ProSiebenSat.1 Media SE (PSM) Earnings Call Transcript & Summary

Good day, ladies and gentlemen. Welcome to our Q2 H1 2022 results conference call of ProSiebenSat.1 Media SE. This conference is being recorded. Today's call is hosted by Mr. Dirk Voigtlander. Please go ahead.

Yes. Thank you, operator, and good afternoon, ladies and gentlemen, and welcome to our second quarter 2022 Results Conference Call. As in previous quarters, today's conference call will be hosted by Rainer Beaujean, CEO of ProSiebenSat.1; and Ralf Gierig, CFO of the group. During the presentation, Rainer and Ralf will take you through the financial and operational performance of the second quarter and the first 6 months of 2022. Rainer will finish the presentation with comments about the updated financial targets for the current financial year. The presentation will be followed by a Q&A session. With these opening remarks, I now hand over to Rainer.

Good afternoon also from my side, and welcome to our analyst and investor call. Today, we want to share with you the results of our second quarter of 2022 and the first half of the year. We are right on track with our development in the second quarter and made progress in implementing our strategy. We continue to see the diversification of our business to pay off and that the combination of content, reach and monetization, thus the basis of our business model works. . Let's start with a look at this quarter's highlights. In the second quarter, we were able to sustain our growth momentum despite the macroeconomic challenges caused by the war, e.g., supply shortages and a tight energy market inflation and decreasing consumer confidence. Let me give you a quick overview. First, we continue to grow our revenues even after the strong growth in the previous year period. Our revenues slightly increased by 1% to EUR 1.55 billion in the second quarter 2022. Our adjusted EBITDA has remained stable. This proves once again that thanks to our diversified profile, we are more crisis-proof than many other media companies. Second, the revenue growth was driven by 2 segments: The Entertainment segment grew by 2% with our advertising business remaining about stable despite the macroeconomic challenges. In our Commerce & Ventures portfolio, revenues increased by even plus 10% organically. Here, assets that were affected by the pandemic restrictions in the previous year, such as our experience provider, Jochen Schweizer mydays and the car rental comparison portal billiger-mietwagen.de, saw a clear recovery. Also our digital investment business at SevenVentures and SevenGrowth continued to increase revenues. Third, we saw clear growth in our adjusted operating free cash flow. One of our most important KPIs grew by 26% to EUR 109 million. We also further deleveraging with our clear and strong cash flow management. Accordingly, our leverage ratio decreased to 2.3x compared to the end of previous year second quarter. Fourth, we also continued to execute our active portfolio management and thus further optimized our company setup. On July 1, we sold our U.S. production business, which was part of Red Arrow Studios. This reflects the clear focus of our TV activities in the German-speaking region for which we are producing local relevant content that is distributed live and on-demand across all platforms. Fifth and finally, mainly due to this portfolio change, we are updating our full year guidance, which I will explain in detail at the end of this presentation. Of course, we also heard the estimates of RTL on the development of the advertising market. Here, you have to take into account that the print market now also is part of RTL's business model through the [ Guna NTR ] acquisition and that its development is more affected than the one of the TV and digital advertising market. That is why we believe in a significantly better development of our business, which was already the case in the first 6 months and which we are also seeing moving forward as we are completely focused on becoming a digital company. Together with our group CFO, Ralf Gierig, I will give you a deep dive in all these topics in the next minutes. Let's start on Slide #4. After a good start into the year, we continue to capitalize on our diversified portfolio. After the previous year's Q2 revenues had significantly benefited from catch-up effects due to the COVID-19 pandemic, we have been able to consolidate the strong previous year performance despite the challenging economic environment caused by the Russia-Ukraine war. If you look at our revenue split, you realize how robust our setup is. Our Entertainment advertising business in the German-speaking region only accounts for 44% of revenues in the second quarter. Furthermore, our Commerce & Ventures as well as our Dating & Video segment are positioned in structural growth markets that have increased their potential substantially in the past years. This shows how well our revenue diversification enables us to balance out fluctuations within our group portfolio. We are therefore very satisfied with our Q2 results as it underlines the strength of our group strategy once again. This directly leads us to Slide #5. As discussed in our full year presentation, the interplay of region monetization enables strong shareholder returns at ProSiebenSat.1. This is also underlined by our recent increase in dividend payments. Our reach is the basis for our monetization and the foundation of our growth ambitions. At the same time, all our 3 segments are linked with 1 shared vision: we empower brands and create moments that matter. Driven by this vision, we further executed on our strategy in the past quarter. With