Scout24 SE (G24) Earnings Call Transcript & Summary

Good day, and welcome to the Scout24 AG Full Year Results 2019 Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Ms. Ursula Querette, Head of Investor Relations. Please go ahead.

Welcome everyone to Scout24's Full Year 2019 Earnings Call. My name is Ursula Querette, and I'm responsible for Investor Relations at Scout24. I have Tobias Hartmann, our CEO; and Dirk Schmelzer, our CFO, with me on this call. Our analyst presentation is available for you on our website, and you can see it if you have used the web link to check in. Let's move to Page 3 for today's agenda. Tobias will guide you through the first chapter with key 2019 highlights and will also address the current situation. Dirk will follow with the second chapter, presenting last year's financials and our capital return plan. Both Tobi and Dirk will then talk about our role in the current highly uncertain environment. There are several backup slides, which go deeper into the 2019 financials. We have also included some Q&As on our capital return plan.

Thank you very much, Ursula. A warm welcome and hello to everybody from my side. Thank you for joining today's call. I would like to share with you how we are prepared in dealing with the COVID-19 impact. But before we talk about what is on everybody's mind, a very quick recap of how 2019 unfolded. Scout24, today is a best-in-class data-driven and tech-enabled platform company, with a very clear business vertical focus. We have arrived at this position as a result of the key strategic decisions made in 2019, which I would like to briefly recap. First, we doubled down on our 2 vertical strategy and created 2 relatively independent vertical champions in real estate and automotive. We continued to deliver on our 20-year long track record of helping buyers and sellers throughout their real estate and car transactions. We remained at the forefront of innovation and pushed several highly successful products into the market, helping us gain significant trust in the market, not only amongst our partners but also with consumers. In July 2019, we announced and launched a EUR 300 million share buyback program, corresponding to approximately 6% of the share capital at the time of the announcement. We have executed around half of the plan, and Dirk will provide you with an update later on in the call. Last but not least, as part of the comprehensive strategic revenue initiated in August 2019, we successfully announced the separation and sale of AutoScout24 to Hellman & Friedman. We are on track to complete the transaction in the near future. As noted earlier, we remain focused on returning sale proceeds to our shareholders in most efficient manner. Dirk will update you on details of our capital return plan later in the presentation. Let's now walk you through our record operational and financial results in 2019 on Slide 6. Our revenues grew to EUR 349.8 million, achieved near double-digit growth in 2019 from ImmoScout24 and Immo-related consumer services activities. During this time, we managed to grow both our number of partners and our ARPA. We continue to be the most relevant marketplace for both our partners and consumers in Germany with clear #1 market positioning for active listings and clear leadership position with 13.5 million unique visitors per month, growing at 4.6% year-on-year. Along with this growth, we were also able to increase our operating EBITDA margin by approximately 1 percentage point to 62.2%. So much for 2019. Now let's move to 2020 on Page 7. We started the year with great momentum in the first 2 months of 2020. We recorded 139 net customer growth on residential agents in the first 2 months, crossing the 15,000 mark. We also recorded plus 6% residential ARPU growth, which we are very happy with, especially, since this was after only 3 cohorts, namely December, January and February, that have been migrated to the new membership model. The addressable home seller audience was at 328,000 end of February 2020, which, by the way, is a plus 50% versus the 220,000 that we showed during our Capital Markets Day. This gives us a significantly higher base to support our lead engine product. The lead engine product itself has been gaining momentum, and we recorded all-time high Realtor Lead Engine revenues in January was nearly of EUR 1.5 million, that is corresponding