Ströer SE & Co. KGaA (SAX) Earnings Call Transcript & Summary

Good day, and welcome to the Ströer SE Q2 Results 2022 Conference Call. Today's conference is being recorded. [Operator Instructions] At this time, I would like to turn the conference over to Christian Schmalzl, CEO. Please go ahead, sir.

Thank you. Dear ladies and gentlemen, thanks for joining our Q2 results call today. As in our past calls, I would like to share with you the development of the just-ended quarter and give you a strategic update. Henning, our CFO, will then present the financials for the second quarter 2022 and our progress in ESG before we give you a short outlook what we expect for the third quarter and the remaining months of the year. As always, following our presentation, we will be available for Q&A. Despite the ongoing challenges of the macroeconomic environment due to the Ukraine war, significant inflation rates, and still strained supply chains, we delivered on our promises in all relevant KPIs and were able to achieve the highest second quarter sales in the company's history. Total reported group revenues for the first 6 months were up by 18% from EUR 686 million to EUR 810 million. Organic revenue was at a comparable level with 18.4%, up 9 percentage points versus prior year. The successful sale of our online performance marketing specialist, [ SAM, ] for roughly EUR 14 million, will have no major impact on organic growth development. Henning will elaborate on this in detail later. The adjusted EBITDA increased overproportionally by 22% to EUR 220 million, mainly driven by the strong performance of out-of-home, which was fueled by the continued high margin, strong development in digital out-of-home and the robust local and regional business. Adjustments remained low, came in at EUR 8.2 million positive in the first 6 months or EUR 11.5 million positive, among other things, due to the just-described sale of SAM and the revision of a capital reserve for stock options in the second quarter 2022. Our adjusted EBIT reflects the strong performance of the quarter but also taking into account the comparably weak prior-year basis due to slowly expiring COVID effects in the course of the prior year quarter, rising by 84% to EUR 88 million. Same applies for adjusted net income, which more than doubled from EUR 27 million to EUR 58 million in H1. Operating cash flow for the first half 2022 developed again pretty much in line with revenue and adjusted EBITDA performance and was up by 25% from EUR 120 million to EUR 150 million. Despite the overall mixed environment, we continue to invest into profitable growth and with that into the rollout and accelerated expansion of our digital out-of-home portfolio. Consequently, CapEx spend of the 6 months is about half of what we planned for the full year and increased from EUR 38 million to EUR 66 million when compared with prior year CapEx spend. The current situation, the heterogeneous client structure makes our out-of-home business by far more resilient than most of our competition. We have shown this slide already before, but we think it's absolutely crucial to understand and predict our performance in more challenging times. About 60% of our revenues come from in total roughly 58,000 local clients, and we approach them with, in total, 1,000 in- and outbound salespeople and specialist teams. In particular, the local customers signed multiyear contracts and also 58,000 clients, sound like a lot. There are more than 600,000 SMEs on our general target list. So still a lot of space to improve. And both across local as well as national advertisers, our clients are spread in a very balanced way across all industries. Accordingly, there is no specific exposure. And if one customer segment suffers, another one might develop in the opposite direction. Key takeaways for H1 are that our local business is completely unimpressed from the current environment, that we see unchanged momentum for digital out-of-home as it's meanwhile nicely integrated in the digital base spend of national advertisers and offering maximum flexibility, that this overall momentum also continues in the summer months where we see mid- to high single-digit growth for our out-of-home segment against a strong rebound quarter last year and that also the prebookings for H2 in total look pretty much normal year-to-date. At the end, we operate with an unsubstitutable market share in a fully consolidated out-of-home market. I think there are 3 aspects that make our business and the German out-of-home market special against any other peers, and we just feel it's important to repeat it. Operate with an extremely high market share in a almost duopoly situation in a consolidated out-of-home market, so no overproportional competition also in tougher times. We focus predominantly on a high number of very diversified local customers, so many small and steady tickets instead of few, large, and volatile ones. We have an extremely strong momentum for digital out-of-home, and roughly 1/3 of our out-of-home revenues are digital, but only a little bit more than 2% of our sites are digitized yet. So we are just at the beginning of a longer structural shift with a lot of tailwind. All of that is a strong counterbalance to the temporary macroeconomic challenges. At our Capital Markets Day 9 months ago, we talked in detail about our strategy to constantly improve our digital out-of-home proposition for advertisers. The achievements in H1 have taken our audience coverage to another crucial milestone. Across the top-10 cities where TV broadcasting is historically weak, we reach roughly 2/3 of the population on a weekly basis and especially the younger, more mobile, more digitally driven audiences. We are constantly working on balancing the net coverage city by city to offer a truly consistent product for national brand advertisers. 