Scout24 SE

XETRA:G24

Earnings Call Analysis

Scout24 Adjusts FY2023 Guidance, Prioritizes Profitability

Scout24 has posted a solid third-quarter performance in a tough macroeconomic environment, with revenue growth at 16% year-on-year and organic growth at 10%. The company boasted nearly 22,000 agents by the end of September, underlining its stature as the market leader. Despite a slow transactional market recovery, the ordinary operating EBITDA for both the quarter and the nine-month period grew by 22%, evidencing a careful selection of product mix and stringent cost control, resulting in a remarkable EBITDA margin. Driven by this fiscal prudence, management has updated its full year 2023 guidance, now expecting EBITDA growth of 19-21% (up from 18-19%), with revenue growth anticipated around 14%, slightly lower than the prior forecast of approximately 15%.

A Strong Foundation for Growth and Profitability

Reflecting on the performance in the first nine months of 2020, there is a notable narrative of robust revenue growth and increasing profitability across all three business segments. The Professional segment particularly stands out with an 11.1% revenue boost predominantly led by core memberships and the recent acquisition of Sprengnetter. This segment's surge in growth was coupled with a remarkable 5-percentage point margin climb to 65.3%, indicative of a beneficial product mix and ongoing efficiency advancements. The Private segment didn't lag far behind, recording a 20.3% growth driven by robust demand for Plus products, attributable to favorable rental market dynamics. However, it's important to highlight that marketing investments slightly curbed margin expansion in this area. The Media & Other segment also enjoyed a 7.5% growth, thanks to contributions from its diverse verticals.

Delving Deeper into the Professional Realm

Focusing on the third quarter alone within the Professional segment, revenue notched up by 15.6% year-on-year, including the input from Sprengnetter, while organic growth was pegged at 6.5%. Despite tepid demand in certain lines like seller leads and mortgage, the overall segment experienced solid double-digit growth from core membership products. It's also significant to point out an attractive 10.5% rise in professional ARPU, although pay-per-ad revenues saw a decline, aligning with the company's strategy to nudge customers towards core membership offerings. The EBITDA margin in this segment improved by 3.5 percentage points to 63.7%, remarkably standing at 67% if one were to exclude Sprengnetter.

Prudence in Investment and Operating Costs

The company demonstrated prudent capital strategy and efficiency by reducing capitalized work and managing a slight increase in operating costs despite incorporating around 200 full-time equivalents (FTEs) from Sprengnetter. Personnel and marketing costs have also been wielded with precision, balancing necessary spend against preserving the bottom line. It is this careful balance that has permitted the firm to secure a 22.1% increase in ordinary operating EBITDA for the third quarter.

Financial Fortitude Amidst Market Observations

Taking an overview of the financial health, a 50% reduction in nonoperating effects and a robust rise in both basic and adjusted EPS exemplify the company's strong fiscal standing. This financial fortitude lays the foundation for a confident adjustment to the full-year 2023 financial guidance, albeit in a climate of a slower transactional recovery than anticipated. Specifically, the company raised the consolidated revenue growth forecast to approximately 14% and improved the ordinary operating EBITDA growth outlook to 19%-21%, despite a slightly softer market scenario. What's notable is the sheer effectivity of their operations, which is expected to churn out an ordinary operating EBITDA margin around 59% for the fiscal year.

Outlook and Competitive Positioning

Looking ahead to the remaining quarter of 2023, the company is anticipating enduring strong demand for memberships and private subscriptions, even as it braces for normalized growth in other areas like PPA. The management conveyed unwavering confidence in maintaining a high level of execution, buoyed by the second EBITDA upgrade for the year. As a long-term view, there is a positive sentiment regarding the momentum in the core business and the platform's increasing relevance—setting the stage for healthy revenue growth in 2024 and beyond. In terms of market competition and threats such as those posed by CoStar, the leadership echoed a composed assurance in their unique offerings and data assets, which they believe sets them apart and should fortify them against new competitive pressures.

Earnings Call Transcript 2023-Q3

[Operator]

Ladies and gentlemen, welcome, and thank you for joining the Scout24 SE Q3 2023 Results Call. [Operator Instructions] I would now like to turn the conference over to Filip Lindvall, Vice President, Strategy and Investor Relations. Please go ahead, sir.

[Filip Lindvall, executive]

Good afternoon, everyone, and welcome to Scout24 Third Quarter and 9 Months 2023 Earnings Call. My name is Filip Lindvall and I'm Vice President, Group Strategy and Investor Relations at Scout24. With me on the call today are Tobias Hartmann, our CEO; and Dirk Schmelzer, our CFO. Tobi will kick off the presentation, and Dirk will dive deeper into our third quarter and 9-month 2023 performance. As always, we will conclude the call with a Q&A session. You can find today's presentation on our website under Financial Reports and Presentations. If you are using the web link we provided beforehand, you can follow today's presentation live. This session will be recorded and a replay will be made available as quickly as possible after the event. Please take note of the disclaimer on Page 2. Tobi, now over to you.

[Tobias Hartmann, executive]

Thank you, Filip, and welcome, everyone. Let's go straight to Page 3 of our presentation, and let me summarize the key takeaways from the Q3 and 9-month results. I am pleased to announce that our double-digit growth trajectory continued in the third quarter as well as for the 9-month period in 2023. Our strong results underline the consistent successful execution of our strategy and prove the resilience of our business in a still challenging macro context and evolving real estate market. In addition, we have advanced the integration of Sprengnetter, which expands our digital ecosystem with the aim of simplifying real estate transactions, opening further areas of attractive growth.

