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

Dear ladies and gentlemen, dear analysts, let me welcome you to our call on our Q4 and preliminary full year results for 2022. As in previous calls, I will start into our presentation with a brief overview of the key figures for the past period, followed by comments on the most important strategic topics of the last year, and what trends and developments we see at the moment. Andy will then present the figures for the financial year and the fourth quarter. This will be followed by an initial outlook for the 2024 financial year and the developments we see, especially for the quarter. Afterwards, we are looking forward to your questions. As a courtesy, I'd like to briefly note that all fiscal 2023 figures are preliminary and unaudited. With that, let me start the call with a short overview of fiscal 2023. When we look at the development for 2023 as a whole, we were able to increase our group sales by 8% from EUR 1.772 billion to EUR 1.914 billion. Organic growth was with 7.5% more or less on a similar level. Adjusted EBITDA increased by 5% from EUR 541 million to EUR 569 million, slightly under proportionate when compared with the strong revenue development due to cost increases like for electricity, external service providers and labor. EBIT adjusted was with EUR 266 million, on the same level as at the end of previous year despite G&A having decreased by 7%, reflecting the investment, especially the accelerated ramp-up of our digital out-of-home portfolio in the last 2 or 3 years. Net income adjusted for the year 2023 came in at EUR 143 million compared with EUR 172 million in 2022 due to higher interest, which we have discussed in the calls throughout the year. In contrast, we were able to significantly increase free cash flow adjusted by 60% from EUR 50 million in 2022 to EUR 81 million in 2023. Strong performance in the fourth quarter in particular, contributed to this positive development. We were able to increase quarter-over-quarter free cash flow adjusted by almost 80% in the fourth quarter and, as expected, significantly exceeded the previous year's figures. As planned, CapEx in 2023 was around EUR 30 million lower than in the previous year, reflecting a back-to-normal CapEx level for out-of-home and a stronger focus on fill rates than portfolio expansion. All in all, CapEx was EUR 129 million in 2023. Without preempting Henning's detailed comments on the results, I'd like to conclude the overview by mentioning our earnings per share, taking my brief remarks on the different effects of the year into account earnings per share adjusted for fiscal year 2023 came in at EUR 2.22 compared to EUR 2.88 for 2022. Looking at the development in the overall German advertising market last year, the gross numbers from Nielsen finally showed after a good Q4 and at least stable environment. According to Nielsen figures, which are gross numbers, our home advertising increased by 11%. The corresponding net number should be around 6% growth or roughly 10 points better than the net ad market. As a result, our total share of the overall ad market rose to a new historic high of 8.6%. Our development in net revenues, plus 8% for the group, plus 8% for our core out-of-home segment, and with plus 28% of digital out-of-home, we were able to accelerate the growth of H1 and the first 9 months even further. The developments are outstanding against the German ad market and even the global digital platforms from the U.S. don't show the dynamics of digital out-of-home at the moment. Most importantly, the organic growth of our out-of-home business in Q4 was at 13.6%, one of the best quarters for out-of-home we have had. Digital out-of-home was even above 30% growth in the last quarter 2023. So we have been outperforming the ad market by roughly 10 plus points. With digital out-of-home, we have [ parted ] from TikTok and Amazon retail, the most dynamic product in the market in our portfolio, and we saw a continuously improving market environment throughout the second half of the year. Over the last 5 years, and through the pandemic, out-of-home has not fully recovered its market share that is influenced by lockdown in 2023, we are more than 1 percentage point above the pre-COVID market share level. So our momentum is good, but the potential for further growth is still massive. When you look at the long-term trend over 15 to 20 years, the CAGR of out-of-home was including the pandemic outperforming the ad market by 4x, 8% on average for out-of-home versus 2% for the ad market. Since the end of the pandemic, the dynamics are even more favorable for out-of-home and 2023 shows a new dimension, even if advertisers spent less, they increased our home substantially. Let's have a look at some exemplary cases and plan strategies in 2023, all based on efficient Nielsen market data. H&M is generally a big fan and believer in out-of-home. Given the challenging environment in 2023, they've reduced their overall media spend by 8%, but more than doubles out-of-home, and the vast majority of the incremental spends went into digital out-of-home. BMW, somewhat representative for German car manufacturers, almost tripled out-of-home spend. Netflix out-of-home was growing 32%. Of course, we've also seen individual advertisers spending less in out-of-home last year, but the list of clients with increasing budget, like a given examples is long, and those are all prominent and well-positioned brands across all industries. Our home and digital out-of-home are gaining importance in that plan. It's a clear statement about the impact on the return on investment of out-of-home and the tendency to focus on what delivers that immediate return. What we have also seen is that by far more advertisers combine their activities on social media with out-of-home. Both channels reached especially young and mobile people and out-of-home amplifies by social activities of brands. For instance, a large German fashion retailer was using our second screen offering with Pinterest app and digital out-of-home. The creators have the same look and feel on mark could reach their core audience along the entire customer journey on mobile devices, digital out-of-home screens in a fully integrated way. While on own filter and the special Snapchat lens, the digital out-of-home creators of the Christmas [indiscernible] also were connected with Snapchat. By the support of augmented reality, young target groups could experience a broad range of potential presence and product in an interactive way. Out-of-home was driving traffic to this [indiscernible] driving the action... Both increasing spend levels as well as the differentiated use of our medium shows a growing overall relevance of digital out-of-home. First of all, it has 1 of the best carbon footprint per contact across all media channel, an important strategic argument from many advertiser nowadays. Secondly, all other classic broadcasting media news audience through mass mobility and constantly growing numbers of streams, digital out-of-home is winning audience. Thirdly, no other digital channels has that impact and power building reach for us across mass audiences, while being are very flexible in allowing also very precise new geospatial targeting. And finally, digital out-of-home has eliminated almost all historic entry barriers out-of-home for advertisers. Still 10 years ago, you had to reserve and book traditional out-of-home some months in advance, we had to stick to the given network of sites and below a minimum investment of EUR 1.5 million, it was difficult to create real visibility nationwide as out-of-home has always seen stand-alone. So doing out-of-home or not doing out-of-home was a very digital and general question, yes or no, and the same every year. Now you can trade it in combination with online media programmatically, short-term availability is excellent, campaign setup is done in almost real time and the cross-channel mix with other digital media means that you don't have to test it with a large budget. You can start with EUR 50,000 and then increase it step-by-step without bigger risks according to your return on investment. Let's look at some expressive numbers. From 2019 to 2023, the customer base of national advertisers on digital out-of-home has more than doubled from [ 450 to 965. ] Last year, we won another 25% more clients, 80% of the new customers have a ticket size below 75,000. Churn rate in the last 2 years was below 7% in times when many advertisers cut budget. Net revenue retention was beyond 110%. From 2019 to 2023, programmatic lines went up from [ 170 to 780 ] nationwide active brands. So the number of new customers is growing. It's easy to test the product. The churn of existing customers is small as the medium works and as existing customers booked more year-over-year. More importantly, the consolidated market structure of out-of-home journey supporting this development across almost all digital out-of-home product categories, we are the dominant market player. You can do digital out-of-home only with Ströer, and that makes it for advertisers even easier. And with almost 80% market share in premium digital out-of-home, we can benefit overproportionate from the current development. At the same time, we've been working on all the relevant criteria for more than a decade. So it's the result of persistence and portfolio development and investment, affecting programmatic initiatives as well as marketing sales... The subsegment digital out-of-home has delivered roughly EUR 300 million revenue in 2023. And when you include the related budgets within the services subsegment, digital out-of-home is currently representing 35% out-of-home business. And also the ad market was going backwards, we've lost roughly EUR 10 million revenue in classic out-of-home through the last stage of tobacco advertising ban in 2023. Our classic business was stable last year. So in a normalized environment, classic will continue to grow at least low single digits and in line with the ad market. Digital out-of-home is currently not growing at the expense of our classic business as our local sales force focuses more on classic products in the coming years. Digital out-of-home is winning from the rest of the market because we constantly improve the product with more screens and more targeting features because we are fully integrated in the digital marketing universe via the programmatic tax structure because we have an excellent sales platform for local customers and strong access to national key accounts via our out-of-home class strategy, and we have more than 60% of the total out-of-home market and around 80% from digital out-of-home. We control the key levers of an accelerated and sustainable growth path. Out-of-home is our core and digital out-of-home is core of the core. So far in my remarks, and with that, over to Henning.