65% is the net reach average. No top city is below 60%, and cities like Hamburg or Cologne show where we will be overall in 3 years from now at around 80% coverage. Execute our mid-term plan with a CAGR of 500 roadside screens and 300 incremental premium in-door screens per year until 2026, but decided at the beginning of this year to pull some of our investments forward and accelerate the momentum in 2022. In H1, to-date, we have installed 402 roadside screens and 207 premium indoor screens, so we are on track to 750 to 800 roadside and 400 indoor displays on a full year basis, even if we have a constant look at CapEx given the current market conditions. Essen, Hamburg and Hanover have been focused cities in H1 and, i.e., Q2 to roll out more roadside screens with 9 square meter size or larger, so-called giant formats. Cottbus, Düsseldorf and Offenbach have meanwhile a really nice and diversified standard 9 square meter network. We've also installed more 2 square meter inner-city format to get into the pedestrian areas of each in Gelsenkirchen, Hanover and Kassel. And in Hamburg, we are still rolling out more of our so-called city towers digital [ columns. ] One of our last quarterly calls, we talked about the large-format screen at the highly frequented so-called Stachus train station in Munich. We've developed the first 3D spot ever on our network with our client, Sky Germany, in Q2 on that screen. You see those kind of spectacular 3D staging rather in New York or Hong Kong and Shanghai, but it's also possible in the German market now, and besides nice revenue streams, it's an important marketing tool to show the attractiveness of digital out-of-home. We try to leverage that momentum also with even increased presence around industry events and marketing summits. The online marketing festival in Hamburg, for instance, was a strong kicker for our programmatic digital out-of-home business as we were able to approach a lot of new digital pure-play companies there. The Greentech festival in Berlin was a fantastic stage to present both carbon-neutral advertising solutions as well as smart and green out-of-home and street furniture products, good triggers to win brand campaign budgets even in times where advertisers are more careful with larger broadcasting investments. Digital out-of-home in general, programmatic digital out-of-home solutions as well as ESG-oriented marketing bundles have been key drivers to deepen the relationships with customers like Pernod Ricard, AIDA or Disney. All of them have significantly increased their investments in our out-of-segment, but we also won new clients on that basis, either bringing them again back to out of home or for the first time into our medium. Uber and PayPal, for instance, have been digital or dialogue customers for a while. Q2 was an outstanding out-of-home quarter with them. And Calzedonia wasn't that active in out-of-home for a while. They spent more than 90% of their classic budgets into out-of-home in the second quarter. None of that would have happened in the same way if we wouldn't have the out-of-home plus setup to constantly be in touch with advertisers also in times where out-of-home is not or not yet on the radar. With the 2 press releases on Asam and Statista in the recent weeks, we've already given you an initial assessment of the successful development in the first 6 months. With the results delivered in H1, both were able to successfully continue their historic growth track record. Let's start with Statista. In the first half of the year, Statista's revenues increased by 42% compared with the same period of the previous year, and EBITDA adjusted even grew faster than revenues. Our international business played a particular role in this strong development. And to highlight a single market here, the U.S.A. now accounts for around 36% of sales. Statista is thus continuing its success story. Since our acquisition end of 2015, Statista recorded an average increase in sales of around 39% per year. Asam also performed very well, and especially the relative performance versus peers is interesting in times of more headwind for the consumer business. Asam significantly outperformed established players in that environment. We doubled sales with a makeup brand, M. Asam MAGIC FINISH, in the second quarter. Skincare grew twice as fast as all comparable facial cares in the drugstore environment. And our haircare brand, ahuhu, grew 10x faster than the relevant market and doubled its sales year-on-year. And last but not least, Asam Beauty ranked 8 in the NielsenIQ Brand Score. So step-by-step, we get amongst the top-10 beauty brands in German-speaking markets. And with that, Asam continues its success story under the Ströer umbrella, and average sales growth of 25% per year since the acquisition speaks for itself. All of our other levers and strategic USPs are fully intact as H1 results show, and we continue to execute our mid-term strategy unimpressed. First of all, the digitization of our out-of-home infrastructure, especially with more digital roadside inventory to strengthen our profitable public video proposition. Secondly, the continued optimization of the synergy potential of out-of-home and digital and dialogue media in the areas of content tech, data and customer access, more and more important for the out-of-home business. And finally, there is the unlocked value crystallization potential of Asam and especially Statista, and both have shown excellent growth and performance in the last weeks and months. With that, let me hand over to Henning, who will guide you through the financial details and results of the second quarter 2022.