Specifically, for the third quarter, including Sprengnetter, revenue growth was 16% year-on-year. Organic revenue growth came in at 10%. The softer growth in the third quarter is due to the tough comparable from last year and is in line with the expectations we communicated during the second quarter earnings call. For the 9 months reported revenue growth was 13% year-on-year with organic growth at 11%. Growth in the third quarter was driven by continued strong demand for agent membership products and plus subscriptions. We are extremely pleased to continue growing our agent base to almost 22,000 by the end of September. In this challenging market, ImmoScout24 remains the #1 go-to marketplace, and we are proud to partner with an ever-increasing agent base with the best products to enable real estate transactions.

Growth of Plus subscribers also reaccelerated nicely in the third quarter. The transactional market remains quite slow. And while we do believe the market has bottomed out, the recovery will be slow and protracted. Consequently, our leads and transactional assets continue to face soft demand. Growth in ordinary operating EBITDA continues to be very strong, driven by a favorable product mix and tight cost control. We generated 22% growth in ordinary operating EBITDA, both for the third quarter and the 9-month period while delivering strong margin expansion. Adjusted EPS reached EUR 1.90 for the first 9 months, growing strongly at 36%. To conclude, I would like to provide an update on our fiscal year 2023 financial guidance.

Based on the strong operating leverage we are seeing in the business in our communicated preference for profitability over revenue growth this year, we are adjusting our full year guidance for fiscal year 2023 as follows: We now expect ordinary operating EBITDA growth in a range of 19% to 21% compared to 18% to 19% previously. We are marginally reducing our pace of revenue growth, steering for circa 14% versus the previously communicated guidance of circa 15%. I would like to point out that this has been a deliberate management decision to drive outsized profitability gains versus chasing incremental revenue growth. We are very pleased to upgrade our EBITDA guidance for the second time this year despite the challenging macro and real estate markets and the slower-than-expected transactional recovery. The upgrade highlights the strong level of operational execution our teams are delivering and the efficiency gains coming out of the organizational update we implemented earlier this year.

Now let's turn our attention to Page 4 of the presentation to look at our third quarter metrics. On a group level, our revenue for the quarter reached EUR 132.8 million, including Sprengnetter, representing 15.7% growth year-on-year. Organic growth was 9.8% for the quarter, driven by continued strong demand for our core products and growth in subscription revenues. Our strong top line growth was partially offset by soft transactional revenues as well as smaller growth contribution from PPA. The ordinary operating EBITDA of the group came in at EUR 78.1 million, up 22.1% year-on-year. The ordinary operating EBITDA margin for the quarter was 58.8%, a strong increase by 3.1 percentage points. Excluding Sprengnetter, the ordinary operating EBITDA margin would have been even stronger at 60.5%.

In the Professional segment, subscription revenues increased by 14.1% to EUR 75.6 million, driven by continued strong membership growth and the consolidation of Sprengnetter. The continuously growing significance of the ImmoScout24 platform for the German real estate market continues to manifest itself through ongoing customer wins. The number of customers grew by 3.3%, bringing the total number to 21,937. Professional ARPU increased by 10.5% to EUR 1,149. In the private segment, subscription revenue growth accelerated compared to the second quarter and grew by 19.7% year-on-year, in line with the expectations we communicated during the Q2 earnings call. The changed subscription tiering, which we implemented in the second quarter has resonated well, and we feel good about the momentum in the business. We ended the quarter with more than 369,000 subscribers.

Turning to Page 5. Let me elaborate briefly on our 9-month results. Group revenues for the first 9 months amounted to EUR 376.6 million, representing growth of 13.3% year-on-year on a reported basis and 11.3% organic. The ordinary operating EBITDA of the group came in at EUR 224.5 million, reflecting a margin of 59.6% and significant ooEBITDA growth of 21.6%. Excluding Sprengnetter, the margin would have been even higher at 60.2%. Within the Professional segment, subscription revenues grew strongly by 11.8%, totaling EUR 216.6 million, driven by membership products and consolidation of Sprengnetter for the third quarter. In the Private segment, subscription revenues grew by 20.0% compared to the previous year, reaching EUR 52.7 million. This growth was a result of a strong performance in the first and third quarters in a slightly softer second quarter as we implemented the changed subscription tiering.

Turning to Page 6 now, which shows an overview of how our value drivers performed for the first 9 months of the year. Our professional membership revenue continues to grow well into double digits driven by pricing and new customer wins. I would like to call out how pleased we are with the continued standout performance in our core business despite the challenging macro and real estate market. Our seller leads business continues to be impacted by the soft transactional market. As we mentioned in the second quarter earnings call, we do believe the market has bottomed out, but at the same time, it is clear that the recovery remains quite slow. Therefore, we do expect the seller leads business to remain under pressure for the rest of the year. And as we have stated previously, we run the business for profitability. Inclusion of parts of Sprengnetter's revenues drives the improved negative growth rate of minus 5.5% for the first 9 months.

Within other revenues, the trends affecting our mortgage business are similar to our sell and leads business. Also here, please note that parts of the Sprengnetter revenues have been included in this line, which is driving the 8.8% growth for the first 9 months. Our unique private subscription business continues to exhibit robust growth, and we are well ahead of CAGR targets as communicated during our Capital Markets Day in 2021. Before I hand it over to Dirk for the financial part, I would like to conclude as follows: As you can take away from the strong results and the upgraded EBITDA guidance, we are very pleased how the company is performing.

