dedicated to Bestellerprinzip.

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

And just to pull out what you said in a little more detail, you think that Bestellerprinzip will be introduced. It will have a negative impact on the commission pool, but you have the tools and the importance within the budget to offset that headwinds. Would that be a fair assessment?

[Christian Gisy]

[Indiscernible] agree with your summary. That's not what I said. What I said Bestellerprinzip will come and if Bestellerprinzip will come, as is discussed today, and we're talking only Bestellerprinzip, it will not have a negative impact for us.

[Unknown Executive]

And I think just to make clear, I think Christian is thinking more in the direction of not a full Bestellerprinzip but more what is already in most of the space and regions in Germany. So a flip between buyer and seller so that the overall legislation will be unified across Germany.

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

So would formalize the existing status quo rather than explicitly say that the buyer no longer plays omission. Okay. So a different type of regulation is what he's suggesting is more likely. Okay, that's helpful. Thank you so much.

[Operator]

The next question is from Miriam Adisa.

[Miriam Anuoluwapo Adisa, Equity Analyst]

Two questions from me. Firstly, on the guidance for IS24, so you're already at the top end of guidance for 9 months and you delivered [ 7% ] in the third quarter. Is there any reason not to expect a further acceleration in fourth quarter? And thus, would you then expect exceed the guidance of 5% to 6%?And then secondly, on the integration of FINANZCHECK, if you could just elaborate a bit on the small benefits that you said that you're seeing and how that might be different from your initial expectation?

[Christian Gisy]

So the top end of the guidance exactly at 6% and we are very confident to reach this. And there is no reason why the business should not accelerate. And if we are able to basically overreach guidance, we'll let you know by middle end of March next year, to be [indiscernible]. But we are -- I think it was very clear during the call and we as a company are very clear that we are aiming to hit, at least on a revenue side, to go for the upper end of the guidance, especially if we talk about ImmobilienScout. On FINANZCHECK, I think it is probably premature to talk about the integration of it or what we call the value creation with FINANZCHECK. I think what I'm trying to explain is this is a very sound business where people were talking about a large price they would pay, to which I believe is right. It was a large price but with a very healthy existing core business that as you can see again in Q3 or in the September numbers has been growing very steadily. And I think that's basically the message that people were a bit skeptical about it and now, we are able to show first signs this is a transaction that makes a lot of sense because it's situated in an area, which is growing very heavily in Germany and obviously will have an asset around February/March. We are able to show product that will really also basically move the needle for AutoScout and ImmoScout.

[Operator]

The next question is from Joe Barnet-Lamb of Credit Suisse.

[Joseph Barnet-Lamb]

One first back on Bestellerprinzip. So you stated that 11 out of the 16 federal states split the commission 50/50. Between those states that split it and those that don't, is there a difference between the proportion of transactions that are agented? So that's Question 1. Question 2 is just double-checking on the IS24 margin phasing, just making sure that there isn't any specific marketing push or sales push in Q3 that buoys the numbers in IS24 residential. Just want to make sure that that is the sort of number that we should -- an underlying number to think about going forward.And then finally, on the AS24 performance, clearly, the underlying price rises aided performance. How meaningful was that underlying price rise and also compared to what Mobile had been doing as well?

[Christian Gisy]

So on the proportion, I cannot tell you because I don’t have the data. We'd need to come back we never analyzed it on the debt respect and it's partially also difficult because we could only talk about our data. We don't have, as you know, market data. On the margin, when we're saying it's a timing issue, it's mainly what you call a holiday accrual that we had to put into Q3 that basically had an impact on the margin. So this will basically, over time, especially into Q4 then wash out and that's the reason why we are so confident to at least get to the 68%. On AS24, it's fair to say that the price increase that was generated across the customers that were part of the price increase was on average 33%. But that was only Germany. I don’t know what Mobile is doing. We know that basically on average, there should be a price increase of 10% to 12% but with their new T-Ring thing, et cetera, it's very difficult to understand and we never had a really understanding of what their price increase really is.

