New Work SE

XETRA:NWO

Earnings Call Transcript 2023-Q1

[Operator]

[Audio Gap] presentation on the results in a moment. Afterwards, there will be enough time for our Q&A session. Questions can then be asked by audio. We're looking forward to the results, and I hand over to Ms. Von Strombeck.

[Petra Von Strombeck, executive]

Hello, and welcome, everyone to our Q1 update. Thanks for your interest and for joining us today. As always, Ingo sitting next to me[indiscernible] might read about how we [indiscernible] I would like to update our top [indiscernible] the lower EBITDA as well as top line growth guidance as well as a press release yesterday. So before we talk about new work and new numbers, I'd like to give a quick insight into how we view the current trends in the employment market. This is a short-term observation and we clearly [indiscernible] be the mid or long term.

So what is our observation. You might have a lot of pain previous discussions you've had with companies in general. Why is there earning acceleration in transitional recruiting services last year, the situation changed quite rapidly at the beginning of the year. The management, particularly among SMEs, which is our core market, took a downturn. We carried out a survey 1,200 German CEO published in mid-January '23. The overall midpoint this year, almost 60% of German companies expected to see be economic decline at the beginning of the year. As a consequence, 6 out of 10 companies were planning to kind of cost in the first half of '23, which certainly includes hiring costs as well.

To get additional proof of this, we track the development of job ads in Germany through our job [indiscernible] technology. As you might now know, our crawlers credit almost every company a website during on a regular basis. We discovered a downward trend of 7% in [ full-time ] vacancies in the first 3 months compared to the second half of last year. This is in line with for market research and [indiscernible] jobs recently carried out. It shows that until the end of last year, there was a significant conservative in open vacancies compared to active jobseekers.

That has changed quite significantly in January, continued through February, as you can see. A significantly increase in jobs increase currently almost equals the number of open vacancies, which declined based on the research. And last but not least, as you saw in the press, some of the job portal can reduce their staff quite significantly as a reflection of this. That is in terms of [indiscernible]. We thought it was important to find this out upfront with the aware of the current market. Nevertheless, we believe the situation will go on quite long. Midterm, we expect the gap between active jobseekers and open vacancies to grow again, which will result in increased demand for [indiscernible] year-on-year on the back of the lower than anticipated growth -- that's also the main driver while we turn down our EBITDA guidance from EUR 108 million to EUR 109 million, which was before EUR [ 22 ] million to EUR 100 million. We decided to continue to invest in our strategy, although we obviously look on the cost side as we believe in the long-term opportunity and the fact that the current market environment is on the temporary headwind. So here are the key financial KPIs in detail.

This is not a great picture compared to previous quarters but pretty much the outcome continuing with our product and marketing investments since we do not expect the current downturn in the market to last driver. Please also bear in mind that even if our HR solutions business is experiencing double-digit growth in Q1, the overall group is still the looked by our legacy B2C business, where we expect to see a further decline in paid memberships to the ongoing repositioning of the same platform.

So how do the 2 [indiscernible] destinations develop. Let's start with kununu. The market leader for workplace insights in Germany are transient. Looking at the side of kununu, its content offering, reach, et cetera, we see that kununu achieved a record quarter with the strongest growth in workplace in [indiscernible] both quarter-over-quarter with 710,000 and also year-over-year with 2 million. The development of kununu inventory is essential as the data collected for employees is extremely valuable to anyone who want to change employers. Every employee center data or even corporate culture analysis helps people make for decision as to which employs the best fit for them, in turn, reducing frustration and ideally also [indiscernible] in future and [indiscernible] kununu 2 other companies based on numerous focus in [indiscernible] .

On the product side, we added the new reactions future, which gets us opportunity to respond to [indiscernible] with helpful or green. This means that kununu is now interactive for the first time with reviews enjoying a formal social proof. [indiscernible] for this reaction is having an account with a valid email address, which encourages users to log into [indiscernible]. The next step is to introduce the reaction which is to employer reviews, which is expected to be launched in May. We also launched the [ MVP ] or profile dashboard for employers. This led employers tribes and understanding interaction with their community profile.