to a year-over-year growth of 190%. Finally, we continued to experience a healthy growth in traffic and are now at around a 106 million sessions per month, which is an increase of 12% since December 2019. Obviously, there's also a seasonality effect in there. Whilst we have a great and resilient business model, we cannot be completely disconnected from the overall economic developments, the changes in policy and the turmoil in the market and the lives of our customers and employees. We remain extremely focused on maintaining business continuity and deliver on our targets as well as taking essential measures to support our partners, protect the health of our employees and the wider community. Now let's talk about the past few weeks, and let's turn to Page 8. In March, we saw an increasing impact of coronavirus on the Scout24 ecosystem. We remain extremely close and are in active exchange with our customers and partners on several fronts to help assist the agents and users and help them to navigate through the crisis from COVID-19 development. We have initiated immediate action program as of March 20, and this initiative includes the following: for agents, we have launched the so-called Liquidity plus, granting a 9-month expansion of payment for April invoice; for consumers, we're allowing private listings to be advertised free of charge for 4 weeks, starting on March 27; and for homeowners, ImmoScout24 will make free mandate acquisition leads available to current agent customers after the crisis. We continue to monitor the situation and are fully committed to support our customers and partners in every way possible, including provisioning with digital products, ensuring they return back to normal even faster and make sure they know that we are here to support them in difficult times like these. Third, we'll shed some more light on the concrete action plan later on in the presentation. While we navigate through these uncertain times, we also wanted to remind you that our long-term strategy and the core strength of the company remain fully intact. We continue to expand the #1 position in the German market, continued growth in core agent customer base. With an impressive track record of innovation and product development. ImmobilienScout24 over the recent years has revolutionized and digitized the real estate classified business. We continue to maintain the pace of innovation with a number of new products coming to market. One interesting one that we have rolled out is premium membership for landlords. We also collect and make available a lot more data and as a result, play a crucial part in increasing market transparency. As part of this, we have also made available our location data product, Columbus, for developers to integrate it into what they are building or planning to build. We built a comprehensive ecosystem for sale and rent and are automating additional parts of the consumer journey. The digital rental contract is a great example of how we can provide significant value and convenience to both our consumers and landlords. We continue to also provide value to our customers through new products, such as image addition and acquisition addition that have had very high take rates in January and February 2020. This allows us to continue to drive ARPU growth for the business in the longer term. Finally, the work we have put into our private listings product is bearing fruit. We are seeing significant momentum in this area, with 13% year-over-year growth in private rent listings due to rollout of the free listings initiatives at an all-time high in new private rent listings in the beginning of March, with 1,600 new listings on a single day. We also have seen a 38% year-over-year growth in B2C revenues due to the free-to-list initiative. I have full confidence in the strength of our business, and we have the resources both financially as well as the people and human resources to drive and continue this journey. I have shared with you an update on our great performance in 2019, the strong start in January and February in 2020 and how we are planning to navigate the turbulence ahead and our long-term commitment to the real estate ecosystem in Germany. I would now like to hand it over to Dirk, to walk you through our financial performance in 2019 and also give you an update on our capital return plan. Dirk, please take over.