Thank you, Christian. Hello to everyone from my side. Let us together have a brief look on the Q2 '22 P&L. With a growth rate of 14% for the second quarter, we are fully in line with our guidance range as communicated 3 months ago. Group-level sales increased to EUR 425 million compared to EUR 374 million in Q2 last year. With that, we achieved again record sales and this despite a high level of macroeconomic uncertainty. With a strong performance in out-of-home and here, in particular, at our high-margin digital out-of-home business, which delivered a revenue increase of more than 70%, adjusted EBITDA for the group increased slightly ahead of our sales development with 18% and came in at EUR 126 million for the quarter. Exceptional items stood at plus EUR 11 million. Despite positive expansion, these positive exceptions are mainly attributable to 2 effects, which each amounted to a mid-single-digit million euro amount. First, successful sale of Turkish online performance marketing specialist SAM, and second, the reversal of the capital reserve that we had recognized for our stock option program. With the corona crisis, we were unable to achieve the ambitious targets set out in the program within the specified time frame. As these exceptions are excluded from the EBITDA adjusted, EBITDA reported came in at EUR 137 million and thus considerably above the prior year level. As in previous quarters, depreciation, amortization continued to decline and were down to EUR 75 million in the quarter mainly due to the declining D&A from capitalized purchase price allocations. As mentioned in previous calls, PPA will decline further going forward due to the general write-down of the underlying assets. The financial result improved slightly from EUR 7 million to 6 million due to lower interest on lease liabilities and more favorable exchange rates. Taxes developed mainly in line with business performance and the improved tax base. Looking at the adjusted net income, the increase is pretty much in line with the improved business performance when compared with the prior year period and taking the effects described before into account. And total net income adjusted increased from EUR 26 million to EUR 39 million in Q2 '22. Moving over to the cash flow. Altogether, we again saw solid cash flow development, which to a very large extent, could offset the decline in Q1. Operating cash flow went up from EUR 93 million to EUR 118 million, underlying good cash conversion, even in more challenging times and our cost flexibility. In other words, we feel well-prepared for potentially bumpier roads ahead. Position others declined to minus EUR 12 million. The reason here is the adjustment on items such as the already mentioned gain on disposal from the SAM sale and the noncash release of accruals for the stock option plan. Cash out from non-M&A investments increased from EUR 24 million to EUR 33 million, reflecting the continued expansion of our digital roadside and public video portfolio. Due to these effects, free cash flow before M&A was up from EUR 70 million to EUR 86 million in Q2 '22. After a decline in Q1, leasing repayments increased by EUR 7 million from EUR 36 million in Q2 '21 to EUR 43 million due to phasing effects. Free cash flow adjusted came in at EUR 43 million, so EUR 9 million ahead of Q2 '21. It should be noted that this does not include the positive cash effect from the mentioned divestment, which is recognized in M&A investments. With this development, financial debt was at EUR 726 million for the end of Q2 '22 and thus EUR 103 million higher compared to the same period in '21. However, the dividend payment for fiscal year '21 of EUR 128 million must be taken into account. And as a reminder, the dividend for 2020 was paid in Q3 last year. Despite this effect, the leverage ratio improved to 2.1x compared to a level of 2.3x a year ago. In this context, let me add that we successfully placed an ESG-linked note loan in the quarter under review, generating more than EUR 200 million in a busy market which saw a lot of issuer activity. Transaction included tranches with tenors of 3, 5 and 7 years, an amount of EUR 120 million there was used to prematurely refinance a note loan maturing in October. All in all, this contributed to improving the maturity profile of our debt. As a next step, we are currently working on the refinancing of our facility agreement, which we expect to close in fall this year. Let me now walk you through the segment performance, starting with Out-of-Home Media. In total Out-of-Home benefited from the still mainly positive market dynamics in Q2 '22 compared with the prior year period, which is still affected by COVID-19 effects. In total, the Out-Of-Home segment revenue increased by 23% from EUR 152 million, EUR 187 million, and thus came in within our forecasted corridor, although in the lower third. Ukraine war, inflation and raising uncertainty as a large part of the first quarter already led to softer demand from national accounts, in particular for our classical products. In contrast, the local and regional business proved to be persistently resilient. In total, digital out-of-home continued to show compelling growth in all 3 categories: national, local and regional, a clear proof point that customers appreciate digital probably even more in times of increased uncertainty. As explained in prior calls, classical tobacco advertising is spent in Germany from the start of this year. Therefore, when adjusting sales performance for