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

Wonderful good morning, ladies and gentlemen. Thank you for standing by. Welcome, and thank you for joining the preliminary figures 2022 of Ströer. [Operator Instructions] It's my pleasure, and I would now like to turn the conference over to Mr. Christian Schmalzl, Co-CEO. Please go ahead, sir.

Dear ladies and gentlemen, dear analysts, thank you for joining our prelims call on our Q4 and full year 2022 results today. Let us start the call with a short overview of the key figures of fiscal 2022 and then go straight into what we have achieved in the course of the year. Henning will then take over and present the financials for the full year and the fourth quarter and in more detail before I'll give you a short outlook what we expect for Q1 and the current fiscal year. After our presentation, we will be available for Q&A. As mentioned in the different earnings calls last year, 2022 faced a tense economic situation due to the war in the Ukraine, inflation still on a comparatively high level despite multiple interest rate increases, but it was once again a proof point for the robustness of our strategy. In a really challenging advertising market, we were able to deliver a comparatively robust earnings performance built on our #1 position in the German out-of-home advertising market, our #1 position in digital out-of-home as well as our #1 position in the SME market and the strong commitment of our employees. Reported group revenues in 2022 in total were up by 9% from EUR 1.63 billion to EUR 1.77 billion. This against the background that in 2022, in addition to the market economic challenges, we also had to digest the first stage of the tobacco advertising ban. Due to limited M&A's activities, with the exception of the sale of [ SEM ] in's Q2, organic revenue growth was at the same level as reported revenue growth. The adjusted EBITDA increased by 5% from EUR 530 million to EUR 541 million, driven by the robust performance of out-of-home, especially digital out-of-home, but then by a softer development in the digital business. Pretty much the same development for our adjusted EBIT rising from -- rising by 6% from EUR 249 million to EUR 265 million. Net adjusted income, on the other hand, grew by 1% and to EUR 172 million. This was almost only due to a higher tax result compared to the previous year. Operating cash flow for 2022 came in at EUR 411 million just 4% lower than in the prior year. This development takes into account the additional payment for corporate taxes and municipal trade tax as discussed in the 9-month call. After investing in the accelerated expansion of our digital out-of-home portfolio with unchanged momentum in the fourth quarter, CapEx spend for the 12-month period increased from EUR 101 million to EUR 163 million, consequently. We will talk later about the substantial progress here, both on portfolio as well as advertisers demand. In line with the development in net adjusted income, adjusted EPS increased by around 1%, and from EUR 2.86 to EUR 2.88. With the beginning of the pandemic at the end of Q1 2020, our core business has been challenged twofold. The overall ad market was by far softer and the various lockdowns and restrictions of public life meant less audience and, therefore, less eyeballs to sell for out-of-home. And the last substantial restrictions fell only in February 2022. But our business rebounded strong after the various peaks of COVID and mass mobility fully recovered across our total portfolio. Consequently, the market share of out-of-home bounced back to pre-COVID levels. Nevertheless, the Russian invasion and the various domino effects put the advertising market under pressure again. But this time, it was the same challenge for all media with an overall softer demand. On a level playing field with us not getting an extra hit on the audience, you see the structural developments that we have observed before the pandemic. Classic prints and broadcasting media are challenged by the digital transformation and out-of-home is winning market share. So when you put our annual results into the context of a German ad market that and according to Nielsen, backwards by 4%, plus 9% for our group, plus 13% for our core out-of-home segment and plus 34% for our most dynamic digital out-of-home products are really outstanding. Even the historically over dominant global digital platforms have not been outperforming our business. Nevertheless, and also, there have been some smaller pandemic challenges at the beginning of 2022. It's fair to say that this includes some catch-up effects from COVID restrictions in 2021 and in the first half of 2022. So let's have a look at the second half of the year when you can really compare apples with apples and an out-of-home business that runs against more or less COVID-free prior year numbers. Ad market down by 9%, and the large TV segment even down by 11%, the desktop mobile market down by 9%, radio and print pretty much in line with the overall negative momentum. And we talk about the gross rate card levels that tend to be a bit better than the real net revenue development of the various media. On a group level, we were able to grow 2% against the substantially negative market sentiment. Digital out-of-home still growing double digit and out-of-home being stable. Overall, we've been outperforming the local German media landscape by 10 to 15 points in the second half of 2022. And also, we will talk at the end of the presentation a little bit more about the outlook for Q1. It's interesting to see that the relative dynamics within the ad market has also continued at the beginning of this year, in January for that month, we have the first public market data. The ad market is down by 7%. TV down double-digit. Desktop mobile market is also very challenging. But Ströer Group and the core out-of-home business is up mid-single digit and digital out-of-home, up double digit in the high teens. And just as a reminder, this also includes the second stage of the tobacco advertising ban. So what are the key drivers for the resilient performance of our core out-of-home business? First of all, it's clearly the digitization of inventory and the clients' demand for more targeted and flexible solutions also via programmatic advertising. Programmatic share of national advertisers for Digital Out-of-Home was 49% in the full year 2022, and the share of data product has gone up by over 35% for the full year. Our clients want more digital out-of-home, and they wanted, including improved targeting features, and they are willing to pay for it because it works for them. End of 2022, our total public video products, including the new roadside screens has net reach of exactly 70% in the top 10 cities. So we have crossed the critical mark where our product, excluding any other digital out-of-home offerings in the market can work as a stand-alone campaign, is available on all relevant DSPs and trading desks, including Google DV360 since Q3 and is offering constantly more audience data and targeting features and increases based on our rollout plan and the general growth of audience reach and coverage across all target groups. Second key driver is the structure of our revenue sources. 2022, 62% of our segment revenues come from 59,750 local customers. They book for longer periods. Advertising is by far a smaller part of their P&L and therefore, more resilient and we constantly increase our sales force and sales activities to penetrate this large segment. That means extra OpEx investments that put our business on a more diversified basis. Like the digital out-of-home development, the local ad market development for us is still in an early stage, and there is so much more incremental potential that we can also grow in a more recession-like scenario when the ad market declines as in Q3 and Q4. And finally, we have more than 60% market share precise numbers are not yet published for 2022 by the out-of-home association in a fully consolidated market where advertisers can do out-of-home only with Ströer, but not without Ströer. According to Nielsen, the German out-of-home market was up 2% in 2022. Our Out-of-Home segment was up 13%. Of course, we are not immune against the current headwinds and have to fight hard as in Q4. The Dialog business has good momentum in tougher times due to a softer employment market, at the same time, the online market is really difficult and even global platforms struggle at the moment. But the mix of segments and the resilience on the digitization of our core business bring a lot of stability. Based on the strong market demand, we've not slowed down the pace of digitizing our infrastructure. On the long run, it would be not smart to reduce CapEx short term to optimize an individual quarter when you have the chance to grab market share. We are prepared for any situation where we have to tune down or even tune off development CapEx, but we didn't see the necessity in 2022 and have meanwhile, almost 1,900 roadside screens, complementing roughly 5,500 indoor public video screens parallel to a broader long-tail network. 2022 was also a year with some new products like more and more city towers where we leverage historic column locations or so-called video city windows in areas where that's the best way to unlock highly frequented inner city spots. Cities like Leipzig, Munich or Hanover have been high on our priority list to further expand our digital footprint, indoor as well as roadside. Cologne, Hamburg and Dusseldorf were more about fine-tuning the existing network and cracking some complicated approvals for top locations. [indiscernible] or Heidelberg were a good example for Tier 2 cities where we had a strong focus on the inner city areas to unlock the revenue potential of regional and local advertisers that focused historically on newspapers only. That context, it's also interesting to see how the discussion around the consumption of energy, sustainability and digital out-of-home has changed in the last... [Technical Difficulty]