Moving on to [indiscernible] , our [indiscernible] destination was 21.7 million members. We are currently transforming from a regular online social network for business professionals to pool pure job or where members and users get access to almost every job vacancy in Germany, thanks to our [ crawler ] in turn helping people to get compared to 20,000 recruiters and providing people with insights and valuable input and potential for us.

We added 1 million new members during the past 12 months or 200,000 net new members in Q1. That's lower than the past quarters but perfectly normal given the high penetration [indiscernible] to the total addressable market around 27 million [indiscernible] for workers today.

And with all intending [indiscernible] options and [indiscernible] culture information as well as comprehensive salary data, same helps people find the right job for them, and they need among the abundance of jobs in a.

Furthermore, on the back of our strategy to reposition into adjust network, we have on our job section to everyone, which was only available to marketing users in the past. We also carried out our B2C marketing campaign to highlight the launch of our jobs marketplace for.

Moving on to our HR Solutions business, which as of Q1 accounts for 70% of total revenue. As most of you know, selling these 2 HR solutions like employee branding profile, job ad and active sourcing licenses is our core monetization across [indiscernible] although most of our revenues are 12 months discussions, any kind of short-term downward market trend also impacts the way our clients [indiscernible] department and recruiting players allocate their respective [indiscernible] .

And this is what you actually see when looking at Q1 customer development. On a net basis, we lost around 18 clients after having added around 300 to 400 per quarter last year. The revenue difference between the fourth quarter last year and the first quarter this year is mainly driven by the more transactional jobs listing business. As mentioned earlier, when tracking the development of jobs sites in Germany with our crawling technology, we observed a 7% decline compared to the second half of last year. So this is clearly a marked difference.

But despite all these challenging circumstances, we managed to grow our HR solutions business by 11%, which is considerable when comparing this to other job market in Germany at the moment. When looking at current trading, we do not see an improvement as of today, and we expect things to easily recover in the second half of the year.

Last but not least, there are a few remarks and what we've done for our B2B recruiting [indiscernible] in Q1. Remember, we introduced our new B2B brand only line in September year. As part of this, we launched a first version of our talent acquisition platform framework. Our aim is to build an integrated talent acquisition platform for HR departments and recruiters, [indiscernible] corporate can seamless branding and candidate sourcing experience. After having launched the first version in December, we accelerated our product development and action plan for one major release per year to 2 releases per year in order to achieve our organization's targets within the next 2 years.

With a new spring release, we combined the 2 products onlyfy one application manager and the onlyfy one job ads. Customers have only had job das benefit from greater efficiency and convenience and recruiting. The ads are published in [indiscernible] , the largest German language job network with [indiscernible] 4 job ads per month. In addition, employees are dramatically received suitable recommendations from the same job platform, which has only 21 million members.

Directly after the job is published and have the option of writing these [indiscernible] individuals directly via system. If desired, customers can also increase their reach many times or with targeted [indiscernible]. Even greater reach can be achieved and combined with -- in combination with the onlyfy one Application Manager, where ads can also be published with up to 900 other high-reach channels such as other job sites.

For hard-to-fill positions, targeted high-performance campaigns can be built on social media channels to increase rate. By integrating company rating for culture data from the kununu employer rating platform, job seekers get a complete pager of the potential employer and benefit report of all from experience. So despite short-term headwinds, we continue to eat product development as we know the current market sentiment won't last forever. And that's it for me for the first part. And next, I hand over to Ingo.

[Ingo Chu, executive]

Thank you, Petro. Hello, everybody. This is Ingo, and I'm going to talk to you about the Q1 numbers in more detail. Now as already indicated in our February call, the start into the year 2023 has not been easy. While our long-term opportunity and our strategy remain intact, the current market weakness impacts our short-term financials.

