Scout24 SE (G24) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. Welcome to the Scout24 H1 2024 Results Conference Call. My name is Francie, the Chorus Call operator. [Operator Instructions] At this time, it is my pleasure to turn the conference over to Filip Lindvall, Vice President, Group Strategy and Investor Relations. Please go ahead, sir.

Good afternoon, everyone, and welcome to Scout24 First Half and Second Quarter 2024 Earnings Call. My name is Filip Lindvall and I'm Vice President, Group Strategy and Investor Relations at Scout24. With me on the call today are Tobias Hartmann, our Chief Executive Officer; and Dirk Schmelzer, our Chief Financial Officer. Tobi will start the presentation, and Dirk will dive deeper into our first half and second quarter 2024 performance. As always, we will conclude the call with a Q&A session. You can find today's presentation on our website under financial reports and presentations. This session will be recorded and a replay will be made available as quickly as possible after the event. Turning to Page 2. Please take note of the disclaimer. Tobi, now over to you.

Thank you, Filip, and welcome, everyone. Let's move to Page 3 of our presentation and take a look at the results and highlights of the second quarter and first half of the year. I am happy to share that we delivered a strong set of second quarter results as our core business continues to show strength. We are progressing to execute our strategy and to develop our 3-sided marketplace towards interconnectivity. Starting off with revenues. I am particularly pleased to share that we have now achieved double-digit revenue growth for the 11th quarter in a row. We managed to grow our revenue by 14% in the second quarter and 13% in the half year. We accelerated growth in the second quarter, exactly as we said we would. Revenue growth in the second quarter was again driven by excellent performance in our core agent membership business as well as accelerating growth in our private subscription business. The great performance in our core businesses was somewhat offset by the continued soft demand for leads as well as normalizing growth for our private PPA business. Let me call out a few key points and highlights. Our membership business grew revenues by 9% in the quarter, driven by a mix of customer growth and product upgrades. We are excited that we attracted new customers in this challenging market environment. Customer growth in the membership business was 2.4% in the second quarter, even higher than in the first quarter. Our leading and increasingly interconnected product portfolio, combined with the strength of the ImmoScout24 platform and brand offers agents unmatched return on invest. By the end of June, our customer base has grown even further, now exceeding 22,400 customers. Our sales teams are doing an excellent job, and our momentum is strong. We are executing well against the strategy and targets we communicated at the Capital Markets Day earlier this year. Our private subscription business was another highlight in the second quarter. We managed to successfully build on the growth momentum from the first quarter and we accelerated new customer acquisition even further in the second quarter. The customer growth rate of 27% for the quarter is the highest rate we have seen since 2022. Growth was spread across our subscription portfolio products. By the end of June, we now have over 440,000 customers. The strong growth in our core business was offset by continued muted dynamics in other revenue lines due to slow recovery of transactions in the German market and normalizing PPA growth. Moving from revenues to ordinary operating EBITDA, we are very pleased to show continued operating leverage. Ordinary operating EBITDA grew strongly by 14% during the first half of the year and 11% for the second quarter. This resulted in a margin of 60.4% for the first half, representing 30 basis point expansion despite the consolidation effect of Sprengnetter. Adjusted EPS rose by 11.4% to EUR 1.37 in the reporting period slightly less than ordinary operating EBITDA. This is due to additional D&A charges. We are pleased to confirm our guidance for 2024 with 9% to 11% revenue growth and an ordinary operating EBITDA margin of about 61%. And finally, I would like to announce that starting with our Q3 results, we will implement a new simplified segment reporting, which mirrors the updated strategy from the Capital Markets Day this year and better reflects how we operate internally. Dirk will elaborate more on this. Before we continue, let me just spend a minute on the state of the German real estate market. While interest to buy real estate is increasing as rates are stabilizing, this has yet to manifest itself into a sustained recovery in number of transactions. While the number of properties for sale is still high as measured by a number of listings, buyer leads remain the critical currency in the market. Mortgage volumes have started to recover, but this was from a very reduced level, possibly as low as 50% of the volume from the previous market phase. Our depiction of the German real estate market during the Capital Markets Day as a resilient market is still valid. It is resilient, but recovery is slow. For our core product suite, this is generally a favorable market environment, but demand for seller and mortgage leads is still low. In terms of our customer base, the residential agent is doing okay, but there are other buckets of professional customers such as commercial, new homebuilders and developers which are still facing very challenging market conditions. In terms of outlook, we are hopeful the market will continue to improve somewhat in the second half of the year. When it does, our leads businesses and transactional assets offer growth upside, while our core business will remain a strong and predictable growth driver. Now let's turn to Page 4 for a short summary of our key second quarter metrics. On a group level, our revenue for the quarter reached EUR 139.5 million reflecting a 14.4% growth year-on-year. This marks a meaningful acceleration versus the first quarter growth rate of 11.7%. Ordinary operating EBITDA came in at EUR 87.0 million, up 11.2% year-on-year. In the Professional segment, subscription revenues increased by 14.5% to EUR 80.3 million. This was mainly driven by continued strong membership growth and the impact of the Sprengnetter consolidation. As I mentioned earlier, we are very pleased with the momentum in this business. In the second quarter, we continued to gain 2.4% new customers. During the month of June, we continued to grow this number, and we now have over 22,400 Professional customers. Professional ARPU increased by 5.7% to EUR 1,132 driven by strong growth in core membership and softness from seller leads. In the Private segment, subscription revenue was exceptionally strong with a 26.7% growth, expanding the already strong performance from the first quarter. Subscriber growth was at 27.1%, also accelerating again compared to the first quarter. We ended June with over 440,000 subscribers. Turning to Page 5. Let me elaborate on our H1 results. We saw strong growth across the board with group revenue for the first half reaching EUR 275.6 million growing 13.0%. The ordinary operating EBITDA of the group came in at EUR 166.5 million, growing 13.7% and reflecting a margin of 60.4%. Within the Professional segment, subscription revenues grew strongly by 13.1%, totaling EUR 159.5 million. This was driven by the strong performance of our core membership products throughout both quarters of the year. In the Private segment, subscription revenues grew 23.3% compared to the previous year, reaching EUR 42.2 million. This growth was the result of a strong performance in both quarters. To conclude, I would like to summarize as follows. We've had a strong first half delivering solid double-digit revenue growth, operating leverage and margin expansion. Our core businesses continued to show excellent and performed very well. This is based on our market-leading product suite, driven by a scalable platform and our unique brand experience. We continue to grow our customer base quarter by quarter, both on the Private and Professional side. The second quarter was another proof point for that. Our interconnected 3-sided marketplace continues to demonstrate its unique value by growing content including listings and users across all dimensions. Our ImmoScout24 app user base increased as well in the quarter. On the German real estate market, while we do see buyer interest returning, we are not yet seeing a lasting recovery in the number of transactions. We are well on track with both our financial guidance for 2024 and the targets we communicated at the Capital Markets Day. And with that, I'll hand it over to Dirk.

