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Good afternoon, ladies and gentlemen, and welcome to today's earnings call of the New Work SE following the publication of the first quarter figures of 2024. New Work is represented today by CEO, Petra Von Strombeck; CFO, Ingo Chu; and Patrick Moller from Investor Relations. The Management Board will guide us through the presentation and the results shortly. [Operator Instructions] Having said this, I turn over to you, Ms. Von Strombeck.
Hello and welcome everybody to our third update call this year. Today we're presenting our results and insights for the first quarter 2024. Let me start by framing the current economic environment we're faced with. From Q1 Last year, we had to reduce our guidance for the first time ever on the back of a weakening employment market. Throughout '23 the situation failed to improve and our short-term outlook for '24 remain somewhat cautious, which is why we also communicated and executed a restructuring process and investment program in mid January. Accompanied by pro forma EBITDA guidance of EUR 55 million to EUR 65 million. So what is the current state of the employment market in Germany? Are there any signs of recovery? Well, since the beginning of '23, employment market indicators took a significant downturn actually. So our decision to reduce costs and prepare for an ongoing weak HR market was absolutely right. The BA-X index, which measures demand for employees is down to 113 points. That's actually pretty close to the all time low during COVID times which was about 100 points.Another far more tangible KPI is the number of open vacancies published by the Federal Employment Agency down by 9% against an already weak Q1 last year. When it comes to the development of paid job ads in Germany, the situation is even worse. The number of job ads advertised on online job boards is down by almost a third. How do we interpret this? It seems like even if there's only a 9% decline in open vacancies, the pressure to advertise open vacancies is much lower than before as there appears to be far more active job seekers applying for jobs than last year. This means that HR departments may only publish vacancies in their career websites rather than advertising them on the job boards as well. That's the current situation heavily affecting our transactional jobs listings and active search solutions.But the same is the case for our competitors too. So how does this translate into our core financial and non financial KPIs? Regarding financial Q1 started off weak as expected, and as announced in January. We basically have 3 effects that impact the top and bottom line. There's a continuing revenue decline in our B2C business given the ongoing reposition we're seeing from the social network to a jobs network. There is reduced demand for paid job ads and active search solutions within our HR solution business, along with increased marketing investments to drive and support XING's repositioning. Ingo will elaborate on this in more detail later.As for [ non fins ] we're actually making good progress. kununu's data inventory of workplace insight continues to grow strongly while our HR Solutions subscriber base remain stable, and XING continues to grow its registered member base.Here are the financials in detail, starting with revenues. As explained the weak employment market as well as the ongoing transition of our B2C business, have led to an expected decline of around 10% in revenues in Q1. Usually, this would lead to a similar decline in EBITDA given our high gross margins. But we already started to act very cost consciously last year, which helped us in Q1 to mitigate the almost EUR 8 million decline in revenue. At the same time, we significantly increased our marketing invest compared to last year, which leads to a decline of our pro forma EBITDA to EUR 9 million in Q1 versus EUR 18 million last year. Q1 pro forma net income remains positive at EUR 1 million. Let me be clear, Q1 is always the least profitable quarter given investments in marketing at the beginning of the fiscal year. From Q2 on we'll increase profitability again to meet our full year guidance of EUR 55 million to EUR 65 million pro forma EBITDA.Before I talk about our 2 main brands, let me give you a short and crisp update on our restructuring and reorganization, which we communicated in January. As we are facing some headwinds, particularly on the back of a weak employment market since the beginning of last year, we worked on an efficiency project throughout '23 with the aim of focusing our operations on the 2 core brands, XING and kununu. As part of this restructuring process, we also had to let go of around 400 colleagues. The overall process went as smoothly as possible, starting with constructive negotiations with our employee committee and a high acceptance rate for our voluntary leaver program. We were even 1 month ahead of plan, meaning that we were able to go live with a new [ out ] set for XING and kununu from April 1. About 85% of the planned annual cost savings have been achieved as of today. The remaining colleagues will leave New Work by the end of this year.The total expenses, and that's actually personnel costs like redundancy payments as well as other expenses for external advisers and process costs have already been recognized in the first quarter. The majority of the plan cash out though is going to happen in the next quarter. Logically, the savings we make from the reduced headcount will not have a full year effect until '25 but it will already recognize lower personnel expenses from Q2 onwards. That's it for the New Work update.Let's now have a look at the B2B HR solution development in Q1. As always, we present the quarterly development of our HR Solutions subscription customer base and the quarterly revenue development for the segment. Development within