So now with the executive summary. Key message points are as follows. Number one, revenues came in at EUR 75.9 million and 2% growth year-over-year, which is less than planned given the weak market. Number two, we continue to increase our access to talent on the c side, both in and have grown the [indiscernible] metrics. That is important because that's the basis for all monetization, especially in HR Solutions. Number three, pro forma EBITDA came in at EUR 17.9 million. Number four, operating cash flow came in at EUR 33.9 million. And number five, we've updated our guidance to pro forma EBITDA of EUR 92 million to EUR 100 million. I'll give you more details on the following charts.

Let's start with the P&L. Revenues came in at EUR 75.9 million. That's up 2% year-on-year. You can clearly see that the weak market situation has impacted our revenue growth. We've talked about that in our February call. And the market does not show signs of improvement yet. HR solutions have grown double digit. Given the weak market, that is good, but it is also clearly significantly less than we had planned.

Marketing solutions revenues are also lower [indiscernible] because of the weak economy. And direct B2C monetization has gone according to for the strategic reasons that we've already talked about. All together, this leads to 2% year-over-year growth on [indiscernible].

Reported EBITDA amounts to EUR 15.5 million. That's down year-over-year. The key driver here is revenue development. So you also have an extraordinary onetime nonoperating restructuring cost item of minus EUR 2.4 million. The majority of that concerns 16 [indiscernible] . As you know, [indiscernible] is our most important brand, which we are currently repositioning to a car network. Now with a more focused new positioning, we need fewer people building the platform and more budgets for marketing. So we structured to be able to reallocate funds overall on a net basis, we keep increasing our investment mix in to drive usage from talent.

Reported EBITDA margin comes in at 20%. Our pro forma EBITDA came in at EUR 17.9 million. That's down year-on-year. Compared to last year, pro forma EBITDA margin came down from 34% in Q1 2022 to 24% in Q1 this year. You will remember that in the first half of last year, margins were abnormally high as we were not yet in full investment mode then. This year, in Q1, we are in full investment mode, combined with the lower-than-planned revenues that, of course, impacts our bottom now. We started countermeasures on the cost side, however, not to the extent that we endanger our long-term strategy.

Depreciation amounts to minus EUR 7.2 million. That's down year-over-year. Compared to last year, we had fewer extraordinary platform write-offs. Reported financial result amounts to plus EUR 0.4 million. That's up year-over-year. And the delta compared to the previous year mainly stems from revaluation of financial assets. Last year, we had a negative book loss of minus EUR 0.8 million. This year, we have a book gain of plus EUR 0.4 million. And if you take out that effect, pro forma financial result would be around 0, which is a little bit better than previous year's level.

As you know, basically, in this slide, we show accounting only, noncash cost for discounting these payments according to IFRS and now also some positive interest. Reported net income amounted to EUR 7 million, that's down year-over-year, and pro forma net income amounts to EUR 9.2 million, which is also down year-over-year.

Now on the next chart, you can see profitability by segment according to our new segment reporting. You will remember from the February call that we have a [indiscernible] reporting and that there are basically 2 major changes. Number one, we put the recruiting business and the cost for the corresponding c side talent access by operating, for example, kununu into one set. So as a consequence, revenues and all related costs are shown in the same segment.

Number two, we allocate more costs which are actually incurred by businesses which are centrally managed from the central and other line to the business segment line. So one very obvious example is , for example, a real estate cost. So effectively, the margins, new segment reporting in the segment have now more of a full cost characterized as post-trade contribution margin character in the all segment reporting. Overall, we are convinced this way we can be even more transparent to you.

Now let's move on to the segments, which are showing the reported figures. The HR Solutions and Talent Access segment came in at EUR 7.7 million in segment EBITDA. That's down year-over-year. In this segment, you can see revenues from recruiting costs for the go-to-market for recruiting and cost for talent access. That segment shows the heart of our new winning aspiration. We want to become the #1 recruiting partner by [indiscernible] . This is where the growth will come from and where we invest in go-to-market on the B side and increasing talent access facing on the [indiscernible].

The B2C segment had EUR 10.2 million in segment EBITDA. That's down year-over-year. That is fixing paid membership business and the respective cost and [ dimensions ]. This is a former historical for business, which is now in cash cost.

