Scout24 SE (G24) Earnings Call Transcript & Summary

Good day, and welcome to the Scout24 Preliminary Full Year 2021 Results Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Ursula Querette. Please go ahead, ma'am.

Welcome, everyone, to Scout24's Preliminary 2021 Results Call. My name is Ursula Querette, and I am Head of Investor Relations and Treasury at Scout24. As usual, we have Tobias Hartmann, our CEO on this call. Tobi will kick off the presentation. Dirk Schmelzer, our CFO, will present our Q4 and full year financials. We will conclude the call with a Q&A session. Please note that all numbers presented here today are preliminary and still under review by our auditors. The final numbers with audit certificate will be published with the annual report on 24 March. The new segment numbers for 2021 and 2020 are for information only and will remain unaudited. We try to be as transparent as possible and included a detailed table in the appendix of the presentation. The official start of the new segment reporting is Q1 2022. You can find today's presentation on our website on the Financial Reports and Presentations. If you are using the web link we provided beforehand, you can also follow the presentation live. This session will be recorded and a replay will be made available as quickly as possible after the event. Let us now turn to Page 3, where I hand it over to Tobi.

Thank you, Ursula, and welcome, everyone. This morning, we published our preliminary results with a slightly higher-than-expected full year revenue number of EUR 389 million and an ordinary operating EBITDA of EUR 223 million. This results in a margin of 57.3%, which is fully in line with the guidance range of 57% to 58%. We are very pleased with the strong Q4 momentum, not only in terms of growth but also in terms of proof points for our next level strategy. I will come to that on the next slide. The growth rates on this page speak for themselves. While our revenue grew by 10% and our ordinary operating EBITDA by 5% year-on-year, we saw 12% and 6% growth for revenue and ordinary operating EBITDA in Q4, respectively. The growth momentum in the year 2021 and Q4 in particular, clearly evidenced the potential of our next level growth road map, which we shared in detail during our CMD in December 2021. On Page 4, we break down our 2021 revenue growth by the main drivers under the new segment structure. Now let's start with our core business. Memberships with both residential and commercial agents. Although the commercial business still affected by COVID-19 only remained stable, the total membership revenue grew by 4.8% year-on-year with an acceleration in Q4 on the back of various upselling and pricing initiatives for our residential customers. Now let me remind you that membership upgrades and pricing represent the first of 5 value drivers we shared at the CMD. We told you in December that we expect a CAGR of 4% to 6% for the respective professional membership revenues in the next years. So 2021 was already on target in that respect. The core membership business is complemented by our well-established seller leads business. We presented this as value driver #2 at our CMD. While the 88% year-on-year revenue growth is impacted by inorganic effects, the Q4 growth rate of 46% is purely organic. Hence, clear evidence for the significant growth opportunity of the seller leads business and reason why we are, as communicated at the CMD directing increased investments into this. In total, we sold over 100,000 seller leads to agents through our RLE product in 2021, resulting in an average revenue per lead of EUR 210. On top of that, we participated in the conclusion of around 1,500 real estate sales transactions in Germany at an average revenue per transaction of over EUR 7,000 through our immoverkauf24 product. The third element on the right-hand side of this slide and value driver #4 is our Plus product business. At the end of 2021, we stood at almost 250,000 Plus subscribers and hence, doubled the number of MieterPlus and KauferPlus customers within 1 year. Since the CMD, we have received several questions about the growth recipe behind this specific value driver. The answer is, besides the longer duration and hence customer lifetime of these products, we invested in more traffic and increased the payroll and conversion efficiency of the products. The depiction on Page 5 should be familiar to you. We have used it for some time now to show how we are diversifying our revenue base towards transaction-based revenue streams. So while the core, our value driver #1 remains strong, listing PPA revenues are increasingly replaced by leads and private subscription revenues. These represented already nearly 30% of total revenues in 2021 versus 18% and 23% in 2019 and 2020, respectively. As I said before, Q4 added additional momentum to our full year performance and consequently also to this revenue mix shift. With the growth strategy presented at the CMD, we estimate that by 2026, about 50% of our revenues will come from the products behind value drivers 2 to 5, meaning transaction-based and private subscription revenues. Let us now take a closer look at the key performance metrics in Q4 on Page 6. Our group revenue grew by 11.7% to EUR 101.9 million when comparing Q4 2021 with Q4 2020. The main growth driver was our Residential Real Estate segment with a revenue increase of 16.6%. The ordinary operating EBITDA increased by 6.3% to EUR 58.1 million. This under proportionate growth compared to revenue is in line with our guidance. It reflects the higher cost base, which temporarily comes with the next level implementation of our transaction-based strategy. So just like with the revenue acceleration proof point, I showed you 2 slides before, the ooEBITDA development is evidence of our growth road map gaining momentum. By the way, without the strategic bolt-on acquisitions such as immoverkauf24 and Vermietet.de, our ooEBITDA would have grown by almost 9%. Due to the strong demand for the Realtor Lead Engine and the membership upselling and pricing measures I mentioned before, the ARPU of the Residential Real Estate Partners increased by 8.4% to EUR 777 in Q4. This is all the more impressive considering that listing numbers were decreasing in a very tight market with a significant shortage of supply. Separately, once again, we were able to grow our professional customer base by 3.5% to 20,711 customers. Concerning traffic, we continue to see clear shift from desktop to app usage, supported by our respective app download campaigns. So while the desktop traffic declined by 11% in Q4, we saw a strong increase in monthly app users by 38% to 4.5 million users. Let me sum it up with Page #7. We are delivering on our next level growth road map. Our core membership business, representing value driver 1 increased by 4.8% and 5% in our full year and quarterly comparison, respectively. This is exactly in line with our CMD growth outlook of what we are expecting in the next couple of years. So tick in the box, on track. On top of that, there are network effects from our seller leads business, value driver 2. The pure organic Q4 growth of 46% is well above the targeted average growth rate with a range of 30% to 40%. Tick, on track. We also take the mortgage box, i.e., value driver 3. In Q4, we managed to improve the lead quality and lead generation so that we delivered 30% growth with the MLE business alone compared to 13% for the full year. On top of that, will come first revenues from our new mortgage transaction business this year. Value driver 4, increased Plus subscribers. Within 1 year, we managed to double the number of Plus subscribers to reach circa 250,000 at the end of 2021. Hence, we already made a large step towards the goal of 400,000 subscribers, which we want to reach by 2026. Ticking the box for value driver 4, on track. Total private subscription revenues, including a small portion coming from Vermietet.de in 2021 grew by 54.6% and 76% for the full year and Q4, respectively. The full year absolute number of EUR 39.4 million is, therefore, the basis for the expected CAGR of 26% to 28% until 2026, which includes value drivers 4 and 5. We hope this helps you better contextualize the CMD strategy. I now leave it to Dirk to dive deeper into what we delivered financially in 2021. Dirk, over to you.

