Scout24 AG Acquires FINANZCHECK.de Conference Call

G24.DE - Scout24 AG
Scout24 AG Acquires FINANZCHECK.de Conference Call
Jul 18, 2018 / 08:00AM GMT 

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Corporate Participants
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   *  Christian Gisy
      Scout24 AG - CFO, Commercial Director and Member of Management Board
   *  Gregory Ellis
      Scout24 AG - CEO, MD and Member of Management Board

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Conference Call Participants
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   *  Andrew Geoffrey Ross
      Barclays Bank PLC, Research Division - Research Analyst
   *  Craig Abbott
      Kepler Cheuvreux, Research Division - Head of Mid and Small Cap Research, Germany
   *  Bob Liao
      Macquarie Research - Tech Analyst
   *  Ian Richard Whittaker
      Liberum Capital Limited, Research Division - Head of European Media Research
   *  Marcus Diebel
      JP Morgan Chase & Co, Research Division - Research Analyst
   *  Miriam Anuoluwapo Adisa
      Morgan Stanley, Research Division - Equity Analyst
   *  Sarah Simon
      Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst
   *  Simon Heilmann
      equinet Bank AG, Research Division - Analyst

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Presentation
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Operator   [1]
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 Dear ladies and gentlemen, welcome to the conference call of Scout24 AG. At our customers' request, this conference will be recorded. (Operator Instructions) May I now hand you over to Greg Ellis, CEO of Scout24 AG, who will lead you through this conference. Please go ahead, sir.

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 Gregory Ellis,  Scout24 AG - CEO, MD and Member of Management Board   [2]
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 Thank you. Good morning, everyone. Welcome to the market update on our acquisition of FINANZCHECK.

 If we go to the second slide, this is the one past the title slide, titled as great strategic fit. This is very consistent with what we told the market in the Capital Markets Day.

 Just to remind you, we have 3 areas of operation, real estate, auto and consumer services. We're particularly interested in the consumer services world, because it provides us direct access to the consumer journey. By that, we get to really understand what consumers are doing with their houses and cars, which allows us to start to predict what they might do with houses and cars in the future.

 As in the documentation that we've released, we bought the business on 3 simple assumptions: it's an -- underlying, it's a very good business; it provides a very good synergy with the AutoScout business; and within the real estate business, as people start to renovate, as they use personal financing to renovate, it gives us some insight as to when they might be selling and also renovating to change from a owner-occupied to a rental-occupied status. So it gives us very good insights into market activity.

 The next slide. We also said to the market that, in round figures, we were projecting EUR 100 million for consumer services from the Scout24. That business was completely organically developed. Again, as a reminder, as we said on the Capital Markets Day, and with the FINANZCHECK acquisition, over the short-to-medium term, we would expect, with its performance and the continued organic growth of consumer services, we should be approaching the EUR 250 million mark in the short-to-medium term.

 I'll hand you now over to Christian Gisy, who is the executive responsible for the transaction. He'll take you through some more details.

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 Christian Gisy,  Scout24 AG - CFO, Commercial Director and Member of Management Board   [3]
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 Thanks, Greg. Good morning, everybody. So to go on to the transaction highlights, which is Page 5, we're paying a consideration of EUR 285 million on a free -- cash-free and debt-free basis. This represents a multiple of 6.8 revenues of FINANZCHECK.de for 2018 expected.

 Important for you to know is that basically the management incentive plan is linked to revenue and operating -- ordinary operating EBITDA development until 2021. And more -- even more important is the CEO has bought into this transaction with a considerable amount, in the amount of a high single-digit million. So there's a lot of commitment also from the management that has just sold to us to be part of, basically, the growth plan going forward.

 The financing, obviously, is going to happen via a credit facility. After transaction, our EBITDA ratio will be around 3x net debt-to-EBITDA, and we are expecting to -- if the status continues as we are -- at the moment, we are expecting to deleverage towards 2.6x, 2.7x by the end of 2018.

 What is the impact, the highlight impact on Scout24? Obviously, we're expecting midterm synergies of around EUR 12 million per annual on the revenue level. As you may have seen on the deck already, we have about -- businesses with FINANZCHECK as of today of around EUR 6 million to EUR 7 million. We are seeing onetime deal-related costs of about EUR 2 million, and we're expecting additional interest costs of about EUR 2 million to EUR 3 million per annual going forward.

