Scout24 SE

XETRA:G24

Earnings Call Transcript 2019-Q3

[Operator]

Dear ladies and gentlemen, welcome to the analyst call of Scout24 AG regarding the presentation of the Q3 results 2019. At our customers' request, this conference will be recorded. [Operator Instructions] May I now hand you over to Ursula Querette, who will lead you through this conference. Please go ahead, madam.

[Ursula Querette]

Welcome everyone to Scout24's Q3 call. Let me quickly introduce myself to those I have not yet met or spoken to over the phone. My name is Ursula Querette, and I took over the role as Head of Investor Relations from Britta at the beginning of September. I know Scout24 since the IPO, where I advised the company as a consultant.I have Tobias Hartmann, our CEO; and Dirk Schmelzer, our CFO, with me on this call. Dirk will guide you through the 9 months presentation, and both Tobias and Dirk will be taking your questions afterwards. Dirk, the floor is yours.

[Dirk Schmelzer, CFO & Member of Executive Board]

Thank you very much, Ursula, and good afternoon to everybody on the call. So let's start with Page 3 of the presentation and the top down view on the group.Overall, we are very satisfied with our revenue and earnings performance on group level, maintaining confidence to reach group guidance for the full year 2019. On a like-for-like basis, our revenues grew by 12.7% to EUR 456.3 million in the first 9 months of the year. This is fully in line with our target range of a growth rate in the low to mid-teen percentage range.The reported revenue growth was at 18.3%, therefore, exceeding our guidance of 15% to 17%. Our ordinary operating EBITDA came in at EUR 236.4 million. The resulting margin of 51.8% is also on track to reach the target corridor for the full year 2019, which was set between 52% and 54%.Cash contribution rose by 16.6% like-for-like, with a cash conversion rate of 92.6% for the 9 months of 2019 despite increased CapEx in Q3.Now please move to the quarterly performance on the next slide. Let us take a closer look at our performance from July to September this year. We continued to see healthy low teens revenue growth and margin expansion across the group. As we will elaborate on the next pages, we saw slightly decelerating revenue dynamics at ImmoScout and Consumer Services. AutoScout, however, continues to be in excellent shape and can therefore offset the developments of the other 2 verticals.Please note that the reported numbers shown here only include FINANZCHECK for 1 month in 2018, but do not include Classmarkets and AutoScott Spain for the whole Q3 2018 period. And hence, I will concentrate on the like-for-like comparison as they give you a better sense of the trajectory of our business.External group revenue increased by 11% to EUR 155.6 million and the ordinary operating EBITDA increased by 12.6% to EUR 82.5 million in the third quarter of 2019. Thanks to our positive operating leverage, this is disproportionately higher than the comparable revenue growth. The ordinary operating EBITDA margin consequently increased from 52.3% to 53%.Group cash contribution was 6% like-for-like up. Cash conversion rate stood at roughly 92% versus 93.3% last year. As I said before, this slight decrease is due to an increased CapEx in the ordinary course of business during the last quarter.Coming to the next page, 5, let us now take a closer look at the development in the segments and start with ImmoScout. The external revenue in the ImmoScout24 segment grew by 8.7% like-for-like to EUR 68.5 million in the third quarter of 2019.To recap, like-for-like means here that 2018 we do not take into account Classmarkets' revenue contribution from 2018. The strongest growth driver was the business with residential real estate partners, which grew steady and increasingly over the 3 quarters of 2019. As we mentioned already in our 1 year -- half year trading update, thanks to our tailored product offerings paired with an enhanced sales approach focusing on the return of invest of the agents, we have been able to partner with a growing number of residential real estate agents since mid of 2017.Revenue growth from business real estate partners still is growing nicely at around about 12%. In particular, project developers and new home builders slightly decelerated in Q3, and hence, overall growth was at 9.2% in the respective quarter. Here we see both an effect from regulatory uncertainty, and in general, more tense market environments.As you might recall, there is an uncertainty in Germany around Mietpreisbremse, which is a ceiling put by the government on rental increases in the German rental market.In the private PPA field, we are facing increased competition on listings, but having said that, our leadership position remains uncontested. Overall, listing share compared to the next competitor still stands at 1.9x at the end of September.The on top revenue growth share in ImmoScout24 increased by 15.2% or 2 percentage points to 32.1%. In