The Marketing Solutions segment came in at minus EUR 0.1 million. That's down year-over-year. It shows the advertising business and their respective cost. It's a nonstrategic byproduct business, and it has turned slightly negative on a full cost basis because of the weak advertising market. But on a contribution margin basis, it has a margin in excess of 14%.

On the next slide, you can see the revenue development by segment. As you know, revenue-wise, there are no major changes compared to the other segments. HR Solutions revenues came in at EUR 53.3 million. That's up 11% year-over-year. Now as we've said already, currently, the market is weak given the market uncertainty. The sentiment is still low, as are recruiting activities. And if you look at other companies in this sector, they are slowing down as well.

Now despite adverse external circumstances, we managed to grow double digit, which is good if you look at the market. As you go one level deeper, our solutions have grown with employer branding and our product [indiscernible] being particularly strong in growth.

B2C revenues came in at EUR 19.5 million. That's down year-on-year. Now this development comes as planned. The key driver behind the development is in direct B2C monetization at Sigma. International, which is only a small part is growing again.

As you know, with our refocused strategy, we concentrate on building our access to talent focusing short-term direct B2c monetization is [indiscernible] point focus because we monetize our tenant access through HR Solutions [indiscernible]. Finally, let's look at the B2B Marketing Solutions segment, revenues amounted to EUR 3.1 million, down year-over-year on the back of the weaker advertising market.

Let's have a look at our cost structure. Again, these are reported figures. In Q1, personnel costs before capitalization amount to EUR 43.8 million which is an equivalent to 58% of revenues. That is up year-over-year, and this includes restructuring costs, as I've already mentioned [indiscernible] those personnel costs will be approximately EUR 4.4 million or 55% of revenues. As you know, we have invested in growth throughout the last year. So we do have full year effects now. Key areas and head count investments are only if I go to market at kununu and some central [indiscernible] .

If you look at marketing in Q1, overall marketing costs amount to EUR 13.1 million or 17% of revenues, that's up year-on-year. Here, we have increased the volume of our branding campaign to drive[indiscernible] its repositioning as well as performance marketing to increase talent access [indiscernible]. As you've seen, kununu made significant profits here and accelerated in content acquisition as well as traffic growth.

The last cost line, other operating expenses now includes, as usual, external services, legal audit consulting, payment processing, servicing [indiscernible] and other costs. In Q1, other operating expenses before capitalization amount to EUR 11.8 million or 16% of revenues, which is up year-over-year just especially driven by head count.

Now cash flows. Operating cash flow, excluding [indiscernible] cash amounts to EUR 33.9 million, down year-over-year, driven mainly by lower EBITDA. We could compensate in part because we've worked on net working capital improvements. Cash-outs for operating investments amount to minus EUR 9 million down year-over-year is mainly driven by higher capitalization, which reflects a stronger focus on product innovation. Cash-outs for interest paid, foreign exchange and [indiscernible] amounts to minus EUR 2.5 million. This is mainly the lease cash out. And if you look at last year's figure, you might remember that it was positively impacted by a lease incentive of plus EUR 2.8 million. With that free cash flow before dividends and before organizer cash amounts to EUR 22.3 million.

Now let me give you some context regarding our updated guidance. As you've seen, HR Solutions business is growing significantly less given the short-term market weakness. This reduces our headroom for investments in [indiscernible]. Now we have started countermeasures on the cost side, but there's a limit. If you cross that limit, you harm future growth.

So we were faced with a decision between cutting back our investment and making EBITDA guidance or keeping up investments and taking down EBITDA. And given our strong belief in our long-term opportunity, we opted for keeping up our investments despite current short-term market situation. And based on that reasoning, we updated our guidance to an absolute pro forma EBITDA of EUR 92 million to EUR 100 million. That's it for the numbers, and we're now happy to take your questions.

[Operator]

[Operator Instructions] Please go ahead, Mr. Daniel [indiscernible] .