Thank you, Tobi, and welcome, everyone. Before I start off with the financial deep dive, I would like to make a comment regarding our new segment structure, which will be in place from the third quarter and onwards. As Tobi outlined, the updated segment structure is a natural evolution to make our financial reporting consistent with our updated strategic framework announced at the Capital Markets Day earlier this year. Essentially, we are updating our external reporting based on how we operate internally. According to this new structure, we have 2 segments instead of 3. In addition to harmonizing with our internal operations, we also simplify reporting for everyone's benefit. For those of you who have read our half year report, you will find details, explanations and pro forma disclosure of the new segments in there. For today's presentation, we will, however, focus on the current segment structure, hence, all numbers and elaborations for this presentation are based on the current reporting structure. Let's go to Slide 6, where you see the year-on-year revenue growth and ordinary operating EBITDA margins for our 3 business segments in the first half of the year. We are pleased that all segments continued to grow double digits during the first half. The Professional segment grew revenues by 14.4% in the first half of the year driven by strong performance in core memberships and the acquisition of Sprengnetter. The ordinary operating EBITDA margin decreased by 1.4 percentage points to 64.9%. This was still a good achievement considering that we absorbed the impact of the Sprengnetter consolidation this year and the low level of marketing cost last year. As Tobi has already explained, we saw strong demand for Plus subscriptions in the private segment driven by the rental market conditions. This development was tempered by normalizing growth in PPA as revenues maintained on a high level. Overall, this resulted in a double-digit increase in revenues of 10.7%. Ordinary operating EBITDA margin for the private segment increased by 3.6 percentage points to 54.4% as we continue to scale the business. The Media & Other segment experienced a 10.1% increase in revenues. Growth was driven by all 3 verticals: our Austrian business, CRM business and third-party advertising. The ordinary operating EBITDA margin for the Media & Other segment showed an improvement of 0.6 percentage points, reaching 43.8% due to profitable growth and efficiency in our CRM portfolio. On a group level, we delivered a margin of 60.4% for the first half, while absorbing the dilution from Sprengnetter. Let's turn to Page 7 for a closer look at the Professional segment. Revenues in the Professional segment in the second quarter grew strongly by 16.1%, reaching EUR 89.9 million, accelerating from the first quarter. Growth was driven by strong performance in our core membership products, which grew 9.1%. The consolidation of Sprengnetter drove reported revenue growth. Despite the challenging real estate market environment, we managed to continue expanding our agent customer base with a growth of 2.4% year-on-year. Professional ARPU increased at a rate of 5.7% in Q2, slower than the overall subscription revenue from EUR 1,071 to EUR 1,132. Core ARPU remained strong but is offset by the declining seller leads business. As we have communicated previously, the professional paper ad revenues are negatively impacted by the ongoing strategy to migrate customers into updated membership contracts. However, the pace of decline improved slightly in the second quarter. The ordinary operating EBITDA margin declined year-on-year, both in the second quarter and the first half as last year's numbers did not yet include Sprengnetter. The second quarter last year is a difficult comparable, but a Professional margin of 66.5% is a great testament to our focus on profitability. On Page 8, let's take a closer look at the Private segment. Overall, the Private segment grew by 12.2% in the second quarter, reaching EUR 39.8 million. For the first half, revenues reached EUR 77.9 million and grew 10.7%. Growth was driven by continued strength across our Plus subscription portfolio, including our main growth driver, TenantPlus, but also stabilized BuyersPlus developments and a small contribution of our innovation efforts around LivingPlus. The average number of private customers grew 27.1% for the first half, reaching an average of 436,000 at the end of the period. For the first half of 2024, subscription revenues increased by 23.3%, totaling EUR 42.2 million. PPA revenue growth further normalized in the second quarter, growing by 2.3% year-on-year as we are lapping the strong growth in listings. The gradual normalization of PPA growth rates during 2024 is something we flagged during earnings calls end of last year. The Private ARPU decreased slightly by 0.3% in the second quarter as more customers are opting for the longer-duration subscription products. Other revenue declined by 10.8% in the second quarter driven by lower demand for relocation leads and credit checks. This is partially due to our targeted effort to focus on selling potential customers, not just a credit check, but a full subscription product. The Private ordinary operating EBITDA margin expanded to 57.9% in the second quarter, up by 3.3 percentage points driven by scale in our subscription business. Let's turn to Page 9 to review the main ordinary operating items. Our own work capitalized decreased by 7.9% year-on-year in the second quarter to EUR 5.5 million. This is primarily