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

Yes. Thank you very much. Dear investors, dear analysts, welcome to today's Q2 and H1 2026 earnings call. Let us dive straight into the numbers and details. On the top line, revenues in the first half amounted to EUR 1.037 billion compared to EUR 980 million in the prior year period. On an organic basis, growth accelerated from 0.5% to 2.7%, while on a reported basis, revenue grew by 6%. Moving down the P&L. EBITDA adjusted reached EUR 273 million compared to EUR 266 million last year. This represents a 3% year-on-year increase. On EBIT adjusted, we reported EUR 150 million, up from EUR 109 million in H1 2025. This corresponds to an increase of 6%. Net income adjusted amounted to EUR 56 million compared to EUR 52 million in the prior year period. This translates into a 7% year-on-year increase. Turning to cash flow. Free cash flow adjusted remained broadly on the prior year level. For the first 6 months, we reported minus EUR 1.9 million compared with minus EUR 1.6 million in H1 2025. Christoph will elaborate on this in detail later in the finance section. Finally, CapEx before M&A amounted to EUR 51 million, up EUR 12 million versus H1 2025. On market dynamics, first, let us have a look at the news numbers for Q2 of our local German peers in the middle of the chart. As always, please keep in mind that these show gross rate card development and that net revenue growth is on average 6 to 7 percentage points lower. On this gross basis, the German advertising market increased by 1.9% in Q2. OoH grew by 8.8%, clearly outperforming TV at minus 1%, 1.1% print at minus 4.5% and radio at plus 2.9%, while desktop and mobile grew by 15.3%. Against this market backdrop, our Out-of-Home Media segment delivered reported net revenue growth at 10.3% in the second quarter. Within the segment, DOOH increased by 24.3% and the DOOH subcategory programmatic digital Out-of-Home by 45% -- the half year picture confirms the same structural trend. The German advertising market increased by 1.1% on a gross basis with OoH up 5.6%, ahead of TV at minus 0.3%, print at minus 0.9% and radio at minus 0.5%. Desktop and mobile increased by 10.9%. Our OoH Media segment achieved reported net revenue growth at 8% in H1, while DOOH grew by 18.5% and programmatic was up by 29.3% in the same period. Driven by the strong development of Ströer, the share of Out-of-Home advertising increased to 10.7% of the German advertising market according to [ Nielsen ]. So far my remarks. And with that, I hand over to Christoph.

