Scout24 SE

XETRA:G24

Earnings Call Transcript 2018-Q4

[Operator]

Dear ladies and gentlemen, welcome to the Scout24 Fiscal Year 2018 Results Call for Analyst. At our customer's request, this conference will be recorded. [Operator Instructions] May I now hand you over to Britta Schmidt, who will lead you through this conference. Please go ahead, madam.

[Britta Schmidt]

Hello, everybody, and welcome to the Scout24 Full Year 2018 Results Conference Call. My name is Britta Schmidt, as already announced by our lovely speaker. I have Tobias Hartmann, our CEO; and Christian Gisy, our CFO, with me, who will guide you through our full year 2018 results call today. As always, we are happy to take your questions at the end of this call. In addition, we will start our annual roadshow within the next days and are looking forward to meeting you there.Tobias, your turn, please.

[Tobias Hartmann, CEO & Chairman of Management Board]

Thanks, Britta. Hello, everybody. My name is Tobias Hartmann. I'm the CEO of Scout24 Group since December 2018. Happy to meet you all today or as part of our roadshow, which is upcoming over the next few days. 2018 has been a very successful year for Scout24, as you will see in today's presentation. So let's get started.Moving on to the first slide. After being with Scout24 for a couple of months now, let me share my view on Scout24's capabilities and opportunities going forward.With an impressive power of innovation, the teams of ImmobilienScout24 and AutoScout24 over the recent years have revolutionized and digitized the classifieds business. Two leading online marketplaces have emerged. Today, Scout24 is far more than 2 classified portals under 1 roof. Scout24 is a state-of-the-art data-driven and tech-enabled platform company. By accompanying buyers and sellers throughout their real estate and car transactions for over 20 years, we have developed in depth expertise of the market and gained significant trust in the market not only amongst consumers but as well as our partners.Our understanding of our partners and their needs has grown steadily. Today, we have a unique set of assets that we can draw on to offer more personalized and relevant search results and services. As a result, we can serve them true assistance, providing a better user and customer experience, and we follow a clear path. The more touch points of data we generate, the better and more refined our solutions will be to serve our partners and consumers. This is the foundation for our Consumer Services segment.We introduced this segment beginning of 2018. However, it already operated under the roof of ImmobilienScout24 and AutoScout24 even before that time. It now looks back at around 10 years of experience of data history. We offer users valuable additional services that support their decision-making process around mobility and living. We were able to increasingly develop direct relationships with consumers. That is the best proof of the transparency and added value that we promote every day with our brands. The new segment reflects our move from a marketplace to a market network.Besides our organic growth in this area, back in July 2018, we acquired FINANZCHECK to further support this strategy. FINANZCHECK is not a mere price comparison portal, but a tech company with strong data algorithm capabilities when it comes to scoring and matching the right user with the right financing offer. With FINANZCHECK, users can now compare suitable financing arrangements via AutoScout24 and be referred directly to our financing partners. But the strategic rationale behind the acquisition of FINANZCHECK is far greater than that. We are gaining an even better understanding about consumer journeys. So for example, when a user will most likely start with search for a new home or a new car. This know-how around consumer interests and needs coupled with our brands enables us to strategically align our offering on our platforms and build bridges to future consumer touch points. This way, we are constantly refining our business model with the focus shifting from classifieds to transactions. The Scout24 market network is at the forefront of digitizing the steps across different consumer touch points.Let's now talk about fundamentals of our market network and our key operational results in 2018. We continue to be the most relevant marketplace for both our partners and consumers with more than 3 million listings overall on our sites across Europe. In addition, looking at our core geographies, we have been able to solidify our market position in terms of listings. Traffic overall continue to grow healthy and is now at around 190 million sessions per month. The share of mobile traffic stands at nearly 80% now, reflecting the ongoing shift to mobile devices and our ongoing enhancements and improvements, especially through our apps.Moving on to the next page gives you an overview of our key financial highlights. Our revenues grew 12.5%, including the contribution of FINANZCHECK since September 2018. Excluding FINANZCHECK, we almost achieved a 10% growth rate, bringing us over the EUR 0.5 billion revenue mark. This is fully in line with our guidance of 9% to 11% organic revenue growth for 2018. For FINANZCHECK, we guided for a contribution of around EUR 12 million, which we slightly overachieved with actual standing at EUR 12.3 million.On a pro forma like-for-like basis for 2017, so as if FINANZCHECK was part of Scout24 already in 2017, we would have seen a revenue growth of around 11% year-on-year. Ordinary operating EBITDA increased by 15.3% year-on-year with ordinary operating EBITDA margin at 54.8%. This is including FINANZCHECK's contribution to ordinary operating EBITDA in 2018, which was a negative contribution around EUR 2 million. Organic ordinary operating EBITDA margin was at 56.5%, again, fully in line with the range of 56% to 57.5% we have guided for.Group cash contribution has increased strongly by 14.4% year-on-year. Cash conversion stands at 90.3%, slightly below 2017.Let's now talk about ImmobilienScout main KPI, starting with listings. We were able not only to improve our listings position year-on-year, but strongly grew our residential partner base. Both metrics support that our products are highly relevant to our partners. In addition, as you know, we worked in our sales execution and we have now, since mid of 2017, seen continuously low churn rates as well as good win back and new acquisition rates.Diving into this traffic stat for ImmobilienScout24, we have seen a very solid increase in traffic in terms of sessions of around 7% year-on-year, with mobile increasing by 11%. Just for comparison, our #2 competitor, despite heavy investment into TV advertising, reported flat traffic year-on-year. In terms of unique monthly visitors and business for desktop-only, we have maintained our traffic lead of 1.8x more unique users than the #2 in the market. This is a slight increase from 1.7x at the end of 2017. Again, more than half of the market still only searches via the ImmobilienScout24 when it comes to real estate. This is a clear sign of our outstanding position in the German market where ImmobilienScout24 is a household brand when it comes to real estate.Looking at our user engagement, i.e. the time spent, we see an average of 534 million minutes spent on our sites each month, slightly higher than last year's average of 530 million minutes. This reflects the disproportional lower growth compared to session growth, which is spurred by our product initiatives throughout the year driving efficiency, and therefore, providing a better consumer experience during the search process. For example, we have introduced recommendations adding more relevant queries as part of the consumer journey. In addition, we have introduced push notification for a safe search. With 534 million minutes spent, we are outperforming our #2 competitor by 2.8x, an increase from 2.7x as of end of 2017.Let's now take a look at monetization. Our VIA share, that's the share of our value-added products, like premium listings, media display advertising and acquisition products as of total, IS24 revenues stand at 31.2% in fourth quarter of 2018. This