tobacco, advertising growth amounted -- 26% in Q2 or 39% for the first 6 months. With this, Q2 '22 achieved an index level of roughly 91% compared to the pre-COVID Q2 of 2019. Looking into the different sales categories, classical out-of-home sales increased by 10% to EUR 122 million. This was outpaced by the developments of digital out-of-home, which rose by 73% to EUR 51 million. Out-of-Home Services increased by 18% from EUR 12 million to EUR 14 million. These performance trends were also reflected in the development of EBITDA adjusted, which increased disproportionately by 38% from EUR 64 million to EUR 88 million in Q2, especially driven by the strong performance of digital out-of-home as described before. Accordingly, the margin went up from 42% to 47% and with that towards pre-COVID levels. Altogether, we believe it is important to recognize the defensive quality of Ströer's Out-of-Home business, reflecting a quite different setup with a broad diversification across national, regional and local sales channels and industries compared to many international operators or so-called peers. Our Digital & Dialog Media segment continued to show revenue growth. Revenues increased by around 4% from EUR 175 million in Q2 '21 to EUR 181 million in the second quarter of the reporting period. Revenues in digital, so online advertising and content publishing, decreased slightly in the second quarter due to comparably lower traffic on T-Online as we relaunched the website and due to the beginning holiday season as well as due to comparably high negative exchange rate effects at international business activities. These were successfully disposed of in Q2, as described earlier. Contrast programmatic advertising on our own platforms drove performance, getting us to PY revenue levels year-to-date. The businesses grouped under Dialog Media continued to perform robustly. Sales accelerated compared to the first quarter to 13%. So revenues increased from EUR 74 million in Q2 '21 to EUR 83 million in the second quarter. However, performance showed diverse business dynamics in detail. German door-to-door operations performed very strongly, driven by highly successful direct sales activities for telecommunications products, offsetting weak business in France and Italy due to challenging market conditions in the French energy sector and the realignment of the business in Italy. Call center remained broadly stable compared to PY. Taking the challenging market environment into account, all in all, adjusted EBITDA of the segment in Q2 '22 was with EUR 40 million, EUR 5 million lower compared with the same period in '21. This earnings decline was mainly due to the sales development in our content business, which nevertheless turned in better earnings than in 2019 and our call center business in Germany, which had to digest rising minimum wage levels. The minimum wage rose by more than 6% to now EUR 10.45 in July. And from October onwards, this year, it will be further grown to then EUR 12. Christian already commented on both Statista and Asam. Let me only make some brief comments. In total, our Data-as-a-Service and E-Commerce segment was up by 28% to EUR 71 million from EUR 56 million in the prior year period. An increase of 37% growth in the second quarter of Statista continued to show strong performance and achieved sales of EUR 34 million or EUR 9 million up compared with the same period of '21. Against a very favorable environment for e-commerce and TV shopping in the prior year period, Asam performed very well, in particular in the context of other German e-commerce players in the second quarter '22. Sales were up by 20% from EUR 31 million to EUR 37 million. Due to continued growth initiatives as well as cost inflation, adjusted EBITDA margin came in at 6% for the segment. Adjusted EBITDA was EUR 4 million in Q2 2022, so some EUR 600,000 short of Q2 '21. Excluding start-up costs for Asam, adjusted EBITDA Q2 '22 would have been clearly above the prior year value. In addition to good business performance, sustainability in all its forms: E for environment, S for social and G for governance, is of great importance to us. In the past 36 months, we made significant progress forward in all areas. In our sustainability report '21, we not only report on this but have once again significantly increased transparency and a variety of topics and set ourselves ambitious target. We have prepared our reporting in accordance with GRI's guidelines to ensure a solid basis for our data and the relevance of the topics covered we carried out extensive double material DD tests. Then the topic in which we were able to make significant progress is our carbon footprint. In the period from 2019 to 2021, we reduced our CO2 emissions by around 50% to 32,000 tonnes of CO2. Key driver here was and is the switch to renewable electricity supply. However, for this is only an intermediate step on the way to CO2 neutrality, which we want to achieve by 2025. Also in 2022, we again celebrated the Diversity Day at Ströer. At this event, we highlighted our diversity, present ourselves as an open company and exchange ideas on various topics. For this purpose, our diverse employees have sent key new speeches, panel discussions and presented the welcoming out initiative. In addition, we joined [indiscernible] to publicize German Diversity Day in many German cities on our digital advertising media. With this, let me now hand you over back to Christian for some closing remarks on our outlook for the year.