Thank you, Udo. A warm welcome also from my side. A very good morning to everybody. Thanks for having me today. Let me immediately start the final section with a quick look at the Q2 2026 P&L. In total, we delivered a solid set of results for the second quarter. Group revenue increased by 7% to EUR 542 million compared with EUR 505 million in Q2 2025. If we exclude exchange rate and consolidation effects, the organic growth came in at 4.2%, which is an improvement of 6.5 percentage points year-over-year. The adjusted EBITDA amounted EUR 154 million, EUR 4.9 million or 3% higher than the same quarter in 2025. Exceptional items for the quarter were minus EUR 9.5 million compared with minus EUR 3.7 million in the prior year period. The increase results mainly from our internal reorganizations. Accordingly, the EBITDA was EUR 144 million, stable compared to EUR 145 million of last year. Depreciation and amortization are virtually unchanged at the level of EUR 83 million. EBIT came in at EUR 61 million compared to EUR 62 million previous year. The overall financial result was minus EUR 19 million against minus EUR 16 million in the prior year period due to a higher average debt level compared to the previous year. Accordingly, earnings before tax came in at EUR 42 million compared to EUR 46 million. The tax rate is unchanged at 29.9% and the tax result amounted to minus EUR 13 million. All in all, reported net income for the quarter came in at EUR 29.7 million compared with EUR 32.3 million in Q2 2025. The total adjustments amount to EUR 8.6 million, mainly reflecting exceptional items and additional reconciliation factors shown on the slide. The adjusted net income increased by 7% to EUR 38.3 million from EUR 36 million. Let's now switch over to a view on the cash flow. In the first half of 2026, operating cash flow improved to EUR 161 million compared to EUR 146 million in the previous year, primarily due to the better working capital development, which came in at minus EUR 13 million compared to minus EUR 31 million. The positive development overcompensated high tax outflows, which amounted to EUR 36 million compared to EUR 32 million in the previous year. Investment cash flows for the first 6 months amount to EUR 51.2 million compared to EUR 39.6 million. There was an exceptional investment in real estate. As a result, for free cash flow before M&A, there was EUR 110 million in the first half year of '26 compared to the EUR 106 million of the previous year after lease liability repayment, which slightly increased compared to the corresponding period of the past year. Free cash flow adjusted amounts to minus EUR 1.9 million, in line with the prior year half year figure of minus EUR 1.6 million. Let's also have a look at the net debt development in the sequential view from end of Q1 2026 to the end of Q2 2026, the financial debt increased by EUR 115 million, including the adjusted free cash flow of plus EUR 7.8 million. Cash out for dividend payments amounted EUR 107 million and the share buyback of EUR 21 million and a EUR 2 million earn-out payment. The remaining difference in the reconciliation of around EUR 7 million relates to a reduction of accrued interest liabilities paid in Q2, representing a cash flow with no effect on net debt. Net debt year-over-year was up EUR 40 million to EUR 996 million, including accumulated free cash flow over the last 12 months of EUR 106 million cash out for dividend payment of minus EUR 115 million and the share buyback volume of EUR 23 million and EUR 4 million earn-out payment on minor M&A activities. With that, the -- our bank leverage ratio increased to 2.6x compared to 2.47x at the end of June 2025, reflecting a higher net debt and the slight decline in the earnings contribution used for the calculation. Then let's have a look at the performance of the individual segment. As is customary, let's start with Out-of-Home Media. During the first half of 2026, segment revenue increased by 8.1% on an organic and 8% on a reported basis to EUR 492 million and outperformed the German advertising market significantly, as Udo already pointed out. As in previous quarters, digital Out-of-Home again was the key growth driver, increasing by 18.5% to a total of EUR 207 million, supported by programmatic demand and also the FIFA World Cup, which took place in June, which accounts for approximately EUR 12 million in this segment. Classic Out-of-Home revenue was 1% lower at EUR 253 million. Services increased by 26.7% to EUR 32 million, driven by the newly won clients, as mentioned in our last call. EBITDA adjusted for the segment increased by 10.3% to EUR 224 million during -- for the first half of the year and EBITDA adjusted margin improved by 0.9 percentage points to 45.6% during this period. Looking on to the adjusted EBITDA before IFRS 16, this increased overproportionally by 23% to EUR 115 million. The corresponding margin improved 2.9 percentage points to 23.4%. From a Q2 perspective, basically, the same picture emerges. Total revenues in the segment were up 10.3% to EUR 270 million, with digital Out-of-Home as a main growth driver. EBITDA just came in at EUR 128 million compared to EUR 170 million in the prior year period Q2. Then let's have a look at Digital & Dialog Media segment. The first 6 months, the segment revenue increased by 5.4% on an organic and by 14.4% on a reported basis to EUR 476 million. Digital revenue was up reported by 2.6%, while Dialog revenue increased organically by 8%. On a reported basis, considering the additional revenues coming from AMEVIDA acquisition, you remember last year, Dialogue was up by 25.5%. The adjusted EBITDA declined by 4% or EUR 2 million to EUR 57 million for the first 6 months of the year. The corresponding margin decreased by 2.3 basis points to 11.9%, mainly due to a shift in product mix and higher minimum wages in the very personnel-intensive Dialogue business. From a Q2 perspective, Digital & Dialog revenue increased by 16.6% to EUR 245 million. Digital revenue grew by 8.3% to EUR 113 million as the strong performance of the programmatic digital Out-of-Home category more than offset the challenging online media market. Dialog revenue increased by 24.9% or 7.4% on an organic basis to a total of EUR 131 million. The adjusted EBITDA of the quarter came in at EUR 30 million, just EUR 1 million lower compared to the previous year period. The corresponding margin was 12.2%. Last but not least, let's also have a look on the performance of Data as a Service and E-commerce. As expected, the performance in our third segment remained below the prior year level. Segment revenues declined by 11.2% to EUR 156 million. In E-commerce, revenue was down by 10% to EUR 83 million, and it still reflects low consumer spending in Germany in that specific field. Data as a Service revenue was 12.2% below prior year revenue of EUR 82 million and came in with EUR 72 million. Adjusted for the disposal of Statista Strategy and Consulting unit, which we reported and also negative currency effects, the organic revenue decline amounts 4.4% year-to-date. The adjusted EBITDA was EUR 11.4 million for the first 6 months, down 43% and the corresponding margin logically is also down 7.3%. If we look at Q2, the picture is very similar. Overall segment revenue fell by just under 9% from EUR 85 million to EUR 72 -- EUR 77 million. Data as a Service recorded revenues of EUR 36 million, down 11.6% and E-commerce achieved revenue just under EUR 42 million, a decline of 6%. These downward trends logically also reflect in the performance of the adjusted EBITDA and the adjusted EBITDA margin with EUR 6 million and 7.5%, respectively, at the end of the quarter. Having given you an overview on the details of the financials, I'd like to hand back to Udo for his remarks.