Thank you, Christian, and good morning to everyone from my side. With the development in the fourth quarter, we were able to continue on our growth path in the operation in most important ones. Revenue rose by 8% from EUR 526 million to EUR 566 million. Organic revenue growth came in with more than 6% for the quarter, and this includes a strong sequential acceleration to double-digit growth in our out-of-home segment, that was somewhat compensated for by a more moderate development at our Digital and Dialog segment as well [indiscernible]. Adjusted EBITDA increased by 4% to EUR 194 million. Exceptional items in the quarter amounted to EUR 11 million. More than half of that is related to the streamlining and optimization of organizational structures in our content business. In particular, on the tech side of the online, as already indicated in our Q3 call. The remainder main results from small reorganization and restructuring measures in several entities. Including exceptional, reported EBITDA came in at EUR 184 million, slightly above the prior year's level. Depreciation and amortization for the quarter increased by EUR 8 million from EUR 84 million to EUR 92 million. Underlying G&A, excluding IFRS 16, increased by EUR 7 million and thus had a higher amount than the run rate of the first 3 quarters. This included a nonrecurring effect of more than EUR 6 million for value correction on assets. These corrections, however, did not qualify as exceptional items, and therefore, also burden adjusted EBIT and net adjusted income. Depreciation on IFRS 16 assets was up by around EUR 1 million. With that, reported EBIT for the quarter was EUR 91 million, up to EUR 99 million in the prior year period. The financial results came in at around minus EUR 18 million compared to minus EUR 10 million in Q4 '22. The difference is attributable to the same 2 effects as of the previous quarter. Firstly, interest expenses for financing the business, which increased by around EUR 3 million; and secondly, IFRS 16 interest expenses, more or less by the previous quarters increased by roughly EUR 3 million. Accordingly, EBT came in at EUR 74 million compared to EUR 89 million in the previous year's quarter. Including taxes, which I will come to in a second, this led to a reported net income of EUR 47 million for Q4 2013. Adjustments to be considered in the quarter were EUR 18 million and related mainly to the exceptions mentioned before, and amortization of around EUR 7 million. Considering the effects described above, net income adjusted came in at around EUR 64 million, some EUR 3 million lower than in the prior year. Let us now have a quick look into the full year development, which Christian already touched upon. Revenue growth for the year was 8%, which includes around 50 basis points contribution from changes in the portfolio, which represents mainly the net effect of our opportunistic acquisition and integration of a few call center locations since the month of June as well as the disposal of our remaining Turkish securities in '22 and the service activity in our out-of-home media segment in Q4 '23, excluding that organic growth came in at 7.5%. The EBITDA adjusted amounted to EUR 569 million, EUR 27 million or 5% higher compared with the prior year period. Exceptional items for the year were EUR 15 million and mainly materializing in Q4, as I just mentioned. Accordingly, reported EBITDA was up from EUR 542 million to EUR 554 million. Depreciation and amortization increased by 7% to EUR 323 million, reflecting the effects, including the mentioned impact of EUR 6 million from nonrecurring value correction in Q4. Including that, EBIT for the year came in at EUR 231 million, EUR 8 million less compared to '22. The financial result decreased to minus EUR 66 million. This decline of EUR 38 million includes higher financing costs for the business of around EUR 24 million from higher rates and higher net debt and EUR 13 million higher interest costs for our lease liabilities. As already explained in recent calls, when we augmented existing lease contracts at the now higher interest rate level, the interest component of IFRS 16 goes up or the capitalized value in use and consequently, also the depreciation from product is reduced. This led to earnings before tax of EUR 165 million, after EUR 211 million for the prior year. Taxes decreased from EUR 59 million to EUR 53 million, reflecting the lower pretax results. At the same time, the tax rate moved up to more than 31%. The main reason being the negative pretax result at Statista, which under IFRS accounting standards also allowed for capitalizing deferred tax asset once the company has achieved a sustainable pretax profit, which we expect within the next 2 years. Excluding this effect, our tax rate would have been in our target range of the high 20s. With that, net income for the year came in at EUR 112 million for '23 compared to EUR 152 million in '22. Adjustments totaled EUR 31 million, mainly including the after-tax effect of the cash flow of EUR 50 million just mentioned and some EUR 21 million, mainly from advertising assets from historical purchase price allocation. Accordingly, net income adjusted stood at EUR 143 million up to EUR 172 million in the prior year. Let us now switch over to the cash flow. The slight increase in EBITDA as well as a better working capital development and less corrections for noncash items and other could almost concentrate with significantly higher interest expenses and higher cash after tax. With that, the operating cash flow amounted to EUR 401 million, after EUR 411 million in '22. Operating cash flow in Q4 was broadly stable. Our now more focused investment approach, which we have discussed in the recent call, with a more balanced level following a record high in the prior year led to a CapEx spend of EUR 129 million or some EUR 70 million compared to '22 million. Accordingly, free cash flow before M&A for the full year after being slightly up already in the first 9 months, improved quite a bit from EUR 248 million to EUR 272 million. This underlines to discuss strong free cash flow development in Q4, which we discussed in our Q3 call. Our lease liability repayments decreased from EUR 198 million to EUR 191 million. Altogether, in particular, due to the improving cash flow dynamics in our out-of-home segment in the fourth quarter, free cash flow adjusted improved by 60% from EUR 50 million to EUR 81 million. Net debt year-on-year was up as expected by EUR 52 million from EUR 718 million to EUR 770 million in '23. In the reconciliation, this increase includes our free cash flow of EUR 80 million, a dividend payout of EUR 103 million, expenses for the share buyback of EUR 24 million, minority dividend of EUR 9 million, M&A