is a 1.1 percentage point increase quarter-over-quarter. With 4.7% growth quarter-over-quarter, VIA is the clear driver of our contractual partner revenue growth. The overall absolute value-add products had revenue growth, it's driving more than 60% of absolute revenue growth generated with our contractual partners already.The right-hand side, you take our ARPU developments for both residential and business partners. The ARPU, so average revenue per agent, of our Residential Real Estate Partners stands EUR 634 for full year 2018 versus EUR 617 for full year 2017. This reflects the 2.8% growth year-on-year. This is disproportionately lower than our residential contractual revenue growth of 8.7% year-on-year. The reason for this difference, as we mentioned this during the half year earnings call, is that ARPU growth is diluted by new customer acquisition. The customers we've been winning back or acquiring come in at a substantially lower ARPU than our existing customer base.Just to give you an example, the average monthly ARPU of newly acquired customers in 2018 was around EUR 348. In June, we spoke about an average ARPU of EUR 338. This is around half of the ARPU for our total customer base, largely driven by the different profile of the customers we are winning back or newly acquiring.Now if you jump back a couple of slides, we've been talking about customer number, you can see we've added around 10% agents to our residential partner customer base versus end of 2017. If you would look at the numbers for those customers who had been with us for 12 months or longer, you would have seen an underlying growth rate of around 5% against the 2.8% residential ARPU growth in total. The higher ARPU growth for our longer-term customers yet again underpins our monetization power, driven by our strong product set and value proposition where we'd build upon in 2019.If we look at monetization of our Business Real Estate Partners, so developers and commercial agents where we have a very stable partner base, we see a very strong ARPU increase, 14% year-on-year. Again, we have the right product set in place for them to support their business. For developers, we offer a product, Exposé, which allows them to list different properties for 1 project within a product Exposé. This increases their brand exposure and at the same time improves user search experience.For our commercial partners, we have launched our new commercial platform and reported last year, where we, for example, offer features like broad search down to specific streets or individual search criteria to find the right new location for their business.I already mentioned some of our product initiatives for driving efficiency of the search funnel or in the area of commercial property search. Let me now share 2 other innovative examples we have launched in 2018.At the very beginning of today's presentation, I referred to our data capabilities. In 2018, we introduced our Real-Estate Atlas. Atlas is a data-driven product, providing the user with convenient and easy-to-digest information for a specific edits. As a homeowner, you can subscribe to the service for a specific address. So something like claim your property and get updates on valuation of a property. In addition, it provides potential buyer with SaaS on the neighborhood, like the average age, the number of years people had been living in a particular neighborhood. This product underpins the value add we are able to deliver with our data via our consumers.We add around 1 million sessions per month for Atlas at the end of 2018, most of which came from home seekers. At the beginning of the year, we had only roughly 30,000 sessions, so we can say the product has been welcomed by our user base. We have also done some work on our Realtor Lead-Engine in terms of fine-tuning the funnel. We are now able to better understand the details of the properties to be sold. This allows the better valuation of the property, supporting the potential seller for this decision to sell. On the other hand, we're able to better qualify the lead for the agent and provide more information for a successful sales decision, a clear win-win situation. So much has been said about the upcoming legislative change for German real estate sale transactions.Let us give you some insights on the real estate market in Germany, what percent of does it mean, and where we are in the process. The residential real estate market in Germany is very healthy, but a clear seller's market. It did continue high amount for residential properties for own, used buyers and investors as well as an unremitting price momentum in this sector. Last year, transaction revenue increased by 5.6%. This is to a large extent driven by continued low interest rates in Germany. We do not expect the interest environment to change given the recent announcements of the European Central Bank, i.e., transaction revenues in 2020 are expected to grow by another 5% or so as well in 2020. At the end of September 2018, the Residential Real Estate Summit 2018 was held, which was designed to drive residential living space by the German federal government, the federal state and municipalities.One measure to drive affordability of residential living and to limit the ancillary cost of acquiring a home according to German government and especially the SPD is the introduction of the Bestellerprinzip.So what does this Bestellerprinzip mean? Bestellerprinzip basically means the person who contacts an agent to sell the house has to pay the agent fee. Currently, it is either the buyer paying the full agent fee, which can be as high as 7.14% including VAT, or the buyer and seller splitting the fee 50-50 amongst them. In the future, following the strict rule of the principal, it would be the seller paying 100% of the fee.So where are we in this legislative process? Since end of February 2019, the draft bill by the Ministry of Justice and Consumer Affairs led by SPD's Ms. Katarina Barley is available. This draft has not been coordinated beforehand with the coalition partner government, the CDU. Currently, it's therefore being discussed with the ministry. An official hearing of the agent associations has not taken place yet. The current draft, which is as stated before still in discussion for cease a 100% of agent fee to be paid by the contracting party, which is usually the seller. It does not foresee a cap of the commission.On 8 May, a formerly agreed hearing at the parliament is scheduled. It is unclear whether there will be a coordinated draft submitted by the government by that time. Currently, the CDU is by majority against the draft. They are rather supported of a split of the commission between the buyer and the seller, as already common practice for the majority of states in Germany. This is where we stand today. We are sure there will be a change in the market, however, to what extent and when it will be introduced remains uncertain.As stated before, we expect something to happen, but let me use the opportunity to give you an overview on the potential impact of the Bestellerprinzip. We see 4 major outcome of this market change. Number one, competition will get tougher among agents for getting the next selling mandate. Our product suite is designed to help the agent to present themselves better and to attract more homeowner, like for example, our acquisition product, the Realtor Lead-Engine and our premium product set to build brand reputation. And we are the right partner for the real estate agents when it comes to efficient marketing channels versus the less efficient and costly print or traditional advertising channels.Number two, agents will need to focus more on demonstrating their added value than before. We can support the agent in positioning and pitching versus their home seller, for example, when it comes to data through efficiency sell a home. We have personalized profiles and solutions to set up the right marketing path for a property. As a side effect, sellers might want to have a larger state or list important via property sold be listed. ImmobilienScout24 as a household brand name is a natural choice.Number three, more home sellers could decide to sell privately. We