On the basis without a significant next COVID wave in autumn or massive further escalation of the Ukraine situation and its domino effects for the economy [indiscernible] third quarter 2022 group organic growth in the mid-single-digit range; Out-of-Home, above the strong prior year level; and just as an additional information, July and August order book at the moment shows a rather mid- to high single-digit momentum versus both prior year and 2019 or prepandemic levels. And for the third quarter, group EBITDA margin broadly stable. For the full year 2022, we expect unchanged and as mentioned, subject to no further deterioration of the macro environment from the war in the Ukraine or resurgence of COVID waves group organic growth of 10% to 14% and group EBITDA margin above 2021 level. As of today, we also still feel very comfortable with our mid-term plans until 2026. You can see on this slide, which we have shown on several locations earlier, our sales as well as our result development is very resilient against macroeconomic shocks. Ultimate stress test for our Out-of-Home segment, not the whole company, the Out-of-Home segment and the 4 worst consecutive quarters for the Out-of-Home business ever were from Q2 2020 to Q1 2021. Our Out-of-Home business lost 33% revenues, and EBITDA dropped by 37%. So even when we had 7 out of 12 months lockdown, which meant massive audience decline, we almost kept the Out-of-Home margin stable. And as a group, we're still generating more than 70% of our normalized earnings, but that was worth of the worst ever. There may be more relevant historic recession reaction of the national ad market, and the Out-of-Home business in general was around 1.5x to 2x GDP development, and we always performed better than the market. And H1 2022 and the outlook for Q3 is another datapoint that shows the resilience of our business. We are still in line with our precrisis plans. And I know that I have already made those points at the beginning of the presentation, but I will repeat it, if you say you've heard it before, because I think it's the most important message in the current environment. Operate with an extremely high market share in a more or less fully consolidated out-of-home market so no overproportional competition in tougher times. Focus predominantly on the high number of very diversified local customers, so many small and steady tickets instead of few large and volatile ones. We have an extremely strong momentum for digital Out-of-Home, and roughly 1/3 of our Out-of-Home revenues are digital, but only 2% of our sites are digitized yet. So we are just at the beginning of a longer structural shift with a lot of tailwinds. Let me now close the presentation with looking at our financial calendar for the coming months and further in-depth information we plan to provide. The course of the remaining year, we plan a capital market teach-in with a focus on digital Out-of-Home and Statista. We will announce the precise date as soon as possible. And on November 10, we will publish our Q3 2022 numbers. On this occasion, we will also publish our release dates for 2023. As always, further dates and information can be found on our financial calendar on our Investor Relation website. Thank you, everyone, and we are now happy to take your questions.