While the transactional market clearly is challenging for agents, we believe the market will gradually improve in 2024. While it's too early to talk in detail about 2024, we feel good about the competitive positioning of the company and the multiple growth levers going into 2024. Our growing customer base, leading product portfolio and increased relevance of the IS24 platform for all stakeholders provide a very good basis for continued growth. And with our updated organizational model, we have become more agile and efficient. The tight cost control we have demonstrated so far this year will not be a one-off. You can expect this to become a hallmark of Scout24 going forward. And with that, I'll hand it over to Dirk.

[Dirk Schmelzer, executive]

Thank you, Tobi, and welcome, everyone. On Slide 7, you see the 9-month 2020 year-on-year revenue growth and ordinary operating EBITDA margins for our 3 business segments. We are pleased that all segments continue to grow at healthy rates with increasing profitability. On a group level, we delivered a margin of 59.6% for the first 9 months, while absorbing the dilution from Sprengnetter. This margin step-up highlights the significant efficiency gains we generated earlier this year. The Professional segment grew revenues by 11.1% year-on-year, driven by strong performance in core memberships and inclusion of Sprengnetter. Organic growth stood at 8%. The ordinary operating EBITDA margin improved significantly by 5 percentage points to 65.3%.

This improvement is due to our favorable product mix and continuous efficiency improvements in our seller leads and mortgage business. In the Private segment, we continued to witness strong demand for Plus products driven by the rental market conditions. This resulted in a 20.3% increase in revenues. Ordinary operating EBITDA margin for the private segment increased by 0.9 percentage points to 51.2%. Margin expansion in the third quarter was lower as we decided to invest into marketing campaigns to drive growth. The Media & Other segment experienced a 7.5% increase in revenues. This growth was driven by all 3 verticals: our Austrian business, CRM portfolio and third-party advertising. The ordinary operating EBITDA margin for the Media and Other segment displayed a significant improvement of 9.5 percentage points, reaching 42.2% linked to the completion of our investment phase in our CRM portfolio.

Let's turn to Page 8 for a closer look at the Professional segment. In quarter 3, revenue in the Professional segment grew by 15.6% year-on-year, including Sprengnetter. Our organic growth was 6.5%, and Organic growth in quarter 3 was driven by continued double-digit growth from our core membership products, which grew by 12.9% year-on-year in the third quarter. We also managed to continue expanding our agent customer base with year-on-year growth of 3.3%. We are very pleased with the compelling operational execution of our sales force. Demand for seller leads and mortgage remains soft, and the business continued to shrink organically in Q3 2023, although there was an improvement compared to the second quarter this year. As Sprengnetter revenues have been allocated to these business lines, the reported revenues increased by 21.7% and 72.2%, respectively. Organic growth for seller leads was minus 11.1% and minus 17.4% for mortgage.

In the third quarter, the professional ARPU increased at an attractive rate of 10.5%, rising from EUR 1,040 to EUR 1,149. The growth rate of the professional pay-per-ad revenues turned negative in the third quarter with a 15.6% decline year-on-year. This is in line with the call-out I made during the second quarter earnings call, where we expected revenues to contract as we successfully migrated customers into our core membership products. The impact of the decline on an absolute level is, however, small. The ordinary operating EBITDA margin improved to 63.7% in the third quarter, up 3.5 percentage points year-on-year despite absorbing the dilution from Sprengnetter. The margin, excluding Sprengnetter would have been 67%.

On Page 9, let's take a closer look at the private segment. Overall, in the third quarter, the segment grew by 17.4% year-on-year, reaching EUR 37.1 million, which represents a slight deceleration compared to the second quarter, driven by slower growth in PPA revenues. The gradual normalization of PPA growth rates is something we have flagged in earlier conference calls, and we expect growth rates to continue to normalize in the fourth quarter. Subscription revenues grew by 19.7% in the third quarter, a significant acceleration compared to the second quarter. This growth was driven by an increase in new customer acquisitions. The average number of customers for the third quarter exceeded 369,000 representing a 17% year-on-year increase. The private ARPU increased slightly by 2.4% in the third quarter. PPA revenues increased by 12.5% in the third quarter, which was an expected slowdown compared to the growth rates in the first half as we begin to lap the listing increase that started to build in 2022 and leveled out in the third quarter of 2023.

Other revenue grew strongly by 22% in the third quarter, driven by demand for credit checks and relocation leads. Our ordinary operating EBITDA margin expanded to 52.1% in the third quarter, up by 0.8 percentage points, driven by scale in our subscription business, offset by continued investments to drive growth. Now let's turn to Page 10 to review the main ordinary operating items. Our own work capitalized decreased by 27.1% year-on-year in the third quarter to EUR 5.3 million as we continue to complete various development and integration projects. As a percentage of revenue, we were at 4% in the third quarter and 4.6% for the 9-month period. Operating costs increased by 3.3% in the third quarter, driven by continued operating efficiency, offset by the consolidation of Sprengnetter.

