New Work SE

XETRA:NWO

Earnings Call Analysis

Company Navigates Recession with Strategic Shift

Amidst a challenging macroeconomic climate and a German recession with declining labor market indicators, the company reported a 4% revenue decrease in Q3. Despite this, there was a 4% EBITDA increase to EUR 28.1 million with an EBITDA margin at 37%, and it remains on track with its full-year EBITDA guidance of EUR 92 million to EUR 100 million. The company introduced a redesigned XING homepage, bolstering its transformation from a social network to a jobs network, aligning with the long-term opportunity presented by demographic shifts. Enhancing the job matching features led to a 50% increase in XING job section traffic and a 40% year-over-year surge in career interactions. With a strategic focus on product developments, such as AI initiatives in various units, the company is committed to regaining growth and securing a leading position post-recession.

Board's Discontent and the Vision Forward amid Stock Challenges

The company starts on a sombre note, with board members expressing their discontent regarding the company's recent stock performance, which has seen a marked devaluation since early October. They emphasize their commitment to shareholder value through the development of promising products and strategic investments for long-term growth.

An Uncertain German Labor Market Clouds Outlook

The German economy is in a state of recession, with key employment indicators such as the BA-X and IAB reaching lows not seen since the coronavirus crisis. The IAB's unfilled positions have also seen a slight decline. There is no immediate sign of recovery, but the expectation of a tightening labor market due to demographic shifts offers a silver lining for the future.

Solid EBITDA Amid Revenue Pressure

Despite facing a 4% dip in Q3 revenues, largely due to decreased demand for Recruiting Solutions, the company reports a resilient increase in pro forma EBITDA to EUR 28.1 million, up by 4% year-over-year, boasting an EBITDA margin of 37% for the quarter. They remain confident in meeting the full-year pro forma EBITDA guidance, showcasing cost discipline and strategic growth sectors such as kununu which reached an all-time high.

XING's Redefined Purpose and KPI Growth

XING's role as a career platform is being honed with a sharper focus on job matching and career guidance. A significant update in mid-October introduced a redesigned homepage offering personalized job suggestions to line up with an employee-centric market. New features are aimed at increasing user engagement, resulting in nonfinancial data points, such as a 50% year-over-year traffic increase for its job section and a 40% year-over-year increase in career interactions. XING added 140,000 new members in Q3, bringing the total to 22 million.

Kununu - A Resilient Player in Employer Branding

Kununu continues to thrive as the premier employer review platform in German-speaking countries. Despite the subdued demand for sourcing solutions, it posted the strongest growth in history with more than 10 million insights and a significant increase in workplace insights. The platform grew by 15% to 23 million sessions in Q3, emphasizing its essential role in providing insights for career decisions. The number of rated employers also grew by 13% to over 330,000, highlighting its continued relevance in the market.

The HR Business Faces Client Attrition

The development of the company's HR business showed a decrease of 68 HR clients in Q3 attributable to reduced demand for digital recruiting solutions. While kununu's employer branding services are growing, a decline in transactional job listing revenues due to a weaker employment market could not be counterbalanced. The executive team remains committed to its long-term strategic path, factoring in AI initiatives across its platforms to improve user experience and efficiency as they navigate the effects of the recession.

Quarterly Financial Recap and AI Optimism

As Petra and Ingo described, the Q3 revenues marginally decreased to EUR 75.7 million due to the weak market. The pro forma EBITDA rose to EUR 28.1 million, showing improvement both year-over-year and quarter-over-quarter, with the updated guidance on pro forma EBITDA standing between EUR 92 million and EUR 100 million. The company highlights AI as a significant future growth avenue, using it to enhance personalization on platforms like XING, streamline employer review summaries on kununu, and improve job ad content creation on Onlyfy.

Segment Analysis: Challenging Times Yet Strategic Growth Continues

The Q3 performance by segments indicates divergent trends: the HR solutions and talent access segment sustained growth with a 3% increase in revenue, yet the B2C segment saw an 18% decline, in line with strategic expectations due to a shift in focus to the talent access market. Marketing solutions revenue declined alongside advertising market challenges, falling to EUR 3.1 million. Despite these mixed results, the leadership emphasized their continued focus on long-term strategic growth and cost management to capture future opportunities and improve net income, which stood at EUR 13.5 million for the quarter.