Ladies and gentlemen, we apologize for the interruption. Please hold the line.

Again, it looks like we had some technical problems. I would continue or start again at Chart 14. In that context, it's also interesting to see how the discussion around consumption of energy, sustainability and digital out-of-home has changed in the last 3 to 4 months. Until mid of the year, there were many emotional symbolic decisions where and how to save energy quickly when Germany seem to face a tough winter. But then both advertisers and agencies as well as meanwhile politics and administration have a more fact-based view on the marketing and media ecosystem. And the study of 1 of the largest agency groups in Germany, service plant, Mediaplus, is eye opening. They have made a detailed analysis of the energy consumption of all media on a daily basis, including energy costs for printing, paper production, distribution of products, energy consumption of consumer devices, et cetera, to ultimately measure what it takes to generate 1,000 contacts for advertisers. The study is called Green GRP. The columns in the diagram show the carbon emissions in grams per channel for 1,000 ad contacts. And in the categories where we are present out-of-home and online and marginally ATV ad sales, the green colors show our performance as we use -- for instance, for digital out-of-home, more or less only renewable energy sources and compensate part of the carbon footprint of advertisers in our online businesses. Ultimately, there is no more sustainable medium than digital out-of-home in case you run it with green energy. Not everyone needs an own device. 1,000 share 1 large public screen instead of millions having devices or TVs for themselves. Printing is besides probably 1 of the most energy-intense production lines within the industry's digital out-of-home involves low paper. Digital out-of-home is managed once installed completely remote, no 1 must drive into inner cities or deliver newspapers or magazines to private households. Including the contribution to smart city concept, digital out-of-home can play a substantial role in reengineering the advertisers' universe a sustainable way and reducing advertisers' carbon footprint. Henning will talk in more detail about our segment performances, but I wanted to briefly speak about our noncore assets. We are fully committed to crystallize their value but money over timing. And in the environment in 2022 and probably also in the next 6 to 9 months was and is not ideal for thinking about disposals or monetizing assets. That said, the long-term development of Asam and Statista is extremely positive, and we don't value them on a quarterly basis. It's an opportunity that we will leverage in the right moment. And yes, 2022 was not an easy year for with Asam with less consumer confidence, increasing raw material prices, challenging logistics and inflation. But we used especially the second half of 2022 to refocus on the DACH region, reorganize our e-commerce business more towards the right balance of margin and growth and also fine-tune our international activities accordingly. That's the foundation for ongoing growth, but with significant margin improvements in 2023. We have top-performing beauty products with an excellent gross margin profile, have successfully shifted the business from telesales to e-commerce and retail and more than doubled the business over the last 5 years. And the start into 2023 seems to be in line with the historic CAGR. Statista had another fantastic year and a track record of more than quadrupling the business in the last 5 years and a CAGR in the 30s. At the same time, that means, of course, tough comps, especially in the first half of 2023. But the further globalization of both product and sales is fully on track. Our DOoHs KPIs continuously improved and the plans towards 2025 with 250 million sales is unchanged. The truly global company with the U.S. is the most important individual market with 22 million average monthly visits, we have more than twice as much traffic then you go for Gartner and therefore, a fantastic free lead generation for our sales team and the latest AI development and ChatGPT features open up completely new dimension for productivity gains of the platform in the long run. Over to Henning, who will share more details on our numbers.