due to the completion of various development and integration projects. As a percentage of revenue, we stood at 3.9%, both in the second quarter and for the first half. These developments are in line with our statements at the Capital Markets Day about continuing to focus on efficiency. In the second quarter, operating effects rose by 16.8%, outpacing revenue growth slightly mainly due to the consolidation of Sprengnetter. For the first half of 2024, the increase was at 9.5% and thus, at a slower rate than revenue growth, highlighting our focus and ability to balance growth and efficiency. Looking into our operating effects in more detail, I would like to point out the following developments. The increase in personnel costs is mainly due to the consolidation of Sprengnetter. On an organic basis, personnel costs were down for the first half of 2024. Marketing costs increased due to planned investments in brand campaigns. IT costs continued to decline due to efficiency measures and consolidation of vendors. Selling costs increased mainly driven by the Sprengnetter consolidation. Organically, they were down for the first half of 2024. For this first half of 2024, ordinary operating EBITDA increased by 13.7% and the corresponding ordinary operating EBITDA margin by 0.3 percentage points to 60.4%, continued healthy revenue growth and a clear focus on efficiency cushioned the effect of the Sprengnetter consolidation. Overall, we continue to be very pleased with where we are in terms of cost structure and ability to steer cost from here. You can expect us to continue to be focused on growing the business at increased profitability going forward. Let's turn to Page 10, where you see the items below ordinary operating EBITDA. Let's go through the second quarter in detail as we have quite a few nonrecurring items impacting the P&L this quarter due to the positive developments in certain areas of our business. Nonoperating effects were significantly higher than in the previous year. This was driven by higher accruals for share-based payments due to favorable share price performance and successfully closing out some of our long-term incentive programs. In addition, we increased accruals related to the Sprengnetter earnout as the company is tracking well in line with upper-end EBITDA target achievement. As a result of the increased nonoperating effects, reported EBITDA increased at a slightly slower pace than ordinary operating EBITDA and improved by 8.3% to EUR 138.9 million compared to the first half of 2023. Moving now to the items below-reported EBITDA for the second quarter. D&A increased as certain internally developed projects were completed and the related amortization schedule commenced. Timing effect between first and second quarter also had a slight impact. This means that the second quarter figure is not a baseline for the remainder of the year. Financial result was impacted negatively by EUR 7.5 million noncash one-off charges, mainly related to increased provision for the Sprengnetter earn-out for the remaining 25% stake. The company is performing better than expected on an EBITDA level, which is the reason for the increased provision. Net financial expense related to our debt facilities was EUR 1.4 million for the second quarter. Taxes increased as we benefit from lower tax rate last year due to the usage of certain tax losses carried forward related to previous M&A. To conclude, the one-off effects impacting second quarter are nonrecurring in nature and due to the successful business performance, both on group and Sprengnetter level. Therefore, adjusted EPS for the second quarter increased by 5.5% as higher D&A charges impacted the cost base. However, for the first half, adjusted EPS still increased at a healthy double-digit rate of 11.4%. Moving to the guidance on Page 11. Based on the strong financial performance of the first half of the year and our outlook for the remainder of the year, we are pleased to confirm our financial guidance for 2024. As a reminder, our guidance for 2024 assumes 9% to 11% revenue growth and an ordinary operating EBITDA margin of about 61%. As usual, I would like to provide you with our views and assumptions for the second half of the year. We have now lapped the Sprengnetter consolidation since the consolidation on July 1, 2023. To be clear, this means that there is no inorganic revenue contribution from Sprengnetter starting third quarter. For the second half, we are confident to keep our organic growth momentum from the second quarter. In terms of cadence of revenue growth, we expect the third quarter to be lower than the fourth quarter. In terms of business performance, we expect the following developments, continued good performance in the Professional and Private subscription business. Transaction enablement still faces challenging market outlook. Having said that, we expect the revenue line to grow year-on-year, mainly due to the Sprengnetter consolidation. We do not expect meaningful organic recovery this year. PPA Private revenue levels remain at a high level, but we are not assuming growth compared to the 2023 revenue baseline. In conclusion, based on the momentum we are seeing in the core business and the improved organizational efficiency, we feel good about our prospects entering the second half of 2024. We will provide the next update during our Q3 2024 earnings call on October 31. And with that, let's open the line for questions. We would appreciate if you could limit your questions to 2 per speaker. Operator, over to you.

