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Good day, and welcome to the New Work Third Quarter Results 2021 Conference. Today's conference is being recorded. And at this time, I'd like to turn the conference over to our CEO, Petra Von Strombeck. Please go ahead, Petra.
Good afternoon, everyone, and welcome to our Q3 update. I hope you're all healthy and well. This is Petra speaking and next to me is Ingo. So let's get started. One of the most read articles on XING these days is about the brand resignation in the U.S. The article states how the COVID pandemic has affected us all, not only in our private lives but above all in terms of our view on the world of work. The fact that working from home became normal to many of us, seems to result in less bonding and less social glue in companies.As a result, people resign more readily and fluctuation tends to be higher. If you add this moment that's also tangible in Germany to the fact that the scarcity of talent in the DACH region is set to grow further, you get all the ingredients of a bright future for New Work at XING. In order to successfully recruit tell them now, companies must adapt to these new circumstances.New Work is on everyone's lips, and companies now need to make a conscious effort to expand the brand and attractiveness to survive the competition for talent. We are in a very strong position here and the recovery trend of the first 2 quarters has accelerated in the third quarter.Therefore, our key message today is that both our leading nonfinancial KPIs as well as our most important financial KPI revenue are up year-on-year and showing ongoing recovery.After we had to post a small decline of 1% in revenues on the back of the pandemic in Q1 this year, which was a first for this company, we're very pleased to report that we are back on an upward trajectory. Remember, top line growth was already plus 5% in Q2, while in Q3, we achieved plus 7% year-on-year growth and enjoyed positive momentum.When looking at our bottom line KPIs pro forma EBITDA and net income, which almost equal our reported EBITDA and net income, it's important to note a different kind of seasonality particularly when it comes to the timing of the write-down involving the platform modules that are no longer used as they affect G&A and net income. Ingo will cover this in more detail during his presentation.Now let's have a look at our most important destinations, XING and kununu. Let's start with our business networking platform, xing.com, plus 8% in Q3. Our member base continues to see steady growth, climbing to 19.9 million as of the end of Q3. That's an increase of around 1.4 million net new members since the end of Q3 last year and equates to 1.5 million net new members if we adjust for the onetime cleanup in Q1 this year. And 2 weeks ago, we even crossed a 20 million member mark. As you can see, we remain the largest business community in the German-speaking region, particularly in Germany. We are striving to add more working professionals in the German-speaking region, not only to help companies find talent but also to guide our users to an ever-changing world of work and help them achieve a better working life.And in order to make that judgment as to whether a particular company is a good fit for our members when looking for a new job or employer, job seekers can now view information on the respective corporate culture, thanks to the kununu culture compass, available in job ads posted in XING jobs. Using the culture compass, employees can select the behaviors they rate the highest in their company from a total of 160 work-life balance interaction, leadership and strategic direction factors.Based on this information, the kununu culture compass calculates whether the corporate culture is more traditional or more modern, in turn, allowing job seekers to be better prepared and educated when making their next career decision.You may recall that we are working on a big thing at relaunch. After extensive user test, actually the most extensive we ever did, we'll be launching the first updated version in December this year. This is obviously only the starting point. Next year, we aim to add more value and personal relevance to our network members. And I'm looking forward to the arrival of Peter Opdemom our new Board member, who will join the team on the 1st of January to drive that forward. Before I say a few words about Peter, let's have a look what our second destination kununu has achieved in the third quarter. As most of you know, kununu is Europe's leading employer rating platform with a focus on Germany, Austria and Switzerland. Their vision is to empower people to choose the right company for them with workplace inside that matter.In September, kununu launched the largest brand campaign in the company's history under the slogan [indiscernible]. The campaign aimed to raise awareness about the salary data offered on kununu, giving people an idea as to what kind of salary they can expect in a particular job or the particular company. This is, by the way, a depth of information nobody else offers in the market.Throughout the third quarter, kununu further accelerated their growth -- their