Earnings Call Transcript 2023-Q3

[Operator]

Good afternoon, ladies and gentlemen, and welcome to today's earnings call of New Work SE following the publication of the Q3 figures of 2023. The CEO, Petra Von Strombeck, the CFO, Ingo Chu, and Patrick Miller from Investor Relations will give you a presentation on the results in a moment, and the floor will be opened for upcoming questions following the presentation.

Having said that, I hand over to you, Ms. Von Strombeck.

[Petra Von Strombeck, executive]

Hello, and welcome, everyone, to our quarterly update. Thank you for joining us today. As always, Ingo and Patrick are seated next to me, and they will guide you through the financials later.

Let me start with a general comment today. As you can imagine, my colleagues from the board and I are quite unhappy about the stock price development, particularly when we look at what has happened to our valuation since the beginning of October. Our goal is to create shareholder value by developing promising products and investing in the right markets to achieve long-term growth. I firmly believe that our focus on the German audience in Swiss employment market is absolutely the right direction. We will continue to provide excellent recruiting and employer branding offerings to our clients and have started repositioning from a social network to a jobs network.

Of course, the timing could be better, especially as demand for recruiting solutions is significantly lower than last year, and our HR business does not fully compensate the planned decline in legacy B2C revenues. However, we firmly believe it's the right course of action and short-term obstacles won't stop us on way to our long-term goals. Speaking of short-term obstacles, as you all know, we are currently facing a challenging macroeconomic environment. Germany is in a recession and key employment market indicators like the BA-X and IAB have dropped to levels we saw last during the corona crisis. ifo Business Climate Index was down until September and stabilized on low levels in October.

This morning, we also received data from IAB on the development of the unfilled positions in Germany for Q3, which also showed another small decline to 1.73 million. So overall, unfortunately, there are no signs of recovery for the German labor market yet. However, please keep in mind that despite potential short-term and midterm macroeconomic challenges, the underlying demographic shift will further tighten the employment market in the next years. That's why we have a long-term opportunity with our current positioning.

Now let's dive into our Q3 results. The third quarter, similar to the previous 2 quarters, presents a mixed picture. Revenues are down due to the lower demand for Recruiting Solutions, although that segment is still growing despite an adverse market condition. Nonfinancials, particularly kununu, have reached an all-time high.

Let's have a look at the key financials in more detail. We understand that there have been concerns regarding a possible profit warning given the softer profitability in the first half of the year. However, as you can see, despite a 4% decrease in revenues in Q3, pro forma EBITDA has increased to EUR 28.1 million plus 4% compared to the previous year. Our EBITDA margin is 37% in Q3. We remain on track to meet our full year pro forma EBITDA guidance. Net income has decreased slightly due to higher depreciation and amortization as well as taxes year-over-year. Ingo will provide more details in his section.

Now let's take a closer look at our 2 main consumer destinations, XING and kununu starting with XING. Most of you have been following us for quite some time, and some of you may even be registered members on XING platform. We have witnessed the shifting focus at XING. Over the past years, our teams have been working to establish a clear and more tangible value proposition for XING. We have made job matching and career guiding the central focus of our efforts.

In mid-October, we took a significant step forward by introducing the new and redesigned homepage in [indiscernible] XING. Why? We are operating in an employee's market where there are more jobs available than their people to fill them. As a job network, we can assist individuals in finding the right job for them. The new home page presents users with personalized job suggestions and inspiration even when they are not actively seeking new opportunities. Users can explore jobs in various fields and discover vacancies at companies with unique growth place cultures.

The new job preferences feature allows XING members to receive job suggestions based on their profile details and preferences such as specific job titles, salary expectations, weekly working hours and preferred employers. By setting preferences, active job seekers are 70% more likely to receive matching job recommendations on XING. Completing and keeping XING profile up to date allows users to be found and contacted also by recruiters and headhunters even before job is officially advertised. We call that the hidden job market. Currently, more than 20,000 recruiters use XING, and they will play a more prominent role in the platform in the future.

XING Jobs offers more than 1 million jobs for every industry and career level leading the way in Germany, Austria, and Switzerland. In addition to a multitude of job opportunities, job postings provide salary forecasts, workplace culture insights and employer reviews based on millions of anonymized kununu data plans.