disposal proceeds of EUR 3 million, cash in from exercise stock options of EUR 5 million and EUR 8 million higher liabilities for future dividends for non-controlling shareholders, mainly following a strong earnings improvement at Asam. And a sequential view, from the end of Q3 to the end of Q4, net debt improved by EUR 91 million, including the adjusted free cash flow for the quarter of plus EUR 99 million and dimension recognition of higher liabilities for future dividends for noncontrolling shareholders at Asam. With that, we delivered what we promised to improve the leverage ratio from 2.5x in Q3 to now 2.2x, and with that roughly on the level of the prior year, also implying that the increase in net debt is well covered by an improving cash generation. On that note, let me share with you some thoughts encouraging analysis and on the improving capital dynamics of our 4 out-of-home media segment. What we see here is the adjusted EBITDA for out-of-home showed a margin compression of 225 basis points in 2021. At the same time, the adjusted EBITDA before the effect of IFRS 16, which by nature, is a much better proxy for cash flow to show a broadly stable margin over the same period. This difference in the margin picture is simply because IFRS 16 effects were increasing way below the rate of sales growth, which is finally a result of a better leverage on our fixed cost infrastructure. Together with a more selective investment approach and stronger focus on improving utilization of existing digital assets, out-of-home delivered a strong improvement in cash generation, which is in line with what we talked about in our Capital Markets Day in '21, even though many external parties has changed since then as we all know. Also, if you look at the total lease expenses for the sum of fixed and variable lease expenses for our portfolio as a percent of sales, we see that we are clearly improving. At the same time, this implies that '23 was a tough 1 regarding all other costs, which clearly increased ahead of sales growth. Now what we do expect going forward. First of all, we are confident that EBITDA adjusted this year will move forward more in line with sales growth, and Christian will talk about the outlook later. At the same time, and based on broadly stable IFRS 16 effect, the cash EBITDA to clearly outperform the adjusted EBITDA. And including stable CapEx, we should even see a higher growth rate in the cash contribution. Let me now talk you through the performance of the individual segments, starting with our fourth segment out-of-home. In the fourth quarter, out-of-home delivered the expected acceleration of sales grow. Sales were up by 12.6, organic growth was 13.6%. In the context of an improving ad market environment, also our Classic product delivered a stable sales growth of almost -- sales growth of almost 4%. And with that helping to achieve a stable number for the full year. Main contributor from this strong department was again our digital out-of-home business, which delivered growth of 33%. The share of digital out-of-home for the year went up from 29.5% to now 35%. Within digital, our programmatic channel outperformed considerably. This reflects the demand for our digital portfolio and specials or programmatic public video from large national accounts. EBITDA adjusted for this quarter increased from EUR 137 million to EUR 140 million despite still elevated SG&A cost inflation. The margin reduction in Q4 was a bit less than 170 basis points that we achieved for the first 9 months. For the full year, the EBITDA adjusted margin was down by 150 basis points. While as seen on the previous slide, the cash EBITDA margin, excluding the lease accounting, was down by only 60 basis points, including lower relative lease expenses and a disproportionate rise in other SG&A. In Digital and Dialogue, revenue in the fourth quarter increased by 9.5%. And with that, more or less in line with the first 9 months. Within Digital, within in Q4, accelerating sales growth, especially from programmatic ad sales more than compensated for a slight decline in our high-margin content publishing. Our Dialogue business showed a slowing revenue performance in the fourth quarter, while our home center continue to grow in line with the first 9 months and supported by external growth. Our door-to-door marketing activities showed a steady decline against exceptionally strong trading in last Q4 that we also pointed out at the time. Altogether, the segment delivered an EBITDA adjusted of EUR 53 million, up to EUR 63 million last year, reflecting sales declines in higher-margin activities such as content and door-to-door and a safe increase in lower margin programmatic sales. The EBITDA adjusted for the current fiscal year in 2024 in the segment and digital and dialogue will be burdened by a technical effect of around EUR 10 million. This effect results from the termination of the collaboration with the Dialog Media Group. [indiscernible] had demanded to market the corresponding digital content until the end of 2023. The specific structure of the collaboration was based on further acquiring the market pool ride by way of an asset deal. The corresponding asset was then depreciated over the contract period. Since we compensate the loss of our contract by winning additional marketing lenders, such as [indiscernible], there will be no negative impact -- net impact on sales, EBIT and cash flow. The now newly born vendors are based on classical revenue-sharing models where revenue share extends in SG&A and not part of depreciation. Moving over to our Data as a Service and E-Commerce segment to satisfy data and total revenue was moderated to around 14% in Q4, with others still growing above 20%, and Statista increases sales by 8% adjusted for currency effect. EBITDA adjusted improved considerably to EUR 54 million for the full year, with a margin of now 15.5%. Let me conclude my remarks with a few comments on ESG t Ströer. As you can see, we are doing very well overall and are practically always in the upper range compared to our peer companies and in the sector. Compared to the second quarter, we were able to improve our S&P Global score by further 3 points to 41 points, putting us in the 92% in our sector. Also, we improved our carbon disclosure project rating considerably from F to E. But it doesn't come for free, thanks to the dedication of our teams who are passionate of this topic and make us better every day. Sustainability has now developed into a decisive success sector in the capital market, in the public space, and for our entire industry. We, therefore, are very pleased that our efforts and above all our progress are being recognized and rewarded. With this, I would like to hand you over back to Christian.