 The business, at the moment, is not profitable. It's growing fastly, and the emphasis is on growth and not so much on profitability. And therefore, we're expecting a dilutive effect on our margin of around 1.5 percentage points in 2018.

 On the approvals and timing, obviously, the transaction is subject to antitrust approval, which we expect to get within the next 4 to 6 weeks. And consolidation is obviously then expected to happen by the end of Q3, which means either 1st of September or even in Q4, which would mean 1st of October, 2018.

 Page 6 gives you a clear overview about FINANZCHECK. I think very important to name is that we have bought here a proprietary consumer financing technology platform in Germany, and I will elaborate to that in a second.

 The business itself is within the top 3 market positions in the German online price comparison market, and it's nearly on par with the #2 player that is called smava.

 Today, it compares more than 70 consumer loan products, with a direct integration in the finance providers' IT infrastructures. And obviously, it has best-in-class technology to cover the full life cycle. Again, this is very important, because this, basically, is the thing that fuels growth and makes the user experience on such a site so relatively important.

 I think that the numbers that are provided on the bottom side of the -- on the bottom part of the slide gives you also a strong idea about the growth that the business is showing. So across the last 3 years, we have seen a CAGR of 28% on brokered loans. The brokered volume -- loan volume has increased to more than EUR 1 billion by the end of 2017, which is a CAGR of 32%. And obviously, revenue has grown 35% across the last 3 years. This gives you a clear indication of the market's development overall, but also how FINANZCHECK is performing in such a market.

 Slide 7 and -- is I think the most important slide to understand the business model behind FINANZCHECK. What you see is basically it's an integrated two-sided marketplace, which is obviously beneficial for consumers and their partners, which is in line with what Scout24 is always attempting when we provide transparency, efficiency and stress-freeness to consumers, but also, basically, allow their partners to deliver the business.

 The consumers can access FINANZCHECK via brands and organic traffic. They can access by affiliates and other offline broker channels. The partners, obviously, are, in this case, mostly financial institutions.

 I think the most important piece on that slide is the center of the slide, which basically tells you about the consumer-centric interface and the lender integration. There to name is certainly the credit scoring, combined with the API that we -- that is provided towards the banks.

 And obviously, the machine learning algorithm that is embedded into the whole system that basically gives even more detailed information and better credit scoring -- so that the whole process is getting more and more efficient, which then, obviously, leads to superior conversion rates and obviously, also to superior products that are able to be offered from the partners towards the consumers via FINANZCHECK.

 This is certainly the center of what we have looked into and also of what we are buying, because we are trying to get deeper insight into the consumer journey. We'll try to be involved, we want to be involved in the transaction so that we know when, basically, the consumer has a need going forward.

 The market is obviously providing strong secular tailwinds, which obviously drive superior growth. I think one of the -- well, the main thing is, aside of the fact that we have healthy underlying market fundamentals, is that many of the borrowers that are accessing FINANZCHECK as of today have multiple loans.

 As you may probably know, Germany is not a credit card country, so a lot of consumer loans today, even at smaller sizes, are done via consumer loans and not via credit cards like probably you would be used to in Anglo-Saxon countries.

 As you can see, the newly issued consumer loans have grown 9.4% across '15 to '17 and expected to continue to grow by 5% until the end of 2022, with a market average of about EUR 108 billion. What we also see, which is also nothing new to you, is that, obviously, Germany in continental Europe is probably a bit ahead of France, Italy and other countries, but it's still lagging behind what we know from the Anglo-Saxon countries.

 So that no -- so that means that today about 14% to 16% of our users in Germany purchase financial products online versus 38% in the U.K. Again, here we are expecting the acquired online share to move up to about 19% by the end of 2022, which obviously will fuel further growth of the overall market, but also of the business we just acquired.

 And this also translates into the online price comparison revenue pool that is expected to increase by 16% per annual from -- through end of 2017 towards EUR 420 million by the end of 2022, and we believe that we are, with FINANZCHECK, very well positioned to address this market.

 Slide 9 reiterates our strategy that we have been following since the inception and which has been communicated again, as Greg was mentioning, on the Capital Markets Day in November 2017.