For the 9-month period, operating costs remained flat year-on-year despite the consolidation of Sprengnetter, including around 200 FTEs. Personnel costs increased by 3.2% in Q3 2023 due to the inclusion of Sprengnetter, Pro forma, excluding Sprengnetter, personnel costs were down year-on-year. Marketing costs increased by 2.4% in the third quarter as we invested in brand and offline marketing campaigns to drive brand awareness and also celebrate ImmoScout's 25th birthday with our customers. On a 9-month basis, marketing costs are still down 10.3% year-on-year. IT cost decreased by 2.9% year-on-year, remaining at a comparatively low level in the third quarter. Selling costs increased by 23.4% in the third quarter due to continued growth in the private segment and the consolidation of Sprengnetter. The mortgage appraisal business of Sprengnetter primarily operates with freelancers. From a contractual perspective, Sprengnetter is the main contract partner and passes on the majority of the revenues to freelancers, resulting in a cost of goods sold.

Other operating expenses declined by 10.8% in the third quarter as we continue to reduce spending on external vendors and resources. Due to the continued strong revenue momentum, a favorable product mix and the operating efficiencies I just outlined, ordinary operating EBITDA increased strongly by 22.1% in the third quarter and 21.6% for the first 9 months. The ordinary operating EBITDA margin for the third quarter reached 58.8% and 59.6% for the first 9 months. As Tobi mentioned earlier, excluding Sprengnetter, the ordinary operating EBITDA margin would have been even stronger at 60.5% for the third quarter and 60.2% for the first 9 months.

Let's turn to Page 11, where you see the items below ordinary operating EBITDA. In the third quarter, nonoperating effects amounted to EUR 5.1 million, a significant reduction of 50% year-on-year, driven by lower share-based compensation and lower M&A expenses. For the 9 months, nonoperating effects are still up 31.1% compared to last year due to increased share-based compensation and higher reorganization costs. D&A charges in the third quarter were EUR 9.2 million, increasing by 10.8% compared to the third quarter 2022. The increase in the third quarter is due to purchase price allocation as a part of the acquisition of Sprengnetter. Basic EPS rose by 70.3% to EUR 1.72 for the first 9 months, and adjusted EPS grew by 35.5% to EUR 1.90. Adjusted EPS for the third quarter was at EUR 0.67, representing a growth of 31.8%.

The number of shares outstanding increased slightly due to the Sprengnetter purchase price, which was partially settled in Scout24 shares. Turning to Page 12, guidance. To further expand on what Tobi outlined at the beginning of the call, we are pleased to adjust our financial guidance for the full year 2023 to reflect the continued successful execution of the strategy we have previously communicated in our earnings call. To give you some more context, we continue to see healthy operating leverage in our business, driving EBITDA outperformance.

We continue to prioritize profitability over revenue growth when running our transactional assets. In terms of the macroeconomic environment, we are experiencing a slower transactional recovery in the second half of '23 than we previously expected and are adjusting our capital allocation accordingly. Based on these points, we are delighted to update our financial guidance for the full year '23 as follows: updating consolidated revenue growth from circa 15% to circa 14% with Sprengnetter contributing roughly 3 percentage points, upgrading consolidated ordinary operating EBITDA growth from the range of 18% to 19% to 19% to 21%, with Sprengnetter contributing roughly 1 percentage point. I would like to provide you with some further color on the updated guidance and our assumptions for the remainder of the year.

The adjusted revenue guidance reflects our deliberate management decisions to drive profitability in a slower-than-expected transactional market. Our core business continues to perform very well and according to our plans. We are very pleased to be able to deliver a second EBITDA upgrade for this year. As you can imply from the EBITDA growth rates, we expect to land at around 59% ordinary operating EBITDA margin for financial year 2023, representing a significant margin expansion of circa 3 percentage points even while accounting for the dilution from Sprengnetter. In terms of key developments for the fourth quarter of 2023, we assume the following: Continued high demand for memberships and private subscriptions. PPA Private growth to normalize further compared to the third quarter. PPA Professional remains a headwind. Demand for seller and mortgage lead remains soft. In conclusion, as evident from our strong third quarter results and the upgraded EBITDA guidance, we are maintaining a strong level of execution and are confident about the remainder of this year.

While it's too early to officially talk about 2024, I would like to reiterate Tobi's comments that we feel good about the momentum we are seeing in the core business and the increased relevance of the ImmoScout24 platform. Based on this, we see continued scope for healthy revenue growth in 2024 and beyond. Combined with our updated organizational model and tight cost control, we feel good about continuing to expand our profitability. I look forward to provide further updates as part of our Capital Markets Day end of February 2024. With that, let's open the line for questions. We would appreciate if you could limit your questions to 2 per speaker. Operator, over to you.

[Operator]

[Operator Instructions] Our first question comes from William Packer from BNP.

[William Packer, analyst]

Look like another good set of numbers. Firstly, can we discuss the potential impact of CoStar, they've been making aggressive noises around the excess of profitability of incumbents across Europe and have already announced the acquisition of the U.K. player and significant marketing firepower there, and they've talked to more deals in Europe. Could you talk us through why you think Scout24 is well placed to weather any new competitive pressure? How is the German market difference in the U.S. where CoStar has made waves with homes.com and Apartments.com? So, that's my first question. And secondly, thank you for the initial comments on 2024, which I would sort of summarize as you're feeling good, but at this stage, are you willing to give quantitative guidance? At your last CMD, you talked to 12% revenue growth and 13% EBITDA growth in the medium term, which is broadly where consensus is for 2024. Are you comfortable with that?