regards to further expanding our reach, we increased our audience shares by 0.6 percentage points and maintained our high market share. With this, we continue to be the leading entertainment platform in the German-speaking region. And we just started the third quarter with another highlight. We successfully kicked off the first German soccer league in that [indiscernible] past Friday. To strengthen this top position, we put local relevance and exclusive content in the spotlight. We underline the strategic focus by selling our U.S. production business of Red Arrow Studios. I will share more details on this in a moment. Furthermore, we increased our marketable AVOD video views on our streaming platform Joyn by 23% in the first 6 months of the year. To remind you, with Joyn, we are uniquely positioned in the streaming market because of its strong advertising financed offering focusing on free and local content. Also, our channels are now available on all major distribution platforms. By offering our best-in-class entertainment anywhere and anytime in a platform-independent approach, we further maximize our free TV and addressable TV reach as well as extend video-on-demand business. We also make progress in diversifying our monetization. We confirmed our position as #1 in the German TV advertising market. In Q2, ProSiebenSat.1 achieved a market share of 38%. This translates to an increase of 1.6 percentage points compared to the previous year. In our Commerce & Ventures segment, we secured new media for equity deals. Here, we offer growth companies advertising time, combined with the high reach and strong impact of the medium TV in order to increase their brand awareness and ultimately, enterprise value. In return, we participate in the company's success by shares in the company itself. One of the latest examples is Germany's new unicorn, the consumer tech subscription platform Grover. And of course, we continuously monitor our investments to see whether they still contribute to our long-term strategy, whether to find new opportunities and investments for our portfolio or whether to exit and monetize. Thanks to the strategy, we were able to let our shareholders participate with strong dividends at our success. After our Annual General Shareholder Meeting in May, we paid out a dividend of EUR 0.80 per share, a year-on-year increase of 63%. This corresponds to a total dividend payout of EUR 181 million and thus, EUR 70 million more than in the previous year. Now let's have a closer look at the milestones we achieved in the past months. The disposal of our West production business was clearly one of them. On July 1, we sold all of our U.S. production companies to The North Road company. The transaction is based on an enterprise value of EUR 293 million. The purchase price is subject to customary adjustments and this is around EUR 189 million. U.S. production companies, which have been sold, generated revenues of EUR 135 million and adjusted EBITDA of EUR 3 million as well as an adjusted operating free cash flow of EUR 2 million. Adjusted net income was at minus EUR 3 million in the first half of 2022. I will explain later in detail the effect of this disposal on our full year guidance. Please note that the performance of the disposed content production business will to be backloaded this year due to the timing of projects that had already been commissioned last year. Therefore, we expect higher revenues in the second half of 2022 compared to the first half of the year, as shown on this slide. In general, the sale of our U.S. production business clearly proves our strategic priorities. We are one of the largest entertainment players in Germany, producing our content locally and distributing it across all platforms is our key competence. We are thus putting the German-speaking region and the production of local and relevant content at the core of our business. We need production companies that understand the cultural characteristics and preferences of our viewers. After all, local content is what sets us apart from the competition. Such production businesses are besides our German companies, our assets in countries such as Denmark and the U.K. It is, therefore, logical that we keep these companies within our group. In addition, we recently launched 2 new production companies in Germany. Cheerio Entertainment is working on shows and entertainment, Flat White Productions creates factual formats both for the German market. Our top priority now is to link the companies of our production portfolio even more closely with our entertainment platforms. This is what our active portfolio management is all about. We continuously verify that our companies are fully in line with our strategy and financial targets. But Arrow Studios is now fully in line with our focus on the German-speaking market and all divestments have successfully been accomplished. After the disposal of the U.S.-based distribution business of Gravitas Ventures in the previous year and the U.S. production business now, our production business concentrates on the European and German-speaking market. This transaction marks an important milestone in the streamlining of our business areas within the Entertainment segment. The strategy strengthened our most important financial KPIs going forward. In particular, our ProSiebenSat.1 return on capital employed and reduces our debt as well as we raise money indirectly through disposals in addition to significantly improved adjusted operating free cash flow. With this, I hand over to our group CFO, Ralf Gierig, who will guide you through our group financials for the second quarter and the first half of 2022.