[Unknown Analyst]

I just wanted to try and better understand the investments made already in Q1. What do they relate to in particular? I know you mentioned the personnel costs and the marketing, but any further detail would be really helpful. And what do you intend to invest in over the course of 2023 which results in the revised EBITDA outlook?

Then a second question, if I could. Just trying to better understand what's baked into the new guidance from a macro perspective. I think you mentioned on the call that you expect a recovery into the second half. But with no signs of improvement currently, do you think there's a risk of the macro picture deteriorating further before a recovery maybe more into 2021?

[Ingo Chu, executive]

So let's start where did the investments go. If you have to look at it in the context of our winning aspiration, which is we want to become recruiting partner #1 by winning talent. So -- and these are actually the 2 buckets we are investing in. The recruiting part, the #1 part is everything where we sell our solutions to HR customers. And there, we've especially invested in go-to-market capability, and that is salespeople, salespeople but also sales processes. We find that especially in my -- in personnel cost side.

Now on the part of the winning talent side, we have 2 major brands. That is [indiscernible] and kununu. If you look at [indiscernible] , we have invested especially on the marketing side, on brand marketing to drive the repositioning from a general social profession social network to a job network. And then we've also invested into performance marketing to actually grow access to talent in various ways for the job market for the network in [indiscernible].

if you look at kununu, it is in part personnel to further build the product, and it is also in part marketing to further drive awareness for kununu. So that is basically the major buckets where the investments have been in Q1. And because of that part, [indiscernible] , of course, is going on. Of course, we are giving the current macroeconomic situation pacing further increases in personnel when it comes to go-to-market. And also -- so we are -- we have significantly reduced our last -- the head count in the short term. That's on the investment side.

[Petra Von Strombeck, executive]

On the macro side, obviously, we look at core trading and what experience so far in basically based our assumptions on -- our top line assumptions on the current trends we see on Q2. So nevertheless, we continue to believe that there will be an upstream in the second part of the business that will grow in the year, but we did a realistic prudent assumption in our guidance, and this is what we also guided in EBITDA range. I hope this answers your question.

[Operator]

Thank you very much. And we received another question from Luke [indiscernible]

[Unknown Analyst]

Maybe a follow-on the previous question. So you made your guidance in February, and that was very early in the year. So if we compare your previous guidance to the current guidance was obviously, Q1, at the end, already below your expectations that you had in February so -- that we also now have a lower base for the second half of the year you still see more positively than the first half year? Would that be a right interpretation?

[Ingo Chu, executive]

Well, I think the difference between what we said in February and what we are saying now is that in February, we actually were still expecting a significant uplift in the second half of the year. And we do not see in the past weeks in the past months, anything that actually gives us confidence in that. And basically, the general macro upstream from the second half of the year, we have postponed that, just as Petra has explained, and that is the major difference. That is the major difference between what we said in February versus what we have to say now to be [indiscernible]. .

[Unknown Analyst]

So you still see an uplift, but not a significant uplift anymore.

[Petra Von Strombeck, executive]

As I said, we planned with the ongoing trends that we see now in Q1 and also in Q2 in current trading, and that's what we predict for the rest of the year ongoing.

[Unknown Analyst]

But you said you expect a better half year 2. that is a half year? Or was that a misunderstanding?

[Petra Von Strombeck, executive]

What we said is that we think the sentiment will turn but [indiscernible] as our prediction on, as I said [indiscernible] something that we currently see.

[Unknown Analyst]

Okay. And then on the B2B segment, can you give us a number or indication how much of the B2B revenue is really recurring?

[Ingo Chu, executive]

You mean the HR Solutions part? Because the B2B marketing, the B2C marketing so part is 100% transactional.

[Unknown Analyst]

No, no, the HR. .

[Ingo Chu, executive]

Okay. HR Is around 70% is recurring. .

[Unknown Analyst]

Okay. And you mentioned the one-off costs in Q1. Is this only a Q1 topic? Or will there be other one-off costs in the coming quarters?

[Ingo Chu, executive]

At this point in time, with regards to the restructuring in the [indiscernible] we are reallocating costs from personnel costs to marketing cost because we changed the strategy and the new repositioning. That is focusing at this point in time.