Last but not least, even as we transition XING to a job network, it continues to provide a platform for more than 22 million members to connect and engage with each other. Contacts and key networking features are now available in the insight section.

So during Q3, XING added 140,000 net new members, bringing the total to 22 million by the end of September. However, the size of the talent pool of XING doesn't fully capture the value that XING provides to its users and members. Therefore, we have decided to provide you with a snapshot of additional nonfinancial data points that track our performance in the jobs split.

Today, I'd like to highlight 3 of the numerous KPIs we are tracking to measure our performance in the talent acquisition field. Starting with a high-level traffic KPI for our XING job section, we achieved a plus 50% year-over-year increase, thanks to our new focus on jobs. And basically, that's before the relaunch that we achieved that already. At the same time, overall traffic at xing.com is slightly down due to reduced common shares and like, which was expected.

The second important KPI is essential for both our members, users and our HR customers who post job ads on our website. There's a number of applicants that we deliver to pay job ads. With an increase of organic traffic in our job sector and our performance marketing investment and paid job ads, we managed to quintuple the number of applicants for our clients, delivering real value and more value for their money.

The third KPI is another significant way to measure the nonfinancial performance of our HR solutions and talent access segment. It's the development of the so-called career interactions, which includes initiated application processes by potential candidates and responses from candidates to messages from recruiters or headhunters. We believe this KPI reflects the vitality of our ecosystem as it involves 2 essential customer dimensions that interact through our platform. Year-to-date, we had approximately 10 million career interactions. Looking at Q3, we had approximately 4 million career interactions, marking a growth of over 40% year-over-year.

In summary, we firmly believe that the focus on jobs is the right direction for XING and that we see a good traction, and we have just begun our journey with this new strategic focus.

Now let's move to our second consumer destination, which is kununu. As you know, kununu is the leading employer review platform in German-speaking countries. As mentioned earlier, we have experienced subdued demand for our sourcing solutions, both active and passive, due to the reduced number of open vacancies in the current market environment. However, there is one consistent anchor in our HR solutions offering and that's employer branding through Kununu.

With Kununu, we aspire to be the most relevant destination for workplace insights in the German-speaking worlds. And as you can see, Kununu is thriving. The number of workplace insights grew by 2.1 million year-over-year, the strongest growth in history. This growth now accounts for almost 10 million insights, including more than 3 million salary data points, which help visitors and users in making informed career decisions. In August, we launched the redesigned home page with an improved mobile user experience. Furthermore, with the kununu Sustainability Check '23, we published a comprehensive analysis of data collected by kununu the topic of ecological sustainability in the workplace. We evaluated over 85,000 pieces of data shared by employees on kununu or collected through surveys.

Let me also provide some more operational performance indicators. Internally, we obviously track numerous KPIs to assess how Kununu resonates with our users and visitors. As I mentioned, a few KPIs with XING, let's also take a look at kununu's performance from both a consumer and HR customer perspective. First, looking at traffic development. Kununu grew by 15% to 23 million sessions in the third quarter of '23, underlining a strong reach in the German market. Second, a long-term trend analysis demonstrates kununu's brand perception in the DACH region, kununu is the go-to destination for valuable employer insights that help individuals make informed career decisions. Third, given the high number of rated employers already, the growth of 13% to more than 330,000 rated employers is quite significant. This expansion broadens the searchable employer database for kununu users and visitors.

Number four, employers actively engaging with the platform by commenting on ratings provided by employees has increased by more than 20% to 43,000 in Q3. This highlights the relevance of ratings and the fact that employers take the individual ratings and their visibility very seriously.

That's the update for kununu. Now let's go over to some more numbers, which we regularly publish, the development of our HR business.

When analyzing customer development, we observed a slight decline of 68 HR clients in Q3. This decline is primarily driven by the reduced demand for digital recruiting solutions, especially within our active sourcing segment as companies are recruiting less in the current market environment.

Looking at the revenue development on the right-hand side, you can see the impact of reduced hiring since Q1. In addition to a slight decline in B2B subscription customers, revenue development has been particularly impacted by the decline in transactional job listing revenues due to a weak employment market and fewer job openings. Our employer branding business based on the kununu platform continues to grow nicely with a 20% increase in Q3. However, we cannot fully compensate the lower demand on the sourcing side of the business.