Before ending the presentation, let me just add some comments on the outlook for the rest of the year with general momentum towards 2024 and our financial calendar. For our first quarter, we expect to carry on with the strong development of the last quarter, in particular, in our core segment, out-of-home. Accordingly, we see up to 15% organic growth for our home based on the double-digit dynamics in Q4 2023 and based on our strong order trajectory. For the full year, we expect organic revenue growth for the group should be noticeably higher in percentage terms and the corresponding growth rate for the year 2023, which was 7.5%, EBITDA margin adjusted around prior year level, and as Henning said, IFRS effects are roughly stable, therefore, EBIT adjusted with double the growth rate of EBITDA adjusted and free cash flow adjusted should rise significantly above the rate of EBIT. Let me now close the presentation with a short look into our financial calendar for 2024. Following today's preliminary results, we will publish our full year results on March 25. First quarter results will follow on May 8. The Annual General Meeting will be held on June 11. On August 8, we will release the half year report 2024. The year 2024 will then be concluded with the publication of our Q3 report on November 30. And as always, update reports and roadshow presentation can be found on our IR website. Thank you, everyone, and we are now happy to take your questions.

[Operator Instructions] And the first question comes from Chris Johnen from HSBC.

A couple of questions. First, on the guidance, specifically with respect to the EBITDA guidance of the stable margin. Can you give us a bit more, I would say, thinking or you're thinking around the operational gearing this year? I was under the impression that we would have left '23, which had a number of headwinds with respect to energy, the personnel cost side, all of those things should be better in '24 versus '23. So I'm just trying to understand your thinking maybe even with a bit of segment color on the operational gearing that you expect in '24? And why you think the margin should still just be around prior year level. Second question, a bit more color on Statista, please. I understand the FX impact in the fourth quarter, but is it possible maybe to get a bit of color on how you think Statista should do in '24, that would be interesting.

On the first question on the guidance, you're right, we are now talking about a stable margin, while, at the same time, I think, I think you noted that we are getting more positive on what we expect from the out-of-home business. I mean we saw margin compression last year. And now we expect for our most important business that margin sales should go more online going forward, even more so if you strip out the IFRS 16 effect. So that would be my first [indiscernible]. And then secondly, obviously, we are very early in the year, and I think there's more opportunities going forward to be a little bit more precise once we have previous trading in Q1. So we don't want to go across negative. I think we are quite construct about the margin after a year of business in some compression, I think we are more confident that we will be more stable and hopefully even better than that going forward.

Yes. Maybe picking that one up and than switching to Statista. But I think Segment 3 should have the potential to improve the margin in 2024 versus 2023, at least that's what we have in our plan, that the momentum we see at the moment. I think Segment 2, I think it's realistic to assume that we are able to deliver at least stable margins roughly versus what we have been last year. And I think that's the key point. If you look at out-of-home, I think we see massive operational gearing opportunities, but you don't see it in the EBITDA because of the stable IFRS line. So you need to look at the EBIT number for out-of-home, and we probably disclosed throughout the year, even there is bit more than in the past, just to give you confidence that I think we are at a point that a lot of fixed costs are relatively stable, inflation is under control, yes, but we are able to grow over proportionately, and therefore, is about exponentially growing cash flow. Then over to Statista, I think '23 was a year where we had to change a couple of things to take the company to the next level so that we had quite some investments in to AI development [ leader ] versions are visible now for customers. We had management change that was planned for quite some time because we switched from the founders to a new CEO. We've also worked on some sales setup regarding how we organize our sales teams globally because we are, I think, at a stage where we had to switch some structures so that we are also able to grow to EUR 300 million, EUR 400 million, EUR 500 million. That's why I would say the turning point operationally in the business was some time in autumn last year, when we had completed the necessary changes. As always, in a subscription-based model, it takes like 6, 9 months until you see the kind of positive momentum again. So I think what we will see this year will, quarter over quarter accelerated growth. And in the second half of the year, growth rates, again, where we have been historically beyond 20% and 25%. But I think Statista for us was always a long-term case to exploit the full potential of the company. And what we've seen is when we get almost from scratch to EUR 80 million, we had to change a couple of things. We've seen that once we get beyond EUR 150 million, we had to change a couple of things and that was necessary to double the company. But I have to say, we are extremely happy with our new CEO with [ Marc ]. We see very positive development there in the sales side, which takes maybe another 3 or 4 months until we see it in the reported revenue...