[Tobias Hartmann, executive]

Will, this is Tobi. Thank you for your question. Maybe we'll start with the second question with regards to preliminary thoughts. We just upgraded our EBITDA guidance for the second time. And obviously, we are delivering a very strong fiscal year 2023. So we are focused on that and providing as much color and context as we can on this call. We also pointed out that we will host the CMD at the end of February, where we will provide obviously more guidance on what's there to come.

But let me reiterate what Dirk and I just said on the call. As you've seen, we've successfully implemented price increases over the past years. We have a very, very strong foundation with regards to our core membership products. We've also weathered the lower demand for other businesses pretty well. So having said that, as mentioned, just in the earnings call earlier, we feel good about our prospects going into 2024. Why do we feel good about that in terms of revenue side. We feel good about our competitive positioning. We feel good about our increased development of the platform in Germany. We have various growth levers. We are not dependent on just the sole single one. We have a larger customer base entering 2024 than 2023 or 2022, respectively. And we're continuing to innovate around the product portfolio. And of course, we will launch some new features and some really need things in the next year.

On the other side, on the cost side, we also gave you the flavor that we've become more agile and efficient and that we've really managed to have a tight cost control that will continue. It's not a one-off. That's why we did it early enough. I can just reiterate what Dirk mentioned that we see the foundation for continued healthy growth, obviously, both on revenue side and also expanding the margins. The first question with regards to CoStar and what you mentioned there. We feel very good about our strategy. And as you know, since we've exchanged thoughts that you've followed us over many years, the strategy didn't come about in a month or so. This was a very comprehensive process. We are executing against that.

We have demonstrated that we can execute, we continue to execute. Our product suite is unmatched, and our data pool has improved very nicely also following the Sprengnetter acquisition, which we just did earlier this year. Now as far as we understand, and as far as everyone on this call understands, I guess the U.K. market is quite different from the German market. Now you take the money pulls for agents, the number of transactions, the role of a typical realtor, et cetera, it's all quite different from the German market. So we feel that we are very well positioned to continue to execute our defined ecosystem strategy.

Now with regards to how we feel about the German market and a couple further thoughts on that. Look, I mean, we operate the leading platform for real estate-related transaction processes. As such, we operate a 3-sided marketplace, which is pretty unique. It's a 3-sided marketplace, against for seekers, homeowners and agents where we have very specific and unique products tied to each of the different stakeholder groups. And we are offering much more than a traditional marketplace or a classified business. And so that's why we think that agents turn to Scout24, and that's not going to change. So we feel good about it. Thank you.

[Operator]

The next question comes from Christopher Johnen from HSBC.

[Christopher Johnen, analyst]

I appreciate the comments. I think most of that was very clear. I'll still try and apologize for that, pick your brain on 2024. I'm just curious, do you think it is fair for us to assume that as we enter the early part of 2024, that another round of terms of service price increases will occur as it has in the past couple of years. Just curious what the argument pro or against that would be if you don't want to be too specific. Yes, that will be my first question.

[Tobias Hartmann, executive]

Chris, it's Tobi again. Thank you. We have formed over the past couple of years a road map how we engage with membership in agents and professionals, we have continued to build more content and features around that. So you should assume that, that road ramp will continue in 2024. We've iterated in the past and stressed the importance of it's not a price increase. It's really about what's the content, what the product, what are the additional features. And we have a very exciting portfolio also given our opportunities with Sprengnetter and products that we've worked behind the scene. So this is going to unfold, and this is going to provide even more value to our customers. So yes, we will continue that road.

[Christopher Johnen, analyst]

Great. That's helpful. And then the second question on the competitive environment. I know that's always a difficult one to talk about how peers are doing. But I'm curious, I mean, how do you currently perceive the Springer assets or client on sign in the market either, let's say, from a product perspective, pricing, sort of aggression towards agents. I'll be curious also knowing about the CoStar comments, whether you have any sort of update you can give to us?

[Tobias Hartmann, executive]

Yes. As you pointed out, we are not in the midst of our competitors' strategy. So we don't know what keeps them busy. We are really trying to stay focused on the very initiatives that we are driving. But I'd like to reiterate again why we do feel that the strategy is working and the strategy will work. We are no longer just a pure classifieds business. We have brought up, and we have not just recently innovated but now also matured some growth drivers that we believe it will be very hard for any competitor to build, take our seeker business.

The Seeker business is pivoted and is tailored for a market leader like ImmoScout and you can't copy 370,000 subscribers if you're #2 or #3 or whatever you are. Now that is one range we've built, and that is interfering and it's becoming more interconnected with other ranges, such as realtors will be able to work with the seekers and but the homeowners because we've built a meaningful homeowner hub, as we talked about in the past. So we will continue driving those assets and products, which are not just a P2P comparison, but which are uniquely tailored to be built and invested by a market leader. So even more so during challenging times, we do feel it's important to deal with a trusted partner, if you're a realtor, and IS24 stands for the most trusted platform. And we also know that we bring the best buyer leads even if it's fewer than in the past. They matter because you just need one buyer leader to sell the property, and that's more so an advantage that we have. So we're committed to further following our strategy, and we feel good about that.

[Operator]

The next question comes from Pete-Veikko Kujala from Morgan Stanley.

[Pete-Veikko Kujala, analyst]

The first one is on for me that you jumped from 1.2 million registered units in Q2 to now 2 million, which is quite a large jump. So if you could tell what has happened there? That would be very helpful. And then the second question is on MieterPlus or the LivingPlus service that you were talking about. Can you please share some comments? Is this like a separate subscription to the BuyerPlus and TenantPlus? And what are the key reasons for a consumer to subscribe to this...