Thank you, Tobi, and welcome. Slide 7 (sic) [ Slide 8 ] shows the old segment view for quarter 4 only. As Tobi already mentioned, the Residential Real Estate revenue increased by 16.6% in the Q4 year-on-year comparison. This growth was driven by our revenue with agents, which grew by 11.6%, strongly supported by our seller leads business. Revenue with consumers increased even more by 28.8% in a Q4 comparison. This is due to the high demand for our Plus products, while private PPA remained stable year-on-year. The ordinary operating EBITDA margin of the Residential Real Estate segment came in at 59.5% for Q4 2021, which is 3.1 percentage points below previous year. This is due to the investment into our next level growth road map, which are mainly product and marketing driven and of temporary nature at this magnitude. The Business Real Estate segment revenue is still affected by the pandemic, resulting in a stable revenue development with EUR 17.5 million for the fourth quarter 2021, a slightly increasing revenue with developers and new homebuilders compensated for the declining revenue with commercial real estate agents due to a decreasing paper ad business. The ordinary operating EBITDA margin of the Business Real Estate segment came in at 69.9%. The Media & Other segment revenue decreased slightly by 1.4% in Q4. While the immoverkauf24 Austria business grew strongly by 19.4%, FLOWFACT recorded a declining revenue due to the ongoing conversion to a SaaS-based payment model and the increased integration of the product into our core business with agent memberships. The third-party media business contracted due to the market and pandemic-related factors. Since August 2021, the newly acquired Propstack also contributed to the Media & Other revenue development with its cloud-based CRM product for smaller agents. The ordinary operating EBITDA margin for the Media & Other segment fell by 3.4 percentage points to 32%. Tobi already mentioned the continued customer growth and the ARPU increase. Page 8 (sic) [ Page 9 ] gives you the customary quarterly and year-to-date overview by segment. The residential ARPU increased by 8.4% in Q4 is driven by the growing Realtor Lead Engine revenues and membership upselling and pricing initiatives. At the same time, the growing residential agent base created downward pressure as it mostly applies to smaller agents. The Business Real Estate ARPU and the number of respective customers changed only slightly, so no real growth to report here as the segment is still suffering from pandemic. Slide 10 is now presented in our new reporting logic and well reflects what Tobi said at the beginning of the call. Our Q4 growth accelerated on the back of the 5 value drivers we presented at the CMD, hence, underpinning that we are fully on track to achieve our targets. The 9% revenue growth in the Professional segment is based on a strong core membership business with additional tailwinds from salaries and enhanced mortgage lead business. With the transition to the new segment structure, we took the opportunity to allocate our holding revenue and cost to the 3 segments, respectively. While the previous holding revenue went to Media & Other, the largest cost portion went to the Professional segment. Including those holding costs, the ordinary operating EBITDA margin of the Professional segment came in at 63.5%. The Private segment showed a revenue growth of 25.1% in Q4, strongly backed by the private subscription revenues, which grew by 76%, including Vermietet.de, while private PPA slightly declined. The ordinary operating EBITDA margin of the Private segment, including the allocated holding cost was at 48% in Q4 2021. This margin reflects the selling cost for the integrated credit check, which comes with the Plus products. It also reflects the investments into Vermietet.de. Apart from the integration of holding revenues and costs, the Media & Other segment is unchanged in relation to the old segment structure. Let's turn to Page 11 (sic) [ Page 10 ] and to the ARPUs of the new segments. As a reminder, the Professional subscription ARPU takes into account the residential and commercial core membership revenues and the revenue from seller leads such as Realtor Lead Engine and immoverkauf24 leads, all divided by the number of professional customers. These customers include our core customers and those immoverkauf agents who concluded a transaction in the respective period. Concerning the Q4 Professional ARPU, which is free of inorganic effects, we see an increase of 6.4% year-on-year from EUR 920 to EUR 979. You can very well see the effect of the increasing customer base here. So while the absolute professional subscription revenue increased by 9.6%, the underlying ARPU increases at a lower pace, so you might want to keep this in mind in a peer group ARPU comparison. Let's have a look at the Private subscription ARPU now. Here, the customer growth effect is much more substantial. And here, we also have a minor inorganic effect as Vermietet.de was not yet part of the group in Q4 2020. So while Private subscription revenues from the Plus products and Vermietet.de increased by 76% in Q4 and customers increased over proportionate by 95% at the same time, the ARPU came down 10%. This reflects that the new customers pay lower monthly subscriptions, mainly because they subscribe to longer periods. And the good news is the customer lifetime value is increasing, which is in line with what we want to achieve. Turning to Page 12 (sic) [ Page 11 ]. Let us go through the main ordinary operating items affecting our margin development. And I will focus on the full year developments and the temporary growth investment that we see here. Own work capitalized increased by 21% to EUR 26.6 million in 2021. This translates into a capitalization ratio of 6.8%, which is above our target ratio of around 6%. This has mainly to do with capitalized project developments from Vermietet.de, which come on top of the other accelerated product innovation efforts. However, I expect that by the end of 2022, the capitalization ratio will be near our target again. Personnel costs increased by 15.7%, mainly due to the integration of Vermietet.de and immoverkauf24 employees and an increased