[Operator Instructions] We will take our first question from Annick Maas from BNP Paribas Exane.

So my first question is on Q3. I think you say Out-of-Home is going to be above the prior year, but July and August is mid- to high single digit up. So are you already seeing something in September? Or is this just pure caution that you don't expect it to be up more? And my second one is on the full year guidance. So you say the order book is normally from September to December. How much do you actually see at this stage of the year? And how much has this varied in previous years versus when you saw it in August, and you said, okay, it's more or less normal. How much can it change before year-end? Then an update on Asam. I think last time we spoke, you were still expecting to potentially sell Asam at the second half of this year. Is this still up-to-date? And then my last one is can you remind us if there's any advantage you have over TV to potentially benefit from the World Cup being in Q4 this year?

Thanks for your questions. I think, very plausible questions here. On Q3, you're right. We said Out-of-Home will be above prior year. And while what we see for July, which is done in August, which is almost down where we see rather mid- to high single digits, to fall back to growth, in general, would mean a weaker September. What we see at the moment is that the September order book is in line or slightly above or around prior year. But the point is the month is not done. So the guidance for Out-of-Home that we mentioned for Q3 is more driven by caution that we just don't know exactly what is possible. And in prior years, we would have said, well, what we see in July and August is what we see for the full quarter. But I think at the moment, markets are in general difficult to predict. So we only want to guide what we -- where we have clear visibility. But this is more driven by caution or being on the safer side than seeing that September would be worse than what we've seen in the first half of the quarter. Rest of the year, that means September to December, if I move away from July, August, and the full year, I think what we have currently in our order book is probably roughly 60% of where we normally end up at the end of the year. That number is pretty much in line with what we had in order book for those months in relative terms, in absolute terms last year. I think in the years before what you could see, but that's more a historic trend than anything short term, that, in general, the lead times for Out-of-Home get a little bit shorter year-over-year. Why? Because advertisers in general tend to book less full year basis, at least the national advertisers, and more quarter-by-quarter or month by month. And we have, over the years, a stronger shift towards digital out-of-home, where I would say, in general, the lead times are also, in theory and practice, shorter, which means we can also benefit from money that is allocated at the very end of a quarter. That's why I would say what we see at the moment is for the months September to December is in line with what we see under normal conditions. So the only aspect of being cautious is we just don't know if the following 4 months are different than the normal September to December time in prior years. But what we see in the order book and the booking behavior so far looks all normal and without anything that would make us nervous around the performance for the rest of the year.

On maybe on Asam in your question here, Annick, first of all, I think it's again worth highlighting the very good performance in the second quarter. I mean, there was, obviously, observation of the development of e-commerce players now in the first and second quarter. So Asam did very well, we believe, and this is very important also for potential future crystallization. However, I think everybody knows where the M&A market is at the moment. The fact of the matter is that we are more or less done with the internal preparations, so we could sort of start the process at any point in time. But at the moment, I think looking at where M&A is getting in general is not push the button yet. So I think we are here on the sidelines for the moment, observing the market development. But again, the most important thing is that the operating performance continues very solid. And the question around advantages versus TV. I think it's the general underlying long-term trend. If I compare out-of-home proposition today versus 1, 2 or 3 years ago, I think it's more flexible. It's more digital, therefore, more attractive than historically, and the audience coverage that we are able to deliver is better than in the past. General people are more mobile. That trend continues even more after the pandemic that I would say we have more eyeballs that we can deliver in a more flexible way, better targeted on more digital inventory. That's what out-of-home stands for at the moment and what the relative development is. I think linear television facing in general structural challenges with their audiences and relatively higher prices if I look at their current pricing and inflation strategy, and an overproportional decline in the younger, more educated target groups. And that's also an ongoing trend. And I think that's where the advantage over time structurally is of out-of-home versus television. And I would say there might be short-term basis slightly different views for whatever reasons, but I think that's the general trend. And I would also see and expect that for the coming months and years.