Thank you Rainer and good afternoon also from my side. Let me start my part of the presentation with the group's financial key performance indicators for both Q2 and H1 2022. As Rainer already mentioned, we have continued revenue growth and confirmed our strong prior year levels of revenues and adjusted EBITDA for the group in the face of macroeconomic uncertainties. ProSiebenSat.1 Group revenues amounted to EUR 1.055 billion in the second quarter of 2022 and EUR 2.009 billion in the first 6 months. This translates into revenue growth of 1% in both the second quarter and the first half of 2022, despite strong prior year figures and the more challenging macro and advertising environment. Drivers of the revenue growth were the Entertainment business, the dating asset eharmony and several of our growth businesses in the Commerce & Ventures portfolio. On an organic basis, group revenues were stable in Q2 and increased by 2% in H1 of this year. Q2's group's adjusted EBITDA of EUR 166 million is in line with the revenue development in the second quarter and is thus on prior year's level. In the first half year, the ProSiebenSat.1 Group's adjusted EBITDA amounted to EUR 289 million. The resulting decrease of 6% or EUR 19 million in H1 is mainly attributable to the deconsolidation of Gravitas Ventures as well as a scheduled increase in programming costs in Q1 2022. This we reported already in May in the course of our Q1 results release. Adjusted net income increased by 8% to EUR 68 million in the second quarter of this year. On a half year basis, it grew by 10% to EUR 110 million. The increase mainly results from an improved interest result as well as, in general, improved adjusted EBITDA to adjusted net income conversion following recent portfolio changes. The group's adjusted operating free cash flow also showed significant growth with an increase of 26%, reaching EUR 109 million in the second quarter benefiting from phasing of programming investments, improvements in working capital and overall cash flow management. In the first half of 2022, adjusted operating free cash flow rose even more strongly by 50% to EUR 254 million. Let me continue with the revenue performance of our 3 segments: Entertainment, Dating & Video and Commerce & Ventures. Starting on Page 9 with Entertainment. Revenues in the Entertainment segment increased by EUR 11 million or 2% in Q2 and by EUR 64 million or 5% in the first half year. Adjusted for currency effects and portfolio changes, the H1 segment revenues also increased by 5%. Advertising revenues in the Entertainment segment almost reached the strong prior year's level and were also almost at the precrisis level of 2019. In this context, it should also be noted that the prior year quarter benefited strongly from the recovery of the pandemic situation where Q2 entertainment advertising revenues were up 55%, with the DACH advertising revenues up even 57%. For the first half of this year, advertising revenues increased by 4% reflecting dynamic growth in the advertising market before the outbreak of the Ukraine-Russia war at the beginning of the year. While distribution revenues were at the prior year's level, the content business developed positively, recording an increase in revenues by 12% to EUR 139 million and by 13% to EUR 255 million in Q2 and H1, respectively. The increase was primarily achieved in the European business although Gravitas Ventures, which was sold in November 2021, had still contributed EUR 11 million to revenues in the second quarter and EUR 22 million in the first half of last year. Other revenues, which include amongst others events, increased by 12% year-on-year in the second quarter. The return to live sports events had a positive impact here. Entertainment's adjusted EBITDA decreased by 6% in both Q2 and H1 2022, reflecting the just mentioned deconsolidation effect of Gravitas Ventures in November 2021. In addition, H1 2022 was characterized by scheduled program cost increase in Q1 2022. As you may recall, in our full year 2021 conference call, we stated that with the Soccer World Cup taking place in November and December, we adjusted our 2022 planning accordingly to reflect a shift in programming costs into the first and second quarter. Please turn to Page #10. Segment revenues of the Dating & Video business amounted to EUR 130 million in the second quarter of 2022 and EUR 262 million in the first half. As expected, this corresponds to a decrease of 6% in each of the periods and is attributable to the overall macroeconomic uncertainty affecting consumers. In addition, the prior year period saw record revenues due to the third stimulus program in the U.S. which boosted consumer spending as well as usage and monetization of our video offerings. Compared to the pre-pandemic level in the first half of 2019, segment revenues grew by an average of 10% per year on a pro forma basis. As a reminder, The Meet Group has been consolidated since September 2020. Within the Dating business, revenues declined mainly in the German-speaking region as a result of the macroeconomic uncertainties. This development was partially offset by the U.S. subsidiary eharmony, which continued to grow