staff base at ImmoScout24. As a recurring topic from the last quarters, the higher marketing expenses mainly reflect our ambition to generate valuable homeowner contacts through search engine optimization, search engine advertising and performance marketing. With these leads, our agent customers can digitally accelerate their mandate acquisition efforts eventually leading to more transactions. Our marketing expenses increased by 16.8% to EUR 36.3 million in a year-on-year comparison. This also includes expenses for TV and online advertising. The year-on-year growth in selling costs by 63.6% to EUR 26.6 million results from the increasing third-party SCHUFA purchase cost, which comes with a successful growth of Plus products. The 2021 selling costs also reflect the accelerated acquisition of leads from corporation partners. Putting all together, we get to a 5% higher ordinary operating EBITDA of EUR 222.8 million in 2021. The resulting margin is 57.3%, mid of our guidance range. Let's turn to Page 13 (sic) [ Page 13 ], where you see the items below the ordinary operating EBITDA. First point to mention here, non-operating costs increased by EUR 7.9 million to EUR 22 million in 2021. The strong increase is mainly due to EUR 5.3 million higher M&A cost and higher share-based compensation by EUR 3.7 million. The latter has to do with adjusted assessments within the LTIP 2018 and the launch of a new long-term incentive program in 2021. This leads to a reported EBITDA of EUR 200.8 million in 2021, which is 1.3% higher than the year before. Second point to note, depreciation and amortization increased by 22.5% to EUR 63.1 million, of which EUR 33.3 million are attributable to purchase price allocation. The largest part of this, namely EUR 30.3 million represents the final depreciation installment for the ImmoScout24 customer base, which is now fully depreciated. The year-on-year increase in D&A was mainly due to the following: first, higher depreciation on rights of use from leases due to the move to the new Berlin office at the end of 2020; second, higher depreciation and own work capitalized; and third, an impairment of EUR 5.1 million on the FLOWFACT trademark as the CRM system is more and more integrated into our ImmoScout24 core membership business and revenue generation in the SaaS-based payment model takes longer than expected. With a quite stable financial result and higher taxes on income, the reported net income decreased by 11.6%. However, based on a significantly lower average number of shares of EUR 88.1 million compared to EUR 102.2 million the year before, the earnings per share increased by 3% to EUR 1.03. Adjusted for the non-operating effects I mentioned before, the PPA amortization and FLOWFACT impairment and for some minor out-of-Scout-related effects in the financial results, the earnings per share would amount to EUR 1.52 in 2021 compared to EUR 1.24 in the year before, therefore, highly accretive development for our shareholders. The decreasing number of shares I just mentioned is well depicted on the next Slide 14 (sic) [ Slide 13 ]. What you see here is the development of our outstanding shares and treasury shares in the context of various share buybacks we conducted over the last 2 years. Including the latest EUR 200 million buyback program completed mid-February, we have repurchased EUR 1.8 billion worth of shares. The number of outstanding shares after buybacks depicted in black in the graph forms the relevant base for calculating the EPS. The volume of up to 10% of our total share capital, which we can hold in treasury shares is reflected by the orange portion in the graph. Such treasury shares have been canceled, resulting in capital decreases in December 2020 after the public tender transaction, in April 2021 and in November 2021. In our top notification yesterday, we announced another capital decrease by 3.4 million shares. So as of now, our share capital stands at 80.2 million shares. After completion of the next buyback program, which we also announced yesterday, there is another cancellation on the horizon. So let's turn to Page 15 (sic) [ Page 14 ]. On this page, I'm giving you a bit more detail on our upcoming share buyback plans. As outlined at the Capital Markets Day, we have set ourselves a target leverage of about 0x net debt over ordinary operating EBITDA. To put this into context, this number is well in line with key peers in the real estate and other online classified area. In order to achieve this target, we will continue to distribute cash to our shareholders via share buybacks. The new buyback program announced yesterday will have a total volume of up to EUR 350 million, which is the biggest since the public tender offer 1 year ago. Based on current stock market prices, this corresponds to more than 8% of our reduced share capital. The program is planned to start within the next days and should be completed at the very latest before the Annual General Meeting in 2023. If we apply the 0 leverage metric to our highly cash-generative business, this could well lead into further share buybacks in the next years of an average of around EUR 150 million. Of course, this is subject to value-accretive M&A opportunities which may arise. So we are complementing our attractive next level growth road map with an attractive recurring share buyback strategy. Let me conclude our presentation on Page 16 (sic) [ Page 15 ] by reiterating our outlook for 2022 and beyond. I think we made it clear with the proof points of our Q4 results. We are very confident that with our next level growth road map, we will deliver attractive recurring double-digit growth in the coming years for our CMD guidance. This will be supported by the 5 value drivers we presented at the Capital Markets Day and mentioned again today. So for 2022, we are expecting a group revenue growth of 11% to 12%. As mentioned before, the year 2022 is a year of temporarily increased growth investment. Hence, we plan for only moderate group ordinary operating EBITDA growth of 6% to 8% for this year. Starting '23, we will see a meaningful acceleration of this EBITDA growth to a recurring level of 13% annually. With this, let me open the floor for your questions. Operator, over to you.