are the #1 property portal in Germany with a strong footprint in private listings in best-in-class products. We help the seller already now to list the property, starting with a property valuation, support and creating the X proceed and provide useful tools like the contact manager, which helps them dealing with inquiries.Number four, with increasing competition, we might see smaller agents leaving the market. We have seen this development with the introduction for Bestellerprinzip for rental market in 2015. What we saw there, in addition, was a short-term disruption in the market, however, longer term, the market got more professional.Our experience with our more professional partners is, they're generally more digital savvy and better understand our value proposition, allowing us for better monetization of that partner base. In summary, we think there could be a short-term disruption in the market which might affect us to some extent. However, longer term we believe we are well positioned and could even benefit from this change.As a summary of the ImmobilienScout24, let us review what we've delivered in 2018 and what we're working on right now. We have further solidified our market share and have seen healthy traffic growth. This is the basis for our success. We will continue to deliver best-in-class experience for our partners and consumers and use this as a lever to drive future growth. We have increased our customer satisfaction and significantly reduced churn, especially in the residential segment, resulting in 10% residential partner growth year-on-year. We will continue to do this. However, we will use the opportunity of a more stable customer base to leverage our value-add product set to drive ARPU growth going forward.The focus on improving sales execution in 2018 drove not only churn reduction as mentioned before, but as well new acquisitions and especially win back of customers. Our sales force is very focused to partner with our customers to drive the right solutions. We will continue to drive excellence in this area and use it as a lever to tackle potentially upcoming challenges around its development fees supporting our partners with our knowledge of products to successfully run their business. We have successfully introduced innovations to the market, including our Atlas product. We will continue to work on data-driven products through our value add for our consumers and partners.Let's talk about AutoScout24 now starting with Germany. We had around 24,000 dealer partners by the end of December 2018. This is a decline of around 13% year-on-year. However, this is driven by our deliberate decision to focus our activities on customers providing value to us and our audience. The customers we have lost throughout 2018 had an average less than 15 listings per month, and for example, in Q4 2018, an average ARPU of EUR 77. As a consequence, our listings position compared to our next competitor did not change. It still stands at 0.9x. The decline in listings year-on-year by around 6% is, therefore, rather a decline in the overall market, partially still driven by Dieselgate.Traffic saw a healthy increase of 4% year-on-year to a total of 48 million sessions per month, with mobile increasing 14% reflecting our continued work on the app experience. I will share some more details in a couple of minutes.Let's now talk about AutoScout24 for our core European countries. Total dealer partner locations decreased slightly at the end of 2018 compared to 2017. This is mainly driven by the ongoing migration to dual platform contracts in the Netherlands and Austria following our acquisitions of Auto Trader and Gebrauchtwagen. The increase in dealer listings of 9% underscores our leading market position in our core European countries. In terms of traffic, we have increased sessions year-on-year by a healthy 6%.Turning the page to monetization. On the left-hand side, you see the share of our value-add product revenue as of all dealer revenues in AutoScout24. The value-added products are our premium listing and media display advertising products that support our dealers with marketing, brand and acquisition. The share of MIA revenues was 18.2% in Q4, a slight increase from 17.9% in Q3. Keep in mind, we have done price adjustments for the basic listing package. So these had grown at a disproportionately fast pace than MIA revenues have. And in addition, the sales force had focused on potentially implementing price adjustments rather than upselling MIA during this time.In terms of ARPU, we have seen a double-digit increase in both Germany and European core countries on a basis of better monetization of the dealers in the respective geographies. This is, as well, reflected in strong growth with dealer partners in Germany and our European core countries of 14% and 20%, respectively.In absolute number, ARPU dealers Germany increased to EUR 252 for full year 2018 compared to EUR 213 in 2017. ARPU dealers, European core countries spent higher than Germany due to our market-leading position and thus stronger pricing power with EUR 278 in 2018 compared to EUR 237 in 2017.As already mentioned, we have done significant work on improving user experience and rolling out data-driven products for both partners and consumers. For the app, we had introduced push notifications for safe searches. The user can activate making the search appear more efficient also boosting our app traffic. This also introduced recommendations suitable to the last searches based on our knowledge of the user. This is a feature we already successfully deployed at ImmoScout24 in the past year. So good example of our OneScout24 approach to product development.In terms of product innovation, we have launched a new product as a minimum viable product in Austria called direct selling or direktverkauf. This is an evolution from our current express sales product catering to private sellers seeking to sell via AutoScout24. The use of data capabilities to provide the user with an approximate valuation for the car to be sold. The potential seller can then opt to directly book an appointment with one of our dealer partners were carefully selected and prequalified for this process. We plan on scaling direktverkauf as a follow-up product in the countries over the coming months. Again, this product does not only cater the needs of our consumers, but as well our dealers, who are on constant search for the right car they allotted.Let me now summarize what we've delivered in 2018 and what we're working on right now at AutoScout24. We have further solidified our listings advantage and invested in our user experience to build a basis for our future success. We will continue to drive user engagement as data-driven product innovations to further solidify our market positioning in Germany and in Europe.We have finalized the integration of the Gebrauchtwagen.at and have demonstrated our monetization power, resulting in 14% respective and 20% growth of revenue with dealer partners in Germany and the European core countries. We will continue to do this and continue to leverage our value-added product set to drive ARPU growth going forward.We have rolled out the MVP of our enhanced direct selling product with promising first results end of June. In 2019, we will continue to partner even better with our dealer network to drive digitization of the automotive market and to work on product innovations to help them run their business more effectively.Let me now hand it over to Christian Gisy, who will walk you through the Consumer Services and our detailed financial results 2018. As mentioned before, Consumer Services is the new player of our market network strategy. Its purpose is to provide valuable additional services that supports our users in their decision-making process around mobility and living. It helps us to extend our footprint along the value chain for real estate and automotive transactions and allows us to create meaningful consumer relationships. Even more so, with FINANZCHECK being a part of the group since September 2018, a very strategic and highly valuable acquisition, which helps us to understand our consumers even better.Christian, please.