Maybe a final remark again on the margin. But my comment is that the technical effect of EUR 10 million that we lose and the visual segment to be formal dropping the lower contracts and compensating with the capital revenue sharing that technically costs us 50 basis points on a group level more or less and the compensation of that is included in our guidance.

And the next question comes from Annick Maas from Societe General.

My first one is on Asambeauty, you were supposed to sell this asset this year. Can you give us an update on where we are today? Where are you in your discussions and so on? The second question is on you are going to have noticeably higher growth this year. What is noticeably higher? Does that mean above 10% or below 10%? And the final one is, I've seen some market data, which suggests that the digital out-of-home market in Germany is growing even more than what you're guiding for in the first quarter. I just wanted to hear your view on the recent digital out-of-home competition that have been arising in Germany.

Annick, maybe on Asam, I think we stick to our plan where the business is performing very well. Just maybe I repeat that we have like gone from EUR 8 million EBITDA in 2022 beyond [ EUR 14 ] million last year. So I think the company is in good shape. We've done already most of the whole work that is necessary to go into the final stage of the sales process. That's what we planned for 2024, and I think it's anyway not easy as a public company to sell businesses. So I hope you understand that we don't disclose too much information and timing on that one and hope to surprise you sooner or later. On growth regarding digital out-of-home. I think it's important to look at the difference between net and gross numbers. I think that's what we drive in one of our initial slides, when you look at Nielsen's numbers, gross in the market, and when you see gross numbers that are published by, for instance, Digital out-of-home Association, that means that discounts are not recollected that free space that is given to social initiative is not properly reflected so that the real net number is always inflated by 4, 5 percentage points. That's why I think, from next point of view, I don't think that the market, at least marketplace of relevant size in net terms can grow faster than us. That doesn't mean that I think our guidance needs to be the end of what's possible for us this year. Yes, I think we are at the moment in the beginning of March. So we know exactly what happened in January. We know 98% of what happened in February. We have very good confidence around the first 85% in March. And it's fair to say that we see more dynamics than in Q4. And we also see that preorders for Q2 and Q4 are also really strong. And yes, I would say, in line with what we see for the first quarter, but there is still a long way to go. But it's fair to mention I think that full truth in the market and also a net revenue number is sometimes is difficult to evaluate based on the various complications. Because as you said, I think digital out-of-home, at the moment, it's just maybe no longer the new pit on the block, but probably 1 of the hot topics in the market and everyone chance on it and everyone wants to be part of the party. That's why I would also say it's worthwhile looking at the real net revenue of various companies. And I think there are -- yes, there are a couple of smaller players. But if you look at their total net revenue versus, I think we disclosed in our [indiscernible] roughly EUR 300 million. Yes, I think all of that is still tiny, but we have an eye on it and confines a feeling for it but ultimately, we see where screens are in the market, what the quality screens are, what kind of paper charging we see there now expecting. So I have to say we feel very comforted with our position, but it's always -- we always have an eye on potential competitors, especially if you see that market segments are very dynamic like digital out-of-home. Germany, you say we see the -- everyone wants to be where growth and own topics... Your second question, sorry, was about...

The group guidance where you say you have noticeably higher growth this year. What does that mean noticeably higher growth?

Well, I think for the first week of March, I would say it's not specifically higher. So if you just look at the dynamics that we've seen 8 months ago, I think we had challenges with our out-of-home business to be overall in the mid-single-digit area and then suddenly, end of the year, we had months with suddenly 15% growth. So just 6 to 8 months had a variation of 10 points. And I think we've done the same good job as before, and it was the external environment. So at the moment, I think it's a bit too early to say if notice will be higher as 10 or 9.5 or 11 or 12, I think what we want to do is give you quarter-over-quarter, very precise overview where the dynamics came from. And as soon as we have clarity, especially about the second half of the year, which will be the crucial point. Of course, we will disclose it. But it's fair to say that the most positive surprise could probably be on the out-of-home and especially the digital out-of-home side. Maybe just 1 aspect I'd like to repeat because we had discussions around that in the past. I think the last 18 or 24 months have been overall challenging in the ad market and also for classic out-of-home. And to be really honest, there are pinpoints where we've been also bit worried at all that digital out-of-home momentum puts our classic business under pressure, but I think that was never the case. It was always difficult ad environment because at the moment, we also see quite nice development again in the classic out-of-home part. We focus a little bit more with our regional sales force and the classic product. That's why I also sustain classic out-of-home can also be on the surprising side, if you think about more dynamics than what we've seen in the past. But again, that's just a bit too early to commit to a concrete number. I think the most important point is whatever the top line shows, the EBIT will grow significantly faster, and cash will again grow faster than EBIT. And of course, the more you put into the top line, the more momentum you have in the very bottom of the P&L. But I think we've organized the business around all the cost challenges in the last 12 months in a way now that we are very confident around what -- operational gearing. But I think you won't see that during the EBITDA line, we need to look down to see the cash flow then we get the true picture of our performance at the moment.