[Operator]

The next question is from Craig Abbott of Kepler Cheuvreux.

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

A couple questions from my side. On Immobilien, you said both on the residential and on the business partner side, you're still winning agents, although the win --

[Christian Gisy]

Immowelt. You don't mean [indiscernible].

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

I'm very sorry because the reason for my mistake was I'm about to ask if you are still winning agents from Immowelt. That's what I wanted to ask. I do apologize for that. But you're winning agents at a slower rate because of the base effect of course, because you're still winning agents. Immowelt posted this morning that they had growth of almost 6%. So a little bit below you and they clearly said that that was being driven by ARPU. They didn’t really specifically state on the agent numbers, but my question is are you still winning agents back from them? If not, from whom? That's the first question.The second question is just to get a feel for your thinking. You went to your use of cash and the debt structure now post the FINANZCHECK deal. It sounded to me like the difference now for kind of being is to move back towards -- you're back in deleveraging mode. Should we assume that that's probably going to be more the focus in 2019, particularly as you continue with the integration of FINANZCHECK?And secondly -- and thirdly, my final question on FINANZCHECK. It sounds like given the emphasis you put on the operational performance before, but I would just like to hear if you confirm that they're still on track to reach breakeven by 2020 or whether or not you might be thinking about accelerating more to grab more market share?

[Christian Gisy]

Let me answer in the reverse order. So yes, we are super confident that basically the business will show full profitability in 2020. The leverage is certainly something if we don't acquire, which is not the case at the moment. We have been deleveraging across the last couple of years with repayments. So this is something that certainly we're envisaging and we are probably, because of changes that we are having, as all of you know, we may be stepping a bit back in terms of acquisition. But this means that basically we may then probably reach the upper end of the dividend or just deleverage at a higher rate than originally thought. On the ImmobilienScout side, as you know, we have two different agent lines. The one is the residential and the other one is the business. The business partner line is the quite flattish one. So there is no big changes. The one that basically is seeing still lower but still growth today is the residential line.

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

And you're winning those back from Immowelt?

[Christian Gisy]

I wouldn’t say that they're from Immowelt and it's partially difficult to assess. I would say those are partially new acquisitions and new acquisitions mean that those are guys that not had been with us for 12 months. They may have been with Immowelt. They may have been nowhere. They may have been with eBay. We don't know partially.I think the Immowelt piece probably that's now gone and I think we are probably also getting people back that were nowhere.

[Operator]

The next question is from Ian Whittaker of Liberum.

[Ian Richard Whittaker, Head of European Media Research]

Just one question now. I think you mentioned that there's still around 50% a share from estate agents, which is in offline, which actually seems quite high just given sort of your sales in Immobilien. So could you give us an idea how that 50% is split and sort of the rate at which that 50% is declining and going through online?

[Christian Gisy]

When I talk about this offline, I was talking about ImmoScout. I was not talking about -- okay, just to make clear. So AutoScout is a bit different. And I think when we went to the market, which is about 3 years ago, I think it was probably I think 60% was offline and 40% was online. So basically you see that across the last 3 years it has moved by 10%. So given the structure of the German market, and if you look into the regionalized newspaper that we are having here, it is certainly slower than what you would normally expect and have experienced in countries like U.K., Americas, or Australia. I think it has mostly to do with the fact that agents in Germany are still not very professional. So they still believe that basically with offline that offline is a good method of sourcing, of branding themselves. I think it has to do with the fact that most of basically the agents in Germany are what I would call mom and pop shops. I mean it's not fully mom and pop shops but it's not the same structure like you would have in U.K. or other countries where you have large franchises that basically don’t care about offline anymore and basically are fully focused on online.

[Ian Richard Whittaker, Head of European Media Research]

And do you think that that shift, from what you can see just in terms of your view of the market, do you think that shift will continue to be gradual? Or do you think there will be a tipping point, which you see in a lot of markets, which actually those shifts from offline accelerate?