[Christian Gisy]

Thank you, Tobias. Now tapping into Consumer Services, as described by Tobias just now, and as you remember, we introduced the operating segment as of 1 January 2018, and obviously, it was not only introduced because it can be -- also to very clearly identify the importance of Consumer Services to deliver on the digitization basically of the transaction on to buying and selling cars and obviously later on buying and selling cars. It is our vision to offer a seamless digital experience within the Scout24 market network.As you remember, we have 3 different revenue lines in the segment. The one is financing, which is obviously the biggest, including mortgage leads, car financing leads and consumer loans and that's also where financials will be positioned. The second one is services, with relocation leads and especially the premium membership, which is a highly successful product. And obviously, the third leg being third-party display where we do all elements that is basically where we monetize audience.Just to remember, and you will recall when we did the transaction of FINANZCHECK, we set ourselves the goal that by 2023, we will -- we want to have at least EUR 250-plus million revenue including FINANZCHECK in the Consumer Services area and we want to reiterate this.If we move on and look -- have a look into the Scout Consumer Services, which we call enabling best decisions. The idea here is very clear. It's our vision and our will to support and enable our users in making their best decisions. Best decisions being mortgage fees, being -- basically, more mortgage taps, being property valuations. It's about the premium membership, it's car financing leads. So we have a leverage of lot of opportunities, in which the consumers taps into us and where we can support him to basically put in its best position.And let me just go back once again to the premium membership, which we have now been able to increase to about over 50,000 paying customers, which when we launched it in the Capital Markets Day of November 2017, we had about 13,000 subscribers. This tells you that basically the -- that the product and also the data that we're offering our consumers is not only worth for them, but they are also more than happy to pay for.If we further look into Consumer Services, we have basically 2 examples of products that we are supporting. For IS24, it's the enhancement of our premium membership product, where users can opt in for legal support for rentals or an image to locksmith service by our partners. This service is a bit smallish, but this is basically where you really sense the support and where you'll -- we see a lot of help coming in and also very friendly feedback from users to ourselves. And part of our strategy is obviously also to prolong the retention period of users on the premium membership as we have mentioned during our Capital Markets Day.For IS24 next to the product integration of FINANZCHECK across next couple of months via the monthly financing rate comparisons. We also launched, what we call the finance boost product at the beginning of April. User can acquire a car and pre-apply for a car financing. They then undergo a free and nonbinding credit check. Credit score and matching is powered by FINANZCHECK, and as Tobias mentioned before, the FINANZCHECK, we bought it also because of the underlying technology. This is certainly the most advanced in the market here within Germany.The dealer can then himself well prepare for the meeting with the customer to seal the deal by offering a car and the financing in one package, and we know that this is basically a core need and this will drive also leads to the dealerships.Product is a win-win. You have a better user experience, you have less steps for consumer because he has already the purchasing and the financing 1 car. It's obviously a supporter to our dealer partners, with further value-added products and monetization is twofold. On the one hand you have for every using with finance pools, there is an on-top fee and also obviously a commission on the financing bit they would get from FINANZCHECK.Talking about FINANZCHECK. The number of brokered loans increased by 22% from '17 to '18 to about 70,000 loans in 2018. The volume as such grew by about 30% to EUR 1.3 billion and the revenue increased, again, by about 31% year-on-year, which tells you that basically our ambition and also our positive momentum around FINANZCHECK and our belief into the business was totally justified by already the results of 2018.Consumer Services, we had strong growth in both organic footprint and in FINANZCHECK. We are creating a recurring business model in the consumer journey. We have a strong product pipeline around changing consumer needs. And obviously, we have first results of FINANZCHECK integration to take Consumer Services to the next level. This is something we have to deliver on 2018, and obviously, we are currently and will continue to work on the continued growth by fast adaptation to the changing environment. And there is lot of changes, as you know. We are trying to further leverage touch points with our consumers and continue to deliver value to them. And we are leveraging our strong and innovation power to drive digitization of the value chain to make sure that after certain point in time, we are able to digitize the whole transaction. And obviously, with FINANZCHECK and the integration, we are trying to close the loop on the consumer journey so that we don't fall apart once the transaction has happened, but we are able to stay in contact and have further touch points.So after having being on the operational side, now let's deep dive into the financial piece. Obviously, all of you are aware that in 2018, we had to deal with a couple of new accounting regulations, and obviously, we have shown those to you across the different reports across the year. So there's the IFRS 9, there's IFRS 15 and IFRS 16, which are leases. Most of -- or couple of those figures are restated for 2017, especially IFRS 15.On Scout Group level, we have been able to get to over EUR 0.5 billion of revenues, which is again a very strong result and which tells you also about our ambition level going forward. The EBITDA margin grew on a comparable basis from 53.5% to 54.8%. This obviously includes all of the numbers of FINANZCHECK. On a like-for-like level, we have been 56.5%.If we then move on to the verticals, starting with ImmobilienScout. It is fair to say that the momentum is driven by Residential Real Estate Partners and also by the revenue with our Business Real Estate Partners. And this is something that you can see on the year-to-year comparison as well as on quarter-to-quarter from '17 towards '18. Residential Real Estate Partners grew by 7.9% year-on-year and/or 9.8% by the last quarter, which again is something that proves our guidance that we have given you that the second half of the year would be the strong acceleration in the business, which is by the way also true for Business Real Estate Partners that grew 13% year-on-year and 15.2% across the quarters.So revenue came in at 6% growth year-on-year for ImmobilienScout. On a quarterly -- on a quarter-to-quarter level, it was 6.3%. And the operating -- the ordinary operating EBITDA margin went up to 68.1%, and obviously, quarter-over-quarter, it even reached 69.2%, which I think is a number that couple of you were expecting where we have never debated that it's basically going up to 70% shouldn't be feasible. If we move onto the AutoScout24, again, here you see that we have further continued sustainable growth. We have successfully implemented price adjustment across geographies, which is Germany as well as our European core markets. Here Germany showed a positive developments after a slow first half and the ARPU increased as we have seen by 18.3% from EUR 213 to EUR 252 across the year.The Dealer European core countries have shown strong performance across the year and ARPU increase here by 17% from EUR 237 to EUR 276. Revenue overall increased for AutoScout by 14.4% with a bit slower momentum in Q4 2018, which had more to do with the other revenues and revenue with OEM. Obviously, the margin, again, or let's say the increase in the profitability as well as in the margin was, again, very pleasing to us by 26.9% increase year-on-year and by showing ordinary operating EBITDA margin of 53.5% for the total of AutoScout in 2018.Scout24 Consumer Services. We have talked a lot about it. I think 3 numbers are of relevance, revenue year-on-year increased by 29.1%, still EBITDA -- the profitability rose by 11.5% even though the margin decreased on the back of the losses that we showed for FINANZCHECK. This tells you that the business is in a great shape and that our every revenue expectation we had was fulfilled on the back of this -- of Scout24 Consumer Services.This takes us to the ordinary operating cost. Obviously, we have and -- capitalized, which has increased slightly by EUR 3 million, which is mainly due to an effect of change in methodology with -- compared with last year. Customer costs grew for 2 main reasons: the one is basically, we have included, obviously, the FINANZCHECK personnel in this line; and secondly, we have increased organically our staff of a 66 FTE across the year of 2018. IT went up by another EUR 3 million, which is mainly due to do with the data center migration into cloud-based