[Operator Instructions] Our first question today is from Andrew Ross from Barclays.

My first one is, well, I guess, is a big one. It's about the membership package migration to the new tiers that you unveiled at the CMD. I think you've moved over about 1,000 agents when you last updated us. Can you give us kind of the latest number in terms of how many agents have moved over? And then could you tell us what you've learned kind of incrementally about the ARPU as you migrate those agents over both for this year and how you're thinking about that into next year, as some of those discounts unwind?

Andrew, it's Filip here. I will distribute the questions today. And I think both of the questions, I would hand over to Tobi.

Hi, Andrew. Yes. So with regards to the memberships, we are very pleased we will not provide any specific details in terms of numbers, but we have a couple of thousand that we've now moved, so it's all progressing really well. What we've also seen is that this is the basis for some ongoing structural growth, i.e., by lifting them to a better tier and a higher price point. They're very pleased. They're very excited about the product. And so what we've learned with regards to ARPU is that this is a good foundation for ARPU growth going forward. So all in all, pretty much in line with what we've shared during the CMD and it's a good time.

So a couple of thousand is kind of in line with your expectations because obviously, that still leaves quite a lot to migrate before you kind of force the remaining migration in the spring of next year, as I understand it.

Yes. It's totally in line with the plan, and we are very pleased with the feedback, it resonates really well. And let's also remember, there's quite a bit of innovation that comes along with those membership packages, right? So we've launched the currency for the first time, so we're getting get used to that. So there's quite a bit of support and guidance that we're still providing, which is good. So folks are really engaged.

The next question comes from Nizla Naizer from Deutsche Bank.

Two questions from my end as well. The first is on Sprengnetter, I mean you mentioned it's been a year since the acquisition. How have you found the advantages of integrating it in the products that you're offering agents? What has their feedback being as you sort of, I guess, lap a year. Some color there would be great. And could you maybe take us through the rest of the earnouts that could potentially come this year on the back of that? And the second question is on your customer growth. I mean, very encouraging to see customer additions again in Q2 in this market environment. How should we think of Q3 and Q4? Is there still a lot of room to sort of add more customers? And now that I guess you're resegmenting it, would it be hard for us to distinguish how many agents you added in Germany? Or would there be some sort of qualitative color you'd give us going forward?

Nizla, thank you for the questions. I think the first one on Sprengnetter, how we're doing there. I think Tobi can take. And on customer growth, for the remainder of the year, I would hand it over to Dirk.

So with regards to Sprengnetter, as you could tell from Dirk's numbers and what we've just shared, not only the numbers that we've seen, but also the product and the interconnection and how we drive the network impact is really, really great. We're very pleased with the product innovation and how it's taken up by our not only Professional clients, but also starting to see some impact, obviously, in the Private segment. So just talk about the modernizer for example, it's a huge topic. People are confused by the administration with regards to the legislation around what you need to do at home versus what you can do. So we're integrating it more and more into the Homeowner Hub and providing guidance to those folks and users there, but then also with regards to Professional valuations has been a support for our agents has been tremendously helpful. So the Gutachten, which is obviously a new product that is launched to help save on taxes on people to amortize their properties over a longer period. That's another key pillar that we actually launched and it's a great uptick. So all in all, Sprengnetter, we are very pleased, and that's also reflected in the numbers. With that, I would hand it over to Dirk.