Thank you very much, Christian, and welcome also from my side. Let us now walk through the key financials of fiscal '22. As Christian explained before, total revenue for the year came in at EUR 1.8 billion, so 9% higher compared with prior year. In absence of any major portfolio adjustments, organic growth was slightly higher, mainly due to the disposal of our Turkish online marketing business, [ SEM ] in the first half. Adjusted EBITDA increased by 5% from EUR 513 million to EUR 541 million, including an earnings decline in our Digital and Dialog segment, while the EBITDA adjusted in our out-of-home segment increased by more than 10%. Exceptional items stood at plus EUR 0.8 million significantly below prior year's level of minus EUR 5.9 million. The main adjustment components have been the positive earnings effect from releasing stock option accruals and the profitable divestment of our Turkish entity SEM. These effects were compensated by one-off costs from restructurings and the complete impairment of the carrying amount of a noncontrolling investment in the call center space recognized in the fourth quarter. Accordingly, reported EBITDA came in at EUR 542 million. Depreciation and amortization for the full year declined slightly from EUR 310 million to EUR 304 million, mainly due to declining D&A from capitalized purchase price allocations after the turnon write-down of the respective underlying assets as well as higher impairments in '21. And that were partly offset by higher capitalizations driven by growing business volume in '22. Due to this, EBIT increased from EUR 197 million to EUR 239 million or by 21%. The financial result improved slightly from EUR 29 million to EUR 28 million due to the recognition of an unexpected interest income from an already fully written down vendor loan. Underlying financial expenses for drawn credit facilities and promissory bills increased by roughly EUR 2 million. This fueled EBT, which increased by some 25% to EUR 211 million against EUR 169 million in 2021. The tax result declined significantly from minus EUR 38 million to minus EUR 59 million. This is mainly due to a higher tax base as well as a higher tax rate. The tax rate increased to roughly 28%, in particular, due to better-than-anticipated earnings outside the out-of-home segment. As a reminder, in our out-of-home business, we are subject to comparably lower municipal trade tax rates. Besides that, we had higher impairments for tax loss carryforwards at Statista, which is not part of the consolidated tax group. These tax loss carryforwards can be used without any limitation. However, according to IFRS, may not be recognized as tax credit in the P&L until Statista delivers sustainable positive taxable income. All in all, reported net income increased by 17% from EUR 130 million in '21 to EUR 152 million in '22. As only significantly lower adjustment effects needed to be accounted for, but net adjusted income was broadly flat at EUR 172 million. Let us now have a brief look on the Q4 '22 developments. Against tough prior year comps and within an increasingly challenging market environment, revenues in the fourth quarter '22 were basically flat at EUR 526 million compared to the prior year. Following a sales decline in our businesses with some cyclical exposure to the ad market, EBITDA adjusted came in some EUR 7 million lower than in prior year's Q4. Exceptional items were minus EUR 4.6 million and relate mainly to the already mentioned impairment of a noncontrolling investment. Depreciation and amortization were up from EUR 79 million to EUR 84 million in the quarter mainly driven by the increase in underlying investments compared to the prior year and partly compensated by expiring depreciation on PPA assets, as described earlier. With that, EBIT came in at EUR 99 million after EUR 115 million in last year's Q4. The decline in the Q4 financial result reflects higher net debt as well as a rising short-term interest rates and an effect of around EUR 1 million from prematurely replacing our old facility agreement. The tax result and especially the tax rate development are ultimately a consequence of what I just described for the full year. So all in all, net income adjusted declined from EUR 87 million to EUR 67 million. Moving over on to the cash flow development. Altogether, we see a quite stable operating cash flow in an overall more challenging business context towards the end of the year. Thereby, the operating cash flow included higher tax expenses from a catch-up effect which we already discussed during our Q3 call. Cash out from working capital includes a further expansion at our high-growth assets, ASAM and Statista as well as the strong sales dynamics in our Dialog business. Let me point out that the working capital position in our out-of-home segment is broadly stable compared to the prior year. In addition, the position Others declined to minus EUR 16 million due to the adjustment on items like changes in provisions and equity accounted investments as well as the noncash release of accruals for the stock option plan over the past year. So all in, operating cash flow stood at EUR 411 million compared to EUR 426 million in '21. As already mentioned before, cash out from non-M&A investments was with EUR 163 million and an increase of more than EUR 60 million compared to '21 on a record high level and reflects, in particular, the continued expansion of our digital roadside and public video portfolio as well as the purchase of our headquarters building here in Cologne in the third quarter. All in all, free cash flow before M&A went down from EUR 325 million in prior year to EUR 248 million in '22. Increased IFRS 16 repayments, especially in Q4 '22, mainly due to some higher payments from minimum lease obligations as well as some phasing effects and finally led to a free cash flow adjusted of EUR 50 million after EUR 147 million in the prior year. Net debt year-on-year was up by EUR 106 million including EUR 50 million free cash flow generation before M&A and net cash in of EUR 14 million from acquisitions and divestments, some EUR 137 million for dividends and EUR 26 million for the share buyback and as well as EUR 7 million from the purchase of minorities and transaction expenses for the new facility agreement. Looking at the sequential development from Q3 into Q4, net debt was down by EUR 22 million including the mentioned expenses for the share buyback and underlining again, the very cash generative nature of Q4. The bank leverage ratio remained stable at 2.2x. Let me now talk you through the performance of the individual segments, starting with Out-of-Home Media. Out-of-Home delivered strong sales and earnings growth despite an increasingly tough market environment in the second half. Sales were up by 12.9% to EUR 791 million. When taking out sales from classical tobacco advertising, which has banned since beginning of '22, growth even amounted to 16%. Also EBITDA adjusted showed double-digit growth to EUR 373 million. Almost 2/3 of the growth came from Digital Out-of-Home, which accounted for 30% of sales. A good quarter of the growth was generated from classic. However, looking at the development of the year, it was a story of 2 different halves. The first half was still characterized by strong recovery from the pandemic, while the second half faced an overall declining advertising market trends. What the 2 halves have in common, though, is the outperformance of our out-of-home business which even accelerated help by the strong resilience of our local SME business, also in particular when times were getting tougher during the year, as Christian already described. Looking at Q4, which was quite a strong quarter last year. The top line was flat if you take out last year's tobacco ad sales. EBITDA came down from EUR 141 million to EUR 127 million, also reflecting some cyclical decline in the high-margin national account business and some support for our external glowing service providers. On a full year basis, our Digital and Dialog Media segment continued to show slight growth with revenues increasing to EUR 744 million. Thereby, the Dialog business delivered remarkable 17% growth and thus more than compensated for the sales decline in digital. Given the higher operating leverage of digital, however, earnings declined by EUR 10 million to EUR 178 million. The digital ad business could not escape a generally worsening trend for the category as a whole as general news traffic declined from peak levels during COVID at the beginning of the war and advertisers were increasingly reducing their spend throughout the second half. Keeping things into perspective. On the other hand, it is worth noting that our sales level here is still very healthy above the 2020 level and this despite losing some EUR 9 million sales in the second half of '22 from the disposal of our low-margin Turkish activities. Looking at the Q4 performance of the segment, we see despite a stronger sales decline in digital than in the first 9 months that EBITDA was slightly up. This is reflecting good margin and cost control in Digital as well as a very strong year in trading in Dialog and here in particular at our door-to-door marketing activities. Finally, let us have a look into our Data as a Service and e-commerce segment, comprising Statista and Asam. Sales for the full year were up by almost 22% and reached EUR 294 million. With around 34% growth, Statista was the main contributor to this strong development, exceeding also our own expectations. There was some tailwind from a stronger dollar, but even excluding this effect, growth was very healthy with 27%. Asam's revenues were up by 13% to EUR 158 million, thereby even showing some acceleration in Q4 driven by a sound Christmas business and an overall declining German e-commerce market. Segment EBITDA adjusted was slightly down for the full year, whereas the fourth quarter showed some traction with an earnings improvement, which is also our target for the current fiscal year. In fiscal year 2022, we successfully refinanced a total volume of more than EUR 850 million and thereby optimize the maturity profile of our financial debt. In May last year, we launched our first ESG-linked note loan with a total volume of EUR 203 million divided into 3 maturity tranches of 3, 5 and 7 years. In early December, we closed our new revolving credit facility agreement with a total volume of EUR 650 million and a tenor of 5 plus 1 plus 1. We are supported by a strong syndicate of national and international banks. With the successful implementation of our refinancing, we can continue our profitable organic growth, of course, out of a strengthened position. Just before I hand you over back to Christian, let me summarize the developments of the fourth quarter from a financial perspective. We have seen a strong operational performance in Out-of-Home, especially when compared to other media types. This against the market environment characterized by uncertainty and retained consumer spending in Q4. We have seen some burden in the Digital and Dialog segment from slowing demand for programmatic online ad spend. At the same time, the Dialog activities did not show any signs of demand slowdown, but the opposite, also demonstrating the defensive quality of our portfolio. Our high-growth assets, Statista and Asam go from strength to strength, developed expectedly at a slightly lower pace at the end of the year, but with better earnings. So all in all, our operations across all different sectors show sustainable relative strength at a time of macro uncertainty, but now better visibility regarding '23 than at our Q3 results call. Our debt maturity profile is optimized and our leverage ratio provides sufficient headroom. So I think we are well prepared not only to gain share based on our strong market position, but also to maneuver what future will bring. Talking about the future, I will hand you back over to Christian for some closing remarks and our outlook.