AI being the topic of the year, I'd like to conclude my presentation by providing some insights into our various AI initiatives that we are working on throughout our different units. Let me start by saying that as a networking platform, we have been using various algorithms and AI for matchmaking and recommendations ever since the founding of the company in 2003. However, the rise of large language models has opened up numerous new opportunities for XING, kununu and onlyfy.

Our approach to AI is focused on defining use cases that we can bring in front of our consumers and users as product features. While we're also looking at internal productivity topics, we are convinced that our major benefit will be to leverage our data more effectively than we do today. We are in an excellent position to benefit from the emerging technologies.

So what are we working on or we have already implemented? On the XING platform, it's all about providing highly relevant recommendations, particularly for jobs. To give you one concrete examples, we have launched more jobs like this. When a user checks out an interesting job, they can see our AI provides a list of similar jobs alongside the job they are currently viewing, resulting in higher click rates on additional jobs.

At kununu, we are developing profile summaries through AI. Employers with numerous reviews can overwhelm users. So they can use kununu review summarize, it uses AI to provide digestible summaries of the most relevant aspect of the given employer. This is a valuable addition for potential candidates.

And last but not least, at Onlyfy, we are working on various AI-driven streams. Our first AI-based improvement is in the job ad creation process, where we empower users to utilize AI to write their job ad content from scratch. AI will also help adapt company communication term, language, salutation and with just one click, write the entire job ad content using AI. The Onlyfy team is also working on smart templates, talent recommendations, and CV-parsing features powered by AI. We will keep you updated on our progress in this area.

In conclusion, we are continuing on our long-term strategic path. Unfortunately, we are feeling the effects of the recession through our financial indicators. Nevertheless, we are driving the transformation of our company, making strategic investments while maintaining stringent cost discipline. Our objective is to regain growth and secure a leading position within the competitive landscape once the market regain stability.

I look forward to keeping you updated on our progress throughout this journey. And with that said, I hand over to Ingo.

[Ingo Chu, executive]

Thank you, Petra. Hello, everybody. This is Ingo, and I'm going to talk to you about our Q3 numbers in more detail.

Now as Petra has said, the macro economy and the labor market, both remain difficult. And as a result, our overall situation remains difficult as well. Nevertheless, profitability has again improved quarter-over-quarter. Our cost counter measures show effects and also our general cost seasonality and some positive one-offs have helped. With that, we are on track with our new plans and confirm our adjusted guidance from May.

So let's start with an overview. Number one, revenues came in at EUR 75.7 million, slightly down year-over-year on the back of a weak market. Number two, and Petra has given you more details on that, we continue to increase our access to talent on the C side. Both Xing and kununu have grown the non-Fin metrics, and that's important because our talent access is 1 of 2 necessary ingredients for our winning aspiration. Number three, pro forma EBITDA came in at EUR 28.1 million, up year-over-year and up quarter-over-quarter. And number four, we confirm our updated guidance on pro forma EBITDA between EUR 92 million and EUR 100 million.

Now let's have a look at our P&L. Revenues came in at EUR 75.7 million, that's down 4% year-over-year. So we said the macro situation stays difficult which impacts our revenue development. We've talked about that in our previous calls. Our HR solutions business continues to grow. Given the weak market, that is good. But as you also know, it is significantly less than we had planned. Marketing solutions revenues are also adversely affected by the macro situation and direct B2C monetization is down according to plan for the strategic reasons that we've already talked about as well. Taking all of this together, this leads to group revenues being down year-to-year.

Reported EBITDA amounted EUR 26.7 million, that's slightly down year-over-year but up quarter-over-quarter. Reported EBITDA margin comes in at 35%. Reported EBITDA includes cost for restructurings in various parts of the group, which will help us with our cost base going forward. If you eliminate these effects, pro forma EBITDA came in at EUR 28.1 million, that's up year-over-year and also up quarter-over-quarter. Pro forma EBITDA margin comes in at 37%.

Now margin is up quarter-over-quarter because of various factors. First of all, our cost countermeasures. As you know, we've frozen hiring, we've reduced other costs and we have improved marketing efficiency. but also our cost seasonality helps. We traditionally do not invest as much in brand marketing in the second half of the year as we do in the first half of. And lastly, we did have some onetime positive effects on the cost side, which, however, we'll not repeat. So please do not extrapolate our Q3 margins there.