particular, the increasing acceptance of our realtor lead engine product contributed to this growth.Let me illustrate this a little bit more. Around 17,000 -- 16,000 homeowners have been connected with 25,000 real estate agents in the first 9 months of this year. Now this translates into real estate lead engine revenues of EUR 7.5 million that is 163% up year-on-year.In quarter 3 2019 only, the realtor lead engine revenues were at EUR 3.2 million and thus tripling year-on-year. The main driver behind this steep revenue increase is: besides the increased popularity of the product, that we changed our pricing model from a flat per lead model to a dynamic pricing model based on the property value. This shows that we are able to customize products to our consumer and customer needs also in a sellers' market environment. This fully represents our strategic path to cater for the changing needs of the homeowners, realtors and home seekers.Thanks to our high cost efficiency, ordinary operating EBITDA has increased by 13.9% year-on-year to EUR 48.1 million in Q3. The ordinary operating EBITDA margin therefore reached 70.2%.Due to the lower growth momentum, we assume that ImmoScout will only reach the lower end of the communicated revenue target for 2019. But regarding the ordinary operating margin, we still remain to be close to 70% as Q3 has already shown.Although a majority of you will be familiar with the next topic on Slide 6, let me brief you -- briefly give you an update on what has happened over the past few months on the upcoming regulatory change for German real estate sales transactions, the famous Bestellerprinzip.So where do we stand now? Today, either the buyer pays the full agent fee, which can be as high as 7.14%, including value-added tax, or the buyer and seller split the fee 50-50 amongst them. The split solution is already market practice in 11 out of 16 federal states in Germany. The 5 states where this does not yet apply are Berlin, Brandenburg, Bremen, Hesse and Hamburg.The Grand Coalition has now reached the agreement that the 50-50 split solution will become federal law in all 16 states, and thus, we expect this new law to take effect 1st of January 2020, with a transition period of 6 months. So we are now seeing much clearer what we and our real estate agent customers will be faced with. Medium to long term, we do not expect a significant change in the overall market dynamics and in our business model. Short term, we might be impacted by an increased uncertainty of the agents and consumers, and consequently, holding back marketing spend. But we would be surprised if this would materialize in more than mid to high single digit revenue numbers next year.I'm confident that we will have a few Q&As around this later on, but, first, let's move to Page 7 and talk about AutoScout. Once again, please keep in mind that the 2018 numbers you see here are restated for the new disclosure, meaning advertising revenues with OEM partner agencies is now no longer included in the Auto, but in the Consumer Services segment. In addition, the life-for-like comparison does not take into account the contribution of AutoScout Spain in 2018.But that said, AutoScout24 continues to be in excellent shape. The segment is over delivering on growth expectations, and for the first time ever, the margin in the quarter exceeds the 60% mark.In Q3, the external AutoScout revenue increased by 14.6% to EUR 47 million. Both the German and European dealer revenue lines are benefiting from 2 factors: improved monetization, which essentially means ARPU growth; and increasing revenues with on top products. Although the number of dealer partners in Germany continues to slightly decline, year-on-year minus 1.22%, but the number of dealer partners in the European core countries remains largely stable year-on-year. Worth mentioning is the ordinary operating EBITDA, which increased significantly compared to the third quarter of 2018 by 21% to EUR 29 million. This leads to the already mentioned margin of 61.4% between July and September 2019.The AutoScout segment continues to exceed revenue growth expectations for the full year. The same applies to the 9 months' ordinary operating EBITDA margin of 57.9%. We therefore assume that AutoScout will at least reach the upper end of the annual forecast or even exceed in terms of both revenues and EBITDA margin.Now let's move to Page 8 and take a closer look at the performance of Consumer Services. Although we announced that the underlying business activities will be folded back into our 2 core verticals from next year on, we still regard this as a separate segment for this year. Please note that the 2018 figures include revenues with OEM agencies, which were previously reported within AutoScout. In addition, in our like--like comparison, we assume that FINANZCHECK had been part of the Scout24 group since 1st of January 2018.The segment generated external revenues of EUR 39.8 million in the third quarter 2019, 