Based on trading in January and February as well as the trajectory of the order book for March, we expect that Q1 sales will show mid-single-digit organic revenue growth for the group and also for our Out-of-Home business. Parallel, we see the German ad market, and we mentioned before the current trends that Nielsen showed for January, February looks the same. So for that ad market declining high single digit, and therefore, Ströer outperforming the market by 10 to 15 points in Q1. Given the macro environment-driven market volatility in the last quarters, we will specify in more details the growth expectations for the rest of the year and in the Q1 earnings call. And that's not a sign of being not confident what might come, but it's just too much change in the market in both directions. You see our structural growth drivers unchanged, and I think that's the most important point, the digitization of Out-of-Home, the sustainably growing SME business backbone, our good client access via the PLUS businesses and the value growth of our noncore assets. But increasing energy and labor costs, of course, require tight steering at the moment on a monthly basis. Let me now close the presentation with looking at our financial calendar for 2023. The publication of our annual report 2022 is on the 30th of March. On May 11, we will publish our Q1 figures. Our AGM will take place on July 5, followed by the presentation of our H1 figures in August. And in November, on the 9th, we will update you on the Q3 performance. As always, further dates can be found in our financial calendar on our Investor Relations website. Thank you, everyone, and we are now happy to take your questions.

[Operator Instructions] We have the first question from Chris Johnen from HSBC.

And I would like to do them one by one, if possible. First, I'd like to pick your brain on the potential introduction of a high-fat sugar and salt advertising ban in Germany. Just to -- maybe you can give us a bit of color as to, let's say, what percentage of your advertiser base would fall into that category. I know you're already having like a certain type of ban around schools and stuff with respect to your Out-of-Home product. But yes, I'd be happy to get any sort of color on that, that would be helpful.

Chris. Well, I would say I think the answer is difficult because what you have at the moment officially is quite vague information. I think yesterday or today, there was a potential list leaked from the ministry that included even bread and milk. So I think the discussions here are very broad still. And I think there is no proper consensus in the government that ultimately needs to put those things forward what the right direction is. I think in general, out-of-home specifically was not mentioned, I think, in the drop so far. Secondly, as you said, we already have for alcohol and other things that are critical for especially younger target groups or kids, we have specific ban miles around kindergarten schools and so on. So I think there is -- whatever happens, there is a way to work around that. On top, I would say, yes, I mean, our business is extremely diversified. So I would say the kind of topics that are currently discussed or more or less non-existing in our regional and local business. And I would say the share within our national business, the max share is maybe 8% to 10% out of 40%. So we talk about the max, max, max 4, 5 percentage points, but that is already a view when you say what is food in general. And I think -- that would also mean brands can still be advertised. And it's forbidden to advertise products where the sugar level is, I don't know, above X, Y, Z, then you could still have a light version of a product and advertise for that. That's why I think what might happen is really unclear. I think it will be a longer process, and there will be a broader discussion around it. But nothing, I think, that we have currently has a huge short or midterm risk, the volume would be also to smooth. But it's somehow that fits into a couple of discussions we have in Germany in the last couple of years. It looks like the government knows everything better than the economy and the free market. Also the government struggles to fix all the areas where they are in charge. But that's maybe a separate discussion.

I think there's a misunderstanding. There is no ban for sugar-related products from Kindergarten whatever. This doesn't exist. So the discussion is now if there would be a ban for this, let's say, sugar product, then it would be around kindergarten and schools. But right now, there's nothing in place. So there is also an upside for us if this ban, which cost would come now for electronic media, like TV, for example, radio, et cetera, where we'll be ban during the whole day. There is definitely also an upside for out-of-home. Because most likely, if the whole thing will be established at the end, we're going to see these ban around kindergarten and schools. But this is -- we had that for tobacco for 20 years. In reality it [ didn't ] affect all our turnover in tobacco, for example. So for us, we are totally relaxed here.