 Obviously, what we are achieving is we want to create a transparent market environment in the real estate and car market. And for that, such a transparent market environment is not only about the search, but it's also about the financing; it's about basically understanding the need of the consumer and providing him with the services that he needs.

 Secondly, obviously, it's enhancing that market and it's -- by complementing the offering with relevant services along the life cycle. And obviously, it is about providing more value to the consumers. More value is the transparency, the accessibility of the market to basically satisfy the needs that consumer have.

 And obviously, it's then being part in the transaction without monetizing the transaction, which means that basically what we are now trying to achieve and to get an active part in transaction phase and very be -- and be very close during the consecutive phase, which we have not been until recently.

 This transaction gives us clearly the value and the opportunity to be close to the consecutive phase and to understand what basically the consumer needs going forward, once he has basically borrowed money for a car, for renovation, for moving, whatever, basically, the borrowing has been used for.

 This allows us to also enhance the proposition to our customer base. It's about the consumer, as we have been talking, but it's also about the customer.

 If we start on the left-hand side, obviously, the very straightforward piece at the moment is the integration of the online financing into the AutoScout24 business, which obviously helps address a clear and current consumer, but also customer need as we know.

 Today, 41% of our used cars are purchased via finance. We're also helping the dealer and the consumer to, on the one hand, increase the transparency into the market, but also the dealer to basically close the transaction, because most of the consumers today are looking to finance their car via either lease or loans. This is something that certainly will help us driving growth in that respect.

 The second piece is, we are -- there is a big opportunity to further build on existing partnerships between our 2 firms. As you know or as you may know, FINANZCHECK already today is an affiliate and partner of FinanceScout24 and of AutoScout24 as well. [Where] we see the opportunity to basically not only continue to grow on the AutoScout level in Germany and also internationally, which the focus at the moment will be Germany, but we have also the opportunity to enhance this via the real estate business. So this is about focusing on additional services [to begin to] scale.

 And lastly, with the product of finanzcheckPRO.de, it's scaling up the B2B offering. The idea is here also to bring the 26,000 dealers that we have in Germany onto finanzcheckPRO, which then allows dealer to recommend product to consumers looking for financing if basically the OEM has closed its leasing and loan books or if the dealer is an independent and does not know how to basically get to a provision of financing for the consumer.

 This basically empowers the dealer, allows them, again, to be closer to transaction and also certainly to basically get even a deeper relationship with the dealer going forward. This basically allows us going forward, we believe, to drive the business from a EUR 100 million business that we are seeing today towards a EUR 250 million and plus business by 2023, with an EBITDA margin by 2023 which is then well above 30%.

 It's fair to say that FINANZCHECK, on a stand-alone basis, is expected to deliver roughly EUR 42 million of revenues in 2018. The reason why there is differentiator is that EUR 6 million out of those EUR 42 million is revenues that are already been driving with Scout today out of FinanceScout and the AutoScout business.

 The EBITDA margin, as I said in the beginning, is minus 14%. We're here investing clearly in a growth business. We're expecting that business to continue to grow in the high double-digit areas. In the past, about 35%, we are still expecting to continue to grow at rates far above 20% going forward. This is basically also the reason why we are so convinced that we are able to drive that business from today EUR 87 million towards the EUR 250 million and plus by the end of 2023.

 This puts us in a unique positioning. As you remember, Scout itself started somewhere bottom left, where it was a huge -- just a marketplace where you could search. With this transaction now, we are moving up towards transaction-ing. We are being now -- we're now getting deeper into the value chain, which gives us not only a larger engaged consumer base, but it gives us also a renowned partner in this industry and a deeper understanding of what happens after the transaction.

 And obviously, our aim now would be then to continue to move towards the right-hand side of the graph, because this is basically the opportunity that will then help to drive those transactions for our partners and obviously, also increase the network effect. We'll have first-party data, we'll have scoring and matching capabilities, and obviously, this will also give us the opportunity to get more innovative products out there for consumers and partners.

 We have clear priorities for cash. You all -- most of you know this chart. We are reinvesting in growth. This is the first acquisition -- or large acquisition that Scout has done in the recent past. And obviously, this is a transaction that helps us to drive the business towards a EUR 250 million-plus business in the midterm.