Generally speaking, we continue to work on our productivity improvement projects in order to adjust our cost base to revenue development and to create headroom for investments to capture structural long-term growth opportunities. Depreciation amounts to minus EUR 8.1 million, that's up year-over-year. Compared to last year, we had mainly lower XO write-offs on software.

Reported financial results amounts to plus EUR 0.4 million up year-over-year and the delta versus the previous year mainly stems from revaluation of financial assets same situation at most of our quarters this year. Last year, we had a negative book loss of minus EUR 0.8 million. Now we have a book gain of plus EUR 1 million. If you take out the revaluation of financial assets effect, pro forma financial result would be plus EUR 0.2 million compared to minus EUR 0.2 million in Q2 last year. And this is explained mainly by getting positive interest on our cash reserves.

Reported net income amounts to EUR 13.5 million, down year-over-year and up quarter-over-quarter. Pro forma net income amounts to EUR 13.6 million, also down year-over-year, and up quarter-over-quarter.

Now let's move on to segment reporting, which shows reported figures. The HR solutions and talent access segment came in at approximately EUR 17.5 million in segment EBITDA, that's up year-over-year. In this segment, we show revenues from recruiting, cost for go-to-market for recruiting and cost for talent access. As you know, that segment shows the heart of our new winning inspiration. This is where the future growth will come from and we'll be invest in go-to-market on the B side and an increasing talent access through Xing and kununu, primarily.

The B2C segment had EUR 10 million in segment EBITDA, that's down year-over-year. That is Xing paid membership business and respective costs and [indiscernible]. This is our former historical core business, which is now a cash cow. The marketing solutions segment came in at EUR 0.7 million, that's down year-over-year. It shows the advertising business and the respective costs. It's a nonstrategic byproduct business.

Now if we dive into the revenue development, you can see that the HR solutions segment came in with revenues of EUR 54.4 million, which is up 3% year-over-year. The growth is impacted by the difficult macro situation. The economy is in a recession and companies are just hiring less. At this point in time, we do not see any signs for short-term improvement.

B2C revenues came in at EUR 18.2 million, that's down 18% year-over-year. As you know, this development comes as planned. Key driver behind this is the direct B2C monetization at Xing. With our refocused strategy, we concentrate on building our access to talents with Xing. Short-term direct B2C monetization is less of a focus because we monetize talent access through the recruiting on the B side.

Finally, let's look at B2B marketing solutions segment. Revenues came in at EUR 3.1 million. That's down year-over-year on the back of a difficult advertising market.

Let's have a look at our cost structure. Again, these are reported figures. In Q3, personnel costs before capitalization amounted to EUR 36.1 million, that's equivalent of 48% of revenues. That's slightly up year-over-year and down quarter-over-quarter, included are onetime negative effects from restructuring. We've talked about that. Also included are onetime positive effects such as, for example, release of vacation accruals and the release of bonus accrued. These positive effects will not be repeated. But also you see effects from a lower headcount base as a result from our hiring freeze and our various restructurings.

Now if you look at marketing in Q3, overall marketing costs came in at EUR 9.3 million, that's 12% of revenues. That's down year-over-year, it's also down quarter-over-quarter. Quarter-over-quarter development is driven mainly by the cost seasonality for brand marketing.

Last cost line is other operating expenses. And as you all know, it includes its usual external services, legal audit consulting, payment processing, server hosting and other costs. In Q3, other operating expenses before capitalization amount to EUR 10.1 million or 13% of revenues, that's down year-over-year, driven by tight cost management.

Now on the next slide, you can see our cash flows. Operating cash flow, excluding organizer cash amounts to EUR 7.1 million, that's down year-over-year. Cash conversion in Q3 is low compared to normal, and there are various factors behind that. Billings are low because B2C billings are declining as expected. And at the same time, HR solution billings in Q3 are not compensating that B2C effect and they also have a higher share of installment payments. On top of that, if you look at the accounts payable side, we've had some negative phasing effects.

Cash outs for operating investments amounted to minus EUR 5.4 million. That's down year-over-year and down quarter-over-quarter. We have a cash in of EUR 12.2 million from investments in financial assets. That is because we have liquidated an investment because the respective fund manager had changed. According to IFRS, we have to show that in our cash flow statement, although it is just an asset change from a financial asset to a cash asset.