the B2B HR subscriber base indicates that Q1 '24 was stable, which is quite positive given the current environment. As you can see, revenue is down year-over-year. This is mainly attributable to the fact that we experienced fewer job ads posted with us, and that's very much in line with the overall market trend I talked about earlier. Another reason for the slight revenue decline is, in fact, the discontinuation of unprofitable offerings such as Honeypot.On a positive note, our Employer Branding business based on kununu delivers more than 1/3 of the segment revenues and continues its double-digit growth in Q1 with an above-average EBITDA margin. On the product side, I'd like to highlight some improvements we made to our job classifieds offering. Since the first quarter of the year, recruiters can have existing job advertisements AI optimized. This is particularly useful for job postings that don't generate enough interest. Artificial Intelligence improves the readability and comprehensibility of texts, for example. The text can also be automatically adapted to the language of the target group. Text shortening is also a part of this new function.Let me now talk about XING and its increased marketing spendings. As some of you might know, our mission for XING is to empower everyone to find the jobs that's just right. This is not only addresses active job seekers, but also everyone passively looking for greater job satisfaction, which is actually the largest part of the working population.Repositioning a 20-year-old brand and its product is actually a marathon but it's worth starting this journey, and we are on track. We've had a brand campaign on air since January '24 across all major channels, including online video and TV, out-of-home as well as online display ads that have produced great results. We have a 43% campaign record, which is actually ahead of Indeed and StepStone. And we see a 10% increase in product usage to market paying recallers.We achieved more than 49 million video impressions with a full video watch rate of over 41 million. And last but not least, XING Out-Of-Home was presented in 35 cities. Furthermore, we started the Baller League sponsoring to get access to and increase the brand awareness among younger audiences, which reached more than 320 million impressions with sponsoring. So our increased marketing efforts significantly helped raise awareness increase usage. In parallel, we worked intensively on the product side to fulfill new expectations in terms of user value.So here's what we did in terms of seeing product improvements for our new jobs positioning. After opening up the jobs preferences functionality to all our members last year prior to that, that was a premium future, we've collected more than 3 million additional preferences from job seekers and relaunched the outlook page to make it even easier to set preferences. The result is impressive. We experienced an almost 50% increase in click-through rates on job recommendations as we are able to match jobs with profiles much better now making use of preferences.Another recently added B2C overview is the instant apply function. A locked-in user can apply with only a few clicks for convenience. The button is already available on every second newly created job. Locked out users receive a profile after applying so that they profit starting with their second application and we gather relevant new user data. Furthermore, we redesigned our search results page using AI. The goal was to make all our filter options more readily accessible by users and user tests confirm that people will be more likely to discover relevant filters when this design is applied. This is relevant since job seekers that use at least one filter, on average, have a 62% higher likelihood to actually apply for a job.But we also made some major improvements for our HR users on XING as they are an important part of the jobs experience on our website as well. Therefore, we introduced an upgraded recruiter profile. We added the hiring batch to more than 25,000 recruits. This makes professional recruiters or headhunters visible as such in front of talent and delivers an average increase of 200% in recruiter profile use. Furthermore, recruiters are enabled to add hiring criteria and linkedIn job sets.We also improved the get found proposition by now at a first showing at talent preferences in the Talentmanager, which is our HR product, providing unique data points about talents that recruiters can't find anywhere else to that extent.On the next slide, you'll see that we also continue to make progress on the operational indicators for XING. Among others, we regularly analyze these 3 performance indicators for XING. Basically, what you can see is that our new jobs positioning drives job relevant engagement with job visits up almost 90% year-over-year. The number of applicants up 74% and similar to previous quarters. While the response or reply rate to recruiters continues to grow by 50% year-over-year, suggests that XING transformation is a journey and we won't change perception overnight. But we do have numerous data points and qualitative user feedback, which indicates our progress and makes us feel confident about continuing in this strategic direction.Now let's have a look at what we did at kununu. We talked a lot about kununu and the progress we made with our employer branding business based on kununu in the last couple of months. During the first quarter this year, kununu developed strongly. But let me start with the key initiatives before I talk about numbers in detail. At the beginning of the fiscal year, it's all about branding. And similar to XING our colleagues at kununu started their, "first kununu, then apply" brand campaign in February. The campaign concentrated on [indiscernible] and was rolled out through analog and digital billboards at interest range