Thank you, Christoph. Before ending the presentation, let me provide some comments on the outlook for Q3 and the current trading momentum. For the third quarter, we expect the following developments. For OoH Media, sales should grow in the mid-single-digit percentage range. For Digital & Dialog Media, we expect sales growth broadly in line with the development seen in Q2 2026. For DaaS and E-commerce, we expect sales to continue to decline in the low double-digit percentage range. Against this backdrop, we confirm our full year guidance for 2026. Let me now close the presentation with a short look into our financial calendar for 2026. Our next scheduled reporting date is November 12. On that date, we will publish our Q3 2026 quarterly statement. As always, updates, reports and roadshow presentations can be found on our IR website. Thank you, everyone. We are now happy to take your questions.

The first question comes from the line of Annick Maas from Bernstein.

So I have 3 questions today. The first one is on Statista. Can you give us an update on where we are in the business model change that you've been trying to push through in Statista? Can you just tell us where we are, how this is developing? The second one is you're mentioning at some point that the product mix in Digital & Dialogue is impacting your margin. Can you just elaborate a bit more what was that specifically? And then I guess there's been again some bit speculation around Ströer. Would you be able to comment on it?

So, we are completely in line to what we said 3 months ago. So nothing much changed. We changed the business model from selling seats to volume, and this takes some time because obviously, our clients need to implement company GPT first, then they connect their own data pools and then they decide which third-party data pools they connect as well to their own AI backbone. But everything is actually unchanged. We're going through a year where we're going to see difficult development on turnover because as we already discussed last time, all the long tail demand where people, whatever private individuals have a question, this is actually declining, obviously. But on the corporate side, things are looking pretty much the same like 3 months ago. So we are in the middle of the process. So about -- before Christoph answering the second question about speculation, there's nothing new. I think we said everything about that. There are rumors, but there's nothing what we have to add now.

Let me maybe add one more thing on the Statista thing. Udo described that this is a change. We have first B2B customers, which we changed from a pure subscription to a tokenization model as a test, and it turned out that the total revenue with these customers remains about at the same level, which is a very positive signal at this stage. It's a first test with first customers, but I think looking at pure financially, this is a promising first proof of concept. You've asked about the product mix in the Dialog business. Well, let me split it and Dialog Ranger as well as the call center. Mix in the call center is that you are well aware that we have German activities, and we have a nearshore activities in Southern regions of Europe. Part of the mix changes is that we relocate business there. That is not only on internal purposes, but also on demand. And these things have an effect on individual -- on revenue, but also a little bit on absolute margin. That's part of it. Second is that in AMEVIDA, we've also seen that with -- in the early stage, we just took over the clients, now we're resorting it. We are rearranging the calls, et cetera, et cetera. I think that also has an effect. So there is -- it's basically driven by internationalization as well as some client changes. On Ranger, we are still the core business in Germany is on fiber. In Italy, we are working with a lot of energy contracts or electricity, and this is a weak market at this stage given the macroeconomic environment. So these are 2 drivers of the changes that you were mentioning.

The next question comes from the line of James Tate from Goldman Sachs.