[Operator Instructions] And our first question is coming from Christopher Johnen from HSBC.

Two, if I may. First, more generally on inflation. I mean I'm looking at your membership revenue pricing target 4% to 6% is an average until 2026. Now when the targets were set, inflation in Germany was arguably a little bit, yes, lesser issue than it is today. So we are talking about 5% inflation. And that backs the question, do you think you have a bit more wiggle room looking at this year and maybe also next year to be a bit more pushy on the membership side given that inflation is as high it is? That would be my first question.

Chris, it's Tobi. Thank you very much. You're absolutely right. We will monitor things as they play out. On the membership part, as you probably figured, you've tried out several things even before the inflationary impact, what's the right pricing, for which group, for which subscriptions and so forth. We don't think that longer-term inflation will have a meaningful impact as of yet. So there's nothing that we've planned specifically for now, but we will keep monitoring things. And obviously, it will have an impact then on the house pricing and real estate prices, which should be rather positive for our membership fees. But yes, good point. Thank you.

Great. And then the second question on the shape of 2022. I'm just thinking in terms of the EBITDA guidance for the current year. I mean how should we think in terms of the phasing of the investments that you've mentioned? Will H1 be a bit more difficult, given, I don't know, ramp-up in sales on the lead side, things like that? Or how do you see the different parts of the year phasing out with respect to investment versus margins?

Yes. Thanks, Chris. This is Dirk. On phasing, I would suggest that you would see a very strong quarter 4 this year, as you've seen in 2021. And calculating backwards from that, I think quarter 2 and 3 will be rather investment quarters. And as we are looking at the numbers that the current quarter 1 is delivering, we're quite optimistic with the development of the business and how this is flowing through. So I would think to sum it up, quarter 2 and quarter 3, where we rather investment-heavy. In quarter 1 and quarter 4, we'll be going through as you are used to.

We will now take the next question from Miriam Josiah from Morgan Stanley.

Great. Firstly, just on the lead products. I guess, at the end of the year, you sort of delivered a better number than your previous guidance, particularly on IV24. So -- and that's both in terms of the volume and then also the average revenue per transaction. So could you talk a bit about what is driving that? Has there been any change in terms of the response from agents towards these products? And perhaps if you could give us some guidance on sort of the number of leads that you're expecting to do this year under the Realtor Lead Engine and IV24? And then secondly, just on the cost side, just wondering if anything has changed in the last couple of months in terms of your expectations versus when you set guidance, any particular or additional areas of concerns? And then finally, if you could just talk a bit about what you're thinking the outlook for the housing market looks like this year in terms of transactions, house prices and also what you're expecting to happen to listing volumes.