and which is by now the largest matchmaking brand in terms of revenues in our portfolio. The Video business decreased in both the second quarter and the first half of 2022, reflecting the strong comparative figures of the previous year. However, our video streaming solution VPAAS which is part of the Video business and is also available to third-party companies was able to partially compensate for the decline. Adjusted EBITDA in the Dating & Video segment totaled EUR 25 million in the second quarter, a decrease of EUR 3 million year-on-year. This development is mainly due to the decline in revenues compared to the record prior year period. Against the backdrop of the EU stimulus package last year, the segment's Video business had recorded strong growth, especially in the first quarter of 2021, as just explained. Accordingly, the segment's adjusted EBITDA for the first half of the year was EUR 14 million below the prior year level and amounted to EUR 47 million. Let us now have a look at the performance of Commerce & Ventures on Page 11. In the Commerce & Ventures segment, revenues increased by 3% to EUR 177 million in the second quarter. On an Organic basis, revenue growth even reached 10%. As you know, the group actively manages its portfolio with a focus on synergies and thus sold the company Amorelie which had been part of Beauty & Lifestyle and moebel.de, again part of Beauty & Lifestyle at the end of 2021. Combined, these companies had contributed EUR 11 million to the segment revenues in the prior year period. Revenues for the car rental comparison portal billiger-mietwagen.de and experience provider Jochen Schweizer mydays, which were both affected in the pandemic for a long time, recovered significantly in the second quarter. Our investment business with SevenGrowth and our media-for-equity and media-for-revenue business of SevenVentures also recorded considerable year-on-year growth. However, this was offset by a decline in revenues at Verivox, which is part of consumer advice, as the price comparison portal is currently burdened by the ongoing situation in the energy markets. In view of the sharp rise in energy prices, the options for switching electricity and gas providers are currently limited. Revenues at Flaconi, part of our Beauty & Lifestyle business were also below the prior year level, amongst others, due to the currently more subdued consumer behavior. However, compared to the pre-pandemic level of Q2 2019, Flaconi grew on an average by 23% per year. This underpins the solid underlying market trend of a continuous shift from traditional retail to online retail in the beauty space. In the first 6 months of the year, segment revenues were 6% down on the previous year at EUR 337 million and were influenced in particular by the disposals of Amorelie and moebel.de described before. Organically, i.e., portfolio and currency adjusted, the segment grew by 1%. Adjusted EBITDA in the Commerce & Ventures segment developed very dynamically in the second quarter of 2022 reaching EUR 12 million compared to EUR 2 million in the previous year. This was due, in particular, to the higher earnings at SevenVentures and SevenGrowth. In addition, revenue growth at Jochen Schweizer mydays and billiger-mietwagen had a positive impact. On the other hand, as expected, Verivox business was impacted by the challenges in the energy market, which I just described. Adjusted EBITDA for the first half of the year grew by EUR 6 million or 33% to EUR 25 million in this segment. Let me now continue with comments about our financial leverage and net debt development on Page 12. Thanks to strong cash generation, the group's net debt at the end of the second quarter reduced to EUR 1.881 billion. This is a reduction of EUR 274 million compared to the end of Q2 last year. And this, despite EUR 70 million increased dividend payment of EUR 181 million in May of this year. As a result of the net debt reduction, financial leverage shows a ratio of 2.3x at the end of Q2 compared with 2.6x at the end of Q2 2021. Let's now take a closer look at our balance sheet management on the next page. ProSiebenSat.1 Group uses various debt financing instruments for the purpose of its group financing, which is regularly adjusted with respect to volumes and maturities. Currently, the group is financed via 2 term loans, the currently undrawn revolving credit facility, all are part of a syndicated facilities agreement and various promissory loans. In May, we extended EUR 800 million of term loan facilities to April 2027 and EUR 400 million of term loan facilities to April 2025. The EUR 400 million loan carries 2 1-year extension options to April 2026 and April 2027. We also extended the revolving credit facility to April 2027 and reduced the amount to EUR 500 million against the backdrop of lower working capital needs. Before the extension, the majority of the credit facilities had a maturity date in April 2024. The extension was completed at very attractive terms, reflecting ProSiebenSat.1 strong credit profile. With this, I would like to end my part of the presentation and hand back to Rainer who will provide an update on the advertising market. Over to Rainer.