Thank you very much, Tobi, and also welcome from my side to all of you on the call. Tobi has already called out some of our key financial highlights before. What you see here on Slide 11, in the upper green section, are the numbers for the New Scout24 Group. That is without AutoScout, without FinanceScout and Finanzcheck and the auto-related consumer services activities. As there are still some central group functions, consolidation and other effects may differentiate between the New Scout24 Group and the New ImmoScout24. The New ImmoScout24 includes the old segment and the real estate-related consumer services activities, we have folded into it. And the revenue of these activities was EUR 349.8 million in 2019. The corresponding EBITDA translates into EUR 217.6 million or a margin of 62%. The New Scout24 Group EBITDA margin is -- was 60%, 2 percentage points lower. In the orange section of the table, you see, for your reference, the Old Scout24 Group with its old segments, ImmoScout, AutoScout and Consumer Services. I'm aware of the fact that this is rather complicated. In the appendix, you will, therefore, find further details to help bridge the numbers. Let's now take a look at agent numbers and ARPU. Slide 12 recalls some of the KPIs Tobi referred to before. Also our full year comparison, 2019 to 2018, traffic developed very nicely, plus 8% year-on-year. As you know, a positive traffic development is key for our listings business and the attractiveness of our platform for agents. In 2019, the number of residential agents was up 1.5% to 14,967. The ARPU with Residential Real Estate Partners increased by 6.6% from EUR 634 to EUR 676. In addition to a successful up selling to our agent customers, an important add-on product was the Realtor Lead Engine whose revenue almost tripled in 2019 to EUR 9.5 million. The number of business real estate partners reduced slightly by 1.5% to EUR 2,774. The ARPU with Business Real Estate Partners increased, however, very strongly by 12.4% to EUR 1,761. The strong revenue growth with agents is also reflected on the next slide where we categorize our new revenues according to our new segment structure. A very solid performance, 11% growth for the Residential Real Estate segment, 10.3% growth for the Business Real Estate and almost 9% growth for third-party media and other segments. Let me remind you, last summer when we announced our strategic road map, we told you that we would fold the Consumer Services segment back into AutoScout24 and ImmoScout24. With the sale of AutoScout, the group needed a new segment structure for the remaining ImmoScout and real estate-related consumer service activities. At the Capital Markets Day, I presented to you how this structure could look. In the backup of this presentation, you will find a detailed explanation of which revenues portion belongs to which segment and how this compares to the old structure. By the way, from quarter 1 onwards, we will deliver ordinary operating EBITDA numbers, resulting from the respective segment revenues. At this point in time, we can show you a consolidated ordinary operating EBITDA margin, which at 62.2% is almost 1 percentage point higher than the year before. At group level, that is including holding cost, we achieved a 60% ordinary operating EBITDA margin. Let's turn to Slide 14. Marketing and IT cost increased disproportionately. The main reason for higher marketing spend is to increase online marketing for the Realtor Lead Engine product, a very strategic product for us whose revenues grew by 190% year-on-year. Our IT costs were up due to the AWS migration and resulting increasing share of cloud-based platform and software solutions. In total, our operating cost increase was lower than the revenue increase, proof of our ability to scale the business. Our ordinary operating EBITDA margin was up by 0.6 percentage points year-on-year. On a separate note, since we have received a lot of similar questions on the structure of our cost base over the last 2 weeks, about 60% of our operating costs are fixed, the rest are semi-variable or variable. Moving to Slide 15 and taking a look at the items below the ordinary operating EBITDA line. Nonoperating costs were at EUR 45.7 million in 2019. The strong increase is mainly due to our very positive share price performance and the resulting increase of share-based remuneration. In addition, EUR 9.3 million are attributable to reorganization and EUR 7.3 million to M&A activities. As a result, the reported EBITDA from continuing operations was almost flat in the year-on-year comparison. At EUR 54.2 million, depreciation, amortization and impairment losses on continuing operations remained roughly at the previous year's level. The financial result from continuing operations fell from minus EUR 6.1 million to minus EUR 15.2 million. This is due to income effects in the previous year, including gains of EUR 1.6 million on the sale of class markets and proceeds of EUR 6.2 million from refinancing the revolving credit facilities agreement. After a tax expense of EUR 30.7 million, Scout reported earnings after tax from continuing operations of EUR 63.5 million for the 2019 financial year. Adding the net income after discontinued operations brings us to a net income of EUR 80 million for the Group in its old structure. This is significantly lower than the year before, partly due to the effects, I mentioned before and partly because of the AutoScout24 transaction, which costs amounting to EUR 24.3 million have been taken into account in 2019. These are all booked into the discontinued operations. Adjusted for the nonrecurring and restructuring expenses for both operations continuing and discontinued, we come out with an adjusted net income of EUR 189.6 million, 11.6% higher than the year before. Therefore, we felt confident in proposing to the Supervisory Board, a regular dividend of EUR 0.90 per share. This corresponds to approximately 50% of the adjusted net profit and a total dividend payout amount of EUR 94.3 million. As of December 2019, our cash position on the balance sheet was at EUR 65.6 million. In view of the expected cash inflow