It's James Tate from Goldman. I've got 2 questions, please. I guess, firstly, on Out-of-Home, please, could you comment in a bit more detail on current Q3 trends? How much of a benefit is there from the World Cup in July? And how does the order book look for September versus August? And secondly, on DaaS and E-commerce margins, I think they were down around 3 percentage points year-on-year in Q2. So could you provide some color between the individual performance between Statista and Asambeauty margins? And then how should we think about margins and profitability in the segment into 2027? Do you think you can return to 2025 margin levels if the division returns to growth?

Yes. Thank you, James. So look, we are not focused on -- as we talked about many times on quarters for the full year. If you look back at the end of the year, I think we see that some business from Q2 most likely will have moved to Q2 because of the World Cup. So that's why we explicitly figured out here the EUR 12 million from our expectation was money which normally would have been spent in the second half of the year and was pulled forward to Q2 due to the World Cup. So I think Q3 looks definitely a bit softer than Q2 because people budget are the budgets. And if you spend in Q2, you cannot spend in Q3 anymore. But for the full year, our expectations are completely intact. If you look to the order book now, then we see a positive development in Q4, a little bit softer Q3. So that's what you are seeing right now.

Can you repeat your second question because I didn't fully get it.

In terms of DaaS and E-commerce margins, I think, have been under pressure through H1. Could you help give some color between the individual margin performance in Statista and Asambeauty, sort of what's driving that segment level margins and how to think about margins in this segment overall into next year into 2027?

Yes. I think as Udo pointed out in Statista, we're changing the model. So what's actually happening there is that we are trying -- the big and long tail market here is the big B2B market. It's not the subscription of small individuals. And we are changing that into a tokenized version versus a kind of a flat fee usage on a monthly basis. As I pointed out, that is not only work in progress, but it's tested with some customers and gives us positive signals. Overall, the Statista business, as we all understand, is a Software as a Service. So it's highly driven by volume and scale. We have brought down the staff even further, and we are stabilizing on the current level in terms of margin that we've shown in Q2. And I would expect for the next 3 to 4 quarters, a similar level before we hook up again changing the model and having fully established. So I would -- if I would model it, I would say let's stick to the current margin level for the next 3, 4 quarters and then ramp up again, but it's difficult to say how fast the ramp-up is going to be. On Asambeauty, I mean, giving a bit more color, the business originally, as you're all aware, comes from TV sales. That has come down. The target group is a little bit -- well, it's aging, and they seem to be -- they seem to have bought enough, if I may say it like that. And the now biggest proportion of sales is in e-commerce to a younger target group and also in retail, so which means that we ship to German retailers. By definition, what are the major margin drivers? Cost of goods are always the same independent from the channel. On retail, we live with a lower margin because high volume but lower margin, and we have to invest into furniture. And we are -- as we are familiar with in like [ Trogerimar ] and Rosmann and these kind of big chains. We're doing well there, but this is a lower margin than typically the TV and the e-commerce sales. And on e-commerce, we see that the actual conversion for people coming into the website is fine, but bringing in new customers is more expensive. And we talk to our agencies and to other -- and we look at our own online performance activities in T-Online, we see that it's just a fatigue of the consumers in Germany right now. They're a bit slow. On top, we have 35 degrees, which is not really the time to buy beauty products and makeup, which is our key product in that range. So here, again, I would expect a recovery from the current downtrend in 2027 first half year. And once again, I mean, fixed costs are -- will stay the same. So margin improvement will start step by step in the next, like, I would say, starting Q1 and Q2 step-by-step getting better to -- well, maybe not to the level that we've had 2 years ago, but to a much better level than we have today.

We now have a question from the line of Jérôme Bodin from ODDO BHF.

Three questions on my side. Okay. It seems to have a delay between my line and yours. So let me go through -- so first question on the advertising trend to follow up on the last question. So on the last call, you said that the second half should be stronger. So -- and now you guide for mid-single digit in Q3. So just to understand if your view has changed and H1 has been better, so H2 will be lower? Or should we expect a much stronger Q4? That's my first question. Second one on the OoH margin. So revenue grew by 10% and cash EBITDA grew by 18%. So should we expect this strong operating leverage to continue in H2? And maybe could you also comment a bit on the rent evolution since the beginning of the year? And last question on the Ad Manager project. So you said earlier that the first test of the platform was going live. So could you give us an update? And what do you see in terms of customer demand and average spend? Any data would be useful.