 We continue to return cash to our shareholders. The dividend payout ratio of 30% to 50% adjusted net income over time is to be maintained. So those transactions will not have a, I would call, negative impact.

 And obviously, our strategy of repaying debt down to 1 to 1.5 over time also is maintained even though we are now increasing our leverage towards 2.6, 2.7 by the end of 2018. So all of what we have communicated in the past still stands; it will not change. It will certainly be adapted alongside M&A targets and M&A strategy.

 What is our outlook for the full year 2018? If you go to the bottom of the page, and this basically takes into consideration a consolidation of FINANZCHECK by the 1st of September, 2018, we're expecting a revenue contribution of about 12% (sic) [EUR 12 million], which then means that Scout24 group should deliver 10% to 12% growth rate in 2018 on the revenue side.

 And on the EBITDA side, as we're expecting FINANZCHECK to be -- to stay and to be negative in 2018, we see margin going towards 45.5% to 56% in the full year of 2016 (sic) [2018]. All other, obviously, guidance number have not changed. All those remain in place as we have communicated after the first -- after release of the numbers of the first quarter. We're just adapting the guidance for the acquisition of FINANZCHECK.

 This is, in a nutshell, the business and the strategic and also the financial outlook for the acquisition of FINANZCHECK that we signed yesterday evening.

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 Gregory Ellis,  Scout24 AG - CEO, MD and Member of Management Board   [4]
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 So thanks, everyone. We're happy to take any questions now, if anybody has any.

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Questions and Answers
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Operator   [1]
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 (Operator Instructions) The first question is from Ian Whittaker, Liberum.

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 Ian Richard Whittaker,  Liberum Capital Limited, Research Division - Head of European Media Research   [2]
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 I have a couple of questions, please. First of all, just sort of going back to some of your comments in terms of real estate and what that -- this transaction would mean there.

 It seems as though you actually sort of -- or the value you would see from this transaction for the real estate part of your business, some of it is really about the insight it gives you when people are actually moving house. I mean, is there an opportunity here to grow your consumer services revenues in real estate by offering loans for what you said, renovation and so forth?

 The second thing related to that is, so if you look at other markets, you've seen other real estate portals move into the provision of mortgages or getting involved within that service. That's obviously sort of an area where portals would have an advantage. Just wondering if you could share your thoughts on that and what that potentially could mean in terms of any future deals.

 And the third question is just in terms of the breakeven -- or sorry, actually, just in terms of the guidance for the medium term, over EUR 250 million of revenues sort of -- and is that sort of by 2023? Or is it sort of a couple of years earlier?

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 Gregory Ellis,  Scout24 AG - CEO, MD and Member of Management Board   [3]
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 So your first question is relating to -- we're -- obviously, we'll make money out of the financing associated with real estate for consumer loans, obviously, through the FINANZCHECK core business, because they get paid when they issue a loan if someone wants to renovate the property.

 For us, it gives us an insight as to -- when people renovate, they either do it for one of two reasons: they want to increase the liveability of the property that they currently have, which means they have no intention of selling it or putting it up for rental; but secondly, it could mean that if it's a medium-to-large renovation, they could be getting ready to sell or to lease the property as they buy another property.

 So one of the things that portals around the world are very interested to do is to anticipate when someone might be thinking about selling their property or putting their property up for rental. So practically, we make money out of the FINANZCHECK business by the issuance of the loan. And then secondly, it gives us the insight.

 Your question about mortgages, we're already in the mortgage business today. The vast majority of our organic revenue comes from providing leads to mortgage originators. But you are correct is that if we have an opportunity to expand or accelerate an already very large business, it's in the realm of EUR 40 million to EUR 50 million of our existing consumer services revenue, growing strongly at a very good EBITDA margin.

 If we get the opportunity to accelerate that business through an acquisition, we would certainly take that opportunity. In terms of the revenue growth and EBITDA margin, I think Christian has got a view on that.

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 Christian Gisy,  Scout24 AG - CFO, Commercial Director and Member of Management Board   [4]
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 So Ian, it's very simple. I mean, we are -- we have projected that, basically, our consumer services business on an organic level would deliver up to EUR 100 million. So basically, the difference between EUR 100 million and EUR 150 million -- and EUR 250 million is EUR 150 million. So this is basically the growth that we are expecting across next year.