Let's have a look at our TV advertising market in Germany and how it developed in the second quarter and first half of 2022. Based on gross figures from Nielsen Media Research investment TV advertising in Germany increased slightly by 1% in Q2 and by 3% in the first half of 2022. The solid development can be seen in most key German TV advertising industry. Especially the tourism sector came back strongly, thanks to catch-up effects from the pandemic and the end of COVID-19 restrictions. And at the same time, there is still potential in the automotive industry. Due to supply shortages, the uncertainties in the energy sector, the automotive industry currently is rather hesitant regarding its advertising spending. Slide 16 shows the development of our net advertising business since the beginning of the COVID-19 pandemic. You can clearly see our own revenues reflect that the TV and digital video advertising market has a high correlation to the development of the macroeconomic environment as well as economic expectations and hence, is very early cyclical. Since the beginning of the COVID-19 pandemic, consumer confidence and therefore, the advertising market have been influenced by the macroeconomic environment in the German-speaking markets. This is, in particular, due to the dampened business expectations and consumer restraints in the context of the Russia-Ukraine war and rising inflation rates. This is also reflected in the development of our entertainment advertising revenues in the DACH region, which as a result, increased by only 2% year-on-year in the first half of the year. Even though there are some clouds over the current environment, the cyclical nature of our advertising business makes us equally optimistic that we will be able to benefit fully from any economic recovery in the future similar to what was already the case during the course of the COVID-19 pandemic. On Slide 17, you can see the overall and long-term development of the net advertising market in Germany by media type. ProSiebenSat.1, we, of course, address the potential of both the TV advertising and the digital budgets, while in relation to the latter, we especially focus on digital video. Many of you might know that the volume of the TV advertising market has remained stable over the past 23 years. It reached its peak in 2000, but showed a strong resilience in the following years. Even after economic downturns with the financial crisis in 2008 and 2009, or COVID-19, as of 2020, it quickly saw a recovery. As our entertainment advertising business in the German-speaking region currently accounts for 44% of our revenues, we have and will profit from these recurring market dynamics. At the same time, the overall digital advertising market that consists of digital and digital video grew quickly in a very robust way, especially due to search and performance marketing, but not at the expense of TV. Digital video now is the digital advertising format that is growing the strongest. From 2018 to 2021, we saw a plus of 35% here. With our business focus on digital video, we are benefiting strongly from this continued increase with our streaming provider Joyn and our digital media and entertainment company, Studio71. On top of that, we are also benefiting in our Commerce & Ventures business from the digital advertising growth. For example, with assets such as marktguru or wetter.com but of course, in smaller dimensions as the majority of our Commerce & Ventures companies which have a different core business. To sum it up, we have a future-proof business model consisting of TV advertising as a profitable and robust base where we have a market share of around 40%. And on top of that, advertising revenues from our digital business that still has great growth potential. With regard to digital video, we today have a market share of around 10% and less than 1% in the extremely fragmented overall digital advertising market. Coming to the end of this presentation, I want to give you more details what our full year outlook looks like, given the disposal of the U.S. part of Red Arrow Studios and the current market environment. When we presented our outlook for the full year 2022 at the beginning of March, we were forecasting revenues within a range of EUR 4.6 billion, plus/minus EUR 100 million; and adjusted EBITDA numbers within a range of EUR 840 million, plus/minus EUR 25 million. All this excluding portfolio changes. We are now seeing an economic environment, which is influenced by the Russia-Ukraine war, the resulting energy crisis as well as burdens on the consumer climate and the ongoing pandemic. Therefore, we now expect, excluding portfolio changes, to achieve results in the lower quartile of this March outlook. This also corresponds to the majority of analyst estimates according to the Bloomberg consensus as of August 1, 2022, which expect excluding portfolio changes, average revenues of EUR 4.512 billion, an average adjusted EBITDA numbers of EUR 860 million for ProSiebenSat.1 also on the basis of the current market environment. Taking into account the disposal of the U.S. production business of Red Arrow Studios as of July 1, 2022, which had a forecast contribution to revenues of around EUR 175 million and around EUR 50 million to adjusted EBITDA in the second half of 2022. The average of the analyst estimate for revenues would be reduced to EUR 4.337 billion and for adjusted EBITDA to EUR 801 million. This now translates for our group's forecast for the full year, excluding further portfolio changes in revenues of around EUR 4.375 billion with a variance of plus/minus EUR 75 million and an adjusted EBITDA of around EUR 805 million with a variance of plus/minus EUR 25 million. The main driver of our revenue and adjusted EBITDA forecast is the development of the advertising market. As we outlined earlier in the presentation, the development is difficult to forecast until the end of the year because of the current conditions. For the updated revenue and adjusted EBITDA outlook, we now assume that the full year advertising revenues in the German-speaking region will develop at the previous year's level when reaching the midpoint of the updated ranges. The adjusted operating free cash flow is based on the development of adjusted EBITDA. This means when reaching a midpoint of the updated adjusted EBITDA target range, adjusted operating free cash flow should continue to be around the previous year's level of EUR 599 million. On this basis, and excluding further portfolio changes, we continue to expect adjusted net income for the full year to be at or slightly above the previous year level of EUR 362 million. We continue to expect these figures, even though we have sold the U.S. production companies of Red Arrow Studios. Because at the end of the day, it's not what you achieve in the adjusted EBITDA that matters, but what remains at the end as the basis of our dividend payout and in cash flow. Because, of course, we confirm our dividend policy to pay out around 50% of adjusted net income as dividend to our shareholders. Due to the disposal of the U.S. companies of Red Arrow Studios, we also assume that the leverage ratio will improve to around 2.1x at the end of the year then reaching the midpoint of the updated ranges despite the challenging market environment. Previously, we forecasted a leverage ratio at or slightly below the previous year's level of 2.2x. On this basis, we continue to expect our ProSiebenSat.1 return on capital employed to be slightly higher than the previous year's level of 14.1%. Let me sum up the last minutes for you. First, we continued to develop robustly in the past quarter and the last 6 months thanks to our diversified and synergistic business model and were able to achieve the highest revenues in the first half of the year ever. This makes us crisis proof and optimistic even in times of high economic uncertainty. Hence, we are better positioned than other pure media companies. We are pursuing our path to becoming a digital group much more consistently and clearly than many others. Our goal is definitely not to regress in the direction of old media, be it print or more linear television through acquisitions. Second, against this backdrop and despite the more challenging economic environment, we remain optimistic that we will continue to achieve a very solid operational and financial performance in the second half of the year as well as the full year period and that we will be able to generate even better results after the end of the energy crisis. And third, we achieved an important milestone with the sale of the Red Arrow Studios U.S. production companies, having aligned our production business to focus completely on local and live content in the Entertainment segment. Thank you very much for your attention, and we are now ready for your questions.