from the AutoScout transaction, we feel very comfortable with this payout ratio at the top of our communicated regular dividend policy. By the way, since we will be paying the dividend out of our tax contribution account, it will be a tax repayment to our shareholders. I just mentioned the proceeds of the AutoScout24 transaction. The relatively high dividend payout amount is one piece of a much larger capital return strategy, which we continue to review, keeping in mind the rapidly evolving environment. This is laid out on the next Slide #17. Starting with the closing of the trajection of AutoScout, we will kick off a large capital return project. First, we will, in order to minimize negative carry, repay mandatory and voluntary debt in an amount of up to EUR 780 million. In addition, we will continue buying back shares in the market in amount of up to almost EUR 500 million, corresponding to 7.4% of our shares outstanding in order to fully use up our tax distribution account. In June, we will, as mentioned on the previous slides, proposed an ordinary dividend of EUR 94.3 million to our shareholders. We will also propose a redemption share buyback commencing in quarter 1, 2021 of EUR 1 billion, and an additional regular share buyback of up to 10% of our share capital to be in a position to buy back shares in an opportunistic manner. We plan that next year, until the Annual General Meeting, we can buyback further up to EUR 200 million in such a regular share buyback. The corresponding redemption and decrease of share capital is mandatory and will be placed in a tender with drawing rights, provided that we receive the required approval from the AGM. You have probably seen our recent ad hoc publication on this. In addition, we would like to refer to some of the questions you may have, as part of the backup of this presentation. In order to navigate through the coronavirus pandemic and its impact on the global economy, we put financial stability and flexibility above all. Hence, we'll run the business debt-free for a while, also minimizing negative carry. We will refinance the company in 2021, and if the macro environment allows return to our leverage guidance. We believe that this is in the interest of all shareholders as it allows us to use our strong balance sheet to come out of this crisis even better positioned and with a high flexibility to benefit from growth opportunities and invest in our business. Given the level of uncertainty and volatility out there, we wanted to share with you the initial steps we are taking as we navigate this uncertainty. As Tobi described earlier, we are already seeing the burdens of our professional customers. Against this background, as you can see on Slide 19, we launched an immediate action program to support both real estate agents and private listers. The first goal is to strengthen the liquidity situation of our professional customers in the short term and help them survive. We are therefore granting them a 9-month extension of payment for the April invoice. Secondly, we want to prevent things coming to a complete standstill. We want to animate the traffic on our website and are, therefore, offering 3 private listings for 4 weeks. As soon as the current crisis phase would be overcome, we will make additional free mandate acquisition leads available to current agent customers as part of a separate third acceleration initiative. We are convinced that this program is also in the interest of our shareholders. We see this primarily as an investment to strengthen our customer relationship. According to our current estimates, this will cost us around EUR 10 million in revenues. About 1/3 of this relates to the misc revenue of the free listings. The remaining 2/3 account for forgone revenues due to lower business activity. As an example, we estimate that our leads business will significantly decrease. Memberships will not be upgraded in these times. On the contrary, agents are asking for discounts. Also the search activities of consumers will be dampened, and therefore, our premium membership revenues. By the way the deferred invoice payment does not have a direct revenue, but rather a cash impact. We estimate this to be at approximately EUR 20 million for the month of April. While we are supporting our customers in the corona crisis, we are also assessing the effects of the market slowdown on our own operations. We are monitoring all our financial and nonfinancial KPIs very closely. Let's take a look at our revenue distribution. Approximately 60% of our revenues are contracted with professional customers, about 2/3 are on an annual agent contract. These will be relatively safe if the shutdown does not take too long. The same applies for the longer-term premium memberships booked by consumers. The leads and media business, however, will see short-term negative impacts. And while standing times of listings increase, new listings are coming in very slowly in these days. This means that the pay-per-ad business will be suffering. At this point, we would like to share our current view on the financial development for the remaining 9 months of this year and our corresponding guidance. In light of the significantly changed circumstances, we suspend our guidance for 2020. We currently assume that we will see a meaningful decline in activity with heightened uncertainty over the next 7 to 9 months. That is until the end of the year 2020. This means that our previously communicated revenue growth rate of 6% to 8% for 2020 would not be achievable. As you can imagine, the environment is very volatile right now. From where we stand today, our ambition is to stabilize revenues for 2020, at the same level as 2019. We have already started planning for such a scenario with immediate cost savings. These cost savings are on top of the already executed gross simply done savings, we communicated last year. We are confident to reduce our costs by up to EUR 10 million for the coming 9 months. We will revisit and confirm as we learn more about the developments and have more transparency down the road. I would now like to hand it back to Tobi to conclude this presentation.