Thanks, Miriam. Let me start with your first question, which is the lead numbers. We have used the lower effects from December to January. So basically, 2021 played out as we wanted to. We saw a slight uptick on the overall lead value that we delivered and the commissions revenues we achieved. And you might see that we are now in the area of around about EUR 7,000 here. So getting -- taking more than 40% of the commission share, which makes us quite optimistic. On the overall lead volume that we are planning for this year, we are sticking to what we said at the Capital Markets Day. We want to see a significant growth here, 20% to 30% that we are trading through the immoverkauf platform and overall, 30% to 40% CAGR on the specific lead business. Nothing changes on that side. We are executing, as we are speaking. On the cost side, thanks for the question. We've been looking at the obvious candidates here. Energy prices, which we locked in for more than the next 12 months in our last negotiations. So nothing to expect from that side. Also most license contracts that we have and specifically, the more spend heavy ones to name AWS, for example, the cloud provider here are long term for the next 4 years. So no changes on that. And also on the personnel cost side, we don't see big issues here as we can balance quite nicely between external and internal costs. And lastly, on some of the marketing spend in Google Ad Services, we're not expecting any big changes here. So nothing to add on that and no risk from our side on that. The housing market, I would hand over to Tobi. We're still seeing quite healthy numbers here. But Tobi, if you want to add something with regards to that, housing market development in 2022 in our expectations?

Yes. Yes. So for the housing market for the residential part, when we talk about the top 7 cities for new and residential homes, we think anywhere between 6% to 11%, maybe 6% to 12% price increase that we will see. With regards to listings development, we have to really watch and see how it plays out with the current supply chain issues that we are currently facing already, which puts additional pressure on any planned new units, but we don't see any major change of the situation from what we are currently experiencing. So overall, still a lot of pressure what we're expecting on the housing market.

We will now take the next question from Lisa Yang from Goldman Sachs.

I just want to follow up on the earlier question on the phasing of top line growth and cost growth. Is it fair to say that based on your comment, we should assume Q1, Q4 margin this year higher than the consensus average we have [ then in ] terms for the full year and then Q2, Q3 below 55%? Is that the way to think about it? And could you also give us a bit more detail in terms of what is driving the higher cost growth in Q2, Q3? And why do you think that's not going to impact or be recurring in Q4? That's the first question. The second one is on the competitive landscape. We see quite a few changes. I mean the numbers from reported by [indiscernible] were pretty strong as well. So I'm just wondering like if you can comment on any change of behavior from Immowelt and EBIT [indiscernible]? And you think you've been doing on pricing or discounting or marketing, that will be helpful. And the third question is on the buyback. Could you maybe just give us a bit more detail in terms of how you think about implementing the buyback this year? Obviously, there's certain limitations and I think the creative issue. So yes, just wondering like how you think about the phasing of the EUR 300 million spending over the next 12 months?

Lisa, welcome back, first of all. So your first question was what's driving the different margin profiles throughout the year. Obviously, quarter 2 in our planning, we were expecting to increase our marketing spend because this is a crucial quarter for the business. The same holds true with slightly going into Q3 and coming out of Q3. And as I said earlier from our history [ that ] Q4 is traditionally on the margin side, quite good quarter. And to be honest, I mean, we're giving you a quite detailed guidance on the overall year. I wouldn't go into quarterly guidance right now. Just to follow the shape that I just outlined when answering Chris Johnen's question. But as you controllably hear from Tobi and me, we're quite happy with how we ended the year and how we're navigating through the year as we speak. So don't expect any surprises by the end of this year. And your third question before Tobi is dialing into the competitions question you were raising. On the buyback side, it's pretty hard given the volatility of the market to really predict when we will be done with that buyback program. As you know, according to German regulations, our bank will be limited to buy a maximum amount of 25% of the daily flow and will be limited to not influencing the daily lever. So under those limits, we have seen quite volatile buyback volumes in the past. With the last year, we have been doing and taking the experience from the last 2 months can go pretty fast. So by the Annual General Meeting with this year, we might already be through EUR 60 million to EUR 70 million or a bit more. But to be honest, I cannot give a clear guidance on that because it's depending really on the volatility of the market.

Lisa, this is Tobi. With regards to your question on the competitive landscape. I think we've shared our update in what we call the next level strategy in our CMD. And hopefully, you will collect today with the announcement and the details [ there and hided ] additional proof points that this strategy is not just the power point strategy, but it's in full swing. It's working. We have an enhanced focus on transaction. And that's why we think the numbers speak for themselves. We are staying focused, and we don't see any changes in the market by any competitor as of now. Having said that, of course, we have to watch out for anything that happens. And we believe that this strategy that we presented and which we are implementing now represents the next growth era. And so we think we're pretty unique there. So no other changes to share at this point.

And maybe just a quick follow-up on the competition is, but although I know they are very small. It looks like the recent -- the association of [ realtor ] agents in Germany have recently made some changes to the branding or thing like that. So I'm just wondering if there's any sort of [ realtor ] cross or anything we should be expecting on that front.