 And I think if you look into the growth rate that this implies, it means that, basically, the business is growing very healthily, which, obviously, then translates also into the EBITDA margin of above -- well above 30% by 2023. I don't think it is wise to expect something before that, because if you then translate the growth rate, this is quite an ambitious plan that we're having at the moment.

 In terms of breakeven, obviously, the emphasis on this transaction is to grow in the market, as you're seeing, because the market itself is growing. So we are projecting for ourself profitability in 2020, which then means clear breakeven.

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 Ian Richard Whittaker,  Liberum Capital Limited, Research Division - Head of European Media Research   [5]
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 And just a quick follow-up, just in terms of looking at other potential M&A opportunities. So would you be prepared to do a -- another transaction of this size if you thought it was the right opportunity? Or do you think that any future deals are likely to be smaller?

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 Christian Gisy,  Scout24 AG - CFO, Commercial Director and Member of Management Board   [6]
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 I think we have communicated, Greg and myself, throughout all the investor and analyst talks that we had, that we are happy to basically go that way of transaction if assets out there that fit into our business, whether it's in Germany or in our core geographies, and nothing has changed.

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Operator   [7]
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 The next question is from Miriam Adisa, Morgan Stanley.

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 Miriam Anuoluwapo Adisa,  Morgan Stanley, Research Division - Equity Analyst   [8]
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 Just a follow up on the M&A point. You said now that your FINANZCHECK is close to the #2 player in Germany. What is this ambition to get into the #1 position? Do you think that there could be any further consolidation either with the #1 or 2 player? And was that something that you have considered in the past?

 And then also if you could just give a bit more detail on how you see the transition or the integration with the AutoScout business in terms of how quickly we could -- should expect the sort of products, and particularly around the B2B products to be offered on AutoScout?

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 Gregory Ellis,  Scout24 AG - CEO, MD and Member of Management Board   [9]
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 Well, I guess, we're sort of getting in the world of speculation here, which is not -- is something that we'd prefer not to do. The principal core purpose of the call today is to explain to the market why we bought FINANZCHECK.

 To reiterate what we said on the Capital Markets Day is that our acquisition focus is on real estate, cars and consumer services, and principally, within the 5 geographies, the core geographies that we operate in, which is Germany, Netherlands, Belgium, Italy and Austria. The -- so I'd be uncomfortable to comment further.

 Suffice to say that our balance sheet allows for that. Our operating performance within the core business is now under control. So our ability to seek further acquisition targets is within balance sheet scope and within operational scope.

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 Christian Gisy,  Scout24 AG - CFO, Commercial Director and Member of Management Board   [10]
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 On your question on the AS24, obviously, on the consumer side, we are already working with FINANZCHECK. And obviously, we will now further and deeper integrate it into the overall funnel, so to make sure that basic consumers do accept this much more as a fully integrated product than just probably as an ad as sometimes they would see.

 And on the dealer side, obviously, we want to give them an alternative and an option to provide their interested parties, which is in the case, their clients, which is the consumer, to also finance their cars, which will help them to close the transaction.

 So basically the lead that we are providing going forward is a lead that is even more worthwhile, because it's not only selling the car, but it's also offering -- it's also putting them into the position of offering a financing around the car.

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Operator   [11]
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 The next question is from Marcus Diebel, JPMorgan.

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 Marcus Diebel,  JP Morgan Chase & Co, Research Division - Research Analyst   [12]
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 Christian, I have one question, again, about how to model this. You're talking about EUR 12 million of synergies. EUR 6 million will come right away, given that you had a business partnership beforehand. So how should we really think about this -- kind of like this synergy coming through? And let's say, how is that split over the next 2 or 3 years?

 And then secondly, again, on the profitability, could you just comment why the asset is so far not profitable? I mean, it's been there -- it's been around for a while. Is it just the classic -- it's purely marketing or -- and launch costs? Or what is really the reason why it's not yet profitable?

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 Christian Gisy,  Scout24 AG - CFO, Commercial Director and Member of Management Board   [13]
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 So on the synergy, Marcus, as we're saying today, we are expecting this year to -- basically, to get about EUR 6 million of revenues. And when we are saying EUR 12 million in the midterm, we mean somewhere 2021. This is basically what ourself is expecting. So this is certainly partially helping the business to grow on a stand-alone basis. But I think most of it will then, obviously, translate later on from also further businesses from other partners and so on. So basically we will integrate FINANZCHECK within the overall Scout24 group, but we expect the (technical difficulty) business to come also from other end.