Thank you, Dirk. What is clear to all of us is that we are now going through the period of historic uncertainty and volatility while the ultimate impact is unclear, what we are sure about is that we will continue to support our customers and consumers as much as we can. Our immediate priority is the safety of all our stakeholders, and we are extremely focused on just that as a firm. As Dirk has shared with you, we have moved very quickly to implement our survive, prevent and accelerate initiative to help our customers, and we will continue to monitor the situation, seeing what's best and what else we can do to help. At the same time, the first 2 month of 2020 prove that our strategy is working, and it's working well, and we have been executing it successfully. We have come off record 2019 results and the strongest growth in residential that we've ever seen as a firm. We enter this period of unseen and unprecedented turbulence in a position of strength, product and platform wise but also with our balance sheet to be further fortified, post closing of the AutoScout24 sale. As communicated before, we remain committed to using the proceeds from the AS24 sale to provide a cash return for our shareholders. And finally, we are extremely well positioned to weather the upcoming market turbulence both in terms of market position as well as our capitalization, and we will continue to support our partners and consumers to develop the real estate ecosystem in Germany. Thank you for your time today. Operator, may I hand it over to you.

[Operator Instructions] We will now move on to our first question from William Packer of Exane BNP Paribas.

It's Will Packer from Exane BNP Paribas here. Three for me, please. Firstly, could you update us as to where we stand with current quarantine measures in Germany? My understanding from afar is that all agents in Bavaria are closed, but elsewhere, they're still operating. Can you just confirm where we stand and your perspective on how likely it is that you get mass closures of agents? Secondly, could you talk us through what your plans were? If there were mass closures, what we see in upper markets, the United Kingdom, Australia, et cetera, is some kind of discounting. It doesn't sound like that's your base case so far. But in what circumstances would you consider actually fee waivers rather than fee postponements? And then on a slightly different side of things, you plan in due course to release segmental EBITDA margins. But today, my understanding is we don't get them. Can you just talk in broad terms, the margin by different business units. So we can have -- so it can help us model downside risk?

Will, it's Tobi. Thank you for your questions. The first one, on where we stand with quarantine measures in Germany, actually, there is a band of contact, that's what they call it. It's across Germany, it's not just Bavaria. It's across all federal states, which means that public life is dramatically reduced. However, grocery stores, pharmacies, doctors and so forth are still open. And yes, you are still allowed to go to work, but there's a limitation in terms of the assembling of number of people. Second question, what would we do if mass closures were to be enforced? We're not ready to share that here because the question is also legally whether Germany can even do that across all federal states. It's a very rare exemption and situation right now in Germany that all the federal states have agreed to follow the guidance of the government because they can take individual decisions. So that means that we will have to take it state-by-state and as we learn more about the developments, and then we will act accordingly. The third question, I'll hand over on the segmental EBITDA to Dirk.

Will, sorry, I can't answer your third question, at the current point in time. I will not give you some guidance around that. Reason for that being that we are still working on the internal cost distribution between the 3 segments. And as the teams have been busy preparing the 2019 accounts plus doing the carve-out at the moment, I beg your forgiveness on that one, please bear with us. But with Q1, you will see the figures as we outlined.

Just one quick follow-up to bias on your initial answer, which is very useful. Things are moving so fast, it's sometimes hard to keep track of exactly where we are. So could you just confirm, as things stand today, all German estate agents are open, but they can't -- they're not allowed to have customers through the door. Is that my right understanding?

No, no, no. The general public and the general businesses are closed down, except for the core businesses, such as pharmacies, grocery stores, bakeries and so forth. So that means real estate offices -- physical real estate offices and agencies are closed down. That is correct. However, we are in contact, obviously, in running the business with them remotely with limitations, i.e., we see a decline, obviously, in physical visits of objects.

And is there a time frame for the closures? Or is it just a foreseeable future?

So they basically, so far have posted as of the beginning of this week for 2 weeks, and then we will see what comes next. There's lots of rumors. There's nothing for granted. And obviously, there's also lots of different opinions. They're watching and monitoring the cases in this situation very closely. So nothing is concrete beyond that time frame.

We will now move on to our next question from Andrew Ross of Barclays.

A couple from me. So first one, could you share what the feedback being from agents so far on offering April deferred. I mean is your sense that they're going to tolerate that? Or have you received a pushback kind of asking some more, given they're going to be facing the environment of having not much revenue for the next couple of months? Second question, can you just talk a bit about what Immowelt and eBay Kleinanzeigen are up to? Has anybody else moved to offer kind of discounts to agents or anything else that you're hearing? And then first thing, I mean it sounds like in April, you're already factoring in, there's been some -- a fewer agents taking premium membership. I hear that 60% of your revenue is contracted. But maybe just help us understand, how sustainable you think that premium membership is going to be? And how much of the hit on ARPU might come for as agents to spin down?

Yes. Andrew, it's Tobi, again. I'll try to start with the first two. So feedback from agents so far is positive. Let's remember, we were the first ones to come out and take initiatives. We were very quick in coming out with a 3-step approach, as we shared with you, which is not only talking about managing right now the situation, but also providing a little bit of a step approach, what happens after we come out of the crisis. We've had over 950 active real estate agents reaching out to our customer and sales teams and asking for the offer and how they could actively participate in the offer, with deferral of the payment and what this would mean. We've also gotten support from the largest association of real estate agencies in Germany, with support that this was a very well taken measure and that they appreciate that. Your second question, what this means in terms of reaction from other acting parties and competitors. To our knowledge, eBay Kleinanzeigen followed this week -- earlier this week, with a free listings offer also on their professional real estate agents for the month of April. From Immowelt, we have not heard anything so far. So we're not aware of anything. Dirk, you want to talk about the...