[Dirk Schmelzer, executive]

Thanks for the question. On Mieter, it's an effect that we have through the migration of both platform into one platform. As you know, and as we showed you, we have a very good property owner area right now. And in that area, you can use the former ImmoScout services as well as for Mieter services. So the brand for Mieter in itself will slowly disappear and it will all sort of be merged into the homeowner area. And that's why we're quite happy with more than 2 million customers on that platform. and we're gaining customers every day in a 3-digit area because we provide a lot of value on the portfolio of every landlord and homeowner. On the second piece, we would stay a bit more muted and quiet on what we are planning with regards to [ BonenPlus ]. As we know, competition is watching closely, and we feel very comfortable about our product strategy on [ Bonen ] and long-term subscription offers for customers going forward. So please excuse us, but we won't share more product information here.

[Pete-Veikko Kujala, analyst]

All right. I might have some more, but I'll jump back to the queue.

[Operator]

The next question comes from Lisa Yang from GS.

[Lisa Yang, analyst]

The first one is just a clarification on the margin guide. I think it implies for Q4 quite a big range like 56% to 59%. So this sort of 8% to 9% growth for the year. That's sort of what that's implied for Q4, which is quite a big range. Could you maybe give us a bit more color in terms of like where you're going to be tilting more towards the upper end or lower end? What are the assumptions we should be thinking on personnel cost and marketing in particular? Like it's basically the trend in Q3, which is marketing up about 2% costs of about 3%. Is that they see the rights of assumptions? And second question is if you can give us a date on capital allocation and priorities and on the buyback as well, I think you can do up to EUR 100 million where you're up to on that because I think in Q2 was quite slow. So is it fair to assume you have picked up and you could potentially do close to EUR 200 million for the year.

[Dirk Schmelzer, executive]

Thanks, Lisa. I'll start off with the second one. On capital allocation, fortunately or unfortunately, the share buyback in quarter 2 was a bit muted given the rising share price of the company. Now that we have seen equity markets coming a bit under pressure over the last innings of Q2, first innings of -- sorry Q3, and first innings of Q4. We see that the share buyback has increased. You can watch that on a daily basis, by the way. We are now at around EUR 50 million of buyback volume, and we continue to improve there. And we are happy and very confident that by latest end of this year, I think the EUR 60 million program will be concluded from what we know today. It might be a bit longer, but I think that's where we stand. And then we're going to discuss internally whether we continue with another EUR 40 million share buyback program as we can do from the AGM approval that we have.

And that totally depends on our assumptions on value accretion of any additional share buyback. On the margin range here, you're absolutely right. We have a bit of a tactical marketing spend, I would say, in the fourth quarter. That's why I've been -- we've been giving a bit more of a range here to put you into a full picture. For example, in October, we spent around EUR 6 million, which is double the usual value of marketing spend because we had the campaign as Tobi outlined for the 25 years of Scout, we had a brand campaign on TV and the metrics that we're seeing there are quite healthy, and we want to keep optionality whether we're ramping that up a little bit more towards the end of the year. But apart from that, all other levers, especially cost levers remain under tight control. And in the direction that we've seen, which is they either go down on the cost side or they remain roughly stable, but we don't see any increases.

[Lisa Yang, analyst]

Can I just have a quick follow-up on marketing. How much of your traffic is organic versus paid search? And when you think about your marketing spend, how much is like brand marketing versus paid search and other forms of marketing spend?

[Dirk Schmelzer, executive]

I think you can see that from the classical tools that you see from outside. But let me remind you that we have around 4 million app users. So a large chunk of traffic is coming from them. Then for us, it's important with a brand -- aided brand awareness of around about 90%. Most of the traffic is really organic on the platform. What we are spending on performance marketing, as you know, Lisa is mainly what we have when we are coming to valuations and generating seller leads/mortgage leads.

[Operator]

The next question comes from Adam Berlin from UBS.

[Adam Berlin, analyst]

Yes. Can you just split the Sprengnetter revenue for us I think it's about EUR 7 million in Q3 between the seller leads and the mortgages, just to make it easier for us to see the underlying trends. That would be very helpful. And the second question is, can you please -- I think you said that you still expect to attract customers -- professional customers in Q4. Are you trying to guide for further customer growth for Q4. Is that what you intended? Just wanted to clarify that point?

[Dirk Schmelzer, executive]

Yes. I'll start with the last one and then hand over to Filip for the first one, Adam. Certainly, I mean, we're in a business of growing, and we're also in the business of gaining more and more customer and in this case, real estate agent attraction. And obviously, this has been quite successful, and we don't plan to discontinue that. On the Sprengnetter piece, I hand over to Filip.

[Filip Lindvall, executive]

Yes. Adam, I'll step in here and this will be a one-off disclosure. You can assume it's roughly 50-50. And I think Dirk gave you the organic growth rate in the script as well for the value drivers. So I think you should be able to compute it by using that. But going forward, we will not break it out at this level of detail. Thank you.

[Operator]

The next question comes from Marcus Diebel from JPMorgan.