[Unknown Analyst]

So no further one-offs. .

[Operator]

And we will move on with Nicole Winkler.

[Nicole Winkler, analyst]

I actually have 4 questions. First, when looking at the EBITDA and EBITDA margin, is there any limit for you when you would stop continuing your investment mode and start taking cost efficiency measures? Second, looking at current trading?

[Ingo Chu, executive]

Can you speak up? [indiscernible] A little bit as acoustically very [indiscernible] on our side. .

[Nicole Winkler, analyst]

Sorry I'll try to speak up yes. When looking at the EBITDA and EBITDA margin, is there any limit for you when you would start continue your investment mode and start taking cost efficiency measures? Then the second question would be at current trading, do you still expect double-digit growth for your HR solutions in Q2 and the remaining quarters? And the last 2 questions I get to the B2C segment. What do your expect for the segment? Are you expecting a further accelerated decline after 2023? And are you expecting that you will reach a low point? And can you give us some more color on the shift to its job network and where you stand currently? And how and when do you plan to materialize it?.

[Petra Von Strombeck, executive]

Will you take [indiscernible]

[Ingo Chu, executive]

I'll take that one. so what we always said that on a full year basis, in investment mode, we are aiming for 30% or low 30% EBITDA margin. That continues to hold true, okay? And when it comes to cost and efficiency, we regularly look at efficiency measures. And we've started taking some already. And of course, we continue to do so because it just -- whenever we have efficiency potential is it gives us headroom for investment, but we do not depend on revenue growth to have [indiscernible] full for investments. If you look at Q2 and Q3 and the HR Solutions segment, we continue to expect year-over-year growth. And then B2C.

[Petra Von Strombeck, executive]

And then B2C, I think that was the question on the kind of the color of adjustment work now. Now if you look at what we have done so far, first of all, there is a new management in place. We have done a real [indiscernible] that is structuring our organization to [indiscernible] job network and fulfill on that job network. And the first major step was opening up our jobs section to the outside world and not just members. Further, things will happen and the product will transform over time. And it is also obviously a marketing effort to reposition our business on business network to a jobs network and offer the talent the best job search, the best access to recruiter and all kind of guidance concerning their career.

So this repositioning project is not a sprint and will not be done in a few weeks or months. This is a step-by-step approach that we take towards that repositioning. So it will take some time to get there. As far as the monetization side is concerned, we always guided and we actually -- exactly what our expectation was, of course, currently happening. We always guided a double-digit decline of the B2C business, slightly accelerating from last year. That's what we guided last year. We're exactly on track if you look at the first quarter, and this trend will continue over the year.

[Operator]

[Operator Instructions] And we received one question via chat from Mr. Peter. To meet your 2023 EBITDA guidance, OpEx needs to fall in Q2 to Q4 from around EUR 66 million underlying to around EUR 61 million. What should we assume for OpEx in the next quarters, such as personnel, marketing and other expenses?

[Ingo Chu, executive]

Our marketing investment always clearly higher in the first quarter because, traditionally, the job market is more relevant on the talent side. For the first quarter, we did a major campaign for the repositioning of brands and of the brand XING in the first quarter. So overall marketing spend going forward will be less that effect. And as we said, we started working on the cost side, and we'll continue to do so.

[Petra Von Strombeck, executive]

Also, we've talked about XING restructuring. And so with on restructuring, it will become effective from April on. So that is something that you will see in the personnel cost side and other costs. Basically, whatever is possible we're saving it this time because we rather invest it in marketing.

[Operator]

Okay. And there we receive another question from Miles [indiscernible]. Well, it seems it's not. Then we will move -- well, Mr. Unfortunately, we cannot hear you, Mr. [indiscernible]. I kindly ask you to place your question in the chat. And we would move forward with a follow-up question from Mr. [indiscernible] . .