Let me add something, Annick. I think what is key now here. We're seeing that out of form is moving for many customers from an add-on medium to a key part of the media strategy driven through the digitalization. I think this is really the biggest difference from everything what we saw in the last 30 years. This is a tectonic shift in media strategy, and this is driven clearly by digitalization. Because if you look back before actually the core invented street furniture, we talked about the billboard business and customers could decide about the size of the campaign because they bought single board. Then we coinvented the network strategy, the street furniture. And -- but that -- the result was also here that the suppliers decided about the budget for a national campaign. And [indiscernible] in Germany were maybe paying EUR 600,000 EUR 700,000, EUR 800,000 and suddenly, it went up to EUR 2.5 million. And with this network-driven strategy, we actually pushed many national potential clients out of the business because the tickets became too big. And now through digitalization, there is no barrier anymore as you can buy for EUR 50,000 contact at a national level, plus you can now combine it with TV or online. And that's what we see now that the growth is driven mainly by new national clients who are also suddenly coming in with much smaller tickets because there's no barrier anymore to entry. So -- and that's actually what is driving this tectonic shift right now. We are right now also negotiating with a couple of classical FMCG customers who were using only TV in the last 30 years. And suddenly, they realize that TV is not delivering the reach anymore, and they need to find new strategies on how they can achieve digital reach in a sufficient number throughout the country. So it is a very positive development, and we have -- that's why we are quite optimistic that we see ongoing positive development based on the digital inventory what we have now and based on the situation that instead of paying EUR 2.5 million for a week, you can buy whatever you want now, in every size you want and make it as a sole out-of-form digital campaign or you can combine it with online and TV. And this is why suddenly out-of-home, digital out-of-home is moving from add-on medium to a key part of customers' media strategy.

And the next question comes from Lisa Yang from Goldman Sachs.

I have a follow-up question on the margin. I still don't really understand like why the margin should be really flat, the adjusted EBITDA margin, and if you could maybe give a bit more color by division as well. Is it because you're still seeing some pressure from certain cost items? Or it's more like a revenue mix impact continuing, for instance, in Digital and Dialogues? So any sort of more color would be helpful to understand this dynamic. Second question is could you clarify what's the size of the programmatic business now? And what was the growth contribution in both out-of-home and also in Digital and Dialogue last year, and what you expect for '24? And the third question related to your comment on strong free cash flow growth. Is it possible to get a guidance on what you expect for group cash leases, tax interest, CapEx with capital? And do you also expect obviously exceptionals to come down, that will be really helpful.

Well, let me take the one on the EBITDA margin. First of all we're trying to say is that we believe that the operational leverage that we are able to achieve should be more visible, further below the EBITDA within in EBIT and also probably net earnings and also into the cash flow, right. And to lead you a little bit segment by segment, I think we are confident and constructive lot of marginal for out-of-home based on all of the things that is done and we will share with you. And I guess from us -- from getting from a declining margin to an improving margin, I think [indiscernible], you have to stabilize them. I think we are in a good way here. And we are, again, more positive... Secondly, we have the technical effect in the second segment, the EUR 10 million EBITDA, I talked about that was hitting technically visit her without being a variable cash or EBIT. So that's technically a variable point. And I think on Asam and Statista, I think we have seen a considerable margin improvement now to more than 15%. And I think it's probably hard to say that we are constructive about the margin here, but we shouldn't expect the same improvement that we have seen last year, obviously plus. Also, we have been on the holding level some costs for upcoming renewal of corporate ERP systems that will also be let's say, a variable result of the holding. So that altogether is coming up to our comments on the table a broadly stable allocating margin. I give it to Christian for the second question actually you had programmatic side.

So just looking where it originally came from. So in simple terms, our online business is half of the Digital and Dialog segment roughly. And in the online business, roughly 60% of the revenues at the moment are programmatic. And last year, I would say the programmatic business was only growing slightly, while the traditional business when we were monetizing individual assets, with more concept-oriented sales approaches was outperforming the programmatic part. That is true for the online market, the online segment. So again, 60% or 50% of the second segment and under normal conditions programmatic in the last 10 years was always outperforming the growth of the other sales channel last year. It was the other way around. The out-of-home business, I think as we said, 35% of revenues of digital out-of-home. And there, I would say, overall, we are at 50% programmatic share of the digital part. And last year, it was like almost 90% of our additional total growth than to programmatic. So there you clearly see that the more we've been able in the last years to integrate digital out-of-home into the programmatic world of historic online media, the more we could benefit with our media from this overall positive tendency towards programmatic advertising -- that we share so out-of-home cost of 35% in the digital dialogue segment, with 50% out-of-home segment.

And then a couple of points on what you asked about in terms of our guidance on our cash flow positions. I mean, just looking at it, where we would say that on the interest side, I think there are 2 drivers. I think first of all, I think you probably see still some increasing outflow for interest partly in first half, therefore, for more stabilizing the second. I think probably there is higher interest expense, but obviously, way below the huge increase we had already in the last fiscal years. These are factors I work from today's perspective, I also expect that the cash outlook was like EUR 70 million, EUR 80 million last year will be cash below because the EUR 70 million to EUR 80 million also included some payments for other periods preceding 2023. So I think we would expect less cash offer taxes. On the investment side, I think in our guidance, we say that we expect this to be broadly more or less at the same level that we have seen last year, slightly down, maybe. IFRS 16 effects, Christian touched upon that. Most of those are in out-of-home, probably more like stable. So as you see, there are a couple of drivers, which actually imply that the dynamic and free cash flow should outperform the dynamics in EBITDA. With regard to expected restructuring at this point in time, there's no larger things on the horizon. Obviously, there will be always a smaller reorganization and restructuring public. But from today's perspective, we will expect the last exception than what we have in 2023.

That's really helpful. Can I just ask a quick follow-up. Why does the reconciliation in your top line increased so much in '23? And how should we model that line going forward?

