Release Date: November 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Stroeer SE & Co KGaA (SOTDF, Financial) reported an 8% increase in total revenues for the first nine months of 2024, reflecting strong business development.
- The company's digital out-of-home segment continues to be a significant growth driver, with a 24% increase in Q3 and a 27% increase year-to-date.
- EBITDA growth outpaced revenue growth, with a 12% increase compared to 8% revenue growth, indicating strong operational leverage.
- Free cash flow improved significantly, increasing by almost EUR 100 million, from minus EUR 19 million to plus EUR 78 million.
- The acquisition of RBL Media is expected to contribute around EUR 17 million in earnings by 2027, enhancing Stroeer's digital portfolio and market reach.
Negative Points
- The broader German advertising market showed signs of deceleration, with a growth of only 4% in Q3 compared to 9% in Q2.
- The company's Asam segment faced challenges due to reduced trading and wholesale distribution in China, impacting overall performance.
- Exceptional items for the quarter were higher than the previous year, mainly due to restructuring and reorganization expenses.
- The advertising fill rate for digital out-of-home remains low, in the mid-30s, indicating potential underutilization of assets.
- There are regulatory limitations on further acquisitions in the out-of-home segment, which could restrict future growth opportunities.
Q & A Highlights
Q: Is your out-of-home guidance for the fourth quarter including RBL Media? If so, what would the out-of-home growth be if it were excluded? Also, what are you expecting for Asam in Q4, and how did Asam perform in Germany versus the rest of the world last quarter?
A: The impact of RBL Media for Q4 might be around EUR3 million, roughly 1 percentage point of out-of-home revenue. Regarding Asam, we had a strong 2023 due to a specific non-core product in China, which is now declining. However, the underlying performance, particularly online in Germany, remains positive.
Q: Can you provide more details on the acquisition price of RBL Media and any additional metrics?
A: The preliminary purchase price for RBL Media is around EUR106 million. We expect mid-term earnings, including synergies, of around EUR17 million. Our leverage target is 2.5 times, and we anticipate being below this even after the acquisition.
Q: Could you provide some insights into the revenue and EBITDA expectations for RBL Media in 2025 and 2027? Also, how does privacy law affect your digital out-of-home targeting in Germany?
A: By 2027, RBL Media's revenue is expected to be in the mid to high 30s, with EUR17 million in cash EBITDA. Regarding privacy, we use anonymous data aggregated into target group segments, which complies with GDPR regulations.
Q: How do you see the broader ad market in Germany, and what are your expectations for out-of-home growth in Q1 next year?
A: The broader ad market is currently less dynamic than earlier in the year. However, out-of-home trends remain strong, and we are well-positioned with diversified sales channels. We expect continued growth, although the market is tougher than a few months ago.
Q: Are there any other out-of-home assets in Germany you might be interested in acquiring? Also, could you provide some color on the growth mix between digital and dialogue businesses for Q4?
A: Given the market consolidation, there aren't many large targets left. We constantly monitor the market but don't expect anything of RBL's size soon. For Q4, we expect strong growth in programmatic sales and slight growth in call centers, with digital driving the segment's growth.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
