ProSiebenSat.1 Media SE

Good morning, ladies and gentlemen. Welcome also from my side to our Q2 H1 2019 results call.

Today's call is hosted by CEO, Max Conze, and our CFO, Rainer Beaujean. I will join the Q&A session.

Good morning and thank you for joining us. I wanted to start with a quick anecdote.

The other day, I met one of our TV hosts and one of our big stars on a Friday morning at the airport, we were grabbing a coffee and as we were chatting, he told me that he and his son were just watching The Masked Singer, the evening before. And then because his son isn't very old when it was time for him to go to bed, his son asked whether he couldn't finish watching The Masked Singer on Joyn.

And I really got a kick out of this for two reasons. One, I think it shows that entertainment is relevant across all audiences and that with Joyn, we're extending those audiences from TV to digital in a very meaningful way.

And I'll talk about that more later. Now if you go to Slide 5, I wanted to start off and remind you of the strategic priorities that we set out last fall and that we have been consistently focused on and executing.

Number one, to build a future fit entertainment said entertainment and commerce champion. Importantly, return to and accelerate organic growth, while investing for total shareholder return.

Two, focus on local content, make up content more live, more local, more relevant and win back bigger audiences. Three, reach large audiences across all channels by building of our digital footprint both through own and third party platforms.

Four, turn that reach into more money, particularly focused on creating more addressable inventory. Five, drive content production by expanding our synergistic local footprint and scale up Studio 71, our digital outfit globally.

And six, on NuCom to build our synergistic commerce portfolio by serving large consumer needs with a focus portfolio and building market leaders across all four verticals. So how are we doing?

Well, we've been very focused on executing across all of those priorities and I think we're seeing good progress across all of them. Though, of course, it's a journey.

And we're working hard every single day. So let me cover the six points.

On growth, we're seeing group revenue goals are 4%, both for the second quarter and for the first half. By the way, that compares to about an average of minus 4% for European peers.

And while certainly we would want more in the future, we think that puts us well on track in delivering growth and acceleration. Two, on local content, we are seeing the best TV audience shares in June in Q2 in the first half and importantly total video view time was up for the first time in the second quarter.

Now total video viewtime measures, all minutes of all content we put out on all channels whether they be TV and digital. And that's a really, really important metric, because what it really means is that we are beginning to compensate and overcompensate with digital viewing the declines in linear viewing and by the way that is before we have launched Joyn.

Three, we've had, I think quite a successful launch was Joyn, 3.8 million monthly active users within the first month, which by the way is four times what 7TV, the predecessor of Joyn, had the months before. Four, smart and digital advertising for smarter digital advertising going plus 26% and we're making good progress in coming after addressable reach with the joint venture called d-force with RTL and the full commercial launch of addressable TV spot.

Five, Red Arrow Studios had another super quarter with plus 28% revenues and Studio71 also delivering double-digit revenue growth. And last but not least, on NuCom we're well on track with 18% revenue growth to become a €1 billion leading European digital platform and commerce champion.

On Slide 7, I just wanted to remind all of us on the breath of our business, because at times that feel that the narrative is getting a little bit too narrow that we are a TV advertising business. And well, by all means TV is still a very important core, and I think can be healthy for the future, we derive 50% of our total revenues from non-TV advertising.

And in fact, that's part of the business if you called all the parts together is growing at about plus 12%. And so if you look at the parts underneath, you can see on Red Arrow Studios, plus 20, plus 41.

You can see on entertainment, the TV core advertising, which continues to be challenged and I'll talk about more on that later, but you also see the growth in digital and smart and distribution and by the way the negative number on other non-advertising is entirely maximum deconsolidation effect, so if you look at that number organically, it would also be growing and then you see very good and healthy growth across the four verticals at NuCom. So if when we go to Slide 8, what are the numbers for Q2 and for the first half, as I said earlier, revenues are up 4% organic and reported, entertainment revenues are minus 1% organic and that is a mix of a 3% decline in TV core advertising, offset two-thirds by 26% growth in digital and smart advertising, where there were Studios are going 21% and 28% organic and reported.

And Commerce/NuCom Group, plus 7 and plus 18 reported. The plus 7, a marginally weaker than we would like because there's some weakness in the energy market, which is affecting Verivox, but all in, we're pleased with that performance.

And I think you can see that we are doing what we told you in our strategy. Returning to revenue growth, accelerating digital, and diversification and all of that is coming through in our numbers.

We've also just seen and closed July. Now, July is a small month, pretty easy comparison.