contract growth by adding almost 400,000 additional workplace insights. Year-on-year, they even added 1.5 million workplace insights, bringing the total number to 5.8 million, up by 36% year-on-year. The XING platform serves to help our members achieve a better working life, while kununu is on hand to enable employees and job seekers to find an employer best suited to their personal values. We believe that people are more happy and satisfied if they can simply be themselves rather than adopting a role not natural for them. That's why we rolled out XING biggest ever brand campaign in September and October. The video we released on YouTube TV and social media encourages members to be themselves by combining suitable imagery with the slogan Don't want to bend over backwards for your job? Do your [ XING ]. With XING, we want people to be themselves at work to do the things they love doing. XING is happy to offer guidance -- ideas to help people achieve that. That's our little B2C update.And before we move over to our core B2B KPIs, let me introduce our new Board member who will be responsible for our B2C business, including XING and kununu. His name is Peter Opdemom and he'll join our team on the 1st of January next year. And I'm very pleased that he will be coming aboard soon. Peter has over 25 years of experience in the telecommunications industry. At present, Peter is Managing Director at Cologne-based mobile phone and Internet provider Congstar, where he is responsible for marketing sales and customer service.Since joining the company in 2016, Congstar has seen its customer base passed the 5 million mark, with revenues also rising significantly from year-to-year in a stagnating market. At the same time, Congstar has evolved to become an industry leader in customer satisfaction. Congstar, in my opinion, is the most successful brand in the industry.This is actually why I think Peter is the ideal person to drive us forward. He has proven that he can position brands in markets where products are comparable and has repeatedly shown that he can achieve keen user focus along with impressive growth. Peter will help us continue to enhance user focus within our main B2C brands and to elevate their relevance in the future. Now let's have a look at our core nonfinancial KPI, which is the prerequisite for future top line growth in our B2B e-recruiting segment. As you know, the most important indicator of future revenue development is the development of the e-recruiting subscription customer base. Usually, corporate sign up to a 12-month subscription package for our various branding and recruiting solutions. And as you are all aware, growth momentum stopped immediately with the onset of the crisis at the end of Q1 2020. Since then, we've lost a few customers on a net basis in the course of 2020. In the first half of this year, we were again able to post small growth. And when looking at Q3, I'm happy to report that the trend has further accelerated and that we have added 89 net new corporate B2B customers. As you know, this helps reaccelerate revenues in the next couple of quarters, but we're also very pleased with how our e-recruiting revenues developed in Q3. Ingo will talk about that shortly.We also agreed with our observations of other market participants when it comes to ongoing recovery of the job market in Germany, Austria and Switzerland. Unemployment rates are declining again, while the number of open positions has grown since Q2 this year. It's also taking companies much longer to fill their open positions. This provides us with multiple indications that things are going in the right direction and that we're in a good position to benefit from this recovery.In fact, another positive sign of recoveries are B2B Marketing Solutions & Events segment. After taking a hit during the pandemic, our Marketing Solutions business already went into recovery mode at the end of last year, and this continued to be the case throughout the current year. However, thanks to recently launching video ads, generally high demand across all ad formats like video ads and content ads and given the rollout of new targeting functions, the segment is now exceeding pre-pandemic level.When looking at our Events business, Q3 continued the steady recovery we already saw last quarter. With increasing visibility stemming from further easing of lockdown and social distancing matters, even organizers have returned and are starting to prepare the events for the second half of this year while also planning at marketing the '22 events. In Q3, we are up 9% compared to Q3 2020 but still about 1/3 behind pre-pandemic levels, which is understandable. So how that is overall quite positive year-to-date performance translate into our financial outlook for 2021. You may remember that we anticipated stable to slightly growing pro forma revenues at a pro forma EBITDA of around EUR 95 million for this year, when we updated our outlook in August. Given what we've achieved in the first 9 months, we are now expecting single-digit revenue growth and an absolute EBITDA of EUR 95 million to EUR 100 million in 2021. And with that, I hand over to Ingo for a detail into our financial results.