11% up like-for-like on third quarter '18. The service revenue line contributed very strongly to this growth. One reason being the continued success of our premium membership product. Revenues from finance partners, however, increased slower than expected.Compared to the same quarter in the prior year, third-party display revenues declined slightly by 2.5% due to the slowing market and economic conditions, but are up 5% year-on-year. As expected and taking into account the weaker display in financing business, the segment's ordinary operating EBITDA was at EUR 9.5 million, which represents a like-for-like decrease of 5.2%. The ordinary operating EBITDA margin was at 23.8% in the third quarter compared to a like-for-like margin of 27.8% in the year before.We therefore assume that Consumer Services will only reach the lower end of the revenue target for 2019 financial year. And due to the above mentioned effects such as the decline in display advertising, slower growth in revenues with finance partners and increased marketing expenses, we now forecast an ordinary operating EBITDA margin in the lower to mid-20s percentage range for this year.Now having talked about the 3 segments, let me now talk about cost and move on to Page 9. Our ordinary operating cost increased on a reported basis by around 28% year-over-year, largely driven by the consolidation of FINANZCHECK. Organically and like-for-like, the cost base relatively decreased, contributing to an overall like-for-like margin increase.Overall, the cost increase was largely driven by higher marketing spend to support new product launches, revenue related selling cost, salary adjustments on personnel costs as well as an increase in IT cost due to the ongoing migration of our data centers into the cloud.Now please turn with me to Page 10, and some notes around below EBITDA and non-operating items. Our non-operating costs in the first 9 months 2019 increased by EUR 25 million to EUR 43 million. The increase is mainly due to higher personnel cost related to share-based compensation and M&A related cost from the first half of this year.The share-based compensation is a noncash item and mainly explains why the reported EBITDA of EUR 109.34 million for the first 9 months of 2019 is down 1.3% year-on-year. The decrease in reported EPS by 15.8% mainly stems from the above mentioned higher operating cost; higher finance cost, especially from higher interest payments, that is also partly due to the share buyback we did; and from a lower finance income. In 2018, to recall, finance income included a gain from derivative instruments of EUR 7.6 million.However, adjusted for nonrecurring items and purchase price location items, the 9 months EPS increased by 11.2% year-over-year. And keep in mind that the 2019 EPS is calculated on a total number of 107,534,824 shares, which is 65,000 shares less than the year before due to the share buyback program.Now over to Page 11. Cash and cash equivalents amounted to EUR 103 million as of 30th of September. This compared to EUR 61.5 million as of 30th September 2018. Our net financial debt stood at EUR 751.7 million compared to EUR 795.8 million as of September 30, '18, and the changes we saw over that period are mainly attributable to the dividend payment in Q3 2019, where we paid EUR 69 million to our shareholders. In addition, EUR 52 million were spent on the first tranche of the share buyback program until September 30th. And to finance dividend payment and the share buyback, we drew another EUR 100 million from the recurring credit facility #2 in the third quarter 2019. Our leverage ratio stood at 2.39 as of September 30.Now let me double click on the share buyback before I come to the full year guidance and move to Page 12 of the presentation. On July 19, 2019, we announced the implementation of a share buyback program of up to EUR 300 million, reflecting the authorization of our General Meeting that allowed for a maximum of 10% of the share capital to be bought back.Based on the share price at that time, EUR 300 million corresponded to about 5.6% of the share capital. The initiated program can be implemented in multiple tranches over a maximum period of 12 months until September 1, 2020.We started the first tranche of the share buyback with a volume of EUR 150 million on September 2. Given current volumes, which are traded subject to market of use regulation, it will end at the earliest on November 11 and at the latest on January 31, 2020.The overview on this slide shows the weekly development of the share buyback program until 1st of November 2019. As of that date, we have purchased a total number of 1,557,652 shares and have therefore returned EUR 80.5 million to our shareholders as outlined before.So now before we come to the Q&A, let me finish with our outlook for 2019. We confirm guidance, but expect ordinary operating EBITDA and revenue both come in at the lower end of the range.Thank you very much. And now your questions please.