Thank you, Tobi. And speaking of numbers also to the second part of your first question, Nizla, that was the impact of the earn-out. I mean what we can state for the first half of this year is that there is a EUR 3 million included in the NRNR as personnel costs and share-based compensation to Jan. And there is also an increase in the financial result, as I already outlined during the presentation just a few minutes ago, and that is about EUR 6.4 million. And both improvements have to do with regular accruing for the liabilities we have towards Jan Sprengnetter on the earnout as well as on the financial cost side. But they are in their key nature due to the fact that Jan and the team have really worked hard on not only growing Sprengnetter, but also making it more profitable. And as you can imagine, profitability kicks in with the link of Sprengnetter product to our own ecosystem. So we are bringing traffic and customers much, much to Jan's business than he has experienced that in the past, which seriously helps him to grow. On adding customers, you were pointing to the new segmentation we are planning from the third quarter onwards. And yes, we will shed some light on the growth in Germany as well as in Austria in the next quarters to come. You can rest assured that we will be fully transparent as we've been in the past.

Our next question comes from Craig Abbott from Kepler.

Yes, 2 questions from my side. First one, I just wanted to verify. So the midpoint -- the fact that the midpoint of your full year guidance implies revenue growth in H2 slowing down to something like 7% to 8%. I just want to confirm the delta versus the 13% in the first half is simply due to the Sprengnetter's scope effects now being completed, as you mentioned. Or were there any other factors there? I'm just thinking about the run rate, how we should think about the run rate heading into '25? So that's the first question. The second question -- sorry, I have to ask this, but I just wanted to get a quick update, if anything has changed on your current thought versus previous calls, about the whole topic of potential new entrant into the market and how your action might be and what the effects might be.

I would think Dirk can start off with the guidance question, and then Tobi can take the market question on new entrants. Do you want to start off, Dirk?

Craig, thanks a lot for pointing out the math here on growth in the second half of this year. And as I outlined in the call, growth in the third quarter and this year will be a bit muted compared to the second quarter, but we expect to grow Q4 onwards again. And that is due to the fact that on both entities, sort of the core entity ImmoScout on the one hand. But Sprengnetter, on the other hand, we are seeing continued organic growth, coming out of this or slightly coming out of this real estate crisis that we've seen over the past few quarters. And therefore, we're quite confident to hit the guidance. That's why we reiterated it. But we will not be more specific around that, Craig. I hope you can understand that. And for the second part of the question, I would hand over to Tobi.

Yes. Craig, thanks for mentioning that. Obviously, there is no material news on the competitive side. So we're not aware of any new competitors, any new entrants but that does matter because we are still paranoid about anyone even thinking about entering the market or trying to enter the market. And that's why we doubled down and tripled down on innovation, on launching new products and rolling out new products. And if you were to describe what you just delivered in terms of set of numbers, I would really summarize it by, the definition is growth and product rollout. I mean that's really what we're doing. We're growing this company, and we are growing our market share and we're growing our presence by rolling out and launching really innovative products, which some of them, as you may know, are just pack to being a really good leader in the market as opposed to being a follower. So that's why we're taking advantage, and there will be more stuff on Homeowner Hub and property hub and really cool stuff coming up that we think we can drive kind of like the market mover. So no other news than that, but thank you.

The next question comes from Pete-Veikko Kujala from Morgan Stanley.

It's Pete. A question about TenantPlus. Can you give any kind of indication like what percentage of inquiries, like tenant inquiries to come through TenantPlus subscription. Like my angle here is like, is it possible that you have high enough penetration at some areas, in some cities that this product basically becomes like a permanent necessity to have regardless of where the market environment is in terms of like rental market tightness. So it's just a must-have subscription in order to find an apartment. I'm wondering if you can give any color on that.

Yes, we can give some color. Dirk would start off. And Tobi, you can chip in if you have additional points.

Yes. Perfect. Pete, great question once again. I mean, what you saw from the numbers is the uptick of 27% in quarter 2 on our overall subscription to Private customers, which was just a great result and which is in line with what we planned, but we are always sort of surprised about the fact that this product has really become a commodity in the German rental market. And that points to the second part of your question, I believe that if you look at most of the listings that we have for rent on our platform, I would estimate that the largest part comes from TenantPlus customers and all the information that is received to land or given to landlords in relation to that product is really beneficial for landlords, and that's why we see an increasing number of landlords using those offerings. And coming to the underlying part of your question, which is basically around the market size and is the product of commodity and to what extent can we grow that product. I would like to remind you that in Germany, we have around 3.5 million to 4 million new rental agreements each year. And for us, that is a sufficient part that enables us to grow the product over the next years. But I would like to hand over to Tobi to add on that.

Great question, Pete. There's so much more potential what we can do with this product and with this angle. Just imagine about tying it closer to the Property Hub or Homeowner Hub that even in the future, if someone is potentially thinking about maybe letting his or her place and tapping into that area will also increase our catchment area, i.e., right now, predominantly, it's used for landlord, who are already landlords and have decided to find a new tenant. But in the future, this would be a guide toward, hey, how about if you wanted to find a tenant that perfectly matches your 4 walls, and that has a great score and has a great [indiscernible] check and so forth. So we are trying to build more and more around that. So it will not become the base product only, but we will expand and it will have permutations. So we are very confident that we can grow this. And yes, we do think that if you want to be more successful in an overheated market, this will become the de facto standard.