platform solutions.Other costs came down because of IFRS 16, where the leases are offset into the balance sheet and then put into the depreciation line. Again, an ordinary operating EBITDA of EUR 292 million with a margin of 55%. Below EBITDA items -- the nonoperating items were mostly influenced by personnel expenses, of which EUR 15.3 million for share-based compensation and EUR 14.2 million for M&A-related activities and EUR 1.1 million for the office relocation in Munich.As you can imagine, the M&A-related activities had to deal, obviously, with FINANZCHECK, with other transaction that we tried to achieve in the first half of 2018, and obviously also with the defense work that has been ongoing for the potential takeover that we are contemplating at this moment in time.On the D&A side, obviously we have quite a large increase which is due to a -- which is due mainly to the adoption of IFRS 16, which leads to EUR 6.6 million of further depreciation that comes out of the different treatment compared to before.The finance income positively includes a EUR 33.4 million contribution from AutoScout Spain, which -- where we contributed our share into an associated company. And this is obviously something that will reflect into '19 because AutoScout Spain will not be part of AutoScout24 group in 2019 and more. By the way, the same is also applicable to a smaller business that was called Classmarkets, that delivered about EUR 2 million of revenues in 2018 and was sold by ourself also to the end of '18.The finance costs includes amortization of capitalized financing fees of about EUR 4.8 million. This is a noncash and this is a write-off, which is due to refinancing and prepayment that occurred in the summer, when we introduced the refinancing and the hunting line for our M&A transaction.The effective tax rate of 24.7% is driven by a one-off reduction of deferred tax liabilities. It's fair to say that the statutory tax rate is, obviously, still or should still be around 31%. With adjusted earnings of EUR 170 million, which leads us to an earnings per share adjusted of EUR 1.58 compared to EUR 1.40 as of end 2017. The capital structure after having successfully refinanced the bank debt in July 2018, shows you at the moment a 2.6 net debt-to-EBITDA ratio that has come down since June of 2018, and we have at the moment a cash and cash equivalent relevant there of about EUR 4 million -- no sorry, of about EUR 50 million -- EUR 58 million at the end of 2018. Obviously, this is reflecting all the transaction that happened in 2018. And the -- and obviously, by Q1 2019, we are expecting also leverage to come down a bit further because of the cash flows that have entered the company.So far for 2018 and once we move to the outlook of full year 2019, let me first start to explain something that we have realized in the second or let's say in the third, fourth quarter of 2018, which is a short adjustment of our financial disclosure to reflect operations. And this is mainly due to changes in the AutoScout area where we have decided to basically take out all the third party to stay around OEM and transfer it to AutoScout24 Consumer Services.As you can see on the left-hand side, we're talking about year-on-year new disclosure. This year, new disclosure is also restated to '17. So basically, if you would like to do the apple-for-apple comparison into '17 based on the changes we have just undertaken would have led to a 15.8% revenue growth from 2017 to 2018. And on the Scout24 Consumer Services side, this would have led to an increase towards 24.5%. On a group level, obviously, no changes, which remains at 12.5% year-on-year growth. So again, we have adjusted certain amount of elements, which are only relevant to AutoScout24 and Scout Consumer Services. This obviously, has also an impact on the margin disclosure as third-party display carries high margin that basically drives the AutoScout margin down slightly by 0.4% compared to what we have been disclosing in 2018. And obviously has a certain positive impacts on the Scout24 Consumer Services margin that would now show 35.2%.If we move on to the full year of 2019, let me do 2 important caveats. Caveat number one is, and Tobias mentioned, is the Bestellerprinzip has not been included in the outlook for the full year of 2019. A reason for is as the bill is not finalized yet, we don't have any clear visibility as to what the impact is going to be. And Tobias did talk to it, we are expecting a short-term impact that obviously would reflect then into the guidance of 2019. And once we have visibility, we'll certainly will come back to the market and adapt the guidance at least for 2019, probably also 2020. Because depending on when the timing is, it will have the impact on 2019 and certainly also on 2020. Second caveat is that in the revenue numbers that we are showing here, 2 elements have been excluded because -- which is Spain AutoScout. Spain AutoScout has been joint ventured into a business since 1 January, 2019, where we are not a majority owner anymore and obviously, we sold our operation of Classmarkets at the end of 2018.So what does this mean now for the revenue growth? The revenue growth like-for-like ImmobilienScout24 is expected to be 9% to 11%. The growth rate in the revenue with Residential Real Estate Partners is expected to accelerate further from currently nearly 8% by 4 to 6 percentage points over the course of 2019. We expect entire group to record a low- to mid-teens growth rate for the full year 2019. Again, this is not reflecting Bestellerprinzip at all. For revenues, with Business Real Estate Partners, we expect a record -- to a record and mid- to high-teens growth rate, which is basically in line with what we have seen already in 2018 accelerating slightly.In the area of other revenues, reported growth will decline because of the debt consolidation of market. Like-for-like, we'd expect revenues to remain fairly stable in the third line. We expect margin to come in as high as 70%, which is certainly something that we have been asked for and obviously, on the back of revenue growth and that's the reason why we never guided so much on margin. On the back of strong revenue growth, obviously, we are able to continue to drive the margin.AutoScout like-for-like growth rate is not taking into account the contribution of AutoScout Spain in 2018 and, therefore, is expected to be between 12% and 14%. And reported growth rate in the new segment structure is expected to be in the 9 to 11 percentage range. The 12% to 13% is slightly lower than the 15.8%, as seen on the slide before. Obviously, there are 2 main elements, which will have an impact on dealer revenues in Germany and Europe as well. First, we'll continue to discontinue part of our commercial basic platform that's called TruckScout to completely focus on variable vehicles for both consumer and dealers. This will have an impact on the revenues in low-single mid-digit million area.And obviously, we foresee lower growth in project revenue with OEMs. This is basically starting there. We kept an AutoScout for the third-party display, although, OEM was brought into Consumer Services. The special project we have with OEMs that are ongoing especially with the BMW are expected to remain flattish. So we are not foreseeing there any growth for 2019.So underlying dealer revenues in Germany and Europe are expected still to grow strongly in the mid-teens. Based on operating leverage, we are expecting the margin of up to 54%, which compares to 53.1% in 2018 based on our new disclosure.Consumer Services will show strong like-for-like growth between 15% and 17%, driven by the consolidation of FINANZCHECK by September 2018 only. If you look into the reported growth rate, this would be in the high 30 to low 40s.For Consumer Services, we expect the margin of up to 30%, which is like-for-like if FINANZCHECK would have been part of Scout for the full 2018 of an expansion of about 3 to 4 percentage points.Looking back and allow me to do so. Looking back at our Capital Markets Day 2017, the guidance we have given there, you would need to exclude FINANZCHECK contribution and the effects from the divestment of Classmarkets and AS Spain to basically be able to compare the numbers that we have basically showed back in time. We have promised back in 2017 to achieve low- to mid-teens revenue growth and expansion of margins by low single digit percentage points. Translating our current guidance backwards, we consume both of it, which should give you a clear feeling that we are delivering -- continuing to deliver on basically what we have been stating.This generates cash and obviously, we have had key priorities for cash in the past and we have also in the present. And it means that basically we are reinvesting growth. So we are obviously looking to M&A activities that would strengthen our market position and/or grow adjacent businesses across the core markets that are defined. We want to return cash to our shareholders. We have included in the annual report a proposal of 20% to the Supervisory Board. So this is basically 40% of our adjusted net income over time, and we are repaying our debt and our target leverage ratio on the ordinary course of business is 1 to 1.5 over time.Thank you very much for being so long with us. And now, I think the time is the right to give you the opportunity to ask couple of questions. Thank you very much.