[Christian Gisy]

I believe that as in other markets here, there will be a tipping point where basically the whole thing will be accelerating. There's no doubt. The market has probably be slower than other markets, but in the end of the day, the market has mostly behaved like other market as well.

[Operator]

The next question is from Chris Johnen of HSBC.

[Christopher Johnen, Analyst]

I would like to take them one by one if that's okay. Coming back to Bestellerprinzip, you said that your base case, Christian, seems to be that you expect to sort of [indiscernible] type of model to be introduced. But you also said either way you'll be fine. Just to confirm, that is even if 100% of the current let's say 3% commission plus VAT in the future would only have to be paid by seller? Right, that's correct? That's my first question.

[Christian Gisy]

That is correct.

[Christopher Johnen, Analyst]

Okay. Then second question. In terms of the commission cap, what do you think about that? Maybe some general comments? Because I think publicly so far, there have only been comments on the Bestellerprinzip. What do you think about the commission cap and the potential impact of that on your business?

[Christian Gisy]

I personally believe, how should I put it friendly, it's -- I mean to me it's a non-event and I think the person that -- let's say the part that is first reacting to it is the RDM, which is the Ring Deutscher Makler, and the constitutional complaint is exactly pointing at this.So basically, if the commission cap is something that would be unprecedented in this market and that's reason why the likelihood of that I believe is close to zero. But you never know what happens today in politics. Everybody is going crazy. But if the constitution -- if the court rules like it has ruled in other cases that we're also trying to basically prevent the private rule for negotiation then the likelihood of this is exactly zero.

[Christopher Johnen, Analyst]

Then coming onto pricing. I know it's probably difficult to sort of estimate if the Bestellerprinzip would be introduced, what proportion of agents may prefer to leave the market, maybe particularly in markets where currently the buyer pays 100%. But how would that change your pricing strategy if at all? I would assume that if some of the agents are sort of faced with significant topline headwinds, it would make it more difficult to push through price increases, just to confirm how focused you'd be on pricing in that sort of scenario.

[Christian Gisy]

So I would underline what you're saying. So basically, price enforcement as a price increase is certainly not the right method to basically approach a partner that is probably facing what we are coming back with is basically -- and that's why we designed the product the way we designed it is basically the upsell. Because the upsell helps him to drive his business. Drive his business means sell faster and source faster. And this is basically the way how we would approach it and how we are already approaching it today.So basically, we certainly would ease off a bit on the price increases, but would make up by the volume because this is something that he basically would have to take anyhow because he will have to basically get his listings rotated. And if agencies appear, but good, then the agencies appear, but the listing in the market. So those listings would then be taken up other agents will need to be promoted in the sense of it needs to be sold, et cetera, et cetera.So that's the reason why we believe, and that's the reason why I said with the product strategy and the product suite we have today, we are absolutely fitting the agent needs, especially if he's getting under difficulty.

[Christopher Johnen, Analyst]

And last question. If let's say it's being introduced and it takes quite a hit with the agents, what could you or what would you do with the sort of on the line business model? I mean is there -- maybe I'm talking crazy but is there a possibility to maybe even shut down private listings or substantially increase the prices of those? Or maybe move to the Australia model? Just throwing some things out there. What would have to happen for you to change?

[Christian Gisy]

We are already today at the Australian model, and if you basically know the story in France, really, the most bad idea is to shut down private listings. Because you prevent yourself from -- and you prevent consumers to basically join your side. You would make a party like eBay Kleinanzeigen without any reason super strong. So that is ultimately the worst thing to be done. And what we're aiming for in the end of today is what's called the vendor based model and the vendor based model is what we are already implementing basically today, only that the vendor is not paying yet.But the way how the whole product strategy and product suite is designed is basically to fulfill what the Australian model is already delivering. So it would be that basically the agent is getting a service fee of whatever percentage and then the vendor has to pay basically for the advertising, which is fine.