Thank you, Petra. Hello, everybody. This is Ingo, and I want to talk to you about our Q3 numbers. So overall, we are well on track. After stable revenues in Q1 and after we had returned to growth in Q2, we are now accelerating our growth in Q3.So let's start with the exact summary and the key message points. Number one, our portfolio of C destinations, XING and kununu continues to grow. Number two, revenues came in at EUR 73.6 million and 7% year-over-year growth. Number three, EBITDA came in at EUR 26.3 million. Number four, operating cash flow came in at EUR 14.1 million. And number five, we update our short-term full year EBITDA guidance from approximately EUR 95 million to a range of approximately EUR 95 million to EUR 100 million. However, the increase in profitability is temporary. It will not carry over into the next years. I'll give you more details on the following charts. Now if you look at the P&L, revenues came in at EUR 73.6 million, up 7% year-over-year. As I've said, overall, we are increasing our revenue growth on group level, which is good. Reported EBITDA amounted to EUR 26.3 million. That's up year-over-year. Reported EBITDA margin came in at 36%. Pro forma EBITDA equals reported EBITDA. And now compared to the previous year, pro forma EBITDA is stable. And the reason for that is mainly that this year, our main marketing campaigns are being executed in the second half of the year instead of the first half of the year.Now as announced, EBITDA and especially margins are coming down quarter-over-quarter. Please note that they're still exceptionally high. As we've also said in the last call that is temporary and should not be extrapolated into the future. As you know, we are in a transition phase where we have the positive effects from the restructuring but not yet fully backed in investment mode. This transition phase is slightly longer than anticipated, and this is why we are raising this year's guidance for our full year absolute pro forma EBITDA from approximately EUR 95 million to range from EUR 95 million to EUR 100 million. Again, these high margins are temporary. In full investment mode, we will have EBITDA margins in the low 30s. So as I've already said in the Q2 call, please do not change your 2022 estimates because of that. Depreciation amounts to minus EUR 14.8 million, down year-over-year if you compare it to last year's depreciation. There's 2 reasons basically for this year-over-year development. This year, in connection with the relaunch of the XING app, we have nonoperative, noncash extraordinary depreciation on platform features of approximately minus EUR 5.4 million already in Q3 -- also be some in Q4 with the launch of the new XING app.And number two, we had nonoperating noncash extraordinary write-downs on a rental contract, which we canceled in our lease assets in the amount of minus EUR 0.4 million. You know that according to IFRS, we have to activate rental contracts. And when we cancel these contracts because we are now consolidating our office space, we have to book an [ impact ].Reported financial result amounts to minus EUR 0.3 million. That's down year-over-year. Last year, in Q3, we had an effect of plus EUR 0.3 million from the revaluation of financial assets. That is the cash that we invested in low-risk asset classes. And this year, we had an effect of minus EUR 0.1 million from the revaluation of our financial assets. If you take out these effects, pro forma financial results will be minus EUR 0.2 million comparing to minus EUR 0.1 million last year. And as you know, these are mainly accounting only, noncash cost for discounting these payments according to IFRS. Reported net income amounts to EUR 6.5 million, that is down year-over-year. And pro forma net income amounts to EUR 6.6 million, which down year-over-year. As I've explained, the reason is that this year, we have a shift of marketing campaigns into the second half of the year, and we had the extraordinary creation on platform already in Q3.Now on the next chart, you can see the profitability by business unit. These are reported figures. And as you know, you will see effects from our restructuring last year and our cost management.Let's with the B2C segment. In Q3, the B2C segment contributed EUR 8.5 million in segment EBITDA, which is up year-over-year. Margin is up as well, and these are mainly cost effects from our restructuring.The B2B E-Recruiting segment contributed approximately EUR 29 million profitability, and that's up year-over-year. Margin is slightly down given that we are investing in this segment. And the B2B Marketing Solutions & Events segment contributed EUR 2.3 