Yes. Thank you, Jérôme. So the Ad Manager, we are testing, let's say, right now, 3 models, self-service models, but it's not the Ad Manager, the Ad Manager that will not be ready before the end of next year. There was maybe a misunderstanding. So we have now -- we are testing a self-service tool for cultural advertising, for example, is more or less a simple web shop. And on the other hand, we have a self-service tool for digital Out-of-Home, which we rolled out like 3, 4 weeks ago and where our own sales staff and our customers now collect the first experience. But this actually are, let's say, we test environment has nothing to do with the Ad Manager. So the Ad Manager, we are on track with our coders. We're working hard. We have -- maybe we discussed at one time, we have coding teams in Czech Republic and also New Zealand and Spain. And so this was -- it's a very experienced team, which was working on the SSP for a long time. You might remember, we have our own SSP. And now this team is actually working on Ad Manager. But it will take until the end of next year until we have it really up and running.

Okay. The other questions, you asked advertising trend and that translated in you want to kind of like have a view on current trading again on Q3 and Q4. I mean I think it's perfect -- the current picture for Q3 and Q4 perfectly matches our guidance. The order book for the third quarter and fourth quarter is up from previous year. And we said that we're going to be above 5% growth. And definitely, we see the same trend. So I would just like extrapolate first half of the year, which is I think fair for the rest of the year. We've just had reviews of July, and that proves perfectly fine. Second question, if I got that right, was your question on revenue to margin impact in Out-of-Home, whether this is a stable one and the 10% to 18% is a fair assumption also for the upcoming quarters. Yes, I would reconfirm that by definition, this business -- I mean, the next extra euro that we take in on existing inventory basically costs only the revenue share or rent and no additional costs either in technology, CapEx or working capital. So step-by-step, it improves with marginal revenues. But I think the current spread is a fair one, which we also internally use for our extrapolation. And the third one, you've asked about the development of rent. Well, I think it's a bit of a hard question because we are not reviewing rents on a daily basis. We are changing rents with new concessions. And we either invest into technology and discuss that with our landlords or with our concession partners. Overall, our ambition is to bring rent down. And on a nondisclosable contract level, we are very successful there. We see that city governments prefer a bit higher guarantees, but are then ready to let go on their revenue share. We have seen that in Hamburg, for example, which we recently won, and we have extended our reach there, and we're very successful in the latest auction. So I think overall, the rent will come down. But given the total volume of 300,000 individual advertising locations, you will not see a big step down in a single year.

The next question comes from the line of Craig Abbott from Kepler Cheuvreux.

Yes, first of all, on the financials, I mean, we saw the leverage ratio increased to 2.6. Of course, Q2 is seasonally the highest given the payout -- dividend payout in that quarter. But I'd like to get an idea basically of ideally where you want to see that leverage ratio by year-end. Secondly, a little bit just more conceptually going forward. Ströer is now investing quite heavily in the rollout of these mega outdoor screens like you have on Page Slide 1 of your presentation. With the 3D dimensions, you've got the Lighthouse in Hamburg and the new one in Cologne, I believe. And I'm just curious if the overall capacity intensity Out-of-Home Media is structurally likely to rise? And if so, how might you consider managing this with regards to your capital structure? And my third question is just briefly, any update you could provide us on the more permanent long-term CFO search?

Thank you, Craig. So CFO search is an advanced stadium. So we should see, let's say, results in the next 4 weeks, I would say, most likely. We have a long process now already, and we are quite happy with the candidates which we have. So for your second question, there is no risk for the capital structure because we are very happy now that we could launch 3, 4 super screens at the same time or in the same year. But for example, the Whale in Hamburg, it was a 10-year preparation work, Lighthouse also a couple of years. So -- and the capacity of these type of screens are super limited. So there will be no impact on CapEx because if we would be able to install such spectacular screens, let's say, in a bigger number, you do it, but it's not possible in Germany.

Because there's only restrictions, you mean.