[Christopher Johnen, Analyst]

One very last one. I'm not sure if you saw the article in the [indiscernible] on the [ Cartel ] office looking into the dominance of marketplaces. I mean it's mostly about Amazon, but is that something that we need to take a look at or can we ignore that with respect to you guys?

[Christian Gisy]

So I believe you can ignore it in respect to us because if you look into us and you basically look into the overall real estate market, I think we are 300 million of 550 billion. So I mean, there's a discussion around probably Amazon, a discussion around Amazon. I think I don’t see where we would have a market dominance basically where it would infringe the market or where it would basically have the opportunity to prevent the market to do something.

[Operator]

The next question is from [ Vivek ] of Bank of America Merrill Lynch.

[Unknown Analyst]

I just have one quick question about FINANZCHECK. So the growth actually decelerated significantly from 2017. So if I remember it right, you used to be in mid 30s and now in Q4, for 9 month, it's trending in mid 20s. So can you give us an idea as to what is causing deceleration? Is it just in duration or something else is a factor her?

[Christian Gisy]

So I think, when you're talking about the deceleration you're talking about the revenues or what are you talking about?

[Unknown Analyst]

Yes, deceleration of revenues actually, revenue growth.

[Christian Gisy]

Well, the revenue growth I think has a CAGR -- I showing a CAGR of 32%, obviously with the business becoming a bit more mature, obviously, growth may be a bit slower. But one of the things that you have to have in mind is that it's still a small company. So basically, part of the guides that our operators have 3 months, something like that, out of the business nearly, and that's the reason why they couldn’t probably perform as they would have performed. So the reason I'm so confident on it and why I'm bringing this forward is because we have good insights and we are absolutely happy with basically the growth trajectory of the business overall.

[Unknown Executive]

With the [indiscernible] out of the business, Christian pointed to the fact that the two founders actually did the deal.

[Unknown Analyst]

And how about AutoScout? I mean obviously as the price increases, feed through in Q4, should we see some upside to your margin guidance or have you planned some investments in Q4?

[Christian Gisy]

We have always the same amount of investments across the year and it's not going to change this year. And we are happy to basically reiterate that our guidance will be around 52% and I think after 9 months, we're at 52.3%. So it's around 52%.

[Operator]

The next question is from Fathima-Nizla Naizer of Deutsche Bank.

[Fathima-Nizla Naizer]

The consumer services segment outside of FINANZCHECK, could you tell us what drove the strong 14% organic growth among the 3 subsegments within consumer services? And secondly, on looking I guess ahead of -- beyond Q4 to 2019. At the capital markets day last year, you mentioned the outlook for 2019 is revenue growth in the low to mid-teens. Is that something that you still stand by for 2019? Could we anticipate a bit more color on that?And I guess the last question on VIA product mix within ImmobilienScout. What are the most popular VIA products that agents keep coming back for in the VIA suite and how are the renewal rates for the VIA products that you’ve seen over the quarter?

[Christian Gisy]

So on the consumer services side, if you look in the 3 revenue lines, the ones that have basically grown still very strong in the third quarter was the services revenues with consumers and the third party display. Those have been the lines that we're growing the fastest. Obviously, '19, there is no reason for us at the moment to at any point -- not at the moment. So there is no reason for us to basically change our view on the guidance, which would be low to mid-teens going forward and as every year, we will certainly specify this guidance in March when we will do our annual roadshow on the back of let's say the '18 full year numbers.But again, what we said on the capital markets for '18 is valid and is also valid for '19 because our business is a run rate business. The run rate, as you can see across the quarters, is building. So the '19 guidance is standing.On the VIA side, I think it's right. It's fair to say that there are two products that are working pretty well. The one is the so-called lead engine where we are basically delivering leads to agents as a method of sourcing. And the other one is basically the selling of premium and [indiscernible] and amortizing to agents for them to basically sell and also brand themselves.

[Fathima-Nizla Naizer]

And how were the renewal rates for VIA over the quarter?