That's very clear. Second question on Asam and Statista, so the segment as a whole, I guess, consensus still expect for -- or for this year for 2023, some 50% EBITDA growth. And yet when you look at the performance over the years, there's been a clear prioritization of top line growth versus profitability as the margin has sort of declined for the past 4 years. I'm just curious, I know you haven't given a specific guidance, but maybe there is any sort of color you could give as to the trade-off this year growth versus profitability so that maybe we have a bit of a better idea as to what you expect on the EBITDA for that segment?

Thank you, Chris. I mean, first of all, I think we don't see any big conflict of growing and improving earnings. Simply, I think we have to see that both assets in the meantime, have also reached some critical mass. So there is now a phase where we will be better on leveraging our fixed cost base. And so this is why we believe that we can grow earnings this year. I don't want to go into too much detail in terms of the size of the improvement. But clearly, the target is that we want to see a turnaround in earnings, probably more at the second half of the year than the first. But in general, we are quite positive that we can now come into a phase of earnings getting better traction.

Okay. That's clear. And...

Also maybe to add 1 comment, also helped by what Christian described within Asam, we have been quite busy, also refocusing the business, clearly on the DACH region, we believe that here say, in Germany, Austria, Switzerland, there's still so much to do, so much market share to tap. And also, as Christian said, we are reconfiguring the e-commerce business, which is a very difficult thing to do in order to maintain both good sales traction and proper margins at the same time.

Clear. One more follow-up on Statista, though. I mean, just is there -- what should we know with respect to, let's say, pricing in 2023 because the -- I mean it is facing increasingly tougher comps, but I think you did a pricing round, but I don't know the 100% sure about the scope across the entire footprint. And so maybe you could give us a bit more color as to how we should think about the top line development for Statista this year?

Yes. I think as always, I think normally, we increased prices by roughly between -- in the range of 8% to 15% because the product in itself also gets broader and we offer more and more content to clients. Nevertheless, there's always client individual pricing underneath. So how long do clients commit. And it's a subscription model over time. So you're operating in general on an overall run rate where, I would say, the changes are not that dramatic. I think our -- for us, the most important point is that we broadened the footprint, bring in more international global sales. We also started with a dedicated team for global key accounts. So far, we've been focusing on countries and regions and then indirectly acquiring global accounts. So with now also a team in New York and London, focusing specifically on the headquarters of like Fortune 500 companies. So I think that's the most important point at the moment. But I think the historic growth rates are ambitious that that's where -- what the company has always do.

What we need to have a look at though is what the dollar will do a little bit, right? Chris, I think we had some sort of tailwinds in the second half of last year. Right now, I think we are more or less neutral compared to the first quarter, but there might be some headwind if you look where the dollar is now, where the most last year in the second half. But operationally, as you can imagine, we are really looking at the sort of organic performance, stripping out currency effect.

The next question comes from Craig Abbott from Kepler.

First question I have is just looking at the continued weakness in online ad sales in general across the industry. I'd like to get your view, please, on how much of that you think is really just the first real cyclical downturn we're seeing in online advertising. Or how much of this may be a bit more structural in nature? And if you could give us any color on what kind of trends you're seeing there in Q1 that would be -- very helpful. I still have a second question, if you don't mind, after that one.

Craig, thanks for your question. Well, I think it's an interesting point. especially when you see that also companies like Alphabet or Meta are struggling at the moment with sometimes even to deliver any growth at all. I think that I would say there's 3 aspects. The first 1 is, clearly, we are running in parts still with the online business in total against COVID numbers... [Technical Difficulty]

Ladies and gentlemen, there is another technical issue. So please hold the line. We apologize.

[indiscernible] phone bill, it makes me a bit nervous that we get cut off constantly, but we are working on it. Back to your question, Craig. So there is that comps point where I just think throughout this year. In general, we have a more normalized base. I would say, secondly, yes, there is cyclicality in there. I think the third point is more maybe also based on the COVID bounce back that I think there was almost an undoubted and unquestioned development towards anything that was digital. And I think a lot of those things get questioned at the moment again. And I think that's also what the global platform see. So I think going forward, I don't think that there is, in general, a structural problem, but you will see probably that it's getting tougher for everyone that just is big globally. And I think it's also tougher for someone that doesn't bring anything to the table. But that's why the development going forward might be more diversified than in the past. I think what we see at the moment, and I think that the January numbers were really bad for the market. When I look at our business, I would say the low point has been some time in Q4, maybe October, November. And the first quarter already looks better than the 2 quarters before. Not -- I think it's not realistic that we get to last year level because Q1 was really strong. But if you look at Q3 and Q4, where we've been versus prior year, I think you will see that we get closer and closer to historic levels. So my feeling is end of March, beginning of April might be the point when our -- that business will grow again. And yes, I think it's a mixture. The relative performance is a mixture of COVID cyclicality or post-COVID comps cyclicality. And here and there are also some structural shifts, but maybe more within the category in the long run.

Okay. That's very helpful. My second question is turning to staying within the Digital and Dialog division. I mean, obviously, we saw the very good operational EBITDA result in the fourth quarter. You mentioned that was driven by the strong performance in Dialog. Obviously a pleasing result, but that was quite an increase in the EBITDA, which I think was a positive surprise for many of us considering that traditionally, the margin has been much higher on your digital sales. So I just wondered if you could add a little bit more color on just what was driving that? And then how sustainable that might be if we continue to see similar trends.

I think in general, we've been working in the last, I would say, 18 to 24 months on bringing more and more of our contact center people into nearshore locations following the increase of the minimum wage in Germany. And as always, when you open up locations outside of Germany, it takes a little while to ramp it up, then you need to step-by-step shift resources that you have for clients to those locations. And I think that gets, in general, nice traction. I think that is 1 aspect. And the other 1 is I would say almost different to the developments that you, for instance, see on digital performance marketing. I think that what we do in that direct marketing really works. It's sustainable. It delivers sales results and it feels like meanwhile, at costs that are relative to online performance activities maybe something that is more attractive to clients. That's what we see in general that advertisers for the first time really question if their paid search strategy is the right one. They really question if all performance marketing also on Facebook allocated the right way and what alternatives are? And I think talking directly to existing customers doing cross upselling, using direct marketing initiatives that we have in that Dialog segment is, I think, just something that is benefiting almost against the development of the digital market segment that you see.