What do you mean by reconciliation on top line...

Yes, I think it was EUR 150 million, I think, in 2023, was quite a big increase versus the year before. Just wondering like...

Okay, okay, that some of the segments is higher than the group. I think it's 2 aspects. The first 1 is that we monetize our portfolio with different sales forces that sit in different segments. And we also run forward the programmatic advertising or especially when digital out-of-home is combined with online is running through the online SSP. That's why we then ultimately consolidated on a group level. So that's the 2 effects that we monetized programmatic via 1 platform as a combined, and we try to push across general monetization with our sales force that captures the whole logics of out-of-home plus that advertises book everything in larger bundles. So that Digital and Dialog can support the out-of-home development and the condo effect. You could also say the kind of synergy effect on the sales side is the kind of number. So I think ideally it should grow roughly in line with the top line development if there are no extraordinary items...

Looking at the segment sales, you see especially the programmatic sales like accounted for price and then this is corrected in the conversation. So also the foundation division itself is a pretty good indicator for the total programmatic volume and digital out-of-home.

And the next question comes from Julien Roch from Barclays.

Just follow-ups. On your -- on Annick's question about organic being noticeably higher. You said it was too early to give an exact number because it was the beginning of the year, but then you also mentioned 9.5% to 12%. So could we kind of get a range of realistic worst case and best case? Is it to 9% to 12%, or could it be 9% to 13%, 9% to 15%? That's the first question. Then follow-up on Lisa's free cash flow question. Just to make sure, so the interest were cash interest was EUR 65 million last year, you said that would go up, so what, to about EUR 70 million. Cash taxes were EUR 78 million last year, you said that would go down to what about EUR 70 million -- then you said CapEx, I believe, would go down, so what EUR 125 million. IFRS impact, you said would be stable at EUR 191 million. What about working capital? Should it be flat? And then just to get some historical perspective, programmatic was up 90% in digital out-of-home in 2023. Can you remind us what was the growth of programmatic in '22 '21, some historical numbers if you have them?

Well, I think on the top line, I think we've already given so much information, I would stick to our original view that is noticeably higher and we'll see the momentum quarter-by-quarter yes. I think it is just, as I said, it's too early. What we can see is the next 6, 8 months -- sorry, 6 to 8 weeks, yes? And I think that's where we are clear. And for the rest, it's simply too early because whatever you say, I think the possible range would just be too mix. It would rather lead into a wrong direction that give you confidence about what's possible. And I think just on the last one, programmatic, was -- maybe I didn't say correctly, 90% of the growth of digital out-of-home came from programmatic. So I think digital out-of-home was growing in the high 20s, something like 28% or so. And 90% of that growth came in via programmatic. But I think the relative growth number of programmatic would be probably longer in the mid-50s or so. And I think the year before, it was a little bit lower. Programmatic has not doubled last year, yes. It's 90% of the growth of it came of the whole segment came from it. Does it make sense, Julien?

Yes.

And on your question to be further specific on the outlook and cash statement, and I would leave my comments and then I'll just get them on 1 question, we're not now going line-by-line through it. But what you sort of repeated is correct, and will be in line with our comments. But at this point in time, I would sort of shy away from giving the exact numbers on what we expect on each of every line. Fair enough good question on working capital because I haven't touched upon that. Could be fair kind of difficult position to forecast. I think last year, we had a much better development than the year before. But year 1 driver could be for higher output with the positive development of Asam and the growth in its retail channel. So here, I will evolve a little bit higher output as opposed to what I said on interest and...

And the next question comes from Craig Abbott from Kepler Cheuvreux.

A couple of remaining questions from my side. First of all, just looking at the digital, your online operations within your second division, I mean when you were showing us the slides about how -- you gave us some examples, the H&M and some of the major customers who are allocating much more to ad. But just through digital out-of-home, which is obviously very positive on that side. However, I noticed on those slides, they were also slashing their online ad spend by like 47% or something. Obviously, nothing dramatically new in these trends over the last couple of years, but I just try to get a little bit better feel of what kind of dynamics you're expecting in your online activities, both in-house, IT, online and your other platforms as well as third-party. And dynamics in terms of growth pricing, margin and so forth there? And the second question is just on CapEx again. I realize you're not going to be like completely -- very specific, but I'm still a little unclear. I mean are you looking below the EUR 125 million ? And I thought as you were focusing more on fulfillment and less on rollout, but actually that number would probably be considerably lower this year. So if you could maybe talk us through your thinking there?

Maybe I'll start with the online business. Just as a recap or putting it into context, I think the consensus number for the group revenue that is out is roughly, I don't know, around EUR 2.1 billion for 2024. And I think the online division is around EUR 450 million, which is roughly 20% of our group, just to put it into context. Based on what we see at the moment, I think mid-single-digit growth in 2024 is a solid basis, and maybe we see a little bit more throughout the year depends on the second half, but how we started into the year, it looks like a very solid and robust mid-single-digit growth. I would say the own assets, the online especially growth pretty much in line with the segment. So no big difference between third party and own assets. I would say pricing at the moment for next year has soaring impact of half of the growth or the 2.5% to 3% and then the same on top for demand. Yes. And as I said, I think on an EBITDA level, the margin is roughly stable. I think Henning mentioned that special effect in the third party sales, which is a technical effect on the EBITDA line, but EBIT should improve slightly in that segment as well. So we're happy with the business. I think you could always compare it with lockdown phases with enormous traffic peaks of news media and all of that happening pre-inflation rates that we've seen in the last 18 months. But I think, for the moment, we are looking at how does the market respond to that business, I think we are well positioned, and it's a nice complementary asset to fuel our overall growth, especially also pushing digital out-of-home combination.