So I don't want to put too much into this. But nevertheless, entertainment and advertising revenues grew 8%, TV advertising grew 4% and digital grew 68%, which I think is beginning to show the impact of Joyn as this was the first month where we launched.

And by the way, if you look at year-to-date, that takes a minus 3% and advertising to about a minus 1.6%. Our forward outlook, I think in advertising market continues to be uncertain.

But nevertheless, I think this is encouraging that our strategy and execution is taking hold. Now onto local content, I gave you an anecdote on Masked Singer at the beginning.

But I just wanted to talk a little bit about this. So Masked Singer is a career format.

The band was a smash hit on Fox in the U.S., and we brought to Germany. And there's really been a summer fairytale for us.

Masked Singer is basically celebrities competing and singing in outrageous costumes the angel, the astronaut, the cockatoo, the monster, and all of Germany feverishly guessing who was behind those masks. We had 7.2 million viewers on average per episode 38.1% market share for the finale and by the way, at that very magical moment when the astronauts was revealed we had over 50% market share, and 28.2% average per episode, 26.6 million digital views.

These are numbers, we certainly have not seen in this decade and numbers that usually I reserve to World Championships in Football. And I think it's a wonderful reminder, that entertainment has unrivaled magic, and power, that investing in content and playing that content across all channels is the right and winning strategy.

Now on to Slide 10, we're not just entertainment. And so to contrast, I thought, I'll give you a view on what we do on magazines or infotainment.

We have leading brands in Germany, such as Galileo, Fruhstucksfernsehen which is our good morning, Germany, red and taff and late night, all them increase market sales. And we reach 1 in 4, 14 to 29-year olds.

So if you look at the numbers on the right, those are 14 to 29-year old audiences. This is a view time across all of them about 15% and for example, on Late Night Berlin 40%, of all viewing is already digital.

So all of them, I think are great examples of excellent brand franchises that are meaningful and relevant in TV, but they are meaningful and relevant digitally. They capture broad and importantly, young audiences.

And maybe also this is a good reminder of the unparalleled reach all of our programs have across all channels, because we reach about 65 million Germans every single week across all TV and all digital channels. Now on to Slide 11.

While I talked about viewer ratings earlier and having had the best June Q2 and first half since 2015. I think we're just getting started.

I'm really excited about the great fall lineup. We have 14 new factual and magazines, 8 new movies, including the thriller, the abandoned village produced by award winning Wiedemann & Berg team, 14 new reality formats and 24 new shows.

And I think Queen of Drags with Heidi Klum and produced by our very RedSeven will be a very exciting highlight of that fall. By the way, if you look at ProSieben as a channel, we've increased own productions in primetime by 33% this year.

On to Slide 12. So on the 18th of June, we launched Joyn, by the way deals in just under one year from scratch with completely new and world-class tech, we're six weeks in and it's early, but we are very happy with the early momentum that we're getting.

Now I wanted to remind you of the proposition. This is the one place where with no barriers, you can access the most TV and viewing digitally.

55 live channels, including the public broadcasts of ARD and ZDF. We launched with five originals 40 formats as seven days previewing.

We have about 20,000 episodes in the library. And we're offering 30-day catch up all of this for free, and frictionless.

And you know, when I meet people over dinner or breakfast, the magical moment I find is, if you download the app, which takes about five seconds, and then you open the app and was two-finger movements. You click on live TV, you click on a channel and suddenly you have TV right there where you want it, and I think that is making entertainment and TV, mobile and broad viewing experience.

And while it sounds simple, it's quite magical. You can't get this anywhere else.

And certainly, everyone I need, whether it be friends or family are hooked. Now how are the early numbers looking?

Well, we've had 3.8 million monthly active users in the first month, that's four times what the 7TV had. Our stated target is to get to 10 million within two years.

And hopefully much faster than that, we had 1.5 million unique, almost 2.5 million app downloads. I think quite excitingly this is a mobile first experience and viewing as about half life and half library.

What's next? We're very focused on continuing to improve the free experience by making access to Joyn ubiquitous across all platforms.

We're going to load up Chromecast and remaining smart TVs through fold. We're bringing more content, more search functionality, more curation and then we are hard at work for a winter premium subscription tier launch.

It's too early to give you all the details on this, but I've just had a review on this last week, and I think will be very strong, we'll have 10-plus originals when we launch, a vast library, and amongst other things will be the home of Olympics in 2020. Discovery as a partner is fully committed, and we will begin to look at expansion beyond Germany in 2020.

Now, going to Slide 14. So how does all of this turned into money?