Yes, Andrew. You were asking about our assumptions on the hit on the ARPU with regards to our upsell activities. When we formed our view that we sort of baked into the guidance and the suspended guidance that we just gave, we came out of 2 very successful months of 48% successful upsell into higher valuable packages for our real estate agents. And certainly, we are assuming that this will be less successful over the next 7 to 9 months of the year. And therefore, we assume the flattening out of that. Nonetheless, I mean what you have to keep in mind, with regards to the real estate industry, and I believe that doesn't only hold for Germany, is people -- we'll continue making investment decisions. And selling or buying a house or an apartment or renting that is an investment decision. And that might be postponed, but that's not going to go away. And therefore, we believe that we are in a very resilient environment.

Great. Just a follow-up, quickly on the second question there. eBay Kleinanzeigen no offer, is it preferred payments for April? Or is it 100% off? You just don't have to pay at all?

No. It's -- as far as we understand, it's a free listing. So it's for free for the month of April.

Okay. And then if I could just ask one more follow-up, I apologize for asking a fourth. But you've clearly got your new acquisitions here on packages, you talked about at the Capital Markets Day. Can you just update us, as how many agents are now taking the acquisitions here on -- at the end of February?

Yes. That's what I just said. I mean we're not updating you on the numbers. But as I told you, on a monthly basis, we are roughly targeting 60% of our customer base with upsell offers. And we have been, in those cases to 48% successful to sell -- to upsell them into higher-value packages. We see this flattening out, as I just explained earlier on. One additional remark with regards to eBay Kleinanzeigen, we have to keep in mind, that this is not only holding for real estate, that's also holding for the rest of eBay Kleinanzeigen, first one. Second one, we have 3 listings for the month of April as well. So we have a similar offer out to eBay Kleinanzeigen.

We will now move on to our next question, and it comes from Andrew Ross of Barclays. I should apologize, it comes from Nizla Naizer of Deutsche Bank.

I have a couple of questions from my end. Certainly, on the overall health of the agents themselves, the financial health. When at the CMB, you sort of broke down an agent's P&L, and it seems like the proportion of spend on platforms like Scout were still very small, as a percentage of revenue, which gives us the impression that there may be a lot more other costs that they could curb, in order to be resilient at the time like this. So just wanted to understand from your end, if that really is the case and if they are in a position to sort of weather out maybe a couple of months of disruption before drastic happen like it actually close down. So just some color there would be great. And secondly, Dirk, you mentioned cost savings of around EUR 10 billion in 2020 that you've already sort of earmarked. Where would those cost savings come from? Some color around that would be great. And lastly, on the capital distribution -- or the cash distribution after the AS24 sale. I'm just curious to understand why a special dividend, the likes of which the market was anticipating to a certain degree, was not considered and is not part of the distribution plan. And also why you intend to pay down all your outstanding debt and not a portion of it, which was what we understood when the sale was announced. Just some color there would be great.

It's Tobi. Regarding your first question, the financial health of real estate agents. Yes, we do believe that real the estate agents can weather this through. Obviously, it depends on the size of real estate agent and the business you're running. It also depends on the geography. And that is something that, while we keep a very close ear to the market, let's not forget we have 200 people in sales and sales operations. We are actively in dialogue to really know what's on top of their mind, how we can help them. Right now, everything is about making sure that they know that they have a choice with us, which is the deferred payment, but which is also that we are helping them, once the engine kicks in, again. So we believe a couple of months is possible, but then it depends on the size and where you're transacting and which part of the region. The other questions, cost savings and cash distribution, I'll turn over to Dirk.