million to profitability, that's up year-over-year. Return on sales is up as well. Development is driven by Marketing Solutions but also by the restructuring and the rebound of the revenues in our transactional businesses like Events in general. On the next slide, we see revenue development by segment. Our B2C revenues came in at EUR 24.6 million, that's down 5% year-over-year. The reasons for the year-over-year development is our off-line-based InterNations business impacted by the pandemic, but it is also our XING paid membership business. Now if you look at the XING paid memberships, we are, of course, not happy with the development. As many of you know, one major motivation for users for buying the premium membership is a job search. And with labor becoming increasingly scarce and therefore, job search becoming easier and easier, users do buy fewer premium memberships. In fact, here, the XING paid memberships business, the good labor market starts to hurt us while it helps us on the E-Recruiting side. Now short term, we will have to take this development at the XING paid memberships because we focus our resources on growing XING overall since this is the talent basis for our e-recruiting business. From a group perspective, this is the revenue maximizing strategy. Long term, of course, we will try to stabilize direct B2C monetization. And of course, we work even harder on the e-recruiting side to compensate.Now let's have a look at our E-Recruiting revenue development. B2B E-Recruiting revenues amount to EUR 43.7 million, that's up 14% year-over-year. Now we have returned to double-digit growth in this unit, which is our most important growth driver. All of our solutions revenue streams are growing. We do have a rebound in our transactional passive recruiting business, which have been particularly negatively impacted last year. And we also see growth in our subscription businesses, especially employee branding, applicant tracking and active recruiting. At this point in time, on a full year basis, we stick to single-digit revenue growth in this segment in 2021. Finally, let's look at B2B Marketing Solutions & Events. Revenues amounted to EUR 5.4 million, that's 23% up year-over-year. Here, the revenue development is driven mainly by a rebound of our Events business. Let's have a look at cost. In Q3, personnel costs before capitalization came in at EUR 32.6 million. It's an equivalent of 44% of revenues. Costs are down year-over-year. And here you can clearly see the transition phase between the positive effects from last year's restructuring and continuous cost management on the one hand and the fact that we are not yet back in full investment mode on the other hand. Now if you look at marketing, Q3, overall marketing costs came in at EUR 10.2 million, that's 14% of revenue. That's significantly up year-over-year. As explained, this year, we have shifted marketing into the second half of the year. And we are running 2 campaigns, 1 for XING and 1 for kununu. And both are being well received.Last cost line, other operating expenses. You all know it includes external services, legal audit consulting, payment processing, server hosting and other costs. In Q3, other operating expenses before capitalization amount to EUR 11 million or 15% of revenues, which is up year-over-year.Our next slide is cash flows, operating cash flow. We switch a chart. Yes, there it is. Okay. Operating cash flow came in at EUR 14.1 million. That's down year-over-year, driven mainly by changes in net working capital. Cash out for operating investment amount to minus EUR 10.6 million, that's up year-over-year. It includes CapEx for our new headquarters, into which we moved in September. And cash out for interest paid, foreign exchange and rent amounts to minus EUR 1.9 million. This is mainly lease cash out. And when that free cash flow before dividends and before organizer cash amounts to EUR 1.7 million.Now to sum it up for Q3. In Q3, we've grown revenues 7% year-over-year driven by e-recruiting. EBITDA still came in extraordinarily strong given that we are in the transition phase between the restructuring last year and the return to investment mode. However, the abnormally high Q2 margins have come down as announced.And we update our short-term full year EBITDA guidance from approximately EUR 95 million to approximately EUR 95 million to EUR 100 million. However, as I said, the increase in profitability is temporary, will not carry over into the next years.So that's it for the numbers, and we are now happy to take your questions.
[Operator Instructions] We'll now take the first question from Simon Bentlage, H&A.