[Marcus Diebel, analyst]

Two questions. The first one is again on the agents. Could you maybe explain what the lower tier agents are doing? I guess that's the level that's probably most challenged. You commented that you plan to acquire more, but I just want to understand what that level of -- that tier group of agents is doing. And then the second question is for Dirk is -- clearly, we've seen a very strong execution on cost. You commented that this is in your view, sustainable. Could you give a little bit more color on this? Is that really headcount? Is it pay? Where is actually -- because obviously that's the majority of your cost base, where is really this efficiency coming from? Could you maybe elaborate a little bit more on this?

[Tobias Hartmann, executive]

Marcus, it's Tobi, with regards to the agents. Overall, we know that 2023 is a more challenging year for the agents and also other professional customers such as mortgage brokers or any other professionals in the real estate world. But we've demonstrated that we were able to attract agents as a function of where do I get the best return for the money that I spent and where do I have the highest probability and likelihood of finding the buyers, and that's where we're growing, and it's really across the board. There's no real hearing in terms of the only fishing in one pond, but it's rather a bigger pond.

The other thing that's interesting in Germany to see is that there's also a bunch of agents that are becoming more independent. They used to be part of a larger network of franchise that work, but they're not seeing the value getting out of the franchise network anymore, so they decide to go on their own and then they turn to the market leader, which could be -- it was Scout24. So that's really what we are seeing. Having said that, it will be a modest growth, and we'll probably continue to see some agents hopping onto our platform. And the other question, I hand over to you Dirk.

[Dirk Schmelzer, executive]

Marcus, happy to give you some more insights into the cost development. And I'm doing that because I think it's also more convenient for you on the organic side, right? And if you look at what we've done there. On the personnel cost side, for the first 9 months, we see 2.1% decreases. If you look just at the third quarter, we see a 10% decrease of personnel costs. And as we have had a merit increase mid of this year of 5%, that means that most of it is really headcount driven. As I said, we have merged our tech and product departments and that has proven very successful, to be honest. Then on the marketing side, for the first 9 months, organically, our costs have come down by 10% -- on the IT cost side, in a mixture of really tough price negotiations that we had plus optimization on the AWS cloud on all other IT suppliers that we have where we've been very closely looking at the amount of licenses, amount of people necessary to use those licenses, traffic optimization, everything you can do.

So that's against the backdrop of those initiatives where we had around 4% price or cost decreases. Other operating expenses have decreased by 14% organically. Selling costs have certainly increased given the growth of the overall business. But that's basically the overall picture that you see and that you will continue to see going into 2024, certainly not fully in those areas because a lot of that has been used to increase margin this year. But as I said in my speech at the beginning of this call, we feel very comfortable about our cost position, and we made good experience with this organization as it's proven to be very efficient.

[Operator]

The next question comes from Giles Thorne from Jefferies.

[Giles Thorne, analyst]

My first question, I wanted to come back to CoStar. If you listen to their investment case, they're making the point that in Europe, it doesn't make sense to have multiple country-level platforms on multiple different tech stacks. The have you -- is that set up creates cost and product cadence inefficiencies. I think there should be a regional platforms in a single tech stack. And so that's among many reasons why they're pushing on the consolidation theme. It'd be interesting able to hear you on this regional scale risk as they see it? And how does that make you look at your own competition.

Now Tobi. I appreciate you've already given some comments on this call, but your competitors are a part of regional groups that will create or have access to regional scale benefits. So just be interesting in here you're thinking on this type of theme. Second thing was on Sprengnetter, simpler question, since you've acquired the business, it's been whatever it is now 5 or 6 months almost, I'd be interesting to hear how your commercial strategy has evolved over that period of time? Are there any things that are coming through that are more exciting or less exciting than you thought back in June.

[Tobias Hartmann, executive]

Tobi, thank you. So with regards to your first question, which implicitly stated how we were thinking about regional platforms or cross-border platforms. So here are the fact -- so far, there is no cross-border platform that's been proven to be successful in Germany. We've just celebrated our 25th anniversary in Germany. We really know how this market operates. And this market is a lot different from any other markets that may use the same language across the pond or other similarities. We don't have that in Germany.

So it's an unproven statement, let's see. But obviously, as you know, we've pushed hard for doing a good job in Germany, and we are convinced that there's more to come that we can do. With regards to Sprengnetter, there's no real big surprises, and there shouldn't be any because we've shared with you that we've known this company. We've known Hans Sprengnetter as a person in his organization. What's really nice to see, though, is that our folks internally are getting more and more excited about not just what they discover there. They knew that beforehand. But what's happening around us is you know the ESG debate is just taking off. You know how complex this world will be.

And every month that passes by, there is more and more that we think we can do in that space because it's getting more and more crowded and complex out there. And so I think that's reassuring. And that's also what we'll probably share during our CMD a little bit more in terms of product features and how we intend to tackle that and use that as a growth lever. But yes, been very smooth so far, no major surprises, and we're very happy to have Sprengnetter in our family.

[Giles Thorne, analyst]

And just one follow-up on the comment around regional strategies worked in Germany. That's, of course, right. the current CEO at a group only came in a couple of years ago and started pushing it then and out of and literally has only just started to push a single platform in Europe as we speak. So while it's not happened, there are changes happening at your competitors to exploit regional benefits. I don't know what is my question. I guess, how do you deal with those scale benefits as they start to bring them to bear in the market.

[Tobias Hartmann, executive]

Yes. Thanks. As far as I recollect the assumptions under which this other competitor was formed and did a transaction a few years ago, didn't really live up to its potential. So there might be a change what they're going through and now if they're taking private or whatever. So I think, again, nobody has proven to do that successfully. What is proven, though, is that it's a very local business. It's a very specific business and that this is a market where you need to act differently in order to be the partner of trust for realtors. And I think we've demonstrated that we can do that and that we've also strengthened our position over the past couple of years. And other than that, I think it's great. Competition is great, and we're up for it.