The next question comes from Jo Barnet-Lamb from UBS.

Just some housekeeping to clarify some of these one-offs a little better. So 1Q, post higher share-based comp, I think you guided to EUR 10 million to EUR 15 million for FY '24, if I'm not mistaken. And you've obviously now done EUR 18 million in 1H. So what changed in Q2 versus your expectations back then? And how should we think about share-based comp for the full year and beyond? And then secondly, you announced heightened M&A-related expense in the quarter. I was wondering if we could just get a little bit of color into that and what we should expect for the full year? And if I can sneak in a third because they are related, I promise. The Q2 net financing costs increased materially. You highlighted the increased provisions related to Sprengnetter and the underlying EUR 1.4 million net financing costs, excluding this, should we assume that EUR 1.4 million is a reasonable estimate for the remaining quarters of the year?

Yes. Jo, yes, I start off, as you can imagine, with the first one, share-based compensation. You're right. I guided around EUR 10 million to EUR 15 million, which is also in line with our long-term planning on share-based comps. For the future, that means '25 onwards. You can imagine that around 50% of our share-based compensation will go to the Management Board and the other 50% will go to key players. And there, we see on each item, around EUR 5 million to EUR 7 million each year, which brings you to the long-term guidance of EUR 10 million to EUR 15 million. For 2024 for this year and the first half, explicitly, Jo, there are basically 2 effects, which I would distinguish in 1 sort of ramp-up effect as opposed to other share-based comp programs we had in the past, we now see a vesting after 1 year. So over the last years, we had to ramp up the effect from past year's long-term incentive programs to Board and to management teams. And the second piece is basically a catch up. It's a catch-up effect from share-based and share price performance. So for example, you look at the first tranche or the second tranche of long-term incentive programs that has been given. In 2023, that was granted at a share price of EUR 50, 5-0 euros. And following the end of the financial year 2023 share price performance and then looking at the overall performance on the metrics in the LTI, that alone makes up EUR 5 million. And then we have an effect from the 2022 long-term incentive program that was given at a share price of EUR 60. So that alone is another effect of EUR 1 million. And then we have the accruals, as I said, or the ramp-up effect for share-based compensation for the management team, which is EUR 7 million. And that brings you up to the number of EUR 13 million for the first half, and the other remaining EUR 5 million is the key player program we have. If you're looking at the next quarters, numbers will be significantly lower in the area of EUR 2 million to EUR 4 million per quarter, which in the end will bring us up somewhere between EUR 20 million and EUR 25 million. I hope that was transparent and sufficient enough for you. What I would like to point out once again here is we're looking at an accrual situation. So that situation will not impact our 2024 cash flow. And hence, going forward, a lot of those accruals are noncash items. Apart from that, I think if you have additional questions around that, happy to answer, but I think that was sort of the amount of transparency we would like to give here. On M&A, yes, you're absolutely right. Jo, you've seen some increases in the first half of this year. I think we stand at around EUR 4 million or something. And I think for the remainder of the year, you can expect something between EUR 2 million and EUR 4 million of M&A payments to come, but that would be the maximum then. And the last question was around financing costs. Yes, the EUR 1.4 million, especially given the current interest rate environment is something you can look at for -- on a normalized basis.

The next question comes from Christopher Johnen from HSBC.

I would like to start with M&A again, and about going international. If the Spanish press was to be believed you were interested in an acquisition over there, at least you're part of the process. Can I just pick your brain about what are your current ambitions about going international, predominantly through M&A, what is the sort of benefit because I think as far as cross-border synergies are concerned, there are usually a few unless the potential target is not very well managed. So can we just pick your brain on M&A, please?

Tobi, that's for you. .

Chris, sure thing. So with regards to -- we also saw the rumors in the Spanish press. So as you can imagine, we didn't comment because those were rumors, so we can't really say anything beyond that. Your more general question around our international ambition or appetite for international expansion. Look, I think one is a case where someone says, there's huge synergies in, what have you, cost and personnel and so forth that makes the case, we're probably not so much about that one as opposed to if you have a leading product portfolio, which we think we have. And if you know how to commercialize that and productize that and if you think there is a potential opportunity out there that would make sense for shareholders then we are open to looking at it. But again, there's a lot of if, if, if. So as you know, this is a market where there's not a lot of potential acquisitive target. And if so, there's plenty of others who are usually around those targets. So it's a highly theoretical case. But yes, in more general terms, we do think that being a good operator, paired with a strong product portfolio and very innovative products and commercial strategies around it, it's something that makes us a unique player to at least legitimately look at certain targets if they became available. So that's all we can say. Hopefully, that helps.