Cash out for interest paid, foreign exchange and especially rent amounts to EUR 2.2 million, and that is mainly the lease cash outs. With that, free cash flow before dividends and before organizer cash amount to EUR 11.7 million. But for interpretation purposes, please remember that this includes the cash flow from liquidating a financial asset into cash. If you exclude that, free cash flow in Q3 is slightly negative given changes in net working capital.

Last but not least, a few words about our guidance from May. Based on our Q3 results, we confirm our guidance of a pro forma EBITDA between EUR 92 million and EUR 100 million. And as we've already said in the last call, we see the likelihood higher that we end at the lower end of this bracket. So to sum it up, the macro situation continues to be weak, which impacts our revenue development. We continue to work on our cost position to adjust our cost base to current revenue development. In Q3, we do see quarter-over-quarter bottom line improvements from our short-term cost measures. And on that basis, we said in Q3, we confirm our adjusted guidance from May with a pro forma EBITDA between EUR 92 million and EUR 100 million.

So that's it for the numbers, and we are now happy to take your questions.

[Operator]

[Operator Instructions] We will start with the questions from Marius Fuhrberg.

[Marius Fuhrberg, analyst]

Yes, can you hear me?

[Operator]

Yes, we can hear you well.

[Marius Fuhrberg, analyst]

Great. So I have 3 questions. Given that the challenging environment and the ongoing decline of revenues in B2C business, looking at 2024, do you expect growth in the next year at all?

Second question is, do you see any potential of higher monetization of kununu as it performs very well on an operating level?

And the third question, can you give us an update if you plan to like position -- seeing any difference over in the next year so that there is a clear differentiation between LinkedIn and also where you're going in terms of tough quarter -- and LinkedIn to where your clear positioning will be and how you make sure that you stay hold on your customer data.

[Petra Von Strombeck, executive]

So very happy to take your questions. Starting with the first one, concerning the outlook for next year. As always, in Q4, we are in the middle of a budget process. So unfortunately, it's too early to give any guidance now. Moreover, as the market is difficult out there and visibility is low, we really cannot give any guidance for the next year at this very moment. And we will obviously do that as soon as possible when time has come.

Concerning kununu monetization, actually, we launched, as we have announced in the last call, kununu jobs. So we have job ads and offer is now available for the kununu C side already, and we will expand that offer on the C side. And that is obviously linked to a monetization potential for jobs on kununu. We see both a C-side relevance and a B-side relevance for that, given that kununu has also a large potential in the blue collar sector. So we believe in an additional monetization potential for kununu in the jobs field.

And talking about the XING positioning. Yes. I mean if you look at the XING starting page now and compare it with LinkedIn because you asked for positioning, you can also see that product-wise, we are already quite different to what we used to be in the past. We now showcase all kind of job inspiration and job search inspirations, bringing the customer to our new value proposition and those job offers will, on the product side, continue to be brought forward towards our users. And we will also underline that new positioning with marketing campaigns for our positioning as a job network.

So yes, we are in the beginning of a journey. You can already see on the product -- on the starting page of XING how different we are already, and this process will continue further to make sure that our audience and all job seekers out there and everybody grasps the new positioning and the very relevant agile positioning of XING as a jobs network.

I hope that answers the questions.

[Operator]

We will continue with the questions from Wolfgang Specht.

[Wolfgang Specht, analyst]

Yes. Can you hear me?

[Operator]

Yes, we can hear you well.

[Wolfgang Specht, analyst]

Okay. Two questions from my side. First, on the XING side, you obviously demonstrated members up, but can you give us some details on paying members? Can we assume that paying members are rather correlated to the 18% revenue slide we saw. And do you expect this to accelerate or to decelerate?

And second question on HR solutions. Can you give us any details how the, let's say, booking of package size is working? We saw this 68,000 less customer number, but -- can you give us any details out of which product classes these cancellations are coming?

[Petra Von Strombeck, executive]

Yes, let me start with the HR solutions business. Actually, when we stated that kununu or the employer branding business grows by 20%, it's clear that that is also linked to a customer growth on the kununu side and on the employer branding side. So the limiting factor and the declining factor is currently the sourcing business, which is both the active sourcing, so the XING TalentManager where people research for talent, which is obviously directly linked to the recruiting demand and the transactional job business. So the negative effect comes from XING TalentManager as this is a subscription product.