of Dusseldorf, Cologne, Duisburg, Essen and Dortmund as well as via digital channels, radio and social media. The aim of the campaign is to increase brand awareness for kununu and encourage users to gain insights into workplaces via kununu in order to take informed career decisions.The second campaign was about this gender pay gap, ahead of Equal Payday, which took place in Germany in the 6th of March, kununu rolled out several initiatives to raise awareness on the average salary difference between men and women. With a gender pay gap calculator, users on kununu can find out the average salary difference in their own industry and region. Additionally, the data page based on over 1.8 million salary data points provides an overview of average salary differences by industry, profession and years of experience.On the product side, kununu launched Career Path. So to further support their users in identifying and achieving their career goals, kununu has integrated additional information to its job title pages, providing 3 types of information for potential new career steps, the highest paying next career step for the position, the career step with the most open jobs and the career step for the most employees in the same job.Also during Q1, kununu launched a redesigned kununu widget. Here, companies can integrate their current kununu score into their own career page or job listings, showcasing their kununu presence is a hallmark of an authentic employer brand. The kununu widget can be placed as a code snippet wherever HTML coding bedding is possible. So it's all about broadening awareness and getting kununu more deeply embedded into an employer's talent attraction measures.So how does all this translate into numbers? I already mentioned that kununu developed strongly in Q1. So here are some of the most important indicators providing kununu's undisputable leadership. kununu is by far the #1 employer rating destination in Germany with 7x more traffic than its direct [indiscernible] peers. The number of workplace insights grew by 2.4 million, which is the strongest absolute growth since inception. And you know that kununu only started collecting salary data points a few years ago. We are proud to announce today that during Q1, we overtook the former market leader GEHALT.de owned by StepStone Group in terms of the number of salary data points in Germany by crossing the 4 million mark recently.That concludes my part of today's presentation. So I'll now hand over to Ingo.
Thank you, Petra. Hello, everybody. This is Ingo, and I will talk to you about the Q1 numbers in more detail. Now while the macro economy and especially the labor market remain weak, we are on track with our plans. We have executed our restructuring program, and we are implementing our investment program. So let's start with the key message points. Number one, revenues came in at EUR 68.2 million, as expected there, down year-over-year on the back of a weak environment. Number 2, we continue to increase our Talent Access on the XING site. Both XING and kununu have grown the non-fin metrics, and that is important, as you know, because our talent access is the necessary ingredient for our winning aspiration.
Your camera actually stopped. Maybe you want to switch it on and off once. I just got the signal.
Okay. Thanks. Now we the camera again. We are okay.
We could hear you, but not see you.
Okay. Okay. It worked when I started. Number 3, pro forma EBITDA came in at EUR 9 million. That's down year-over-year according to plan because we are investing despite a weak macro and revenue situation. Number 4, we confirm our guidance of a pro forma EBITDA of EUR 55 million to EUR 65 million. I'll give you more details on the following chart. Let's have a look at our P&L. As I've said, our numbers overall came in according to plan. But they are, of course, characterized by a difficult macro and revenue situation, our investment program and restructuring. Revenues came in EUR 68.2 million. That's down 10% year-over-year, driven by all segments. Reported EBITDA amounts to minus EUR 15.2 million. That's significantly down year-over-year, clearly impacted by onetime restructuring costs. Overall, reported EBITDA includes restructuring costs in the amount of EUR 24.2 million, and I'll give you more details later on.If you eliminate onetime restructuring cost, pro forma EBITDA came in at EUR 9 million, that's down year-over-year. Pro forma EBITDA margin came in at 13%. Now margin is driven by various factors. The number one is seasonality. As you know, our marketing spendings are particularly strong in Q1. The margin in Q1 usually is between 5 to 10 percentage points lower than our full year margins. Number 2, factor number 2 is our investment program. As we have communicated in January, we have decided to accelerate our investments into the repositioning of XING and into the further growth of kununu. And in Q1, we've invested more marketing in XING as well as in kununu. Also, you will not see a positive impact from the restructuring in our Q1 pro forma P&L figures because the reductions are effective as of April.Now reported depreciation amounts to minus EUR 8.6 million, that's up year-over-year. That includes extraordinary depreciation in the context of the restructuring. So for example, we have written off some of the Honeypot assets. Altogether, these effects relating to the restructuring amounts to minus EUR 2.7 million. Now if you eliminate that effect, pro forma depreciation amounts to EUR 5.8 million, which is down year-over-year.The reported financial results amounts to plus EUR 0.5 million. That's up year-over-year, mainly because we have positive interest on our cash reserves. If you take out the revaluation of financial assets effect, pro forma financial results amounted to plus EUR 0.2 million, which compares to about 0 in Q1 last year and that is also