Yes, it does. And is there any color you can give as far as geographies are concerned? Is there something that, for example, you may even rule out? I know you cannot be specific, but maybe there is something around that, things that are attractive or less attractive?

Yes, I think we would obviously be focused on Europe. That's a key thing. And beyond that, I think there's -- it wouldn't make sense.

The next question comes from Will Packer from BNP.

Firstly, could you help us think through how the improving property market backdrop when it gets going a bit further will flow through to your business? I suppose, reflecting backwards, your business proved much more resilient to the interest rate that slowdown in the property market with, in particular, lines like PPA proving a big upside surprise. So as we go towards a stronger period for the market, could you just help us think through that flow through, Asian numbers after PPA, seller leads, et cetera? How would you expect to come through? And then secondly, Adevinta has changed hands, those reports the KKR taking the keys of Avi Group. Are you seeing any change in behavior from your competitors, in terms of their marketing spend or their package structures or the aggression of which they're going after the state agency customers? Or is it kind of business as usual?

Thank you, Will. I would hand over the first question to Dirk about the markets and how it would impact us. And second, the question on Adevinta, I think Tobi can take.

Yes. Will, I think that an uptick in the German market will actually be to our benefit. And that comes from our clearly defined an outlined strategy that this company will be able to grow in any market environment. So when the market would pick up again, when transactions improve and increase, I believe that we have an opportunity to maintain or even slightly increase the listings on the platform. There will be, of course, a mixture effect between shorter duration, outstanding times, but also maybe more -- some more objects coming to the market. There will be potential that we are seeing when it comes to the increasing purchase price difference between energy fit buildings, as I would call them, and the buildings who have a renovation need for energy cost reasons. So I believe there will be an improved demand on our platform in the homeowner area. There will be a demand for leads around energy-efficient buildings. And then when it comes down to ARPA growth, Tobi just outlined earlier on that we are improving our product portfolio towards agents with the CRM platforms, we're fully integrating, with valuations, we're fully integrating into it now. So I would think ARPA growth will follow that more healthy environment. And on top of that, maybe in the Private plus, in the tenant environment plus, in the buying environment, we will also see some uptick, especially in the buying environment we have seen and as you might recall, in the first quarter already, some upticks in subscriptions there. So people that are looking to buy a house are also looking to buy subscription from us as people with TenantPlus subscriptions do. So all in all, I would think we can go optimistic into an uptick in the market. But with that, I would hand over to Tobi, especially with regards to the competition question around Adevinta.

Yes. Thanks, Will. With regards to competitors, as we all know, we had Adevinta transaction closed, we believe, end of May. Both competitors really with Adevinta and also the Springer or Avi's assets, they're very active and they're also very aggressive. So they're chasing customers, they're chasing talent, they're trying to copy products and solutions where possible. So we are used to competition, and we lost the competition. So we feel good about our positioning. We try to innovate around stuff that we feel we can only do and it's harder to copy. And it's -- whether you look at the membership structure on the Professional segment, whether you look at the Private segment, there's pockets, and those pockets are getting deeper and deeper where we are offering solutions that you just can't simply copy because it's the manifest of 4- to 5-year long journey in terms of product innovation that we've launched many years ago. So we feel good about that. And then lastly, with regards to the rumors about KKR and Springer. Let's see how that plays out. But again, we are focused on our own business strategy, and we are focused on our own products, and we feel good about that. So hopefully, this somewhat clarified a little bit of your question.

The next question comes from Marius Fuhrberg.

Two from me as well. The first one with regards to ARPU at the Private segment, it's fairly on the same level as compared to last year. Do you expect it to continue, especially against the background that last year's Q4 was a little bit higher than the remainder of the year? . And the second question, the German mortgage market already recovered in the first half of the year, a double-digit growth. You can go from a small level, whilst your other revenues continue to decline. This magnitude affect that mortgage is still small in terms of revenue contribution and therefore, outweighed by the decline of [indiscernible] and other products? Or how should we look at this.

Thank you, Marius. I would start off with the mortgage business. I think that it's very helpful to look back 24 months when markets were going down. What you could see there is a situation where it took us 1 to 2 quarters longer until we saw our lease and revenues really going down. So in -- on our sort of advisory business, which is the smaller part of the business, we're seeing similar growth rates than we see in the reports from Hypoport. On the leads business, I would think the time lag applies that I just elaborated on. It hasn't recovered at the same pace. The leads business held up quite well until the end of 2022. So late revenue decline going into the changed environment. And our thesis around that is that the recovery might therefore also be late in the cycle. We might see slight improvements in demand as we go into the second half of this year. On your ARPA question, you have been very hard to understand, Marius. Maybe can you repeat that again?

Yes. If I look at ARPU rates on your product segment, they have been fairly flattish, I would say. And when I look at Q4 last year, we saw the strongest quarter. And I was just wondering whether the same should apply for this year? Or should it stay fairly, yes, flattish?