The first one would be on your B2B segment, particularly on the customer growth numbers, which have been showing a positive trend in the last 2 quarters. I'm just wondering how you see this trend going into Q4. And what do you see would be maybe a normal number for the quarters in 2022? And then basically following up on this, how do you see B2B growth next year and also the group growth next year? Because I think I remember that you were talking about double-digit growth in 2022 during the last call. Is that something you would still commit to? Yes, I think those would be my questions.
Simon, thanks for the questions. We do see and we do expect B2B customer growth to continue in Q4 and also in the quarters in 2022. Now generally speaking, we don't speak about next year until we publish our preliminary results in February. So we will give you more color on next year in February.And when it comes to the double-digit growth, let me just reiterate what we said is we don't talk about 2022. But in a very positive scenario, it could be double digit. That's what we said and that's the standing.
Okay. Maybe one follow-up question on your EBITDA levels. You said that you're not fully back into investment mode. Can you share a little bit color on where exactly you would like to invest more? What are the things that will ramp up more significantly going forward? And maybe also how you see your savings basically on the personnel side? Is that now already sort of back to the new level? Or is there going to be further savings going forward?
So in investment mode, our margins on group level should be in the low 30s. And if you look at the different cost types at this point in time, we are. And basically, that's because the labor market is difficult if you're an employer, good for us on the revenue side. But it's also tough for us on the input side. We are behind in our hiring. So I would not expect further savings on the personnel side. And going forward, I mean, in very general terms, we will -- the investments were as usual in our business model will be on the personnel side but also on the marketing side you might also see other costs going up with business life returning to normal. I mean during COVID times, you don't have travel, you don't have entertainment in our B2B sales force, for example. And you see this slowly coming back with the return to normality.
We'll now take our next question from Sarah Simon of Berenberg.
I've got a couple of questions. First one, just on the cost side of things. There was a decline in personnel on a sequential basis. Is that kind of natural attrition? Or are you still cutting people through Q3?Second question, Ingo, you talked about a bounce back in classified or transactional revenues as well as subscription. Can you give us an idea of the quantum of the growth between, let's say, the transactional versus the subscription products in Q3?And then the third one was, Petra, I don't know if you can give us a bit more color around how clients -- whether there's a kind of shorter sales cycle now given that people are starting to hire and finding there so much shortage. If you could give us a bit more color on how this shortage of talent is affecting demand for your subscription products? That will be really helpful.
Happy to answer your questions. This is Petra. So first of all, the decline in personnel is actually, as you said, attrition. We haven't reduced or cut any more or have done any more restructuring compared to last year. So that's a natural decline and low restructuring from our side. Looking at the B2B sales, actually, we are happy to see that both the transactional and the subscription business are on the growth trajectory. Obviously for the transaction business, that came down in the crisis even further and is now revamping and -- but we are also happy to see a growth on the subscription side. And if we look at the talent scarcity and how that affects our business, actually, all companies -- actually the hiring, the rehiring in the DACH region is really kicking in now. There is a slightly higher fluctuation every year and the scarcity of talent kicks in so that the companies really see a kind of war for talent out there. And our tools actually help them either attract the talent.If you look at employer branding profiles, whether they work on their employer brands to present themselves towards the candidates or they actually offer the access to the talent if you look at our XING talent manager and other products. So basically, we are super well positioned to profit from the scarcity and war of talent going forward. And the demand increases, the higher the scarcity gets.
And just in terms of the transactional revenues, are those back at pre-pandemic levels yet or not?
They are growing over proportionately because of the rebound. And let me have a quick look to give you the really exact number.
That's what we like, really exact numbers. That's always good.
Well, I give you the correct answer, and never the correct number because -- if it's numbers that we don't communicate. Let me -- I get back to you that. Please go on with questions, and I can give you an answer to that in a second.
Okay. So can I be greedy and just ask one more, which is you launched that kind of managed service, which I can't remember what the name is, but whereby you were helping people -- you were basically running XING talent manager for them. How is that line service going?
We call it XING talent manager -- XING talent service, sorry...
XING talent service, okay.