Maybe some sort of technical hint. I mean, as you know, within the digital ad business, in fact 2 components of the stuff which we sell from the own properties, so like T-Online, which is very high margin and then the sort of lower margin wholesale app business. And if you look at the decline, the decline takes place at a stronger stage at our own assets, obviously not help with the margin and the other way around. And there's probably some little bit of headroom that we can apply in terms of how we manage the sales. And secondly, call center wise, I also indicated that there was quite a positive EBITDA effect from -- in particular, the door-to-door business, which sold very strongly telco products and that gave some sort of very good impact on the profit in the fourth quarter. And if you look at it today, now, we don't see any signs of slowdown in the dynamics of that business.

The next question comes from Julien Roch from Barclays.

Yes. The first 1 is on Statista and Asam. Could we have an update on the monetization of those 2 assets. Time -- is there any change in timing? Are you active talking to people? Do you feel that the price of those assets has evolved? That's my first question. The second 1 for Henning. Could we get some indication or guidance for CapEx, working capital, tax rate and interest for 2023. And then the last 1 is on M&A. You sold the small business in Turkey last year, you bought some minorities. What are your plans for 2023? Still a few small deals, something bigger? Any color there would be great.

Thanks, Julien. I would take question number 1 and 3 on Statista and Asam. I think just looking a little bit back, originally, we had Asam on our mind for Q3, Q4 last year. We've been preparing ourselves and the assets for a potential process. I mean the overall M&A market was more or less hardly existing. So I would say we are prepared because of the work we've done by 80%, 90% to go into a potential process any time. But at the moment, we have no concrete plans because we see that, yes, the M&A market maybe picks up a little bit, but it's very difficult to predict anything. And I think we have no pressure, so it wouldn't make sense to do anything unless the overall M&A market and valuations are really robust. So we also had no focus on talking to external parties. Yes, in general, I think there is interest. We get feedback here and there, but we have not really focusing on discussing current valuations. And I think it's the same in the case of Statista. There we always said we look at revenues beyond EUR 200 million before we see realistically the right moment for monetization. So I think that won't happen before end of 2024. So -- the company is very well organized. So whatever we do, we can always act relatively quickly. But I think at the moment, we really concentrate on doing our homework and developing the businesses, and we wait until the external environment is a more stable one. And yes, then we -- I think on the M&A, in general, yes, we -- there's nothing that we have planned. I mean we are always opportunistic if really interesting bolt-on acquisition might pop up here and there, but it would be really small, opportunistic. And at the moment, we don't see anything. We don't have anything in our pipeline. So realistically, at least that's our plans, M&A is nothing we have on our list either way for 2023.

And then coming to your question a bit of indication on some of the cash flow components. I would say if you look at CapEx and interest together, I would probably expect sort of the same cash outflow in '23 as we had in '22, meaning that I think we believe that CapEx is probably coming down by some EUR 20 million. We have this kind of special one-off buying in the headquarters here. Also, we were sort of fine-tuning a little bit the expansion path in digital out-of-home. And clearly, we have to expect like probably EUR 50 million -- more like EUR 20 million higher interest rate expenses. And in terms of the tax rate, for the time being, I would still work with like 27%, 28% as a guidance. But at the same time, I think it's not unlikely that cash-out for taxes will be higher this year than the cash cost. Also because we had some, let's say, the postponement of payments, again, some opportunity that we used in '22, where we shifted payments into '23. That was part of the government sort of measures against the energy crisis that was under radar by the end of last year. On working capital, I think that is kind of, to be very fair, it's very hard sort of to forecast that. Of course, we're trying to do everything we can to have a better situation in the current fiscal year than we had last year where we had like EUR 30 million, EUR 40 million cash-out. But in the end, to be very open dependent very much on the sort of business dynamics, in particular in the second half of the year.

Then we go to the next question, which is from Nizla Naizer from Deutsche Bank.

I have 2 questions from my end. The first is on the decline in Classic Out-of-Home in Q4. Could you maybe give us some color as to what the scope of declines were in the national customer base versus the performance of the local and regional customers. And second, I guess, related to that is what sort of conversations are you now having with your national scale clients. Are they still holding back on spending when it comes to out-of-home? Or has that tone changed from maybe 3 months ago, similar to maybe what we're hearing in some other markets, given that the macro expectation doesn't seem to be as bad as we anticipated going into 2023? Any color you can give us there would be great, even by sector, if that's possible.

I would say the Q4 development there was, again, as in almost in every quarter, the tobacco impact. Other than that, there were no specific tendencies here. It was lower demand throughout the total market. I think entertainment was relatively good. That was the only positive exception. We had more new streamers that went to Germany with Paramount and Disney was doing more. Other than that, I would say, all others were spending rather cautious in Q4. So no sector-driven development similar to the overall ad market. Regarding Q1 and the rest of the year, I mean, I think we've just finished week 8. And to be really honest, if you would have asked me end of October last year, what Q1 might look like? My really honest answer would have been, I think, Q1 will probably be the low point of the whole development because you could see from Q3 to Q4, it got worse and the overall sentiment was very, very negative to Q1. So what we've seen surprisingly, that it looks like Q4 and even there, maybe for the mid of Q4 was the low point of the development. And Q1 shows good dynamics. That's why I would say on the basis of the annual commitments that we have, there is nothing that looks in a way, negative. I mean you never know what clients ultimately do and where they log in within their commitments. But that all looks reasonable. We only had during the annual negotiations, 1 client who canceled the whole advertising budget for like 6 months, but that was the exception that you always have here and there. And funny enough, they already came back for Q2 now. That's why I would say it's very early. That's why we don't want to be too positive too early because the other way around, we've seen last year, with the war with the inflation, with supply chain problems that there are so many things that you don't know because you don't know them. But at the moment, the order book doesn't show anything else than what we see in Q1. And again, from the general logical view on the business, I would say that the comps get [ easier ] and easier throughout the year and especially the second half is, I would say, a base performance from 2022, that is easy to beat. And the other way around, my original feeling was that January and February might be the toughest month to beat because that was prewar and then there were some tactical ad cancellations right after the Russian invasion. So yes, at the moment, it all looks quite stable. And I think it's more the experiences from the last almost 3 years with pandemic and lockdown and next mutation and war and so on that you almost expect that there will be problems that you don't see right now. But that is the only reason why we say, let at the moment, look at the quarter-by-quarter. That's how we optimize it. We still have homework to do on inflation, on energy costs, on minimum wages and so on. So nothing is a home run here, just to be clear. But I would say the general development looks really good. And I think what we see as very positive is our development versus the sentiment that we get at least from other local player in the German ad market. It looks like the out-of-home business or our business is recovering faster or has less challenges and is again in growth mode while others are still somewhere in the middle of going significantly backwards. But that's where we are at the moment.