I think it's pretty clear that if you have a rather small business in any sector that your growth potential is absolutely there. So we certainly do expect that the certain competitor will drive growth, and that's fine, but we think that's a different footprint. The offering and the services that we are offering today is something completely different, a lot more comprehensive and a lot more proven since it's been in the making for the past 2 to 3 years than what you were just talking about. So -- but yes, absolutely, competition is out there and we'll be in our front foot.

We will now take the next question from [ Sonal Doshi ] from Royal Bank of Canada.

A few from me, please. The first one, could you share with us your thought around the current mix of membership fare? I believe, around 20% of agents are on acquisition addition, over 50% on image and the remaining from base addition. Do you see the current mix as optimal? And is there any potential for a higher tier that acquisition addition indicates that demand exceeds your expectation? And the other question is just wondering now that the migration has been done, what is the focus of the current sales team currently? Are they still having conversations with agents on encouraging migration -- sorry, encouraging upgrades or pushing the product like Realtor Lead Engine?

Maybe I'll start before Tobi goes into the conversations we're currently having with our agents. Thanks for the question. What you will see in the end and that might be a few quarters down there is a typical bank, as I outlined it earlier on our different editions. So you're going to see roughly 50% of our subscribers in the image edition. You're going to see 25% to 30% in the acquisition edition and around about 20% in the base edition. This is what we're targeting, and this is what we are going for. And the experience we are having with our agents at the moment and the satisfaction of the different products tell a very clear language. Customers in the acquisition addition are really happy with the product and notably, they are the highest paying customers, and that is a good sign. So with regards to that, I would hand over to Tobi, who will elaborate a bit more on the conversations we're having with regards to Realtor Lead Engine and on top of…

Yes. Thank you. The focus of this year will certainly be to educate our partners in the market about the capability of mandate sourcing and using ImmoScout as a key driver for their mandate sourcing in the future. So we'll talk about Realtor Lead Engine. Obviously, you see from the numbers that we have a very compelling offer there, and there's more and more agents who've had a fantastic experience with that. Number 2 is also that we were winding and expanding on our IV24 network with affiliated partners out there. We've also talked about that, the cost of investment era. And then number 3 is certainly also to work on specific and supporting our partners in specific campaigning and positioning within their own zip codes and against their direct competitors in their respective areas. This is something that they now have a better understanding for because they've moved on into one of the 3 clusters, mainly the 2 memberships, either image edition or the acquisition edition. And now they get the full stack in terms of KPIs and understanding of what it takes to have better visibility, more reach and more relevant. So this is certainly what we're focused on. Now also to support that because that's a part of our sales team is our customer service and support teams. As you can imagine, there was a lot of heavy lifting in completing the migrations. And now it's about making them feel comfortable that their membership category. So that is the focus, and that will keep us busy for quite some time.

Our next question comes from Adam Berlin from UBS.

I just got 3 questions as well. Just to follow up on this point about your sales force trying to sell more leads to the agents. What percentage of your subscription customer base of agents are currently regularly buying mandate leads, yes, sense of what the penetration is? How many people have been convinced that these leads add value? Second question is, there was a comment in the presentation about including the Vermietet.de revenue. So have you now started monetizing Vermietet.de? Roughly how much revenue that you generate in that business in Q4? And then how is that monetization of that asset going? That would be really helpful to know. And then the third question, just clearly, these are preliminary results, so you haven't got balance sheets and cash flows in there. But could you give us any steer on how operating cash flow performed in 2021 overall? You've given us the net debt number, but if you -- but that's obviously been impacted by all the buybacks and dividends, et cetera. So if you can give us some sense of where operating cash flow landed for the year, that would be really helpful as well.

Yes. Thank you so much. So first of all, this is Tobi. Your first question with regards to what the current penetration. Again, we are talking about still a very low single-digit penetration, 6% approximately is currently the penetration of our customer base participating. Again, just to give you some color on that. It's a shift in terms of also what we are positioning as a company, how we can help them drive more business and so that takes some while in terms of adoption rate. But the good news is there's obviously a lot of headroom. Then I think the second question, Adam, if we understood it correctly, I think you asked about Vermietet.de, was that correct, whether that was included?

Yes. I thought you said when you bought it that it wasn't generating much revenue. And that I noticed in the presentation, you kind of said including Vermietet.de revenue. So does that mean you've started monetizing the audience on that platform?

Okay. Got it. Okay. We have actually concluded the integration of the company as of end of last year. And that, again, is roughly about 500,000 units, but there's not a lot of monetization that went on. We're really playing with monetization and started to play with that in the year 2022. So yes, there were a couple of revenues here and there, but it didn't follow through the strategic logic. So that's now 2022 action plan. We need to figure out what is the right pricing. We've also now combined the flow in from the ImmoScout platform onto the Vermietet.de platform. So once you have a listing, you automatically get the subscription on the Vermietet.de platform. So we are now checking whether that sticks, whether that resonates and whether we can then take particular landlords for monetization. So there hasn't really been a lot of monetization in 2021. So that's for us to do in 2022.