Yes. And actually, as we said last time, it's still in the early products. But the first experiences we have are very good. The customer satisfaction is high. We are able to deliver the short list. We have a lot of rebookings on the customer side. So we see a nice growth in that field.
Okay. And Sarah, back to your question. If you compare it to pre-pandemic levels, we're slightly above pre-pandemic levels now with -- in Q3.
With the transactional...
With transactional passive recruiting business.
[Operator Instructions] We'll now take the next question from Marius Fuhrberg at Warburg Research.
Yes. The first one would be with regard to depreciation of your software or your platform. Should we expect a similar amount to be visible in depreciation in Q4 as well? And when should this go back to more normal levels already in Q1 or Q2? And second one, sorry if I missed it on the call because there was some issues with my line. But with regards to kununu, how are things -- when you think of integrating kununu into your business and how you strategically thought about it when it comes to more like a marketing tool to get more people on your B2C plus also on XING -- sorry, your B2C platform? And how are your thoughts on monetizing kununu a bit more?
This is Ingo. Let me start with your depreciation question. Not really clear because we always run basically audit to all of our apps and all of all parts of our platforms and then we look what is unutilized and what is utilized. And what is unutilized will be taken off extraordinarily. And we've done that in Q3 already with the connection of the XING app. So we had already some part, but usually, we do that in Q4. But I would count with the same order of magnitude in Q4 than in Q3. That probably would be a good guess and it would basically be around that.
Okay. And I'll take the question concerning kununu. Now kununu is obviously one of our real treasures, and it has a double role actually. On the C side it's about helping people to make better career decisions and is a clear market leader in that field, attracting C-side traffic and bringing real value to C-side users. And in that function, it's actually a super combination together with XING because the insights we create will also be displayed continuously on XING and in the job posts of XING so that people can do more educated career decisions. And that's actually they are reinforcing each other, which is very good in the strategic role #1 for kununu. The second part is obviously that kununu is the basis for our employer branding profiles. And with the increasing number of companies and reviews on kununu, it basically gets an obligation for companies to -- over time, to buy an employer branding profile and be present on kununu and manage the profile. So yes, we see nice growth potential for monetization, and we also see a strategic role to stick to the review market and reinforce [ XING's ] job perspective. So obviously, we're very happy with kununu.
Okay. And one further question for me. We just saw a very good development on [indiscernible] -- I know that they are more in the business of direct staffing. But -- aftermath, I think that HR companies would consider getting -- being better by staffing new personnel by themselves. So they would rather go to -- B2B subscription with you guys -- do you have any feeling of how this time lag in growth develops between companies like [indiscernible]?
I'm following -- I would just find a not as close as you. So currently, I have no feeling what the time lag between the companies is. I can't tell you.
[Operator Instructions] We'll now take the next question from Simon Bentlage at H&A.
Yes. Just one more follow-up. You mentioned on XING that some people are sort of -- or people are not as active on the paying memberships because it's easier to find jobs. Can you remind us sort of what kind of people do use your paying memberships? And what's the share of -- how do they split? So on the one side, there is people trying to find a job. But then I think there's also a decent share of people who are trying it -- or who are using it on the sort of human resources side and sort of heavy networkers maybe, if you will. So maybe a little bit more insight on that would be helpful.
Actually, there are various reasons for the membership and for people joining that membership. But since the very beginning, job has been one of the main reasons actually to join. People looking for a job have the impression that they present themselves better networking opportunities, et cetera. So that's the main driver -- always has always been the main driver for the premium business membership, although there are also other motivations to do so, but jobs is definitely crucial for it. We don't -- I mean also for competitive reasons, we don't give out a split on how exactly the breakdown is. Hopefully, you're understanding.
There are no further questions at this time. Petra, I'd like to turn the conference back to you for any additional or closing remarks.
All right. Thank you very much. Thank you for your interest and for your questions. I hope you have a nice Christmas season and talk to you next year. Bye.
Bye-bye.
That concludes today's call. Thank you for your participation. You may now disconnect.