[Operator Instructions] We will take our first question from Omar Sheikh from Morgan Stanley.

I've got three questions, if I may. First of all, on advertising, could you remind us what the comps for German-speaking advertising were in H2 last year? And what, therefore, your assumptions are for H2 this year? And if you could give us an update on what you're currently seeing in July and August, that would be helpful. Secondly, on Joyn, just in light of one of other's comments in the last week or so about potentially emerging Discovery+ with HBO Max in the U.S. Is there anything that you sort of any information that you have about potentially their plans in Germany in relation to the joint venture? And I guess in the event that perhaps you and Discovery part ways, what's your kind of strategy in relation to online video in Germany? That would be helpful. And then thirdly, Rainer, if you could just update us on potential future portfolio changes. Could you just maybe run through what you consider currently to be core and noncore, particularly interested in assets like Flaconi, obviously, and maybe even Verivox given the current difficulties?

Thanks, Omar, for your questions. Let me start with July, August. As you all know, September is the most important month for the third quarter because its stands for approximately more than 50% of the whole quarter. July and August are compared to last year's down, really a small amount. That's at least our current expectation. As you all know, August is not over, and that's the reason why we also put our program -- new program more or less in September because this is the most important month, and September looks very -- as well as we can see it right now because the agency are currently starting to book looks good. So overall, I'm optimistic on that. I think the most important factor people have to have in mind is that especially the phasing of our content costs will be different this year than last year due to the fact that the World Championship is in November, December. So therefore, we will spend a little bit more in the third quarter compared to last year. So therefore, you should also assume for the third quarter that we will have perhaps an EBITDA decline compared to last year. On the other side, you will have a positive effect in Q4. And that's also something which you have to have in mind. So phasing is different, and also the expectation for sales is different. But on the other side, and I know that others are talking very negative about the World Championship. But as the market leader overall, we clearly have to say that also the World Championship gives us opportunities due to the fact that the public broadcasters who will show it are not allowed to do advertising after 8:00. So at the end of the day, we have to see how this will develop. So therefore, we are not 100% clear what will happen in the fourth quarter, but we have tested several times during this year, how we can compete against soccer. Yesterday evening was a good example when Frankfurt played against Real Madrid and Airtel has shown it, and you could see that our program worked out very well. So at the end, we tested a lot at the beginning of this year. And I clearly have to say I think we find solutions to also have an acceptable rest of the year. That's the reason via our outlook, and I come to your -- the rest of the question, in H2 2022, we assume currently that we will have in our midpoint minus 2%. The low end of our range is approximately minus 4% and the high end is plus/minus 0. I clearly have to say last year second quarter, I think, compared to the 2020 year was plus 10%. I look in the faces around me, they say that I'm right. So that's the number which we had. But again, last year, there was clearly an uptake, especially in July, August, recovery based on the really poor performance which were in 2020, yes. So -- and join Discovery, yes, we have to see how this will work out. In my opinion, we have a good partnership. We work together very well. We are sharing costs in Joyn. On the other side, when you look on the 10 top formats of Joyn 8 of them come from ProSiebenSat.1 which is logical due to the fact that our local life relevance strategy pays off. That's the reason also why I've said in my speech that we are gaining market share or even not gaining we are increasing our market share against competition. So therefore, our strategy with Joyn always was an AVOD strategy with a very small SVoD strategy. We think after 2 years, which we are now in business and everybody else now goes into our direction. I think our strategy further pays off. We have a lot of downloads of the app. Now we have to figure out how we get more customers on it, but also when coming back to that what I've said before, to the advertising performance. Clearly, our digital advertising performs is a lot better than the others also due to the new format. And that's, by the way, also the reason where others are negative than we are about the rest of the year because we have seen that linear TV for sure, is declining. On the other side, our digital advertising was the new one-to-many addressable TV and so on is growing double digit, and that's clearly offsetting one of several of these effects you see with others. And portfolio changes, your last question, nothing has changed since I'm here. I clearly said that we want to have an asset-light strategy. We clearly said several times that we are -- we did a lot during the last years. I sold -- or we sold WindStar Medical, [ moebel ], Amorelie several examples. We also sold Gravitas. We now sold on the U.S. studios and production in the Commerce & Ventures business further on. Market environment is not there. Obviously, Flaconi is clearly not an asset-light strategy ad Stylight is not an asset-light strategy. And that hasn't changed in the past. But obviously, currently, there is no market which easily makes transactions happening. So therefore, it's but still on my list and further on my list, and that's at the end of the day the things which we have to do. And then for the rest, everything which gives us an opportunity and someone comes along with a good price for something. So I'm not ruling out that we are also ready to do something. But again, obviously, with the things which we have done. I also said 2 years, 2.5 years ago, return on capital employed is important. I'm not happy with the net debt-to-EBITDA ratio. So we're working consequently on that we reduced approximately EUR 0.5 billion in debt during the last years. So even in the crisis and so overall, we are clearly on track as a company to fulfill also our midterm target to be above 15% return on capital employed. So we consequently go our way. Yes, it's not easy with the overall market environment, but I'm not pessimistic that we are clearly running in the right direction.

We will take our next question from Annick Maas from BNP Paribas.

Firstly, on the German dating business on Parship and Elite, you suggested that they declined a bit more. Can you give us more of an order of magnitude of the decline that you've seen in Q2? And also tell us how you developed the German dating business to -- developed actually in Q3 given the subscription element has now, I guess, it cannot be a reason anymore for the decline? And the second one, also on dating and on the monetization of the dating business, is it an IPO no matter what? Or is there a point in time where you would say, well, actually, let's consider maybe an asset sale? And then the last one is just with regards to your guidance on a full year basis, how much of your order book do you see actually today? And I say this because [indiscernible] this morning suggested by giving their full year guidance that they have a very clear view, over 60% of their order book from now to the end of the year. So can you give us maybe a bit more indication of how much do you see beyond September?

First I'll start with the last one. I have a similar development in my order book than last year. That's the reason why I'm not pessimistic, and it's clearly more than 70%, which is already in. So this is like obviously, for us, no bad development in front of us. And that's what is not played back to us from the advertising customers we have. Again, different positioning we have than others due to the fact that also our digital advertising piece is working very well. So therefore, we have a very good positioning in that. So IPO, we are -- we have partners here. This is General Atlantic. We both look carefully on the markets. We always said we are IPO-ready, currently is not the timing. No, we don't do an IPO, whatever comes. And again, for us, the idea behind that is due to the fact that we see also a lot of synergies that, first of all, primarily General Atlantic is the one who is selling the asset. But as I said before, whenever there is someone coming along with an outstanding price, I look on everything because at the end of the day, our ParshipMeet business is a Commerce & Ventures business and was built out of a Commerce Ventures business. It was getting too big. And therefore, we put it as a separate segment. And therefore, obviously, for us, we always think rational about things. But again, we also see a lot of synergies also with our video content product. That's the reason why we bought The Meet Group in the past. Because here, this is especially for the young target groups you've seen us investing into Studio71. We bought out TF1 in the past as well as Mediaset, and we also bought BuzzBird, which is the biggest influencer community in Germany. So all this together is clearly one of the paths we want to go into a digital company. And that's also the main difference to other than the market who are concentrating on print or for the linear channels, where we say we have to figure out how we can monetize through all the platforms which we have our content, and that's clearly the positioning which we are going and which we want to further work on. I hope I could answer all the questions. So there was the question about what we are doing in the performance in the dating business. Yes, we see currently in the German market, the effect you see in a lot of subscription-based businesses. You know that the consumer behavior is obviously difficult. And therefore, it is -- we have on the same platform, 2 businesses, which is Elite and Parship, and we also have on the same platform eharmony in the U.S. eharmony is growing due to a different momentum of consumer behavior double digits, and we see a more difficult behavior and a declining business in our German business, which has to do with the cost inflation and all the stuff which we have in the German economy. I would describe it like that. And we have to see how this will develop going on further. But again, when you would take the assumption over 3 years, you would easily figure out because we also have to compare the overall dating business with very strong comps last year. You will figure out that we were growing over the 3 years above 10%. I think I also mentioned that in my speech before.