And when we look at XING paying members, yes, obviously, there is a correlation between paying members and decline in revenues. We expect that decline to continue given the strategic change of XING.

[Operator]

[Operator Instructions] In the meantime, we will continue with the questions from Benjamin [indiscernible].

[Unknown Analyst]

Thanks for the presentation today. Two questions, if I may. Firstly, on HR solutions. We're keen to understand what kind of feedback you're seeing when you're approaching new corporate clients? Are many not spending at all in the current environment? Or are they delaying HR investments more until next year? Also, what products are they still willing to pay for or to subscribe to?

Secondly, it's great to see the step-up in margins during Q3, despite the revenue decline. Could we expect any further restructuring or one-offs impacting pro forma EBITDA in Q4? You also mentioned that marketing spend tends to be lower in H2. So could you bear any more color on how you're thinking about marketing spend into the fourth quarter? And just lastly, is there any seasonality and other cost lines that we should be aware of in Q4?

[Petra Von Strombeck, executive]

Okay. I'll leave the margin and cost question to Ingo and start with the first one. The feedback from the HR clients is clearly that they are facing a recession, a difficult situation so that many clients do have either hiring freezes or very limited recruiting capacities out there. So they need less of our products. They still consider our products relevant and are happy with what we deliver. For example, on the job ads field, they clearly see that we increased customer value. So the feedback to the products we get is good. But given the limited need in the current macroeconomic environment, they kind of postponed their invests to a later stage.

[Ingo Chu, executive]

Okay. So about your question regarding margins in Q4. First of all, as I've said, Q3 margins are extraordinarily high as we've had not only cost seasonality, and we did not only have the effects from our strict cost management, but we also had some one-time positive impact and they will not -- the positive impact will not repeat. If you look at margin seasonality in Q4. Generally, it's similar to Q3 without the positive effects, okay? So we expect head count a little bit to decrease from fluctuations. We're working on that. Marketing is at the same level because in the second half, so both quarters of the second half of the year is rather lower on marketing than the 2 quarters in the first half of the year.

When it comes to restructuring, as you know, we are working on productivity improvement projects. And I cannot exclude restructuring at this point in time. It's still early. Yes.

[Operator]

[Operator Instructions] We have -- for now one question left on the chat, we roughly touched it already during the presentation. However, maybe you could give some more color on it. It's regarding the loss of the net 90 B2B subscriptions. What is the gross change and how many subscriptions were canceled and how many new ones taken out?

[Petra Von Strombeck, executive]

Yes. We have had that question in earlier calls already. And actually, for competitive reasons, we do not give detailed churn rates on our products. What we give is an indication of how the different products do perform. And what we can say is that our ATS, the applicant tracking system, has the lowest churn rate followed by our kununu employer branding profiles because those are stable investments companies do or the software they use in case of the ATS system that you don't exchange on a regular basis. The products linked more to recruiting do have slightly higher churn rates, and that will be the Xing TalentManager. So we have different churn rates in our product and also different number of net gains, obviously, for those subscription products, but we don't give out any details. I'm sorry for that, and I hope you understand it.

[Operator]

We received a follow-up question on that and why you do not provide a split of the B2B revenue at a model -- at a module level? Or is that mainly planned for the future?

[Ingo Chu, executive]

No, it's not planned for the future. You know that we generally comment on it so that you get a feel of it. The reason for not providing that is also competition. But at this point in time, also in Q3, we could say if you allocate the bandwidths, then it's about 1/3 active, a 1/3 passive, 1/3 employer branding and the rest is applicant tracking.

[Operator]

All right. Thank you very much for elaborating on that. We did not receive any further questions in the meantime, though, which means everything might be answered for the moment. In case any further questions come up afterwards, Patrick Moller from Investor Relations will be happy to take your concerns and questions.

For now, thank you very much for your interest and dialing in. And of course, to you, Ms. Von Strombeck and Mr. Chu for taking the time giving us the insights.

I hand over to you for some final remarks before closing.

[Petra Von Strombeck, executive]

Well, I thank everybody for participating and for your questions. See you soon. Bye.

[Ingo Chu, executive]

Bye.