 Around profitability, Marcus, we can -- I mean, it's easy to make such a business profitable as of today. You just cut down, as you are saying, marketing cost and then you're profitable. The question is, what is the aim when you basically look at those businesses. If you look into the underlying market.

 What you do is basically -- it is something that we have also partially done for the other businesses, you basically are trying to grow the business. And when you grow the business, obviously, you are trying to attract as much consumers and partners as you can to basically -- to continue to drive it. And that's the reason why we are not focusing profitability before 2020, and we're very comfortable with that, because we believe that there is a lot of growth in front of us and this will help us to, basically, continue to grow the overall business.

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Operator   [14]
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 The next question is from Andrew Ross, Barclays.

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 Andrew Geoffrey Ross,  Barclays Bank PLC, Research Division - Research Analyst   [15]
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 I've got a couple left. So first, just to go back to the monetization model of FINANZCHECK. Can you actually just tell us exactly how they make money? Is it a cost per application, cost per lead? Is it a flat fee or a take rate? Help there would be good.

 Then to go back around how much money car dealers make if I may finance a car. In the U.K., we know that's a pretty big number. Can you help us understand what that number is in Germany, just to get a sense of the benefits that dealers might see from this?

 And then just to come back on some previous questions on the numbers. Are you explicitly saying that this is going to get to EUR 150 million of revenues by 2023, i.e. the difference between EUR 250 million and EUR 100 million? Or is that too aggressive?

 And on your margins, you're saying high 30s by 2023. I think most people had already in high 30s for consumer services this year and probably assume the margins went up from there. So are you saying that this is going to be dilutive to that margin? Was it just wrong to think consumer services margin was going to go up in the first place?

 So yes, just getting a better sense of what the margins are going to be would be helpful. And perhaps you could give us a sense of when you think it's going to get through your cost of capital, because it sounds like it's going to take a couple of years to be profitable. So when are we actually going to see a return above the cost of capital?

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 Christian Gisy,  Scout24 AG - CFO, Commercial Director and Member of Management Board   [16]
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 Yes. So thanks, Andrew. Well, the EUR 150 million is obviously on the aggressive side, but we believe that this is achievable. When we said well above the 30s -- I mean, what you have been modeling in the past is basically conservative modeling. We have never, basically, claimed to basically go further than the 30s.

 But you are right, there's a dilutive effect, obviously, because if we think the business is only -- will be profitable in 2020, it will take a while also to, basically, scale it up. So we believe that the cost of capital, as you're pointing out, should be in by latest 2023 on the back of this calculation.

 The payment model underlying is basically they are getting commissions for closed contracts. That's the reason why, if you remember, at the beginning of the presentations, we did show you the amount of brokered loans, which are basically the loans that have been closed, the amount of volume that is underlying on those loans and obviously, revenues. Those 3 things are linked to each other, and the way they are paid is via commissions for the closure of contract.

 And on the AS24 dealer, honestly speaking, I would have to look up. I can't really tell it -- you from the top of my head how much it will improve, basically, the dealer margins if we are able to provide them with a financing. Obviously, it has to be with the value of the car. So it is not just an average number that you can put out.

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 Gregory Ellis,  Scout24 AG - CEO, MD and Member of Management Board   [17]
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 Yes. So the revenue and earnings guidance we gave you for the core consumer services business at the Capital Markets Day, Andrew, is correct. Obviously, as Christian said, when we aggregate this under consumer services, revenue growth rate will go up, margin of consumer services will be affected as this business comes towards profitability.

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Operator   [18]
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 The next question is from Craig Abbott, Kepler Cheuvreux.

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 Craig Abbott,  Kepler Cheuvreux, Research Division - Head of Mid and Small Cap Research, Germany   [19]
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 One remaining question from my side, please. And as this business goes from being independent to now being integrated on your platform, do you see any risk of potential loss of either customers on the consumer side or partners on the financing partner side?