Yes. I can do that, Nizla. On the cost savings piece, I mean it's quite obvious and these are the obvious candidates as you can imagine. So first of all, with certain products that are now going slightly down, which is the Realtor Lead Engine, as an example, also some mortgage leads, which are going down. We have directly related costs in affiliate and performance marketing. Certainly, this is an area of savings here. We also have other marketing spend that we are reducing. We certainly have means -- identified means to reduce the cost of external labor. And we have also started to look at our head count cost and look at new hires in this area. And if I sum that all up, that is the guidance I just gave you. In addition, you heard me saying that around 40% of our cost are variable and semi-variable. So you can imagine that we can sort of navigate through that with some cost measures, and we're going to do so until the end of the year. On your third -- two questions with regards to special dividend, I'm not sure whether the market expected a special dividend. We have had, of course, some interactions with a large part of our investors base. And we've seen that they were agnostic around the fact whether we buy back shares or we have a special dividend. The technicalities that we have outlined on the Q&A section in the presentation, with regards to tax corporate governance, law, AGM approvals, SVB approvals and everything else around that, led us to the conclusion that it's in the best interest of all our shareholders to use the structure we just said, that it accelerate our existing buyback program plus put us -- ourselves at the upper end of the 50% dividend guidance. And then come back with a large redemption share capital buyback in first quarter 2021. Everything else would have been subject to sort of very insecure from a legally perspective and commercially perspective and tax perspective, return programs, and we wanted to give safety and security to our shareholder base. Well, I mean we want to -- on your second part of that question, of course, it's in our interest and in shareholders' interest to avoid negative carry here. And if I have cash on the balance sheet that is waiting to be distributed to the shareholders, I might as well repay debt. In the end, my net debt picture doesn't change.

We will now take our next question from Patricia Pare of UBS.

Yes. I actually have a follow-up on one of the questions that was asked before. Can you break down your customer base between what is like large agents versus small agents? Or what agency you're seeing can run your businesses even if the housing market collapses for a few months versus those agents that actually will have like severe cash flow issues just in 1 month. And then actually, a second question also on agent numbers. I think a while ago you mentioned that you were not expecting to win back any more agents or you were thinking the benefit would become less and less, but I think still, like in Q3 and Q4 last year, you still managed to add from agents. So I guess, longer-term and once the corona crisis is over, how do we think about that?

Yes. Patricia, this is Tobi. Your first question, high level, think of it the following way, over 65%, over 2/3 of our revenue with our core products is generated with customers that we call the larger customers, i.e., we put them in the bucket of being in a stronger -- financially stronger position. With regards to your second question, yes, we managed to grow the number of agents. But we do know that we have a pretty good market share, already. And we are very well penetrated. So we wanted to manage expectations going forward, that we are not here to set expectations to show growing agent numbers quarter-over-quarter versus being concentrated on migrating and upgrading.

We will now take our next question from Marcus Diebel of JPMorgan.

It's Marcus Diebel. Probably two questions, more longer term. I mean the first one is again on the property market. When you scan the German press, very quickly, you find lots of articles that the structural impact might be that, finally, a price growth starts to stop and some make the argument that that allows housing transactions to go up in the long run. I would be curious what your experts internally are telling you because I guess that's part of the discussion as well. And secondly, I think, in terms of your strategy. Even before COVID-19, a lot of property classified operators put more and more focus on private clients. And I think given the current development, has this changed? Have you done any more initiatives to potentially grow that segment, potentially a bit more than you thought in January?

Thank you, Marcus. Yes, great questions. The first one, on the real estate market, we all agree that so far, for the time being, we were pretty much in a sellers market in Germany. And you could argue or one could argue that this was also a limitation to our business model to a certain extent because if you're in one of the top regions, you really didn't have to worry too much about where to advertise or whether you needed someone like a real estate agent versus just selling your property and choosing who to sell it to. Now we don't know how we will come out of this crisis. There's arguments for both sides. There's arguments to be made that people will hold on to their property now even longer because they are uncertain about what the markets will do. There's arguments about, once there's a financial squeeze that people are forced to sell their property because this is a part of their wealth. And -- so there will be more property on the market. So we honestly don't know. All we know is that over the past 20 years, not that we've ever had anything like a corona crisis but we've had different down cycles and up cycles in the economy. And we always managed to find our sweet spot and how we were relevant, very relevant to the market. The second point, I'd like to make, with regards to your question, the strategy we laid out at Capital Markets Day, where we actively are now embracing 3 parts of stakeholders as part of the real estate ecosystem, was actually driven and geared towards the fact that we wanted to make sure that we can act stronger and provide more options also on the private homeowners or on the consumer front. And so how does this affect and change our thinking? It actually doesn't change it at all. All we would like to do is we'd like to go faster, and we need to digitize faster and further. And things like virtual tours, things like virtual assessment of your property and assessment of valuation, these are things that we haven't completely covered yet, but this is also something that we need to focus on even more so to make sure that the ecosystem will be in full swing.