[Operator]

[Operator Instructions] The first question received is from Chris Johnen from HSBC.

[Christopher Johnen, Analyst]

I'd like to take them one by one, if that's okay with you. First, could you repeat the comments you've given at the press call regarding your interest in the eBay classifieds business? I think I'll be particular interested in a comment around regulatory issues given on both eBay Kleinanzeigen and Benelux, we're talking about #1, #2 or #1, #3 mergers? I'd be curious on your view with that. That's my first question.

[Christian Gisy]

So Chris, let me probably start, then I hand it over to Tobias. Obviously, we have been asked the question on the press call if we are interested in eBay classifieds group. And obviously, we have to say clearly, yes. Because I mean it's a company that owns couple of assets that are not only relevant to only Germany, but also in other countries. Whether regulatory comes into play or not? And we did answer the question very simply by saying while the competition in German market has increased quite considerably across last couple of years introducing aCar, Carwow, [indiscernible] there's a lot -- there is a big space in it and a lot of people entered into this market, which obviously, I think is something that the antitrust authority will have to look into. And the second -- the second answer is, that we are also given -- we just had recently a transaction in the space, which probably is comparable where the #2 goes to #1 in the -- on the [ food ] side. So there are signs out there that basically life is changing. We can't speculate something that is basically really eBay classified, who would be for sale, then we will have to answer the question as when it comes a time.

[Christopher Johnen, Analyst]

And in terms of leverage, where do you guys see your firepower? I would assume that in terms of going above a certain threshold on the leverage side, you'd be interested or you'd be willing to forgo a certain limit in the short term. Maybe you can just give us a quick idea on where you see your own firepower at the moment?

[Christian Gisy]

To be honest, I think again, this would be speculation. If basically the situation arises, we certainly, as a management, we'll make a decision and will come back and see what basically is really necessary and feasible for the company. I think talking about this at the moment without knowing numbers, prices, whatever, it doesn't make any sense.

[Christopher Johnen, Analyst]

Okay. And then coming to IS24. In terms of the residential performance. I appreciate your comment on the 4 to 6 percentage points acceleration in '19. Can you maybe give us a little bit more color on ARPU trends versus agent count? And maybe how that has started in 2019 already?

[Christian Gisy]

So let me probably start with the second one because it's easy. The business real estate part is obviously a more professionalized part of the business, where agent count does not play such role. So basically, monetization as such is coming of our ability to drive prices, on the other hand to basically the product. On the Residential Real Estate Partners side, and we have commented this across the year, we've been surprised ourselves where the amount of agents we have been able to pull on. And if basically this continues, we'll certainly continue to see smaller agent joining us, which again will have more of a dilutive effect by obviously our successes that we have seen across the last quarters on a penetration of the year.

[Christopher Johnen, Analyst]

And so -- I mean, where would you see the stronger support coming from? It sounds that you still expect more agents even on the low end to come in and that's sort of growing quicker than the ARPU? Am I getting this right?

[Christian Gisy]

I don't know whether -- the question is how much of them will come? And as you know, I mean we have never been so much focused on the agent count. So basically, our business is -- on the residential side is the penetration and further acquisition of large customers to date because those are the guys with whom we will make them money. Obviously, our acquisitions and also our activities on the churn side has delivered good results. I guess there are still couple of agents out there that will certainly be able to join. And this is basically, and as you know, all prior [indiscernible] I think lot of those agents will not come anymore. [ If they should have continue, will come again ] because I guess those guys will just leave the market.