[Operator]

[Operator Instructions] And the first question received is from Marcus Diebel from JPMorgan.

[Marcus Diebel, Research Analyst]

Three questions please. I mean one is on the dynamic pricing model. More -- maybe higher level. I mean clearly house prices and your ARPA growth haven't been growing in line. And can you give us maybe a magnitude how you see the benefits evolving over the next couple of years? What is really the ARPA upside in ImmobilienScout?Then secondly, could you give us a bit more comments on the weakness in Consumer Services? I'm still not fully clear what happened after your comments.And then maybe last question back on Bestellerprinzip. I mean clearly you said no major impact on your business. Could you elaborate a bit more what you think will happen? I mean what are the levels where commission rates will go down? Where do you think they will settle in the future? What is the industry talk in this regard? It will be interesting.

[Dirk Schmelzer, CFO & Member of Executive Board]

So let me start off with the pricing model and housing ARPA upside. That's a difficult one, of course. Still we believe that we today catch the lower end of the real estate agents' marketing spend, and therefore, we still continue to believe that there is an ARPA upside in the future. But as you've heard and what I outlined earlier on is that a growing amount of the ARPA upside that we're seeing is coming from additional products like the lead engine that we have put into place a year ago, which is driving our ARPA upside very successfully, and we now make up around 30% of our overall revenues with additional products, and we continue for that to increase.On the ARPA upside, overall we saw ARPA -- one single digit growth rate on ARPA in both residential and business and have no reason to assume that this will end over the next period.Coming to your second question on the weakness on Consumer Services, I think it appears quite clear from the numbers one piece of that is due to the weakness of the display ad market. And if you have followed what has been going on over the past weeks in the -- especially in the auto segment and the OEM segment, you can as well read from that, that a large number of automotive operators have cut back their ad spend especially on digital ads, and that went up to 27% as far as we know from the Nielsen reports we are seeing year-on-year.So with that down 27%, we are still quite happy with our performance of 5% plus year-on-year in that segment. And therefore, we believe that we are still a very attractive partner for the automotive industry in total. But as I said earlier on, our expectations for the third and fourth quarter were a bit higher. But nonetheless, I think especially our performance versus peers in this area shows that we are a good mixture between digital ad, on the one hand, and performance marketing, on the other hand, for our digital ad partners.Coming to the second piece in Consumer Services, that is out of question the performance of FINANZCHECK, which has been seeing a very tough Q3. And we are coming out of a tough Q3 with a good October that we're seeing in the business. But as I said in the half year 1 call this year, we have implemented GDPR rulings on the platform and we have done some AB testing on the platform over the course of the third quarter. We have done some increases -- some enhancement on the technical platform of FINANZCHECK. So we are seeing the first upsides on that.Also when it comes to traffic acquisition, we are seeing more [ real ] traffic on the platform over the course of the fourth quarter. However, in the third quarter, we had to attract more traffic via VIA spend, which had an adverse impact on the margin as you can imagine, and we saw slower revenue growth due to the increased competition in that area.On the third one, the Bestellerprinzip. I still and we still believe that this will have no major impact on the business and will not have any impact on our long term opportunity in the market, and therefore, we are -- I wouldn't say relaxed, but at least to the mid to long-term quite relaxed when it comes to Bestellerprinzip.We don't see a depression of the overall agency fees. And that's why we believe we can still grab a large part of the agents' marketing spend and share over the next years. What I outlined was a little bit of an insecurity. I mean changes in law always cause insecurities in the market and we cannot rule out some of our agent partners might hold back some marketing spend over the next few months. But we believe that this will phase out latest by the end of 2020.

[Operator]

And the next question received is from Marius Fuhrberg from Warburg Research.

[Marius Fuhrberg, Analyst]

I have basically for 2 topics. The first one is on ImmoScout. Now that Springer belongs to KKR and took over Immowelt completely, I see -- or I believe that there might be much fiercer competition in the real estate classifieds market. What is your expectation how this will affect the number of your customers, your revenue and also your EBITDA development?And the second question is again on FINANZCHECK maybe. It appears that the financing -- or private financing market is much -- or largely driven by marketing expenses. Do you agree on this? Or do you see any other way to increase the demand for FINANZCHECK? And furthermore, how is the conversion from ImmoScout and AutoScout to FINANZCHECK developing? Or -- are you happy with this or do you see any room for improvement there?

[Tobias Hartmann, CEO & Chairman of Management Board]

I'll take the first one. This is Toby on the IS24 and your question around the competition given the fact that one of our competitors has teamed up with a new owner. What we know is that we have a very strong product portfolio, as Dirk explained earlier. The realtor lead engine is just one of the few examples that has cutting edge competitive advantage in the market. It is tested. It is rolled out. And our customers are more and more understanding the great value that we are providing.In other words, we could also call it we are moving from a digital classified platform more into a digital farming step by step, i.e., we are helping in building the potential secret sauce to help realtors to create their future revenue line and their profit. And that is a key position that we embarked on and that we worked on given our product and solution portfolio. So we believe we'll concentrate on that. We're very confident. And we think that also Bestellerprinzip medium and long term will actually help us drive even a clearer position between the #1 and any other #2s or #3s in the market.Second question, I'll hand over to Dirk regarding the FINANZCHECK.

[Dirk Schmelzer, CFO & Member of Executive Board]

Yes. To your point on FINANZCHECK, let me say 2 things. The fundamentals of the business model of consumer loans in Germany are attracting customers, because basically a customer becomes profitable and significantly profitable with the second loan he is then booking over the platform. And that's the reason why you start attracting customers at a first instance and you try to build up customer cohorts in the first instance, which, after 2 to 3 years, then become more profitable.And this is exactly the way we are following with FINANZCHECK. Yes, there are a few ups and downs. There's increased competition in the market. There might be some changes on advertising spends in performance marketing and VIA, but overall I think we're following a very clear path with FINANZCHECK, and that might change from quarter-to-quarter, but not materially. I think overall we're on the right track to attract the right consumer cohorts for FINANZCHECK and to grow the business in the future.

[Operator]

The next question received is from William Packer from Exane.

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

Firstly, could you comment on the recent pricing round at AutoScout24, speaking to dealers, the various trade press reports? So it sounds like it's been another very favorable pricing round for the automotive classified businesses in Germany in the region of 20% or so. Therefore, can we -- could you comment on that? And is consensus organic growth there for AutoScout next year about 12% too low?Secondly, could you comment in a bit more detail around the short-term headwinds from Bestellerprinzip? I may have misheard on the call, but did you talk to low to high -- sorry, mid to high revenue growth for next year? Consensus is 9%. Should we, therefore, be a little more cautious for next year?And then just finally on FINANZCHECK. Could you update us as to how the model utilizing the dealer is progressing? Obviously, you have a very successful consumer-facing business, but there was discussions in previous calls around a partnership with the dealers. Could we just have an update as to how that's progressing?