[Operator Instructions] We'll move on to our next question from Lisa Yang of Goldman Sachs.

I have three questions, please. Firstly, could you maybe tell us what happened during '08, '09? What happened to the number of transactions and numbers like real estate French closures at the time? That'll be helpful. Secondly, I'm just wondering like, once this crisis is over, how quickly do you think it will take you sort of go back to normal in terms of price increase, product upsell and going back to basically where you were in January, February. Is that the 7 to 9 months window you've talked about? And is your strategy basically put to a similar level of price increase or you think it will be more difficult? And thirdly, this is more like a mid- to long-term question, but even after the cash returns, you announced you're going to end up with significant net cash position. And obviously, before this year, AS24 deal was announced, you had a target leverage of 3x. So just wondering if you can update us in terms of where you think you want to get to, in terms of targeted leverage longer-term? And how you plan to get there?

Yes. Lisa. So thank you for -- 2008 and 2009, I don't have all the data points on top of my head, but some data points. We managed to grow the company about 20 -- 25% top line during that time frame. I can't tell you exactly going back in history at this point what the competition at the core levers were. But obviously, we stayed very, very relevant through that time and we adjusted very quickly. Your second question, in terms of how do we ramp up and how do we go back? Unfortunately, we don't have a clear line of sight right now, what we could share with you because it depends a little bit on what the government and the federal state and authorities will decide. It could be a state-by-state approach. It could be a city or a municipality approach. It could be by professional group's approach. So we don't know at this point in time, which obviously sets the framework for how quickly we can ramp up, back again. One thing is for sure, we are very, very close to our customers. And we are ready to provide them with anything for any case, given the fact that we're doing everything centrally, with our central sales ops teams and are staying intact with them. Dirk, you want to talk about leverage?

Yes. Lisa, on your last question with regards to cash. I mean I outlined it already in my statement, when I presented the numbers and the cash return that we are having ahead of us. I mean you understand we are going through the biggest crisis, probably we have seen for the past centuries. And therefore, I would say, it is pretty wise to keep cash flows. And as I said, once again, we see the economy returning back, we will return to our old leverage guidance and that was up to 3.5%, and we'll stick to that. But please bear with me for a while as we want to navigate the company very successfully through this crisis, and cash is an initiative and a very important part of that.

Okay. So you don't know what happened in 2008, '09? What was the number of real estate branch closure or transactions? Because I understand you include the...

Yes. Lisa, let's go back and look at some numbers. I'm sure that we have some of the numbers that you are looking at. But we don't have them here for the call today. And as you can imagine, we would like to give you the right numbers, right?

We have one more question remaining from [ Russell Eaves ] of SMB.

Would you be able to comment on whether the actions you've taken with regards to deferring April subscriptions and the 4 weeks of free listings? And has that been applied to the AutoScout business as well ahead of the closing of the transaction? And could you also comment on whether what you -- what impacts you've seen on the AutoScout side in terms of number of [ bills ], counting subscriptions and wider impact in terms of how the coronavirus is impacting that business?

Please understand that we wouldn't like to comment the measures that have been undertaken AutoScout, at this point in time. What I can tell you is that we are in very close contact with the buyer of the business. And of course, we support the decisions of the buyer of the business because most of the decisions are looking at the long-term value of AutoScout, which we still believe remains intact. We're going through a crisis at the moment, but the value of the business is not harmed long term. So -- but please excuse that I won't comment on any current trading issues or additional measures we're having there as we are approaching closing, that doesn't make sense.

It appears we have no other questions at this time. I'd like to turn the conference back to you for any additional remarks.

Let me say one thing here, at the end. I heard for lots of you that you had difficulties dialing in at the beginning. We are very sorry for that. Seems to be due to an overload of the internet and many calls taking time at the same time. We will try to find a better solutions for our next call. For this call, what I can offer you is that we will upload as soon as possible the audio file of our -- of Tobi's and Dirk's presentation and maybe even a script or something. So that you can, within the next 10 minutes, find it on the web. You would find it then under the link Webcasts & Presentation. So thank you all for joining the call. If you have any more questions, please do not hesitate to contact me. And for now, I think, let's close the call. Thank you, and have a good afternoon.

Stay happy. Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.