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 Gregory Ellis,  Scout24 AG - CEO, MD and Member of Management Board   [20]
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 Just to be very clear, we're not integrating the platform or the company. The company is remaining a standalone operation. Now yes, we will find operational ways to deliver them traffic and inquiry from the respective Scout consumer services and consumers that use the site. And obviously, our car dealers, as an example, can take advantage of the FINANZCHECK product.

 But this -- we are not integrating the people, we are not integrating the technology. We're using various types of technologies such as APIs to get traffic over to FINANZCHECK and FINANZCHECK products into the dealer network as an example of AutoScout.

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 Christian Gisy,  Scout24 AG - CFO, Commercial Director and Member of Management Board   [21]
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 And therefore, we're also not expecting to lose any existing partners, et cetera, because the business, as Greg is saying, is continuing to stand alone. Obviously, it will benefit the Scout24 group. And I think -- and it's something, probably, that we have not mentioned so far.

 What we have -- what we're acquiring here, aside of the fact that it's a very good technological platform, it's also a great management team that stays on board, that is obviously, as I said in the beginning, highly incentivized. And I think those guys, with the reputation they've built in the market, will help us not only to defend, but also to continue to grow partnerships, affiliates and such like.

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Operator   [22]
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 The next question is from Bob Liao, Macquarie.

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 Bob Liao,  Macquarie Research - Tech Analyst   [23]
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 I just had 2 questions. The first is on the integration. You already work with them now, and I just wanted to know what additional sort of functionality you can provide to consumers in order to realize additional synergies? And you know a lot of other portals have decided to partner rather than to acquire. I just want to know what making the acquisition gives you in terms of additional -- you said deeper integration, what does that really mean for the consumer?

 The second question is on the timing of this acquisition. These companies have been around for a while. I think a number of private companies have -- haven't -- I mean, I'm guessing you looked at them before. Just why are you looking at them now? Is it because you didn't have the capacity to look at them before? Just want to get some insights into that.

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 Gregory Ellis,  Scout24 AG - CEO, MD and Member of Management Board   [24]
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 Well, I think the timing issue is more a fact of the owners of the asset have decided that now is something that they'd like to take advantage of the work that they've done.

 So there's no magic in the timing other than, as we understood through the process, that we've expressed interest in the business previously in the sense of we said if you'd ever like to consider sale, please let us know, that sort of interest. And obviously, with inside their ownership structure, they have decided that they wanted to run a process to exit, for which we were successful. So we're very happy on that.

 In terms of your question about consumer synergies, I'd answer that in 3 parts. Yes, other portals have gone down the business development route. I think, to be honest, what that means is they treat people like FINANZCHECKs and the smavas and the CHECK24, to use 3 brand names that are out there, they set up commercial deals with them to sell them traffic.

 The first synergy is, FINANZCHECK will clearly get the priority from us now, number one. Number two is that we have a lot of traffic, generally, which we think we -- now that we are more comfortable and have control over both assets, subject to obviously the completion, is that we can integrate the features of FINANZCHECK into the consumer flow more deeply. You wouldn't naturally do that in just a business development deal.

 And thirdly is something that FINANZCHECK can do as well as themselves, as we get with registered logged-in CRM-based users, you can start to do really targeted, specific marketing, obviously, with the user's agreement under the new GDPR legislation. So they'd be the 3 reasons or the 3 areas of focus that we would see from the consumer point of view.

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Operator   [25]
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 At the moment, there are no further questions. (Operator Instructions) We have a follow-up question of Andrew Ross from Barclays.

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 Andrew Geoffrey Ross,  Barclays Bank PLC, Research Division - Research Analyst   [26]
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 Yes. Sorry, guys, just one as an afterthought. You mentioned there, Greg, you needed to be GDPR-compliant. Has GDPR had an impact at all on this business in terms of its customer list? Kind of appears to me that it might have been impacted.

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 Gregory Ellis,  Scout24 AG - CEO, MD and Member of Management Board   [27]
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 Well, the answer is, that was part of the due diligence exercise. And within the deal structure, we're very comfortable that any risk that we see has been successfully mitigated. So that was a clear topic of conversation where our internal lawyers and law specialists were involved in the deal with some external advice that we received.