Yes. On your third question, and this is Dirk. I believe when you see the final numbers, you will be looking at our cash flow profile, which has developed quite healthy over 2021 as well. We have seen some downside from tax, as you could see from the prelims results that we're just seeing, some upside from mortgage capital movement. So that was quite nice. And we didn't see any specific changes with regards to payment profiles for our agent base. So overall, rather healthy and reconfirming than anything else.

Our next question comes from William Packer from BNP Paribas.

Three, please. So just coming back on the competition angle. Vendor leads and consumer subscriptions are going to be the key growth driver of the group. Could you just update us what your peers are offering in those areas? Or is there no change and they remain very nascent? Secondly, there was an impressive growth in the number of consumer subscriptions over 2021, although we have seen a little bit of a decline in the quarter-on-quarter growth. Could you just remind us, looking backwards, why were those subscriptions so strong in your view and how much momentum do you take into the new year? And then finally, on the margin question, you've given us some very useful detailed guidance for the margin overall. But could you kind of help us think through what particular items of the cost base are going to be growing faster? What's the mix of costs? And what are the key drivers of that in the mix between marketing, people, costs, et cetera? Just to help us think through the modeling.

Sure. It's Tobi. On the consumer subscription competitive landscape, we don't -- right now, we are not aware of anything that's as comprehensive or that can be compared to our offering. There's a couple of also, we think, explanations for that. If you do that, you probably want to do it with the market leader or someone who is positioned as the market leader. If you're doing this depending on which product you choose, there's some work involved, i.e., you upload your application, you get your folder organized digitally and so forth. So that has a certain impact in terms of who you want to be doing business with. We are very visible. We have a 98% brand awareness amongst 18-year-olds and above. But again, having said that, maybe someone else is working on something right now. We think we have a sweet spot there, and we have the most comprehensive offering. In terms of what have we done to improve the offering, we've played around, we've applied our playbook from other products that we've launched, which is we've increased the paywall efficiency. We've also increased and worked around the -- in better understanding the conversion drivers. And we've also allowed to generate more traffic and direct it towards the funneling so that we can convert those relevant customers into active subscribers. So that is something that is obviously we're working constantly on. This will also -- that'd be the name of [ again ] for 2022. We have by and far, not reached the end of the optimization there. It takes a lot of time, and it's also different in terms of regionality within Germany. We see obviously differences not only within the top 7 cities, but also outside of the cities that has been picking up pricing on terms of what we are offering and in the paywalls that we are setting up. So hopefully, the test. Dirk, can you say something about the margin question?

Yes. Will, this is Dirk. So on the marketing sales cost for our development costs. I'm giving you the numbers which we basically baked into our guidance here and then all of the projections that we baked in there. As I said earlier on with regards to the question on cost inflation, we basically planned our budget based on a reasonable uplift in personnel costs, and that is fine. And we -- as we can see from attrition numbers at the moment, we can very well navigate through that. People are very attractive by Scout as brand. So our personnel costs are well planned and well in line with what we've planned. Main items that you have seen in the personnel costs in 2021 have been the acquisition of our businesses. So that was the reason an organic increase in personnel spend. What you're going to see on a like-for-like basis is increased marketing spend, as we outlined it before, increase in selling costs with regards to the subscription business that we're growing and some slight improvement and increases in product development costs. License cost, IT cost and all the rest will move within the mid-single-digit range and we're not going to see any major developments there. So as of today, I think we're navigating quite well through the financial year 2022 and continue to do so.

Just one quick follow-up. You gave a very useful data point at the CMD and you've commented over time, which is the portion of IV24 vendor leads that is sourced via your own website versus via third parties. And my memory is it's about 1/3, 2/3. So 1/3 of the vendor leads originated on platform. How is that developing at the moment? Are you succeeding in shifting a greater share of your sourced vendor leads to your own platform?

No. Well, that has exactly stayed as we stated it on the Capital Markets Day. So 1/3, 2/3 is the metric you can draw here. And what you also can deploy is that organic traffic that we are getting through the platform and take the higher quality than the [indiscernible].

Our next question comes from Craig Abbott from Kepler Cheuvreux.

I have 2 remaining questions, please. The first one, just on the financials. I just want to make sure we understood this correctly. You had another -- a final PPA installment on the IS24 allocation of around EUR 30 million total. So just to be sure, when we're looking at total D&A, starting with the base of EUR 63 million, I think it was in '21. Expect some expansion of that, depending on your investments. But then we should deduct EUR 30 million for this, i.e., we'll see a sizable step down on the group DNA. I just want to make sure I understood that correctly. And secondly, more operational. I just wondered -- I know it's early days as you're rapidly growing your Plus subscriber base. But I just wondered if you could give us an update on what you're seeing or anticipating in terms of churn rates and average contract duration.