[Christopher Johnen, Analyst]

Yes, on that on a full year basis, is there sort of an updated view on how many of those agents you would think may leave your agent count? I mean you probably have a good idea of what this sort of long tail is of people who may be willing to trade down to another platform or leave the market all together? Is there any sort of percentage figure or absolute number you could give us? Just an indication or range, anything?

[Christian Gisy]

No, we'll come -- so as I said, once, basically, we have a clear picture of what basically the set of -- what Tobias said, is going to -- is we're going to need in terms also probably of numbers, we'll certainly come back to the market. But at the moment, it's still too blurry.

[Christopher Johnen, Analyst]

And then one very quick one. We've been told by agents and their associations that you're increasingly pushing for 24-month contracts on the real estate side. I mean is there any comment in terms of strategy in the pricing you've undertaken in last couple of months? Or how should we think about 24-month contracts?

[Christian Gisy]

So that's interesting that you say that because this is -- I mean are you talking about agents that you recently talked to, or is there a statement of...

[Christopher Johnen, Analyst]

Yes, over the past couple of quarters, yes.

[Christian Gisy]

Well, then probably it's long time ago because the 24-month thing was introduced at half of '17 because as you remember, we had pricing issues at that point in time. But the 24-month contract is nothing that we are at all -- selling activity at all. So this is -- so basically that's reason why I can't -- I haven't really able to refer to the comments. Craig? Any other questions?

[Britta Schmidt]

Craig, go on?

[Tobias Hartmann, CEO & Chairman of Management Board]

Yes, go ahead.

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

I have 3 questions please. The 2 first on IS24 and then just one quick follow-on, on Besteller. On IS24, I just wondering if you see any signs for a turnaround in the trends in terms of number of listings? They've declined, obviously, over the last 2 years. You see any signs, i.e., in terms of building permits or whatever maybe this trend will reverse? And secondly, just looking out a little bit further down the road. Obviously, excluding potential short-term disruptions from Besteller. You're now guiding for 70% EBITDA margin IS24. I just wondered where you kind of think maybe a natural mid-term upper limit might be on that business? And the third question, as I mentioned, on Bestellerprinzip. But I just want to confirm that I understood that correctly, your comments there will not be an agency Bestellerprinzip cap, is that correct? If that is not correct, I just wondered if you have any thoughts at this stage on whether or not in the case of an agency P/E cap, whether or not listing costs would still be outside, [ that's the main ], i.e. would you be able to still -- would agents be able to pass on the listing costs directly to the home sellers?

[Christian Gisy]

So let me start probably -- great maybe with the trends on listings. We don't see any reverse trend because obviously, yes, there is probably 1 million of building permits until 2020, but we know that basically the demand is rather in the areas of 1.5 million. So the contraction and basically the supply is still partly low what basically the demand is as of today. So we don't see any reversal trend, and Tobias also in his speech said that basically, fueled by the decision of the ECT of keeping interest that low is certainly not going to help in that area. And on the EBITDA margin, as you remember, I mean we are not really guiding to it. EBITDA margin and EBITDA growth is a factor of scalability of business. That, obviously, if we're able to continue to drive revenues as we do, there is certainly a certain further margin expansion possible. Whether it's 10.72, 10.75, really I can't tell you. And honestly, we don't care so much because it's more -- for us, it's more about the profitable revenue growth.

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

Sure, sure. I understand that. Okay. And...

[Tobias Hartmann, CEO & Chairman of Management Board]

And Craig, regarding your third question on the Bestellerprinzip. So yes, in order to correct you, we currently assume that there will not be a cap on the commission. That's given all the insights that we have. Obviously, we don't have a 100% certainly, but that's what we currently see it here, which we've been clear, it's rather the Bestellerprinzip, which a potential split between the seller and the buyer or just the buyer, that's the one who basically calls upon the agents to pay the fees.

[Operator]

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

[Vivek Ghiya, Research Analyst]

So just wanted to know if you have changed the definition for listings on IS24. Because what I see is that on Slide 7, you show 470,000 listings in December '17. But if I remember in '18, at the first half '18 results, the slide showed 440,000 listings. So just wanted to know what has changed? And if listing definition has changed, then could you please provide like-for-like listings figure for December '18? So that's my first question and I'll ask a follow-up question after your answer.

[Britta Schmidt]

Yes, Vivek, let me look into this. This is Britta speaking. We haven't changed our listing definition, and we should have the same number of listings on the slide, but we will double check and let you know.

[Vivek Ghiya, Research Analyst]

Okay, great. It will be really great if you could come back on that. And the second question is, when the Bestellerprinzip was introduced for rentals, did you -- did the real estate agents see a deflation in the monetization or let's say, the amount that landlords were paying instead of rentals? And did that normalize over time? The reason I'm asking is obviously, you -- the assumption here is that the sellers right now are paying 7.2% roughly commission on selling property. Over time, that commission will not go -- will not see any pressure when the -- sorry, when buyers -- when sellers are required to pay right -- because buyers are paying right now. And so once the sellers start paying that commission, do you anticipate any deflation on that? And if there is any historical kind of reference as to what happened when it was introduced that would be helpful.

[Christian Gisy]

Vivek, let me just clarify because I'm -- I want to make sure that Tobias and myself understand the question correctly. You're asking whether we are able to basically -- whether we can talk about what happened on the rent side and whether this is comparable to something that we assume will happen on the sales side, is that what -- basically what you're asking for?

[Vivek Ghiya, Research Analyst]

Yes, yes.

[Christian Gisy]

Okay. So let's go back into June 2015. And obviously, you're trying to compare 2 things that are not comparable. Rent is a commodity, whereas the sales and the purchase of a house is depending on whom -- what sort of a German you're talking to is a once-in-a-lifetime transaction. So that's the reason why we said in the past, those 2 elements are not comparable. But assuming that they would be comparable, you see basically it is a clearing of about 4,000 to 5,000 agents back in time of the market and the commission rate on this -- on the rental side it used to be 2.3 gross decreased to obviously 1.1 done -- borne by the person that basically was ordering the service. So that is what happened. But again, the one is the commodity, the other one is a very fortunate kind of transaction that happened depending on who is it once-in-a-lifetime.

[Vivek Ghiya, Research Analyst]

Okay, great. And last question, I mean do you have any update on your transition, Christian?