[Operator]

The next question comes from Marius Fuhrberg from Warburg Research.

[Marius Fuhrberg, analyst]

2 from my side as well. The first one on your customer side. So when you look at the market and more specifically at your agent base, do you generally observe that the number of agents overall contracted over the past months? Or was it rather flattish? And the second question, you mentioned your new organizational structure and that the strong margin should become a hallmark for Scout24. So should we expect further margin expansion, which you mentioned, obviously, but also in a stronger market recovery if you would assume that in 2024? Or would you then potentially switch to investment mode again at least for a certain period of time.

[Tobias Hartmann, executive]

Mars, thanks. With regards to the customer growth, we don't see any specific deviations. We are adding customers, as we pointed out earlier, and we hope we can add more to come. Again, this will not be the core driver, but this is just a great side effect that we are obviously welcoming and embracing and we would like to be the home of any future customer who would like to be more efficient in a challenging real estate market. With regards to the org structure and the cost measures we undertook.

We said that this was a great foundation that is not a one-off, but it is there to stay because we've adjusted our overall cost framework. We've also adjusted based on the integration of the various companies that we have acquired over the past 3 to 4 years, they all -- aside from Sprengnetter were basically 0 revenue and a lot of costs. And we've now absorbed it. We've integrated it. So you will see that reflected going forward. And yes, we also do push for margin expansion in the future, but more to come in 2024. Thanks.

[Operator]

We have a follow-up question from Pete-Veikko Kujala.

[Pete-Veikko Kujala, analyst]

Pete from Morgan Stanley again. On the agent subscriptions, can you remind us like when do you start those pricing discussions so that we can then start pestering you for feedback? And then another question on pricing in general, maybe outside of the core subscriptions, like PPA, whether it's Private or Professional PPA, private subscriptions. So what are your thoughts on pricing outside of the core subscription bundles.

[Dirk Schmelzer, executive]

Pete, it's me, Dirk. Sorry, these were very valuable and good questions, but please understand that we're not commenting on them because they really go down into our various product strategies. I think you can draw your conclusions from past comments we had on that and past actions you've seen. But apart from that, we wouldn't like to disclose further.

[Pete-Veikko Kujala, analyst]

All right. I had to try.

[Operator]

We have another follow-up question from Andrew Ross from Barclays.

[Andrew Ross, analyst]

I just sneak one in at the end. Can I just come back to the position of your agents and maybe trying to get a sense of what [indiscernible] are getting through your sales teams, so I guess having probably quite regular conversations with your agents and kind of thinking about temperature on their tolerance towards taking more products and pricing. Appreciate there's no kind of numeric answer to this question. But broadly, is the feedback you're getting from your sales team, Silver agent health is okay like a few months ago? Or do you think there's been any change given the market is recovering more slowly than perhaps some had hoped.

[Tobias Hartmann, executive]

It's Tobi. Agent health is still okay. We're not seeing anything tremendously shifting. There are subsegments and obviously, there's other pieces depending on where you are, whether you're in one of the top 7, top 8 whether you're more from other cities. But by and large, nothing meaningful.

[Operator]

The next question comes from Lisa Yang from GS.

[Lisa Yang, analyst]

A very quick follow-up. I think you mentioned you continue to see basically your PPA, Professional PPA customers moving on to the core membership. What sort of revenue uplift do you get actually when they made that sort of shift? And how much more room do you think we have basically to migrate those customers on to the core membership? I think you mentioned in the past there was quite a big gray market, which is sort of normalizing. So just think about the opportunity here.

[Filip Lindvall, executive]

Yes. Lisa, it's Filip here. So obviously, the purpose we're trying to migrate customers is to get them into our recurring membership and to have a long-term relationship with the client. And of course, there might be some benefits to that, but that's not something we would disclose here on the call.

[Operator]

The next question comes from Craig Abbott from Kepler Cheuvreux,.

[Craig Abbott, analyst]

If I may just squeeze in one small technical question for our modeling. I noticed quite a positive swing in the net financial result in the third quarter, rate. And at least so far, I haven't found an explanation for that. I just wonder how we should be modeling that out over the next coming quarters. Were there any one-off factors in that? Because actually, if we analyze that figure actually becomes quite meaningful for the adjusted EPS calculation.

[Dirk Schmelzer, executive]

Craig, it's me, Dirk. Thanks for the question. I knew it was coming, and I know it was coming from you. I think you can normalize it out, Craig. And the effect is mainly driven by basically call options we have on remaining shares and then those call options for us are not executed at an earlier stage and at better conditions. And that's why we have positive financing costs here. So but for the future, I would ask you to model it out and keep it roughly flat.

[Operator]

There are no further questions at this time. I hand back to Filip Linda for closing comments.

[Filip Lindvall, executive]

Okay. So this concludes today's...

[Operator]

We have one last minute No. Sorry, excuse me sir, you can go on.

[Filip Lindvall, executive]

Okay. So thank you all. This concludes today's earnings call. I would like to thank you all for your interest in Scout24 and joining us.

[Operator]

Ladies and gentlemen, the conference is now concluded. You may disconnect your telephone. Thank you for joining, and have a pleasant day. Goodbye.