explained mainly by getting positive interest on our cash reserves.Reported net income amounts to minus EUR 16.9 million. That's down year-over-year. Pro forma net income amounts to EUR 1.1 million, also down year-over-year.Let's move on to segment reporting. Given the reported figures are distorted from the restructuring cost, we are also showing pro forma figures, and I will comment on our pro forma figures. The HR Solutions and Talent Access segment came in at approximately minus EUR 0.3 million in pro forma segment EBITDA. That is down year-over-year. Now the key driver is the acceleration in marketing spending to increase our Talent Access by repositioning XING, onlyfy and kununu and revenue development. The majority of the year-over-year pro forma EBITDA decline comes from the step-up in marketing spending.The B2C segment had EUR 8 million in pro forma segment EBITDA, that's down year-over-year. That is, as you know, the XING paid memberships business and respective cost as well as InterNations. And that is our former historical core business, which is now our cash cow. Development of the pro forma EBITDA is driven by the planned decline in revenues.Marketing Solutions segment came in at minus EUR 0.3 million. That's down year-over-year. It shows the advertising business in the respective costs. And please remember that on a contribution margin basis, that business is profitable. In our segment view, we are allocating fixed costs.On the next slide, you can see our revenue development by segment. Now HR Solutions' revenues came in at EUR 50.4 million, that's down 6% year-over-year. Growth is impacted by a difficult macro situation. The economy is not really growing. And especially the labor market data is weak. The number of unfilled position is down year-over-year and labor market sentiment is declining. Another factor is the portfolio cleanup because, as you know, we are phasing out Honeypot, which, of course, also impacts revenue development negatively.B2C revenues came in at EUR 15.9 million. It's down 18% year-over-year. As you know, this development comes as planned. The key driver behind this development is the direct B2C monetization at XING. With our refocused strategy, we concentrate on building our access to talent through XING and we monetize that talent access to the recruiting on the B side.Finally, B2B Marketing Solutions revenues amounted to EUR 2 million, which is down year-over-year. On the next slide, you can see an overview of our cost structure. In Q1, our costs were significantly impacted by the onetime restructuring cost. So if you look at personnel costs, they came in -- personnel costs before capitalization came in at EUR 57.5 million. That includes EUR 20.3 million of onetime non-operating restructuring costs. If you take out restructuring costs, pro forma personnel costs before capitalization amount to EUR 37.2 million, which is an equivalent of 54% of revenues.In absolute terms, pro forma, and therefore, operating personnel costs are down EUR 4 million year-over-year. That is a result of our continuing cost management from last year. You will remember that we reduced head count by using natural attrition and some minor restructurings in 2023.Q1 pro forma personnel costs do not yet reflect our major restructuring from this year. Those effects you will see from Q2 onwards.Some facts about restructuring. Total restructuring costs impacting EBITDA amount to EUR 24.2 million. Most of that is personnel related. And if you look at the full year savings from that restructuring, you will see in 2025, a full year effect of approximately EUR 30 million in cash cost versus 2023.Now please remember that this is the cash cost effect, which, of course, also drives cash flows. Accounting, the accounting cost effect will be lower given that capitalization will be reduced with lower personnel costs as well.Now if you look at marketing in Q1, overall marketing costs amount to EUR 19.4 million. That's 28% of revenues, and that is significantly up year-over-year. As announced in January, we have started our investment program and accelerated our marketing spend to reposition XING and to further grow kununu. So far, we are happy with the results. Advertising reach is significantly up, and we have very good advertising recall figures. Based on that, we are confident that this will translate into the targeted perceptions shift at XING.Last cost line are the operating expenses. As you all know, it includes as usual external services, legal audit consulting, payment processing, server hosting and other costs. In Q1, we reported other operating expenses before capitalization amount to EUR 15.2 million. This includes onetime nonoperating restructuring cost of EUR 3.9 million. If you take out those pro forma other operating expenses amount to EUR 11.3 million, slightly down year-over-year, despite the fact that we have more cost to cover new regulatory requirements, for example, such as NIS2.Let's move on to cash flows. Operating cash flow amounts to EUR 7.5 million. It's down year-over-year. Cash-outs for operating investment amount to minus EUR 5.2 million, down year-over-year. Cash out for interest paid, foreign exchange and rent amounts to minus EUR 2.8 million. This is mainly lease cash out. And with that, free cash flow before dividends and before organizer cash amounts to minus EUR 0.6 million.Now if you look at our guidance, we confirm our guidance of pro forma EBITDA between EUR 55 million and EUR 65 million, which we had given in January.So to sum it up, we do have a weak labor market situation, which is weighing on our revenues while our Talent Access is developing well. Our bottom line is impacted by the investment program and came in according to plan. And based on that, as I've said, we confirm our guidance from January.That's it for the numbers. We are now happy to take your questions.