[Christian Gisy]

On my -- no, no. So my contract is expiring on the 30th of September, and the company and I will let you know when there's something to announce.

[Operator]

[Operator Instructions] The next question received is from Christoph Bast from Bankhaus Lampe.

[Christian Gisy]

Bast?

[Tobias Hartmann, CEO & Chairman of Management Board]

Yes, Bast?

[Christoph Bast, Analyst]

Sorry, my fault. Three questions, please. So first one regarding the revenues with private listers, that ImmoScout24, seems like the decline has accelerated in Q4. Could you remind us what the reason behind that was and how we should think about this going forward? And the second question. Could you give us maybe an indication how the ARPU in Residential Real Estate Partners, excluding your newly acquired customers has increased? I think if my math is correct, this should have been around 7 percentage. And the third and last question with respect to the international car dealers. Could you update us on the reason for that small decline in 2018? And whether we should expect this trend to continue, because I guess AutoScout Spain is not the explanation for that decline?

[Christian Gisy]

Okay, Christoph, let me start with the private listers. Obviously, we have never guided for the private listers and we will not do so. So that's probably the first statement. The second statement is that we did some testing around the private in Q4 of last year, where we did try to understand certain pricing and also needs of consumers. And this basically led to a, let's say, to a probably slight down turn on the revenue side, but we're not guiding for it. And if you look into the guidance that I've given for IS24, we are saying that in 2019, we're expecting flat revenue growth compared to last year, which tells you that basically we're not expecting further declines. On the car dealers' part -- on the car dealers side, it's very simple. It's about -- it's mainly about Holland and partially also about Austria. We have and there -- we are migrating -- in Austria as well in the Holland, we are migrating the customers that we bought on Auto Trader also on to AutoScout. And therefore, we are basically concluding with those guys 2 new contracts and we have seen certain amount of churn there, which is fine because couple of those customers are not exactly those who we want to work with.

[Tobias Hartmann, CEO & Chairman of Management Board]

On the question in terms of increase of ARPU. Without the effect that we outlined, it would have been around 5% growth rate.

[Christian Gisy]

To complete also, because you were asking whether the trend in internationals will continue in '19. No, I don't see it continue. I expect a stable -- I mean as you know, we are working very much for markets and as a market leader, and I think to be able to show, it requires substantial lead that we're having, we -- I would expect stable numbers and probably slight increase, but nothing basically to be very excited about.

[Christoph Bast, Analyst]

Okay. And maybe one last follow-up, if that's possible. With regards to your nonoperating cost. Could you give us a better understanding how they are split between the long-term incentive program costs related to Hellman & Friedman and others? I mean just as a rough indication.

[Christian Gisy]

So Hellman & Friedman is not included in my notes. I don't know what you are referring to, but what I can do is the following. In those EUR 34.2 million, you will have basically personnel expenses of about EUR 90 million, which are mainly to deal with the share-based -- with the overall share-based compensation. You will have another EUR 14.2 million that are M&A related. M&A related means FINANZCHECK, other companies that we looked and that unfortunately we missed. And if you remember probably in Q2, the number was already introduced. And obviously, there is also EUR 1.1 million that is to convert for the office relocation in Munich that happens March-April of 2018. This is basically the sum of what we're showing.

[Operator]

The next question received is from Nizla Naizer from Deutsche Bank.

[Fathima-Nizla Naizer]

My first question is on the premium subscription product that you've -- that you are saying is seeing very nice growth. Could you just tell us what the economics are around it? I mean how much does a consumer have to pay to be on the subscription? And does that change based on the products that they sign-up to, just some color there would be great? Secondly, in Consumer Services, I know you described a couple of products that you'd like to launch going forward, but what are the maybe 3, 4 key areas of focus that you'd like to put in to drive future group, to get to that EUR 250 million type of revenue target that you have? And the last one is on I guess, the current bid on Scout. Could you give us some color on what happens next in terms of communication to the market and what sort of a time line we should expect on future communication and what that could be? That's it.

[Tobias Hartmann, CEO & Chairman of Management Board]

So thank you for your questions. On the premium subscription services, there is currently one offer out in the market that basically paid approximately EUR 30 per month. And the strategy is that obviously it's a very tight market, a very, very tight market and it's really desperate for some home seekers to find the right home, so that it basically allows you to have more content and premium content at your disposal. So the strategy is clear, that means we like to make more relevant content available to those subscribers. Content is described by the locality, i.e. relevant content in your ZIP code or at your street level where you are searching for and then trying to match that with a counterpart, i.e. your real-estate agent. That's the key of strategy there. We have some exciting road maps there, but at this point we did not want to share any specific numbers in terms of customer growth or subscription growth.

[Christian Gisy]

On the M&A fees, I think we're basically, Nizla, expecting the offer document to be issued. Obviously, this is nothing that basically we are steering. So we are as you are waiting basically for the document to be out. Once the offer document would be out, we at the forefront as well as Supervisory Board will have obviously a very good look at it, and then we would have to come back within 2 weeks after the publishing of that offer document to the market, we'd also call recent statements, where we basically will then elaborate on the recommendation and what we have done to basically scrutinize that offer.

[Operator]

We received further questions, it's from Marius Fuhrberg from Warburg Research.

[Marius Fuhrberg, Analyst]

Just 1 little question, regarding the joint venture in Spain. What can we expect to contribute going forward? Is this compared to the level we saw in 2018?

[Christian Gisy]

No, for the joint venture just to be very clear and, here the joint venture means that we have gone into minority position, so that basically we will account for that joint venture only within the financial income. So we won't record any revenues nor will we record any profits anymore. The only thing that we will record is the financial income that we expect to be positive, obviously, in the line of financial income.

[Marius Fuhrberg, Analyst]

Yes, that's what I meant, but in the amount -- should this be comparable to the level we saw in 2018?

[Christian Gisy]

Absolutely.

[Operator]

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

[Tobias Hartmann, CEO & Chairman of Management Board]

Well, thank you very much for joining on today's call, and we look forward to seeing some of you in person very soon. Thank you very much. Bye-bye.

[Britta Schmidt]

Thank you. Bye.

[Christian Gisy]

Thanks, bye.

[Operator]

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