I would think on the ARPU side, I don't expect too much movements there, Marius. On the customer side, we just outlined it. I mean I would think that we are rather following a textbook exercise here when we look at market penetration. So at the current point in time, our overall focus with regards to Private subscription products is on improving and increasing customer lifetime value, which we can easily see in the amount of months customers stay on the platform. . And at a later stage, we will enrich the product with some more features and we'll certainly have some ARPU measures. But for the next 2 to 3 to 4 quarters, I would not put significant growth on Private customer ARPU.

The next question comes from Lara Simpson from JPMorgan.

I just wanted to come back actually to the comments on the outlook and the cadence of both for H2. You mentioned Q3 will be sequentially slower than Q4. Could you just elaborate on that? I mean, is it really a comp effect? Or is there something else that's driving that softness? And then just a follow-up on the Professional ARPU. I mean, obviously, still seeing a positive trend, but it did grow slower than the subscription revenue. I think you've mentioned that's partially due to slower revenue volume from new customers. So could you just elaborate a bit on that? I mean is it just about mix from a product perspective? Or is there some other moving parts.

Maybe I'll start off, Lara, thanks for your questions. Maybe I'll start off with the first one and then hand over to Tobi for the second part. Well, for the first one, I think what you could -- what you can see in the market in the first half of this year was -- hold on a second. Sorry. We just had a communication issue here. On the cadence of growth for the third quarter, I would think that this is more of a seasonal effect that we are seeing when we look at the third quarter and then a cadence of growth effect in the fourth quarter, where we traditionally see higher growth rates in October and November. November is one of our core months. And looking at an overall growing business, you can also see slightly more growth in that third quarter. And with regards to the ARPU question, I would hand over to Tobi now.

Yes. With regards to the ARPU question, I think we are on a continued journey. So the ARPU is really a reflection of, obviously, what we're driving with regards to customer numbers and also what sort of services and kind of service penetration we will have. We do think, as mentioned earlier, obviously, Professional segment, we will continue to see ARPU increase as we laid out. So we're fully on track there. And on a Private world, it's not so much about the ARPU increase, but it's really about driving our innovation and driving our market share. There's so much more to go after. And we're still finessing about the terms and the subscription terms and various product uptakes. And we haven't even answered the question of, what did you ended as a TenantPlus, but then you want to become a homeowner all of a sudden, you want to use the homeowner services and you're switching to the other side, oh, you're acting on both sides. So we're about to unlock that with the team. So expect more stuff to come. But again, there, we are focused on growing the customer base. Again, we want to reach the 500,000 plus as we laid it out. And so that's the journey beyond. So we're fully on track, and we feel good about it.

We have a follow-up question from Christopher Johnen.

I thought I'd jump back in the queue for a couple of housekeeping questions. First, I was curious, a couple of quarters or month ago, you reintroduced advertising like general advertising from Google on the listings. I'm just curious on the thinking behind that? And if you can share sort of the impact that this has had. And then jumping to the leads business. Is there any color you can give on the real to lead engine versus IV24 in the quarter just so that we get a bit of an idea, that would be great.

Thanks, Chris. I'll take the first one and maybe the real to lead engine question will be answered by Tobi then later on. On the advertising, I'm not quite sure what you are referring to, Chris. Are you referring to the fact that we reduced our overall performance marketing spend on Google? Or are you referring to the 0 uptick of Google? Or are you referring to using Google Analytics for our customer count? I'm not sure in which direction your question was going.

Traditionally, a couple of quarters ago, the advertising on the listing, whether for rentals or for sale properties, was mainly from agents who are paying for branded advertising for their own broker or something like that. I think we reintroduced general Google AdWords, the advertising on the results, on the listing pages. And I think that probably contributed somewhat significantly within the media and other segments in the past 2 quarters. But yes, correct me if I'm wrong.

Yes. No, I don't see that. I mean, the largest chunk of advertising in the Media & Other segment, comes from partners that are offering services around real estate. So what you're seeing there is Deutsche Telekom, IKEA and other large sort of energy providers offering services there. But other revenues are really captured in the Professional segment and are not linked out to the Media & Other segments.

With regards to your second question, I'm happy to give a little bit more color. So I think we mentioned earlier during the call that we do see the buyer interest returning, but we don't see it lasting recovery in the number of transactions. So it doesn't manifest itself yet. So that's why, in summary, the demand for seller and mortgage leads is still low. And the market may continue to improve somewhat, but it's muted both for a real to lead engine as well as for the more entrenched IV24 model. So same pattern we see across the board.

Ladies and gentlemen, that was the last question for today. And I would like to turn the conference back to Filip Lindvall for any closing comments.

Okay. So this concludes today's conference call. Thank you, everyone, for dialing in and your interest in our company. Thank you. Bye-bye.

Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you very much for joining, and have a pleasant day. Goodbye.