We will now take our next question from Julien Roch from Barclays.

My first question is the usual one for Ralf. How much was smart advertising up in Germany in Q2? The basis was EUR 63 million, I believe. That's number one. Rainer, you said in your intro that your business was all about reach, but you only gave us TV audience share, which is only part of viewing now. ITV total viewing on-demand plus live was down 16% in the first half, while RTL was down 6% in Germany. How much was your total viewing down in Germany in the first half? And can we have a split between linear and on-demand? And my third question is on dating. It's down this year, but several times, you said it's been growing more than 10% since 2019. But 10% in 3 years is only 3% a year. So what do you think outside of a recession, what is the steady state medium-term growth you can achieve in dating because 3% doesn't seem like a lot?

So let me start with the reach question. Obviously, we had very tough comps compared to last year, and we also had the situation in this year due to the fact that when the Ukraine-Russian war started. Obviously, it all went back to the broadcasters, the public broadcast is due to their news departments and so on. And obviously, that's one of the things which we also figured out, which is very important for us as ProSiebenSat.1, that's the reason why we have decided that we also need news. And yes, we did a lot already on the basis of that what we have in our company, but obviously, it's not enough to be -- to play on the same level field. And also, you could see when you look on the development of the total video reach also from the streaming services, everybody was down, which also had to do with the unbelievable good weather. People were happy to go out and with the end of the pandemic. But overall, if I compare us to our competition, we had a very good performance. That's the reason why I've said that -- and the biggest performance we have currently is clearly the TV performance. And there, we could increase our market share against competition, which is relevant because that gives us the basis also for our future advertising sales. And that's the reason why I'm happy about it. Absolute numbers, as I said, perhaps compared to last year, we are down with 12% or something like that in total video view time. And also digital overall is also down with perhaps a little bit more than 10%. But that's not the relevant figure because at the end of the day, it's what's competition doing, and therefore, we were good performing against them. Yes, smart advertising, how much, Ralf?

Julien. Obviously, as you would expect, the performance of our digital and what we call smart advertising revenues, was better in Q2 than what we had seen for, let's say, the core/classical TV advertising revenue. It grew again, mid- to high single digits, and we are showing a nice CAGR, yes.

So -- and your -- the growth question about ParshipMeet, we had a compounded average growth rate, 2019 pro forma because we have to give that pro forma due to the fact that The Meet Group was acquired. And up to the year-end assumption approximately this year is then the 10% compounded average growth? What does it mean for the next years? As you know, if you are assuming, and that's still what we want to do, and that's also what we believe in, that an IPO is coming. I'm not forecasting currently growth rates for this segment also for the next years. But based on this development in the past gives you hopefully a good indication.

We will now take our next question from Sarah Simon from Berenberg.

I've got a few questions. First one was, can you just give us the FX impact in terms of the rest of the world advertising? Or just give us an idea of how much of it is U.S. versus the other euro markets? The second one was the phasing of some of the Commerce & Ventures businesses. So obviously, billiger-mietwagen has done very well with the recovery in travel. Can you give us an idea of how much of that sort of phases through the different quarters presumably, you have another strong Q3 and then it gets pretty quiet, but that would be helpful. On dating, the cost base is obviously down year-on-year. How much of the cost base within dating is fixed as opposed to variable? And that was it.

Sarah, I can take the first question. I think your question was with respect to advertising, what was the proportion of our rest of world ad revenues. And in the second quarter, we posted in our group, EUR 72 million. And this compares to the Entertainment revenues of EUR 535 million.

Yes. I'm just wondering how much of the rest of the world is U.S. versus -- I know you have operations in France and Spain and things.

It's mostly U.S., we have approximately in Studio71 approximately, Ralph, you correct me later on, EUR 130 million of sales.

In the U.S.?

In the U.S.

Okay. Yes.

And to answer the phasing question, Ventures -- Commerce & Ventures, this is clearly something which is one of the bigger assets is Verivox. And Verivox for sure, has normally a high expectation in the last quarter. That's also something which now we have to see, but we totally believe that especially in the fourth quarter, especially all our businesses also Flaconi, all the others should have the strongest quarter due to the fact that Christmas season and all the others is there, also Jochen Schweizer mydays, a lot of voucher business also goes in the first quarter. We had this specific ramp-up effect due to the fact that people are able to go out again and could travel again, which was more or less ramp-up, as you remember, we were hit a lot in Jochen Schweizer mydays as well as in billiger-mietwagen last year. So therefore, phasing normally should be in the fourth quarter that we are -- that we will have the biggest amount of sales and profitability in Commerce & Ventures. But again, the most decisive number for the performance of our group for the full year guidance is the development of our advertising market because that's clearly -- that changes the needle in Commerce & Ventures. This is not as relevant from the absolute numbers to change it, yes. And last question was...

Fixed and variable sort of cost split in data.