Wait a second. And not to forget, 60% local TV is 100% national advertising. And this is especially in a situation like now. If you look back to all the other crisis since 2000, you see that national advertising is lagging quite fast to any kind of macroeconomic change, and local advertising is completely unimpressed. Even in the pandemic, our local advertising was still growing. And I think this is a key difference. Also, between the TV guys and us, and by the way, also between [ Deco ] and us because we got again and again compared with Deco because, amazing company, but they are global, and they focus on national advertising, and we are focused on 1 country and focused on local advertising. So except that we do outdoor, I think we have nothing in common at the end because the local advertising market is reacting completely different because we have a long big joint of terminal advertising, which is completely unimpressed by any kind of macroeconomic downturn that we might see now in the second half of the year. So that is something that we maybe should also communicate much stronger in the future. And our focus is clearly on the local advertising market international, maybe to say, the add-on is maybe too strong, but the heart of the company is the local advertising market. That's what you're targeting, and that's why also we can't compare it all this TV besides this structural development, which are clearly key because what Christian already said, TV is under pressure from digitalization, structure under pressure, and this will not change. Even if they are like last year, there was a certain uplift suddenly due to the crisis reaction, but on a normalized basis, TV goes down structurally because eyeballs are vanishing. And digitalization is obviously supporting outdoor in every dimension and shortening time to market, much higher turnover allocation, et cetera, et cetera, et cetera. So these are, I think, the key difference structural headwinds against structural tailwinds and the local advertising market against national advertising markets.

This is all super clear. I guess my last question was more related to the World Cup, specifically. And I had in mind that maybe gambling rules for out-of-home are less strict than what they are in TV, which means that you could potentially benefit from extra ad spend in Q4 around the World Cup?

Yes. It could indeed be. It's always a little bit driven by the sponsors and their behavior. But in general, if there is an impact, it's rather positive. And it's also -- normally also an interesting impact on the online portfolio for both the sports assets that we have as well as the news areas because there are always -- I mean, soccer or football is like general news, and that's why I would say there is some positive momentum there as well. Might not be extreme but definitely some kind of positive ticker.

We will take our next question from Christopher Johnen from HSBC.

First, I mean, partially coming back to the World Cup question. Obviously, it's always a huge event, sucking a huge amount of advertising euros in any given time. So if I understood you correctly, you were saying you draw see positive impact also flagging the online portfolio. But I mean in terms of the advertiser mix, it's hard to sort of ask you what you're budgeting here. But as far as the classic out-of-home is concerned, you would make that same statement as a net positive? And with respect or sort of coming further from that point with respect to the full year guidance, I mean, for out of home 16 to 20 is at least on the top end, I think, if I assume for Q3, let's say, mid- to high single digit is guided for if July and August also carry over to September, let's say, 7.5% on the top end would imply 15% in the fourth quarter, which would be quite a significant acceleration. So I'm just trying to pick your brain here, where, particularly in out of home, do you think the guidance is realistic at this point, below the mid-, the high end? Yes, and how that also translates whether or not the World Cup has a significant impact here? Yes, that would be the first question.

Yes. Thanks, Christopher. Well, I mean, the guidance is what the guidance is. And as we've seen in the last 9 months, situations can change in both directions quite quickly. But looking at the momentum today, I would, in general, agree with you that the guidance that we've given, especially for Out-of-Home was before that Ukraine war started. So it's probably more realistic to look at the lower end of the guidance if anything. But nevertheless, when I look at last year's development, yes, we had a very good second half, but you could also see declining momentum in the fourth quarter because, at that time, the rise of the Omicron variant and thinning restrictions around and after Christmas again. So there was a lot of momentum, I would say, until September/October, then it really got softer. So this year, yes, that might be towards the end of the year slightly different, or we're running against softer cap comps from mid- of Q4 onwards. And as you say, there is that World Cup extra momentum where we see at least 2 or 3 advertisers that could also show different spend behavior in out-of-home versus prior years. As Udo mentioned, I think our local business is just a recurring business that is operating in general already on a higher base and bringing in month-over-month more base momentum. And that's also something where we see the longer the year loss, the more impact we will see in that. So that's why we still feel okay with the guidance we've given [indiscernible].

Okay. That's very clear. And then a final question on price in more general. I mean, on the demand side, that's one thing, maybe somewhat harder to influence, but how are you seeing the pricing at this point in time on the other [indiscernible].