[Dirk Schmelzer, CFO & Member of Executive Board]

I start off with the pricing rounds. The way we look at this business is: Can we add value to our dealer partners and to what extent can that be reflected in future price increases? But I can confirm, and this is once again a good sign for the business, that we managed to increase our prices, and hence, our ARPU with the dealers in Germany significantly. And we also managed to keep churn in line and even better than expected.And that's why I said in the statements that you heard from me in the beginning of the call that we are sort of phasing out the dealer churn that we saw in Q2 and in Q1 slightly, especially with regards to TruckScout. But price elasticity seems to be quite in our favor at that end, and therefore, we don't see a significant dealer churn, and therefore, are sort of in line with future price increase rounds that we are seeing. But we always will orientate ourselves with regards to the value-add we can give to the dealer to that extent.Your second comment on the Bestellerprinzip. As I said earlier on, yes, medium to long term, we are quite relaxed; and when I say relaxed, I mean relaxed. In the short term, as I said, there is an uncertainty. Any change in law creates an uncertainty in a market. And that's why we would be -- and that's the way I put it in my earlier statement: we would be surprised if we see a impact of high single digit million revenue here in the next year. We rather expect a mid single-digit revenue impact, if at all. But that's very much depending on the insecurity of the agents we are seeing.

[Tobias Hartmann, CEO & Chairman of Management Board]

Will, this is Toby regarding your third question on the FINANZCHECK integration with dealers. We made great progress also aligning and bring the 2 organizations closer together since we took the decision to align it even closer with the auto world. We view this clearly as an on top product that should be an additional value that we can provide as a value creating model for our dealers.We are in the process of extending the offer to Europe and making it available also for the European countries and make this an integrated part of the listings offer to the dealers. So it's become an integrated part and it should be part of the future value that we're providing to those dealers.

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

Just to come back and just to really get clear in my mind as to the headwind from Bestellerprinzip for FY'20 IS24, you're talking about a EUR 5 million headwind versus what the underlying growth would be for the business. Is that a fair summary?

[Dirk Schmelzer, CFO & Member of Executive Board]

That's okay.

[Operator]

And the next question is from Craig Abbott from Kepler Cheuvreux.

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

My first question on Consumer Services, I have now modified it a little bit. Initially, I was going to ask why there was such a significant negative operational leverage effect from just a 2.5% slip in display and sales, which only account for about a 1/3 of that division sales. But now it sounds a bit more like it was more a combination with also the cost factors that you just told us about a few moments ago in FINANZCHECK.And I just wondered if you could elaborate a little bit more on that. Is kind it kind of a fairly even split between the 2 factors? You've told us a little bit about how you're seeing trends turn up a little bit on the FINANZCHECK side. I just wondered if you can maybe give us a feel for how you're responding on the display side and have you seen further deterioration in Q4?And my second question. Just turning over to ImmoScout, your residential segment, all the growth metrics remain very solid. But I just wondered if you have any concerns over the next couple of quarters if the macro environment continues to slow, if we assume it continues to slow, whether you might be concerned about the residential segment also showing some signs of slowing growth going forward?

[Dirk Schmelzer, CFO & Member of Executive Board]

Okay, Craig. I think I'll start with the first one. You wanted a little bit more light on the FINANZCHECK details.

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

No, and display as well as. The negative operational leverage impact, yes.

[Dirk Schmelzer, CFO & Member of Executive Board]

I haven't finished my sentence.

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

Sorry, sorry. Apologies.

[Dirk Schmelzer, CFO & Member of Executive Board]

So on -- what you see on FINANZCHECK is 2 cost lines basically growing. First one is marketing spend. And that's mainly VIA spend on global performance marketing. And the second is -- that you see is personnel cost. But in this context, that is more Customer Service. Because personnel cost in FINANZCHECK is very much contributing to the conversion of the offer that we receive from the customer before we hand it over to the bank. And that's why we decided to invest a little bit more into that area. And those are basically the 2 drivers behind the FINANZCHECK performance that we are seeing.In total, and I reiterate what I said earlier on, the business model of FINANZCHECK is mainly based on the fact that we attract consumer cohorts and that we get them profitable over the second or the third loan that they buy through our platform. And you have to keep that in mind when you look at the long term performance of the business, which we still remain very optimistic about.Then you were elaborating on ad spend. Ad spend is, as I've said, 27% down in the automotive industry year-on-year 9 months 2019. And I have to say 5% up for us in AutoScout and on our display business and we are quite happy with that. But needless to say that when we entered the year, we had slightly higher plans on that. And that is basically the reasoning why we are looking at this at the moment. Is it still a good sign for us that we still remain on the growth path for the first 9 months and only slightly decrease in Q3? Yes, that's still a good sign against an industry that's decreasing by 27%.

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

The residential segment question?