It's a little bit a difficult one. Let me answer the following way. It's a contribution margin business where ideally, and we have that, for instance, perfectly done in our dating business where we have one platform which supports also the U.S. So therefore -- and then we have several people, 30 to 40 in the U.S. who performs eharmony. So at the end of the day, it shows you as more sales we get in as better the contribution margin gets. That's a different story for the video business there, for sure, because you have a revenue sharing model a little bit more. So that's fundamentally a little bit different. So -- but what you don't have is a lot of extra cost. So when you have a high EBITDA margin that normally falls down to cash flow and profitability because we are not doing huge investments in CapEx and others. That makes this business so attractive. And that's the reason why it also fits to our overall performance and why it's also from a longer-term return on capital employed very accretive for us because as more load we get onto our platforms as more profitability we get out of it. That hopefully answers it. I can't give you a percentage here and there, but it shows a little bit like how it is. So one thing is a platform-driven business, 1 platform, more contribution, and sure marketing plays an important role on costs as well as personnel. But the -- and on the other side, it's more also that you have specific costs when you have a model where you're sharing with a partner, the success of your video content.

And just to be clear, when you -- when we look at the revenue you give on video, that is before revenue share.

Yes, yes, yes. Yes.

[Operator Instructions] We'll take our next question from Richard Eary from UBS.

Just sort of three questions from me. Just coming back to the ad market in terms of phasing between Q3 and Q4. You said July and August down small, September is looking good. I mean, are we thinking then if at the low end of expectations that were down 4%, are you within that? Are you expecting the second -- third quarter to actually be positive if September is pretty good. And then we get a significant fall away in the fourth quarter. So just clarity in terms of Q3, Q4 guidance based on what you're seeing? The second question is just on dating. I mean, I think I'm correct now. This is like the second year in a row on a pro forma basis that which now being negative in Q2. So when do we start to cycle out of the headwinds in the growth and as you start to see a recovery in growth rates? Is that the expectation you'll see that in Q3 from what you're seeing at the moment? Or are we having to wait until basically Q4 or even into '23 and beyond to see an acceleration in growth from the dating business? And then just lastly, again, if we look at Flaconi, obviously some difficult comps. But as far as I was aware, by looking at the data of the difficult comps for Q1 and Q2, as we end Q3 and Q4, can we start to see an inflection in growth? Or do we have to wait again until FY '23 or beyond?

So let me start with your second question about dating. Honestly, no surprise, Richard, because we said it last time, Q2, tough comps and so on, that's totally the development, which we also forecasted. Normally, I would have said now and repeat myself, what I've said before, Q3 should be better in dating and see growth again. And then Q4 should have a lot better growth. But the situation is we have to see how the consumer behavior will play in because it's not the U.S. is strong, but the German business has a lot to do with consumer behavior, and I think this is for all subscription-based businesses a challenge. We have to see how this will develop. But totally in line with our expectation, totally in line currently the development, which we had besides that it's a little less good in Germany or is it not as good as we assumed before, but we are a lot better in the U.S. than we expected. So overall, it's leveling it out in the dating business. Again, we are -- we have to see how the development is and how consumer behavior will be in the third quarter. So then you asked at market phase in Q3, Q4. Clearly, I think it's not like that we have a huge effect in Q3 positive and then a negative effect in Q4. This is at least not my assumption. I would assume that it's in both quarters pretty stable, getting to this point in our midpoint. So that means in the second half of the year, as I already said, midpoint ends up with minus 2%. But again, this is very difficult to forecast. Signals are positive. And I'm talking about entertainment advertising business currently. And then we have to see if it's at the higher end then it's 0, at the lower end it's a minus 4%, which is the basis for our range. So I don't want to go more into detail in that. Ralf, you want to add?

If I may add. And as you know, Richard, Q3 will very much depend on September, yes. More than 50% of contribution is a September month contribution. And once we have more visibility on September, yes, we have a better view on what we believe we'll be facing.

And then just a follow-up question on Flaconi.

Yes, Flaconi, similar situations. So consumer behavior will play the key factor for the rest of the year. And again, we had a very good growth during the last years. And we have to see how this will develop at the year-end. Again, this is also not changing the needle. If we are EUR 3 million on EBITDA, up and down, and that's the dimension I'm talking about. So this is at the end of the day, a very good business, very stable. I'm optimistic, but I'm also not forecasting how this will develop. And again, Q4 for Flaconi business, Christmas season is important. We are a very important big player in that market. And I'm optimistic we were growing in the last 3 years, I think, was above 20% on average. And yes, we had a decline now, but this is not fundamental that has to do with the situation that Germans can go out again and buy stuff wherever they could. But at the Christmas season, I'm again, optimistic that we can see the pattern which we have seen during the last years.

So Rainer, can I just ask a quick clarification follow-up. So for dating, within your forecast and your revised guidance, you have growth in Q3 in dating and accelerating in Q4, and that is a similar basic trajectory that you're also expecting in Flaconi?

No. In my forecast, currently dating, the dating part is positive because we know that this is developing goods, especially due to the U.S. business. Our current biggest brand is eharmony. On the other side, the video business is not clear because that has to do a lot with the consumer behavior. So therefore, I'm overall, not -- I'm not telling you that this will be easy to grow against last year. But again, in my opinion, we should see growth, but we will see that we will know that when December is done. Again, it's a small amount of money we are talking about for the overall group relevance. And Flaconi, a similar situation. There, I'm optimistic for overall growth in the fourth quarter because they are, obviously, I should see growth again compared to last year.

[Operator Instructions] We will take our next question from Nizla Naizer -- we may have lost them there. [Operator Instructions].

Okay. Ladies and gentlemen, as there are no further questions, I would like to finish this call. As always, my colleagues in the Investor Relations department and myself will be available for any follow-up questions shortly. So thanks, everyone, and goodbye.

That will conclude today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.