And further on CapEx, Craig, our current forecast implies that CapEx is down compared to the prior year in '24, but not to the same extent we have seen that last year, which look like [ 30 million ] a store. So I would rather say from today specifically slightly down. That implies more than stable CapEx in out-of-home. Some decline in the second segment, Digital and Dialog a bit higher CapEx in Asam and Statista as well as a holding level for acquiring [indiscernible] rough picture as we look at today.

And the next question comes from Marcus Diebel. [Operator Instructions].

One question left. I mean 15% growth is a strong number for Q1. My understanding question, you don't want to give much more on the guidance. I want to be conservative. But can we just understand, is there anything special in Q1? Or was there a big contract? Anything that doesn't come through in the remaining quarters? Or how shall we think about it. I think what everybody is trying to understand why the strong momentum in Q1, so kind of like fade a little bit in Q2 and going forward? Is it really just conservative? Or is there anything kind of like as a one-off that is worth highlighting?

No. I think, first of all, I think we mentioned the 15% for the out-of-home segment. And we said, at the moment, we see very good momentum there. But the point is that I don't know that based on the order book, our -- we have at the moment less than 30% of the final revenues of the second half in our books. That's why it's just too early to know exactly what the potential this year is, yes, that's why it could be weaker than Q1 because of some effects that it costs could be also better than Q1 or it could be the same. We simply don't know. And I think it's not, I wouldn't say, conservative approach on the basis of having confidence in the business. It's just when we look at the last 3 or 4 years, all those external effects have been quite extreme. You never know what might happen next. So I think that since the mid of last year, we've been coming into a more reliable environment that's gradually better. And the most important point was that you suddenly had no negative surprises. I think that's also one of the reasons why advertisers came back and stabilized their spend. So everything was easier to predict. And I think all the potential cost challenges have normalized. So it was also easier to focus, not only on cost management, but also on top line development. And you're looking at the development today, I would be surprised, to be honest, if suddenly the environment will get more challenging. We don't see any signals for that at the moment. Just to be clear, that's why we are very positive, but it's a bit too early in the year to already commit to a very specific number in the first year, but just based on the logics of today, and especially looking at our core business out of home, I wouldn't know why the dynamics throughout the whole year, so it should be weaker than in the first quarter, but I don't know what the second half might bring as just as simpler fact. So -- I mean I'm since 11 years with this company and, I don't know, 25 years in the industry. I think I've rarely seen 6, 9 months in a row where out-of-home had so much positive momentum. And to be honest, I would be surprised if that would not go on. And I think, for us, maybe the most important message today was I just read again what we put in the guidance. And we said look [indiscernible] IFRS, the other half will grow over proportionate. So you see it in the EBIT line. So EBIT will grow twice as fast as top line. And again, assuming we put in whatever you do in the first line 10%, growth in the revenue and 10% in the EBITDA, but it's 20% in the EBIT. And I think then we said, cash flow will grow remarkably higher than EBIT. So again, you can interpret what remarkably is, but anything 20% should be expected. Also if you see the absolute development from 2022 to 2023, that's also a good indicator. And I think that's the most important message. I think our overall growth -- top line growth stabilizes on a historically high level. We still don't know how far it can go, and we see that on the very bottom line that ultimately cash generation, we are making massive progress over the last 18 months. And I think that makes the performance of our company, very much predictable. And I think it's not a sign of weakness, not to commit with the last 2% or 3% top line development. I think that's just too early for that. But overall, I think we are really happy with how the business is performing, especially the out-of-home business. Yes, that's the core of our company, and that business makes the difference. Two or 3 quarts better and worse in Dialog and Digital doesn't move the needle in my view and another 5 to 10 points top line with that cash conversion out-of-home, that makes a huge difference. And that is we are getting into a phase now where we think we can deliver more of that in the coming quarters and years.

I think this was a very important remark because EBITDA margin is clearly misleading because there's a big portion of IFRS, what Christian said. And especially on the margin side, we are very optimistic going forward, everything what is more cash near.

And we do have a follow-up question from Chris Johnen from HSBC.

Yes. On the last point, I wanted to ask, you said -- and again, I may have misunderstood. You said that the 60% free cash growth in 2023 is a good indicator. Did you want to signal that with respect to the significantly higher free cash than EBIT in the guidance? Or was that just a directional comment just to interpret anything into anything?

The absolute increase in the '22 to '23 is maybe also an indicator about the direction. Just take that and also say that cash is growing significantly higher than EBIT than, you, I think, get close to what is a realistic number.

Understood. And then "through" follow-up on the Euro this year. I know historically, and I think the World Cup was in 2006 many ages ago, last time around in Germany wasn't a huge topic, but correct me if I remember this incorrectly. So just to pick your brain on this year, what is the initial expectation here? Could this be an important kicker for your business? Or yes, I'll take any comments.

Yes, I think as you said, historically, both events have never had a really positive impact on out-of-home, especially also when it happens in Germany. Why? Because you have sponsors that leverage the sponsorship via out-of-home. But at the same time, the nonsponsors go out of the ad market in that period of time as they just get overwhelmed by the kind of cluster from the event. So the historic learning was both effects somewhat in combination neutral to the business. We have this year a couple of combined offers out in the market with our strong sports proposition in the online business in combination with digital out-of-home. So that is used nicely by sponsors. We don't know yet how other advertisers respond to the overall development. But I would say there is no negative impact. In that case, it has a smaller positive impact. But sometimes, if you expect nothing then suddenly things surprise you positively. I hope the same for our football team, but I think we have a fair chance that the out-of-home performance in June is clearly better than the performance of football team.

There are no further questions at this time. So I would like to turn the conference back over to Christian Schmalzl for any closing remarks.

Many thanks for your questions. And looking forward seeing you in 3 months' time, maybe earlier, and you can rely on us will give you more updates on what we expect for the full year. Okay. Have a nice day. And again, thanks for your time and attention.

Thank you, bye.