[Tobias Hartmann, CEO & Chairman of Management Board]

Craig, this is Toby. On the residential segment, we don't see any macro environment issues or concerns that we currently have. As you saw from the numbers that we reported, we are very close to the market. We have a very stable base there. And we have a really exciting product solution suite that is appreciated and that is more and more used and understood how to make a difference out in the market. So we don't see any macro trends that should be of concern.

[Operator]

And we go on with Chris Johnen from HSBC.

[Christopher Johnen, Analyst]

I'd like to do them one by one if possible. First could you talk a little bit about competition? I mean you're mentioning headwinds on private listings I assume with general classifieds being mentioned to this eBay Kleinanzeigen. Maybe you could start with a couple of comments on how you see that part -- or how you seen that business -- that part of the business developing in Q3 and how that has entered into Q4?

[Dirk Schmelzer, CFO & Member of Executive Board]

Yes, let me -- let me briefly state on that. Yes, there is an increasing competition from eBay Kleinanzeigen. But to be very clear on this, this competition is more on the listing side than on the agent side. And what we see is a growing amount of listings of rental agreements below EUR 400 and real estate sales below EUR 200,000 which are posted on eBay Kleinanzeigen.We still remain the market leader in overall listings and we still remain the market leader in what I would call the relevant upper end of the market. And that's why we believe that this is not sort of giving us any headaches over the next years. But what we believe is that we need to maintain our overall listing leadership, and that's why we believe we will need to change some of our pricing structure with regards to that. But that will be in the course of the first quarter 2020 to gain back momentum here on the private PPA listings. But as I've said, we're still continuing with our real estate agent customers to grow very, very healthy and the lower end of the market will be in our focus in Q1 2020.

[Christopher Johnen, Analyst]

Okay. That's clear. Second question sort, well, of related to the Bestellerprinzip. I mean maybe you could talk, knowing everything that you've just said before, how you are approaching pricing in the current renewals that you have with agents? Any sort of color on push back on pricing, your strategy would be appreciated.

[Dirk Schmelzer, CFO & Member of Executive Board]

For competition reasons, we won't comment on our pricing strategy with regards to Bestellerprinzip, and I'm sure you can understand that. But as I outlined earlier on, I think we will manage -- and I wouldn't even call it a bumpy road, but we will manage the first few months of the implementation of the Bestellerprinzip quite nicely.

[Tobias Hartmann, CEO & Chairman of Management Board]

Chris, this is Toby. Maybe to add on that. We've started rolling out localized campaigns also to really make a statement that we are side by side with our partners, with the real estate partners out there. It's called -- the campaign is called [ Gamaemiarizen ]. And we're seeing very good results there and it's a part of our rollout plan also for 2020.

[Christopher Johnen, Analyst]

Okay. That's clear. Then you talked about the pricing in -- at AS24 in Germany. Could you confirm that you've also seen your competitors at 1st of November increase prices by as much as 18%? And then second question related to that, maybe you could also talk about your own pricing on the current rate cards in the other European countries?

[Dirk Schmelzer, CFO & Member of Executive Board]

Chris, this once again Dirk. We cannot comment on pricing by our competitors, and I guess you're point at mobile.de. We are looking at the market and our prices are reflecting the market and the ongoing competition. And I can confirm that we also managed to increase ARPU in the other European countries, in -- depending on whether it's Italy, Netherlands, Belgium, but roughly in the same amount that we managed to increase ARPU in Germany.

[Operator]

And we go on with Andrew Ross from Barclays.

[Andrew Geoffrey Ross, Research Analyst]

And I've got 3 questions as well. First one on -- can you give us an update on the AutoScout sales process just in terms of timing or anything else you can say? And I guess the second question is an extension to that. I mean what we're seeing today I guess is very strong AutoScout, a few incremental headwinds in ImmoScout, and therefore, perhaps the benefits of diversification is showing through. So wondering if at all it changes your thinking about whether it is actually the right thing to do to sell AutoScout.And then the other question is back on display within autos. I don't quite understand what it is that makes you think your display line isn't going to start decelerating much more quickly. If your overall market is down 27%, you guys are weathering that now, but why at some point next year will your display line not start to decline quite materially?

[Dirk Schmelzer, CFO & Member of Executive Board]

I'll take the first one, Andrew. No, we will not comment. That was easy. On your last point with regards to auto and why our display ads will not decrease as the market is decreasing. As I said earlier on, there is a slight mixture between performance marketing, on the one hand, and brand advertising, on the other hand. And when you look at the AutoScout platform across Europe, we provide a very good means for display ads -- for all advertisers basically to put ads onto our platform because these ads are very targeted.So if you are running in an advertising agency or you are an OEM, you are focusing on very, very targeted ad campaigns. And that's why we believe we can deal with the headwinds here.

[Tobias Hartmann, CEO & Chairman of Management Board]

And this is Toby. Just to add, Andrew, on the question around the AS process. We stand by what we shared earlier, which is we are exploring and we're evaluating various options, and a potential sale is only one of the options that we are exploring. And we intend to provide an update on the overall process during our Capital Markets Day.