And we also see that the beginning of the year in January, in 2023, very anchorage for us, especially in the light of the fading out of the pandemic effects. Don't forget in '21, for example, you had a very strong TV development. Many people thought there's a recovery of TV, but pandemic changed completely media consumption and changed also spending behavior. And if we see now the results of the overall market in Q1 where we see a decline high single digit. And when you see the Q1 results, you're also going to see these effects in our -- the balance sheets of our competitors, we are very encouraged by the development what we see for digital out-of-home and for out-of-home in general. And if you look back also last 2 years, you had corona crisis, war, inflation, the interest hikes and tobacco ban. So the resilience of our business for the last 2 years is quite impressive from our point of view, and we see the same going into 2023 where we're going to see a normalization of the structural effect of the overall media market more than the last 2 years. I think at the end of the year, it will be much more clear where we see structural growth and where we see a structural decline in the EBITDA business.

Super helpful. Can I just ask you to remind us again what was the absolute tobacco impact in 2022 and Q4, please?

I think total number was probably around on EUR 15 million, 1-5. So it's like EUR 22 million Classic that we lost, that were compensated by EUR 7 million in e-cigarettes or heaters. So the net loss was EUR 15 million. And I think in Q4, it was around EUR 3 million, I would say. A little bit less than in the first half of the year -- the second half. To be fair, I don't have at the top of my , but you can square it from Chart 21, where we give both growth rates. So able to map it out.

The next question comes from Simon Keller from Hauck Aufhäuser Investment Bank.

First, again, on the Digital and Dialog segment profitability in Q4. You answered on that before already. But with the explanation you gave, should we now expect to see similar margins for Digital and for Dialog? And the second question on CapEx. How much roughly belongs to the Out-of-Home rollout of the digital screen.

Okay, Simon, good question. I gave some light on the development in Q4, as you said, but I will refrain from sort of giving the guidance what we expect in terms of margins for individual segments. I just wanted to point out the sort of self-help mechanics that are also a function of the portfolio diversification that we have. Obviously, our best scenario is that margins go up, and we see growth, let's say, in Dialog and in the digital app business as well. But at this point of time, I would not give any specific outlook for what we expect in terms of earnings. Also in light of what Christian just described, the Q1, so sort of pretty tough base, especially for the digital part in that segment. And CapEx, I would say, based on the rollout roughly a little bit less than 40% of the Out-of-Home infrastructure CapEx spend into Digital expansions. We still have a very broad portfolio. So there is stuff going into classic maintenance renewal of contracts that's more or less ongoing and rolling. But I would say that it be 38%, 39%, something in that range as share for digital expansion.

Okay. Just with a short follow-up on the Digital and Dialog. So between the 2, yes, that -- I mean, was it clear that the margin development between the 2 segments? Or the -- is Digital, the same margin as Dialog roughly? .

No. So I mean, we've disclosed the numbers historically I think at our Capital Markets Day. So just giving you rough ranges also when you look at peers, I think top class global BPOs or Dialog businesses get margin profile between 15% and SKs 17%, 18%. So with our Dialog business, we are at the upper end of that, like top class corridor. Our Digital business in total is probably around 28%. It could have been during the pandemic, close to 30%. I think it was historically rather 28%. That, again, a combination of proprietary publishing business, which we fully control, where we run the platform like t-online, like Watson like GIGA, where the margin profile is probably up to 50%, depending on the asset or even beyond, if it's a small profitable vertical. The ad sales business that we do, that's something where we only do the monetization where pick up a specific commission there, the margin profile is rather between 10% and 15% roughly. So different margin profile, the difference is probably 10, 11 points between Digital and Dialog. But if you look into Digital, there is parts of Digital that is even a bit lower than Dialog.

Next question comes from Marcus Diebel from JPMorgan.

Question -- 1 question, you can comment on, on volume and growth, yes, in the outdoor business. I know it's a bit of an art. It's not easy given that they are sort of interlinked. Just trying to find out for '23, given you're still aspirational plans to roll out more screens. What would you say is just a component of volume growth that you sort of get on in '23, that would be maybe interesting. And then 1 question for Henning. I mean first of all, great that the difference between EBITDA and adjusted EBITDA is now low. I think that's very helpful. So thank you for that. The question is on leasing expenses. Yes. So if you could also give us the cash effect of leasing. I think that's the key one to look for and the cash flow bridge.

On the first question, as you say, I don't know if it's science or arts, difficult to say. But just technically, we have -- if I just look at the premium screens that's a really relevant 1 because the monetizing long-tail inventory, smaller screens, point of sale is, I don't know, less than 5% of the Digital Out-of-Home business. So ultimately, we have let's say, 7,500 screens with 2 square meters and bigger, that's premium roadside products, and we add, let's assume 500, maybe 600 or 550 on top, you talk about 6%, 7% expansion of the network, just by means of volume. That said...

More in revenue terms, if that's okay. If there's anything to -- obviously, I've seen the slide, but more in terms of like what could be the revenue impact of this rollout, which is obviously a bit harder, I guess.