Well, we've discussed that over the last couple of months. I mean, our general decision was to say we stick to the pricing that we've given for 2022 to our customers no matter what energy costs, other inflation rates were and so on because we just want to be a reliable partner and felt like we'd rather talk about extra opportunities and what we can do for them in a way that they spend more money, yes, then asking them for more money to -- without any benefit for the advertiser. I think it will be a different discussion for the coming year. We are currently working on the price list for the next year and are in discussion already with bigger advertisers and agency. And I think for 2023, we will somehow reflect price increases that we've also seen in different areas that needs to be reasonable. But for the running year, our feeling was the better net revenue development will happen on the basis of consistent pricing, no changes throughout the year. And at least to-date, I think that was the right momentum. And I think other media have operated in a different way. So we will see now towards the end of the year how advertisers react to that. And I think different media categories at the moment have a slightly different view on the rest of the year. Maybe that is also driven by the fact that some are -- have been more aggressive on pricing in the last couple of months and others have been more reasonable.

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

My first question is on the macro. I mean, you were very clear. You're not seeing a slowdown because you have structural tailwind, and you are local and regional. But if we focus just on the national part of your portfolio, the one that is more cyclical, are you seeing any change in behavior at all or not? That's the first question. The second question is on Q3 guidance. You were very clear overall guidance, 5%; very clear on Out-of-Home, but can we have some color on the other 2 divisions? That is my second question. The third is on net debt, which from Q1 to Q2 was up EUR 73 million. Free cash flow is EUR 43 million, dividend is EUR 128 million. So the net debt should have gone up by EUR 85 million. So there's a EUR 12 million difference in your favor. I know EUR 12 million is not a big number, but that's 28% of free cash flow. So if you could explain what happened there? Those are my 3 questions.

Thanks, Julien. On your Q3 question on the guidance there, first, well, just taking what we've said for the group in combination with the Out-of-Home business, if you want to get to that mid-single-digit number, it requires probably low to maybe mid-digit in the second segment. And in the third segment, the historic growth of Statista above 25%. And as I'm probably more around the range that we've seen in the first half of the year. So if I take that in combination, the base assumption would be Segment 3, I don't know, around 20%, maybe more if there's good momentum. And Segment 2, where we've been running especially against an extremely strong online business, part of Segment 2 and not just Q3, maybe around 2%, 3%, maybe 4%, maybe a little bit more, we'll see, but the base case is probably around that in combination with Out-of-Home minus the consolidation should take you to around 5%. If we take the standard number for mid-single digit, that would be roughly the momentum, yes. And again, across all the 3 segments, we see July and August current trading order book at the moment slightly above that, sometimes a bit more than just above that. So I think there's still buffer for whatever happens in September to feel quite comfortable with that kind of guidance. On the -- your first question, national advertisers, is there anything we see structurally? Structurally, no, other than more shorter lead times from national advertisers in their booking behavior, yes, that's something we've seen year-over-year in the last decade, but I think through that more challenging macro environment even more short term. So takes a while until we have clarity about every month and quarter, especially as far as national advertisers is concerned, that's one aspect. The second one, I would say, is not structurally. It's just more an individual decision that we see since March or April here and there maybe a traditional, more brand-oriented broadcasting campaign from national advertisers less, clients just sent is at the right moment of time to invest EUR 1 million or EUR 2 million in a quarter into pure brand messages and rather postpone it. At the same time, as Udo mentioned, we win on the Digital Out-of-Home side with short-term allocated money. We see positive momentum local and regional. so far, I think we've been able to compensate those more individual client decisions. But structurally, all we see is really more short-term orientation, but nothing eroding or by means of wild reactions that are completely different to what we've seen historically, that advertisers spend sometimes a little bit more or occasionally also cancel something. That's just normal course of business. Net debt is something for Henning, I guess.

Yes. And Julien, you're right. I mean, if you just come from the cash flow development compared to the end of last year to now, you would expect an increase of EUR 120 million, more or less, rise in net debt that actually rose by EUR 113 million, so that is a difference of EUR 7 million, which comes from the reduction of overpayment of customers, which we have to recognize is a financial liability. So in some situations, actually customers pay more than they should, and that needs to [indiscernible] liability and that [indiscernible] changing.

So it's overpayment of customers that is the difference. Out of curiosity, overpayment strikes me as a bit of a working capital item. So why is that not included in your free cash flow?