[Operator]

And the next question received is from Patricia Pare from UBS.

[Patricia Pare, Associate Analyst]

My first question is on VR revenues. What is the split actually between residential and business partners and is growth driven by both type of customers?My second question is also on property. I know in the past you talked about trying to lock in customers into 3-year contracts. Could you provide an update maybe on the percentage of your customers or revenues that are based on those 3-year contracts versus shorter term contracts?And then my last question is on FINANZCHECK. Given the recent investment in marketing, are you still on track to reach the breakeven guidance that you provided by the end of 2020?

[Dirk Schmelzer, CFO & Member of Executive Board]

I take the first one. So if I recall your question, it was whether growth was driven by both parts of the business. Yes, I can confirm that listings are increasing. Our listing gap is maintaining through the next competition, and that's why visits and unique users on our platform are still healthy and also increase.And on the customer side, I elaborated earlier on that we managed to have some slight value-added price increases on the real estate agent side, which also is a good sign with regards to growth. And I also said that residential partners are increasing in growth from quarter-to-quarter. And therefore, I can confirm that growth is driven by both ends of the market as it should be in a network business.Your second question was on whether we are progressing with 3-year contracts. It is not our intention to lock in our customers over 3 years and we continue to believe that this would not be the right way. We continue to believe that our customers, although we are offering them a subscription-based model, our customers come on to our platform because we offer a certain value to them. And we have shown over the past decades that this value is good for our customers. And that's why we are not following a strategy of 3-year contracts.And the last one was on FINANZCHECK and whether we can -- and we maintain guidance that this business will be profitable in 2020. Given what we sort of commented earlier on, I would like to point you to our Capital Markets Day, where we give a bit more flavor and shed a little bit more light on growth and profitability over the next year also on that business. But as Toby said earlier on -- I mean it is possible to make the business profitable. The question is just will the business be valuable after we made it profitable. And this will be something we will elaborate more deeply on the Capital Markets Day.

[Operator]

And the next question received is from Nizla Naizer from Deutsche Bank.

[Fathima-Nizla Naizer]

I just have 3 questions from my end as well. The first is on revenue from business partners. You mentioned there was a deceleration in Q3. Would that continue over the next few quarters based on what you're seeing on the ground and the rent cap that from what we understand is in Berlin now? But do you see a risk of it being implemented in other German cities as well? Some color on that would be great. The second question is on your service revenue within Consumer Services. Could you give us an update on the subscription product and how many subscribers you currently have on the platform and whether you're satisfied with the renewal rate? Some color on that value-added product to the consumers would be great.My last question is more a top down query I guess. With Bestellerprinzip in mind, if you look at your agent customers' P&L at the moment, how much in Germany is being spent on digital marketing and online classifieds, when you look at their own P&L? And do you think that share can increase as you go off to more -- better monetization of those agents? Some color there would be great.

[Dirk Schmelzer, CFO & Member of Executive Board]

Let me start off with the revenue from business partners. I mean what you have to keep in mind that we're still roughly growing 10% in that business. And what I was talking about was a deceleration of growth. And we have been seeing pretty solid growth rates in Q1 and Q3. We don't think that this business will decelerate to a certain extent further, because the development of new real estate in Germany will still be on the top of the agenda of regulators, politicians, consumers and of course also real estate agents.And we also think that a part of the revenue line is new home builders and those new home builders will also continue to do business with us. And therefore, we don't think it's an onward and ongoing trend. What we're seeing here: we see a slight bump here, but we don't see that this will impact us in the medium to long term.

[Tobias Hartmann, CEO & Chairman of Management Board]

This is Toby. Regarding your second question on the service revenue on the subscription business, we have currently approximately 80,000 subscribers. We are very happy with that result and we are very confident we can grow this business along the lines of the consumer journey and the experience. And we have a very exciting product pipeline coming up, including also some learnings on what makes renewals and uptakes work.Your last question on digital marketing and how much is spent there. I think it's a fantastic question because that is fully in line with our intended strategy for ImmoScout. Just to be clear, there is approximately EUR 700 million just on marketing spend that agents currently spend that we are just touching upon so far. That will be scrutinized even more so in the future, because, as we mentioned earlier, so far there's a wide belief still that it's the best spent marketing euro, to spend it somewhere with Google or in some other means.But our marketing suite provides in the future for digital farming, i.e., we are helping agents to get to their new mandate as part of the ecosystem that we are building. So it's an excellent question because it ties into the strategy that we are pursuing. And you'll hear more about that at our Capital Markets Day, which then obviously we'll also share guidance for 2020.

[Operator]

And the next question received is from [ Ryan Bodolsky ].