 So I have to be very honest with you. You used the word GDPR-compliant; we don't think there's a company on the planet that's GDPR-compliant at the moment. We're doing our best to be GDPR-ready is what we'd probably say.

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Operator   [28]
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 The next question is from Sarah Simon, Berenberg.

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 Sarah Simon,  Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst   [29]
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 Just a quick one. If you already provide a lot of leads to the company, presumably, there's some intercompany revenue that we need to eliminate on consolidation. I'm not sure if that's factored into the numbers that you've given us. I know it'll be neutral at the EBITDA level, but just for modeling purposes, is there some intercompany we need to consider?

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 Christian Gisy,  Scout24 AG - CFO, Commercial Director and Member of Management Board   [30]
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 When I was talking -- Sarah, when I was talking about '18 and I showed the EUR 42 million, I said that basically EUR 36 million is what the company delivered standalone. And the EUR 6 million is basically -- will be going forward in the company.

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Operator   [31]
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 The next question is from Simon Heilmann, equinet.

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 Simon Heilmann,  equinet Bank AG, Research Division - Analyst   [32]
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 Just a quick follow-up on marketing expenses. What we've seen in the German market here was a kind of marketing fight between FINANZCHECK and its other competitors, namely smava and CHECK24. So this is -- so I think the question is, in terms of marketing budget, will you go down the same route like the former management? Or will you search for the fight with the other competitors?

 And then the second question. Can you give us a little bit more light what are the top 5 players actually in Germany in the OPC market, because I was not able to find some current market data. Because you were talking about smava as the current #2, and I was thinking about CHECK24 as #1. And for example, what about Verivox and maybe another competitor?

 And the last question, regarding is it possible -- for example, you're talking about a German market of EUR 80 billion currently. And on the one slide, you were talking about an addressable market should double within the next 5 years. So is EUR 160 billion the right figure here? And is it made possible also to roll out the FINANZCHECK.de model into other European countries, so for example, the car dealers in the Netherlands or in Italy?

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 Christian Gisy,  Scout24 AG - CFO, Commercial Director and Member of Management Board   [33]
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 So let me start with the latest. Yes, and as I expressed during the presentation, we are focusing on Germany right now because we need to make the model work even deeper today. But there's a clear plan to introduce FINANZCHECK.de or then dot whatever in those countries where it will make sense. And obviously, those are mostly what we call the core countries, aside of moving it also onto the real estate part of the business.

 The market today is consisting of competitors that you named, which is CHECK24 as being, let's say, the biggest one, followed by smava, followed by FINANZCHECK. Verivox is a very small player in the consumer loan area, and I don't even know who the fifth would be.

 So this is -- this market is at the moment dominated by those 3 players, which have grabbed amongst themselves quite a lot of market share. And what I'm suggesting that the revenue pool was doubling, it was meant on the online price comparison. It doesn't mean that, basically, an EUR 80 billion market is going to move into a EUR 160 billion market.

 So this EUR 80 billion market might grow over time, with probably 2% a year or something like that, but it was -- when we did talk about doubling it, it was about the online price comparison tool that is going to grow because of the shift from offline to online.

 When you were asking around the marketing expenses, so just to be very clear, because you were talking about former management, the management is very key to us in this transaction. That's the reason why not only we have retained those guys, but we are very -- we believe it's a very strong and very capable management. And I think they have been very wise or they behaved quite wisely in the past. So basically, they were mainly out of the street fight between CHECK24 and smava.

 Obviously they had to respond at a certain point in time, but during the due diligence process, we went all -- through all of that. And I think it was mainly a fight between CHECK24 and smava. And the spending on the marketing side is certainly something where we can now -- with all the consumers, the uniques that we have from auto and the real estate, we can certainly help quite dramatically to basically avoid such street fights between, at least, FINANZCHECK and the others.

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Operator   [34]
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 At the moment, we haven't received any questions. (Operator Instructions) As there are no further questions, I would like to hand back to you, gentlemen.

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 Gregory Ellis,  Scout24 AG - CEO, MD and Member of Management Board   [35]
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 Great. Well, thank you very much for everyone who attended the call. And we look forward to speaking to you next when we do the roadshow for our half year results, when our half year results are due August 13. Thank you.

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Operator   [36]
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 Ladies and gentlemen, thank you for your attendance. This conference has been concluded. You may disconnect.




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