[Unknown Analyst]

I just wanted to dig a little deeper on the dynamics around HR Solutions demand. Have you seen any particular areas of softness, for example, across specific sectors or perhaps different trends between large corporates and small SMEs? Then just on -- sticking on HR Solutions, it looked reassuring that customer losses remain very limited so far. And with the majority of subscriptions on a 12-month contract, just want to check if there's any particular seasonality around customer renewals we should be aware of? And then finally, if I could, just to clarify some of the earlier questions, what trends have you seen so far in Q2 in terms of HR solutions and marketing demand? Have April and May been roughly in line with the Q1 trends?

[Petra Von Strombeck, executive]

So to start with the last question first on the trends. We have not yet seen a revamp of the market, and we said there is no kind of upward trend if you look at Q2 that just we consider the market environment has [indiscernible] our assumption of the market environment. So Q2 continues to be weaker than we originally expected as it was Q1 so far for the trend question.

[Ingo Chu, executive]

When it comes to the seasonality, what you do have, usually, Q1 is a strong quarter, Q3 is a strong quarter. So if you look at the free-to-churn basis, basically in Q1, where potentially people could churn out. That is in Q1. And so that's true. And then it will be in Q3, Q1 being stronger than in general. And so for Q2, I don't expect [indiscernible]. .

What you do see and you will remember that we've done the price increase across many of our HR solutions. And they come into effect over time as contracts renew. And so we started September, October last year. So until September, October this year, you might see some higher churn, which is normal and which has been factored in the decision whether to raise prices or not. On a net basis, it was positive. So that is regarding churn.

And when it comes to have we seen any particular sector which is soft or not, I mean, I'm aware of it. If you look at -- we do have a lot of companies or targets to on the HR Solutions side is the small and medium-sized enterprises. And in that large and very broad segment, there is a general reluctance in -- when it comes to hiring and investing in recruiting and the [indiscernible] solutions. There is no particular sector which is good at. At least that as -- I don't know .

[Operator]

And we received from Miles the questions via chat. If I got you right, the new guidance is still anticipating a recovery of the economy, but the extent is lower. Is that right?

[Ingo Chu, executive]

Well, I think maybe we will not make this clear. I mean we do expect the market to recover in the second half of the year. But what will be the impact to the financials, which were the basis for our guidance, there is not much impact there because if it goes up, all the entries might go up in Q4, revenues will be basically then go into 2024. so maybe because we've heard many questions about the uplift comment, which is rather about do we believe that the intention between the upgrade comment was, do we believe that we are going to stay like this and the end of 2024. No. At some point in time, it should go up again. We do see this in our numbers this year, not to a large extent. And that is the basis for our guidance. So let's say, the recovery moves on the timing front for a few more months into 2024, the impact on our guidance should be limited. I think that our own that [indiscernible] for everybody because we received other questions. .

[Operator]

And another question for Mr. Fuhrberg. With regards to your marketing expense, are you currently satisfied with the returns you see? Do you track talent satisfaction on your platform? And how has this changed over the past months of repositioning the network?

[Petra Von Strombeck, executive]

We do constantly track all kinds of satisfaction with a job offer with usability, et cetera, et cetera, et cetera. And so we have all kind of KPIs that we track with users in brand analytics, et cetera. And that's a monitoring we have been doing for a very long time. That is actually -- the satisfaction now is stable for the last year, I would say, as the major turn in the -- into a jobs network is yet to come or in the first steps. The satisfaction with the traffic from the outside world as it opens the job network, too, there is certainly a high satisfaction because before, it was completely close to nonregistered members. So that makes a difference to the outside world .

[Operator]

I received a follow-up question from Nicole Winkler. Following up on cost efficiency measures, can you give us some more color what you have already done in Q1 2023?

[Ingo Chu, executive]

Okay. So the big thing, which also has a lasting effect, is restructuring. Then also what we've done, once we -- the more we saw that top line is not coming as planned is we've been particularly tough on everything, which is other costs, okay? And so whatever [indiscernible] in entertainment, and we looked at the cost in terms of technical licenses, et cetera, et cetera, and look what everything is there [indiscernible] We have content trades or, of course, for reflection on this cost item, but that's where we looked at.