Craig. First of all, to start with your question on PPA. Thanks very much for asking that. I think that's helpful for everybody around the call. The number you were referring to, the EUR 30.3 million, that is the number we have advertised in 2021 for the customer base of ImmoScout24. According to IFRS, we needed to amortize for that, and that is done. So you're not going to see that EUR 30 million in '22 going forward. And there was an impairment, as you correctly pointed out, on FLOWFACT, which was much lower. That was EUR 5 million that we saw running through the balance sheet, which was mainly on the FLOWFACT trademark, which we also accounted for at the time of the purchase of FLOWFACT. And as you can imagine with our new strategy, the FLOWFACT trademark is not used to the extent it has been in the past because it's bundled into the IS24 product. And as I said in my commentary on the slide, we also see that the shift to the cloud-based business, although makes us -- bring us happier customers, bring a bit of -- a bit less of the recurring revenues, which will increase in the future.

Yes, in terms of your questions about the operational KPIs. For the full year 2021, we have -- on a COD basis, we have a blended estimation for the MieterPlus and KauferPlus across the portfolio of approximately EUR 120 and the lifetime duration is about 5.4 months. And in Q4, it's slightly different, but pretty close to that. It's about 100 and -- slightly north of EUR 110 [ CLB ] and 5.2 months. Obviously, again, repeating myself a little bit here. We are optimizing within those KPIs as we are learning, as we are adding additional service features, as we are bringing on connecting it also with the other platform features with Vermietet.de and so forth. So it should be more great news and inside throughout the year. Thank you.

Our next question comes from Joseph Barnet-Lamb from Credit Suisse.

Excellent. Just one more left from me. You were asked on political backdrop back at 3Q, and you said it was a little bit too early to say much with confidence. [ Just wondering ] if you had any updated thoughts on that front?

Joe, sorry, this is Dirk. Quite awfully stated, I didn't get the question.

Sorry. Back at 3 -- excellent. Yes, back at 3Q, you were asked about the evolution of political backdrop and the impact that, that may have on your business. And I think you basically said it's a little bit too early to say with much confidence to what was happening or what it would mean for you guys. Do you have any updated thoughts on the political backdrop and what it means for the housing market and your business?

No. What we have seen is that the German government became a little bit under pressure after announcing that they are planning to build more than 400,000 apartments per year or housing units per year in Germany. And now more and more people are knocking on the door of the government and saying, "Hey, how are you going to plan to do that?" Because when we look at January, we saw the German mortgage bank, which is delivering or helping people to energy-efficient mortgages here, have stopped giving out new mortgages. And also, we haven't seen any significant new laws coming in on speeding up the process to come to a new apartment. So the government really has come under pressure to state exactly how they want to reach 400,000 buildings. So it's rather sort of an ongoing and very well looked at political battle here in Germany. But in the end, will help as a tailwind to our business rather than a headwind.

And we will now take the last question from Nizla Naizer from Deutsche Bank.

I just have 2 remaining questions. The first is on the decline in listings. Do you expect us to continue given the backdrop that you just explained to us? And does this make an environment where the agents are more willing to talk to you to go with the Realtor Lead Engine product, et cetera? Some color there would be great. And the second is on the M&A potential going forward. What sort of entities are you still looking at to add to the portfolio to make the offering more compelling to either -- like any part of the value chain that you're focused on? So some color there would be great.

Thanks, Nizla. Yes. I'll start before Tobi will elaborate on the first question. On M&A, I think we clearly outlined that we have set our strategy. We communicated our strategy. We mentioned the key investment areas that we are undertaking with the 5 growth areas we've been presenting to you. Anything that can help us along those lines to accelerate growth, we will consider. Anything else, we will not consider. And with regards to where are we standing, what are we looking at, we'd rather see some targets in the mortgage piece, if at all. On other growth areas, we don't see targets because we are at the forefront of developing those businesses, and there's simply nowhere outside doing what we are doing. So with that, I hand over to Tobi.

Yes. So we've pointed out the areas of potential add-on M&A are well laid out. It's our journey. It's the geographical scope. We've talked about that's unchanged and it's either a bolt-on acquisition that helps us with product acceleration or that helps us going deeper into any of our existing competencies. On the declining listings question, we don't expect a significant change. Again, the view that we have right now on the German real estate market is the question marks will not be resolved, i.e., there are supply chain constraints, housing still is short of providing enough supply and politicians have crafted a plan, but execution lags. So that means, yes, it should be theoretically favorable for agents to understand that they need to use different sources to get to their new mandates, which is while we're glad that we've completed the migration, which is why we are glad that we have gotten a better penetration and also a more completed offering, including all the way up to IV24. So normally, I would say, yes, they should be okay with the product selling that we have now, but also we've shared that with you that we broke that out and we're working with our sales force to make sure everyone understands what's available. So all in all, no changes neither on the M&A strategy nor on our inspired aspiration to really help sourcing methods for the agents.

Okay. Thank you, Tobi and Dirk, and thank you all for this very lively discussion. I'm looking forward to continuing this discussion on the phone. So if you have questions, please call the Investor Relations team. Thank you, and talk to you soon. Bye-bye.

This concludes today's call. Thank you for your participation, and you may now disconnect.