[Unknown Analyst]

So I have 3 question mostly revolving around AutoScout. The first one is last quarter you reported half year ARPU increase in Germany by 45%. Could you give us a sense of roughly how much of that was like-for-like price increases versus upselling due to added services and the third part, which is probably churning lower paying customers?The second one was related to that and similar to the question that was asked just earlier on the Immo business. How much marketing spend are dealers now like concentrating for these online platform and how much room do you think ARPU can grow further?And the third one. I understand there's limited disclosure about competitive dynamics, but yesterday CarGurus also reported a 98% revenue increase in their international business. So that's probably mainly the U.K. But do you see them moving into Germany and how could that impact the competitive landscape in the future?

[Tobias Hartmann, CEO & Chairman of Management Board]

Regarding your first question on auto, we don't break out the various components and levers between churn and price increase and puts and takes. Overall, we're happy to reiterate what we stated before. We're doing a really, really good job in preventing churn to the extent that we can. We've got better there. We've got much, much better data, intelligence and insights also working with our sales and field network.Number 2, the price increase that we've just recently implemented, as Dirk mentioned earlier, has gone well so far. So there's a clear value that we are providing and it's accepted and it's perceived as a clear value-add.Your next question on ARPU growth. I think it's amazing to see that we still compare to some international benchmarks at a very low average take rate. That shows you how much headroom we have still to grow particularly in the international countries, but also in Germany, where we are the #2, and also assuming that the market leader will keep driving price increases.And the last question on CarGurus. So far we do not see any impact. But having said that, obviously we are very cautious about any competitive moves. We are monitoring it and we are ready to adapt in style and measure as we see anything change out there.

[Operator]

And we received a question from Lisa Yang and his -- her colleague from Goldman Sachs.

[Lisa Yang, Equity Analyst]

I just want to follow up on one of the previous question. And sorry to insist, but why you're looking at starting options for AS24 now given its clearly outperforming expectations, there's scope for further upside. I mean is it because you think it's significantly undervalued? Or you think there could be more investments needed in years to come given all the changes happening in the end market? I mean it will be just be important to understand your strategic thinking behind this.Secondly is about Consumer Services. I mean could you give us some color in terms of how we should think about the split of Consumer Services between AS24 and IS24 and maybe how much of Consumer Service could be included in the existing AS24 review?And lastly on corporate. I mean the losses were higher than expected. Maybe you can comment on what happened in Q3 and how much loss we should now expect on a full year basis?

[Tobias Hartmann, CEO & Chairman of Management Board]

Lisa, it's Toby. I'll start with the first one, why we're looking into the options or evaluating the various scenarios and options for Auto right now. We believe that there's a lot happening in the competitive environment at a macro level when you look out a few years. There's a lot that's been debated whether it's from an OEM standpoint, whether it's from a mobility standpoint. There is operators. There is mobility services. So that's one question that you need to ask yourself about a business and say, "Hey, where do you want to play? When do you think major trends will kick in? And how do you want to position the business in the best and most appropriate way?The second question is how can we create and what's the best opportunity to create the most long-term value for shareholders. And that's why we've decided to undergo that evaluation.But again, having stated that over and over again, we do not have any conclusions yet and we're doing our homework and want to make sure that we see and contemplate everything that's available to then take the right action.

[Dirk Schmelzer, CFO & Member of Executive Board]

Okay. Let me go through your question on the corporate spend first. Just one second -- sorry. On the corporate question. I believe you are referring to Page 15 of our quarterly statement, where you see central group functions/consolidation number. And here you see on the operating EBITDA number EUR 2.9 million in 2018 the third quarter versus EUR 4.2 million in the third quarter 2019.The delta of EUR 1.3 million can be explained first of all by a positive one-off we had in Q3 2018. But of course you're pointing in the right direction here, Lisa. We had some slight increases in personnel cost. There were some increases in consulting. And also smaller increases in marketing spend that we had over the period. And to mention that as well our Annual General Meeting this year was a bit more expensive than last year, to add on that. But that mainly explains the price difference here.

[Lisa Yang, Equity Analyst]

And how should we think about the full year?

[Dirk Schmelzer, CFO & Member of Executive Board]

We don't expect any material changes to what you've seen. Slightly remaining on where we are at the moment.On your question with regards to the split of Consumer Services between Auto and Immo, we believe that around 51% to 52% of Consumer Services both -- mainly revenue will flow into ImmoScout and 49% will flow into AutoScout.

[Lisa Yang, Equity Analyst]

Right. And just to confirm. So that half of the Consumer Services which will flow into AS24, that's also part of the existing review? And FINANZCHECK would be included with the -- mainly within AS24?

[Dirk Schmelzer, CFO & Member of Executive Board]

Confirmed, yes.

[Operator]

As there are no further questions, I hand back to the speakers.

[Ursula Querette]

Thank you very much for joining, and we are looking forward to seeing you at the Capital Markets Day in 3 weeks.

[Operator]

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