Then we look particularly at personnel. We look the personnel, but also especially in the sense of do we -- should we grow personnel as we originally planned. And of course, the answer is clearly no, and we've taken that down. And that is probably the second [indiscernible] level that we have if you look at other cost -- personnel cost.

And in terms of marketing, because we believe it's important for our strategy and our new operating model, which is -- which has a higher importance on marketing than the old operating model. Basically, what we've done is we hope that we have been more efficient than we wanted. And these efficiency gains, we've taken down for marketing. So in the end, on the effectiveness of the marketing, even with less budget, we still have the same and what we have according to plan. But we -- instead of reinvesting the efficiency and we've taken them to protect [indiscernible] .

[Operator]

Okay. I received another question on. [Operator Instructions]

[Unknown Analyst]

On the cash flow side, your operating cash flow and free cash flow held up quite well versus the slide we had to notice on the EBITDA side. Do you expect this pattern to continue for the remainder of the year? And on your CapEx plans, should we, let's say, call the first quarter as a proxy for the remaining 3 quarters? Or should we expect any peaks or lows in your CapEx pattern?

[Ingo Chu, executive]

Okay. Now If you look at operating cash flows, you have to see that if you look at the seasonality of the cash flows, a lot of it is from changes in net working capital and that comes from the renewals, which are especially in the strong Q1 quarter. And so what you -- if you look at the quarterly development over -- for example, last year, we had a very strong positive cash flow from the change in net working capital. And over time, it gets eaten up in the following quarters. What we've done this year is we've deliberately worked on net working capital improvement. So you have some positive effect there as well. But it's not going to be -- you won't have a cash conversion from EBITDA to operating cash flow like we have in Q1 in the coming quarters. That's not going to happen. When it comes to CapEx, about 3/4 of that is capitalization from internal software development. And you can assume that for the remaining quarters, order of magnitude this time.

[Operator]

And we also received another question for [indiscernible] .

[Unknown Analyst]

Yes. Just one follow-up on capital market and confidence from your side to the capital market participants due to the strong share price decline today at around 20%. So I think one measure could be that you, as a management, do some director dealings. So is this an option for you as you both are part of it and you have some colleagues behind you, that this is a measure you would consider to also make your confidence in the company's strategy?

[Ingo Chu, executive]

Well, we've been asked this question quite enough time, do we buy stock, do we have stocks? And we don't have -- as a group and as a team, we don't have a rule or a -- which is very, very individually. And for example, my personal opinion is there's a lot of times where I would like to buy stock in our company. But being an insider, buying is a good thing. If I want to set it for whatever reason, maybe just because I need the liquidity, it's always a bad thing. And that has personally kept me from doing director dealings.

Now if you look at our compensation structure, what you will see that from our total target cash, approximately 60% is variable, and of that 60%, about 40 percentage points are a long-term incentive, which is tied to stock. So whatever we get allocated stays with the company and is tied in its development to the stock price for 4 years. So on the current NTI for 4 years and the NTI before that for 3 years, and if I take that together, actually, I do have a significant part of my assets in that virtual share program. So I think our incentives are clearly aligned. But in terms of signaling -- and it is very individual and when you can say what you [indiscernible] .

[Petra Von Strombeck, executive]

I invested as well. Once I joined exactly that, I can keep it forever. And other than that, we are linked to the share price. So we have not discussed it in the group or our Board members. But I'm happy to take your comment to the other group members. .

[Operator]

Thank you very much. Well, it seems that there are no further questions. Thank you very much for your questions, and thank you, very much. Ms. Strombeck, Mr. Chu and Mr. Moller for your presentation and your time answering all those questions. I will hand over some -- for some final remarks to Mrs. Strombeck.

[Petra Von Strombeck, executive]

Well, thank you very much interesting time and your questions today. This was clearly not starting the year we expected. But we thank you for your trust, and see you at our Annual Shareholder Meeting in May. Thank you. Bye.

[Ingo Chu, executive]

Bye-bye.