Yes, if you just look at the volume, that's why it's just -- and if it's the pure volume, it's 6% to 7%, but you digitize top down. So screen numbers, 7,501 doesn't have the revenue potential of the first screen because you pick the best locations first. So realistically, I would say out of the 7% that you increase in volume, you generate best case 5% growth that comes by more inventory. The rest is organic growth on the existing infrastructure. And if you -- under normal terms, would assume you're able to grow 15% with that business. The that's driven by 5% expansion of the network and 10% organic growth on the -- or the yielding of the existing inventory.

Okay. Perfect.

And Marcus, you on the leasing payments. As you know, I mean, we met them out to the cash sort of cash effect on Page 20 as part of our sort of cash flow statement. And if you obviously look back over the last 2 years, I think there have been some distortion also from achieved postponement with negotiations with municipalities in the course of the pandemic and so on. So what I -- what we see now behind the increase from '21 into '22 is 2 effects. One is that in 1 of the other contracts, we sometimes adjust the minimum lease payments and then need to be accounted for under IFRS and also lead them to a higher number in this context and the rest is postponement. So I think sort of a mid-single-digit million euro effect would be from adjusted minimum payments and the rest would be postponement. So that I believe that what we see now there in terms of the EUR 198 million should be more or less also the working assumption for the coming year.

The next question comes from [indiscernible].

Can you elaborate a bit on the drivers behind the slowdown of Digital Out-of-Home in the fourth quarter? Did the discussions about potential dark greens play any role in that slowdown? How do you see it? And a bit about the share of national accounts and Digital Out-of-Home, I presume it's substantially larger than the overall business. And well, in that kind is probably a bit more in terms of growth rates we should a TV growth advertising growth rates plus a certain outperformance certainly. And what are you -- how are you looking at that business in terms of the spread between -- the drivers of the spread between EV growth and Digital Out-of-Home growth. A bit more light on that one.

[indiscernible], what I have to say, the Q4 result was not impacted by the electricity discussions. I think it was end of August or beginning of September, discussions with advertisers if they can be sure that they get the airtime that they want, that was like 1 or 2 weeks around, okay, we need to be reassured what's possible in Q4, but the development there was clearly demand driven. And I think it's a video product. That's how we've positioned it in the market. So the weak -- so if the TV market is so bad, as in Q4, of course, TV stations give discounts. So I think the competitive environment has made it difficult to grow to make sure that the digital out-of-home business can grow even faster. But if you look again, at the performance of digital out-of-home versus the market, it was like 20% or more than 20% better than the ad market. So that just says that it shows the relative potential of the product. That said, in under normal conditions, let's say, normal in Germany is that the ad market grows very low single digit, 1%, 2%, that what we've seen over the 3, 4 years before the pandemic. I think digital out-of-home has a growth potential of 15% to 20%. The majority of the growth of that product clearly comes from national advertisers. You're right there, I would say, the share is 75%. If you look at it the other way around, national advertisers spent, meanwhile, and that's our prediction for 2023, slightly more than half of their out-of-home money in digital out-of-home, which is quite positive for us because that's where the highest margin is. And you see that the -- this is happening as a part of the structural challenges of the in the media landscape because national advertisers, they ultimately allocate the money where the eyeballs are. And structurally, the eyeballs in television, print media, even radio meanwhile, go backwards. And I think what we do by means of free inventory, more mass mobility, more screens out there. We offer more and more inventory to spend that money that may be no longer allocated in the same way in other channels. And that's, I think, where the growth comes from. I personally don't see that, that long-term trend is changing. It looks like that -- the pandemic was a little extra positive kicker for broadcasting television and now it's going faster backwards than before. I think print is an ongoing development that gets maybe also accelerated now by the printing costs and electricity costs. I mean that hits especially regional newspapers very hard and difficult to say what happens beyond the next 5 years, but I would say that trend that you could also observe before the pandemic, now just continuing. And I would say, digital out-of-home outperforming the ad market by 15 points is something that is our target. And besides the classic out-of-home still growing low to mid-single digit. That's what we said before the pandemic. That's what we say for the midterm plans. And I think the current development of the ad market show that the relative development of our businesses are going exactly in that direction. Unfortunately, the overall market is a bit more challenged now. But at least Q1 feels like we are getting more back into the direction that I've just described.

Interesting new aspects under the carbon footprint of advertising campaign. So we believe that this is going to play a much bigger role in the foreseeable future. And there, we're actually very, very good positions with out-of-home and the digital out-of-home. So the digital out-of-home, we see 0.007 gram carbon per contact. And if you look to other classical media [ is some 0.4 gram ], in [indiscernible] 11 gram in advertising per contact. So I mean, I would not be surprised if in the future besides the traditional key KPIs reach and cost per thousand eyeballs footprint will be 1 of the key KPIs for the efficiency of campaigns. And there's -- we don't know now how strong this is going to be. But we see that this is discussed more and more, and there is definitely a very interesting perspective also for out-of-home and for digital out-of-home.

Right. Regarding good positioning, also coming back on this chunk for discussion. It looks a bit like this is Ferrero would be the poster child of the company affected by this. And would it be fair to say that well, Ferrero -- while a client which is disproportionately has a smaller share in your business than in the overall market, where it's the second largest advertiser?

Yes, absolutely. I think their Head of Media,[indiscernible], we have -- I personally have battled with him because he is spending all of his money still in television, like in the 80s or 90s . So -- if you look at the media mix of [indiscernible], maybe 1 day, he will listen to our calls. But so he would say, "Yes, I know you tell me all the time, he spent 90% of this money in television, like in the '80s". Yes,and he does digital out-of-home here and there when he gets completely frustrated with inflation rates and television. But I think -- I personally think he has made strategic mistakes, yes. So for the good -- there is nothing or not that much to lose at the moment for us.

The opposite -- opposite, I mean, definitely, we would see much more ad money from his side, in case there's a lot we come through. That's what I already said before. I mean, don't forget, we have a tobacco ban restrictions for -- tobacco ban in all other media and restrictions on out-of-home -- and we benefited from that about 30 years, I think. So we are more -- we are generally against advertising bans. But commercially, it's more likely that we're going to benefit from that than anything else.

[Operator Instructions] It seems to be no further questions, and I hand back for closing comments.

Thank you very much for your time, all the questions. We hope you also had a good start into the year and looking forward to see you soon.

Take care. Bye-bye.

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