[Christian Gisy]

We don't disclose those numbers. We talk about a lot about numbers but we don't disclose renewal rates, et cetera. That's getting too far. Sorry.

[Fathima-Nizla Naizer]

But they're going in the right direction is what we hope to hear.

[Christian Gisy]

Absolutely. Otherwise, you wouldn’t see, let's say, an increase in penetration is one. So it's a combination of [indiscernible] element.

[Operator]

The next question is from Marius Fuhrberg of Warburg Research. Please go ahead.

[Unknown Analyst]

I basically have just one question left, one again on the Bestellerprinzip. You state that in 11 out of 16 for the states, the commission is already split 50-50. When we look at the commission you charge from the agents, do you see any difference in those regions where the commission is already split in those or isn't?

[Christian Gisy]

That's a very good question, Marius. Thank you very much for that because this also helps clarity. No, it does not. So there is no - we are tapping in the pool of -- in the commission pool of agents in the same amount and whether it's 5 states or whether it's in 11 states.

[Operator]

The last question is from Andrew Ross of Barclays.

[Andrew Geoffrey Ross, Research Analyst]

Last one. You'll be pleased to hear not on Bestellerprinzip. It's about online agents and I guess most rated by [indiscernible] investing into Home Day. Can you tell us how big online agents are as a percentage of your listings today? How fast that has grown or is growing? Point 3, how are you monetizing online agents. And then I guess also be interested just in wider comments on Axel being invested both into Home Day and also [ Tilly ] into Immowelt.

[Christian Gisy]

So I cannot comment basically on [indiscernible] because they will have a certain acquisition and also business strategy that basically will tell them that investment in Purplebricks and/or Home Day and others may be the right way to go. We are very much focused on the consumer so that's the reason why probably we would not do transactions like this because we are not trying to basically get into competition with our customers first.But I can't comment on it because as I said, I mean different companies have different basically strategies as how they believe they can conquer the market. In terms of penetration on listings, I can't really tell you. I know roughly basically what those guys are spending with us per month, which is quite a nice number in the meantime. But I can't tell you really how much listings we're talking about. It can't be that much because they're still -- all of those guys, whether they're called Home Day, whether they're called [ Der Mich Markler ] and others are still very, very small.And I know that they are claiming that they are basically moving up and growing fastly. Maybe the case but we're not seeing that really. I mean they're a client of ours and we're making good money with them. And we're happy to basically service them as other agents as well. But I can't really tell you how much these things they will have [indiscernible]. But certainly, I think that we would realize it.

[Andrew Geoffrey Ross, Research Analyst]

Thanks. And just as a follow-up on that, the pricing you're giving for those online agents, should we just think of it as being reflective of kind of the average age on the platform or more or less? Any different in terms of your pricing?

[Christian Gisy]

Absolutely. There is absolutely no reason for us to basically discount or be beneficial to those guys. They are -- to us, whether it's a guy that has an office on High Street or not, we couldn’t care less. For us, it's an agent. We have a clear defined price strategy and basically, those guys have to buy into it. Otherwise, they need to go somewhere else.

[Operator]

We have no further questions. I'll hand back for closing remarks.

[Christian Gisy]

Thank you very much, Laura. Thank you very much. I think that was the most intense call I've had in the last 3 years with a lot of questions but thank you very much. A lot of good questions. I know that Bestellerprinzip is obviously shaking all of you guys and obviously, it's also something that we're looking into. But rest assured, we are very much and very well prepared for this. And we didn't prepare on purpose for the Bestellerprinzip, but the way how we drive the business is exactly fitting to this.So I think I'm very thankful for the open questions and we have been trying to be as open as we can and give you a clear understanding of how we're dealing with that. So thank you very much. Thank you very much for the person that supported me in the room and looking forward to see a couple of you either in Barcelona in 2 weeks' time or talk to you in March latest. Thank you. Bye-bye.

[Operator]

Thank you. Ladies and gentlemen, thank you all for attending. This call has been concluded. You may now disconnect.