[Operator Instructions] We already received the first question from Wolfgang.
So 3 start-ups from my side. First, housekeeping on the guidance side, you confirmed the pro forma EBITDA guidance. What about your sales target? Is there still a sales target for the full year? Second question would be on the phasing of the spendings on marketing and reorganization in the remainder of the year. Can you give us an idea how the 2 cost items will move during the 3 quarters. And the final question on workspace insights and other, let's say, soft KPIs you give us, which are growing steadily or even gaining pace. Do you also, let's say, phase out older outdated data here just adding and adding, but let's say, the tail end could be outdated in this field.
Do you take the guidance part?
Well, our guidance actually is confined to our EBITDA figures. But when you ask about revenues, we are cautious, but the outlook that we had given still holds.
All right. And as for the phasing of the marketing and the reorg costs, marketing always has the strongest quarter and the highest spend in the first part of the year or in the first quarter. And we continue, obviously, spending, but they are reduced compared to the first quarter. So you will see further marketing spend during the year, but at a lower level than in the first quarter. And the reorganization and restructuring cost that we show in the first quarter, they are one-off, and you will see reduced personnel costs from Q2 onwards. So that's a one-off cost in Q1, as Ingo indicated, and you will see reduced personnel costs in the following quarters. And if you look at the workplace insights, we obviously add more workplace insights to the respective companies over time. And yes, some of them are older, some of them are new. But if you look at the data points we indicate and the star ratings, we obviously rank higher the newer ratings so that the overall rating we demonstrate for a company is an actual and relevant one. And as we only started collecting salary data points a very short time ago, basically, all those salary data points are still of high relevancy. I hope this answers the question.
We will now move over to the questions from Finn Kemper.
Thank you for your presentation, first of all. So it seems that your marketing initiatives are bearing fruit given the rise in the XING user count. So do you think that there's a possibility of a positive surprise in B2C sales for the full year 2024? Because if I remember correctly, you've mentioned that you expect around EUR 16 million less in B2C sales for 2024. So is this still what you're seeing? Or yes, can you give me some more flavor on this?
Yes. Let me first confirm that, yes, the marketing campaign is indeed successful, but the marketing campaign is actually driving the jobs network and the perception shift of XING and clearly targets XING as a job destination. And so it's not actually targeted at increasing B2C sales. The B2C sales that we have is the membership and premium memberships that are in decline because we actually move from a social network to a jobs network. So there is no increase to be expected on that side, and we stick to the guidance we gave in January, yes.
And then I'm not sure if I have missed this regarding kununu. But do you expect sales for kununu to grow in 2024? And if you -- if they are expected to grow to what extent? Can we expect double-digit growth or -- yes, what do you think?
So kununu and the Employer Branding product is clearly the highest -- the one with the highest growth rates that we have. And kununu is very successful even in those difficult market situations. I don't give an indication whether it's double-digit or not, but it's clearly the segment with the highest growth rate.
And it's about 1/3 of B2B sales, correct?
Correct.
Yes. Of B2B, HR Solutions and Talent Access.
So by now, this was the last question. [Operator Instructions] There are no further questions left so we, therefore, come to the end of today's earnings call. So thank you, everyone, for joining and to showing interest in New Work. So should further questions arise at a later time, please feel free to contact Patrick Moller from Investor Relations. And a big thank you also to you, Ms. Von Strombeck and Mr. Chu for your presentation and for answering the questions. So from my side, I wish you all a lovely remaining week. Happy free day on Thursday, and I hand over again to you guys for some final remarks.
Thank you. Well, thank you, everybody, for your interest and for your questions. I hope to see you at our Annual Shareholder Meeting on the 4th of June or in the next earnings call. Thank you. Bye.