Well, there's a lot of things we're working on, from better client facing organization, to creating total reach metrics. But the one that I really wanted to focus on and I think is most important is to build ability for us to have more Euros of what in totality is a very big vast and healthy advertising market.

If you want to get hold of the TV advertising corner. And the secret to do that is to create large addressable or targetable inventories.

And we're making good progress on this. Number one, we have launched and addressable TV spot.

In Q2 we ran 19 geo-targeted campaigns in the better version. We have about 60 client requests for the second half.

Two, we're working on mixing that addressable TV inventory with addressable digital inventory, so that we can reach large enough audiences and clearly Joyn plays an oversized role in this. And then three, we've just set up the joint venture, d-force, with RTL that makes all addressable inventory across their and our infrastructure available in one place.

And this I think makes the drop for advertisers and agencies much, much easier and should really support scaling this business that we think will be a multibillion markets in the future. Now on to Slide 16 and Red Arrow studio where we've had a very strong second quarter and first half.

On the production side, we saw successful international production such as Jailbirds or Vienna Blood. Jailbirds is by the way, if I may say so the non-scripted version of Orange is the New Black and is also running on Netflix.

So if you haven't seen it, by all means, check in. In the UK, this format was Netflix number one reality show and number 5 of all shows very shortly after its premiere.

Also Studio 71, our global digital player posted double-digit growth in revenues across all key markets. And we're seeing important initiatives in the production of podcast markets, with productions for Facebook watching the U.S.

and a rising podcast business where we have well done over 40 podcast live in the U.S.. The best one, I think is called something scary.

It has 4.5 million monthly listeners. And again, if you're, other than numbers trying to pick up from entertainment out of this call, this is very worthwhile to check in.

And if you look at our total social distribution, plus 27%, growth on YouTube, plus 1.7 billion snaps, and lots of very good work across Facebook and other digital infrastructures. On to NuCom Slide 16.

I think we're well on track to create a €1 billion commerce champion with NuCom. We're very focused on the 4 big consumer needs and corresponding verticals.

I just wanted to give you 2 examples. So on eharmony, we're making good progress in integrating that into the PARSHIP Group.

Registrations are now growing by 13% after a long period of decline. We will switch eharmony to our tech platforms and fall and have quite a confident outlook on the business.

The other example I want to give you is Jochen Schweizer mydays. We launched a Jochen Schweizer TV show called The Dream Job that Jochen himself was looking for new Managing Director for his company and all had to go from crazy challenges around the world and being Jochen young jump out of planes and all those kinds of things.

And while, by the way, that TV show did good but wasn't a great success. Nevertheless, it listed the growth rate on Jochen Schweizer 2x, just because there was more exposure.

And I think that's another nice reminder that entertainment and commerce very, very synergistic. And Bill Ford, GA's CEO, and I talk a lot and we're both very pleased, but also excited about what we may do in the future with this business.

And that's also on Slide 17. I just wanted you seen this before.

I just wanted to remind us that I think there's a very clear synergy case, or NuCom Group and entertainment. I've been amongst many other things, a marketer for 25 plus years and having at one fingertips the awesome entertainment, reach, convening and star power to fuel commerce assets is like the dream of every marketer and it's something that we can do unique while our much more take data-driven commerce business is helping us on the journey in entertainment, which is becoming a more consumer-facing and more tech-driven business witness.

So then on to Slide 18, I saw that close by just give you an update on we're doing across our transformation agenda. We have now completed our leadership team with Rainer joining as CFO and Nick joining as CPO, and I think we really have build a top team that have a great balance of industry experience, ProSieben know-how, but also brings fresh thinking to the opportunities and challenges ahead of us.

I'm really pleased that Rainer is now on Board is only been a few weeks but it seems like we've worked together for years and he is bringing discipline urgency and fresh thinking to our business, P&L and bottom line. Our critical capabilities as I think you saw earlier where we're really focused in building out, important consumer-facing technology and addressable advertising technology building better sales clients structure and working across a broad range of important partnerships.

Partnerships are key to winning. We have been the original investigator of the European media alliance.

We have TF and media shareholders in Studio 71. We have just set up the joint venture with RTL, which I we believe is an industry first.

We are the first strategic partner for Facebook watch in Europe. We're doing Joyn together with Discovery and indeed we have few of other ideas and corporations in the pipeline.

Now, third, I just wanted to talk about one entertainment company and structure, you know, I think we have a unique opportunity to take the three pillars of our business and really make then operationally very sharpen and focus. We have done successfully NuCom, which is operating as an end-to-end clearly structured company and then we are doing with entertainment, so that we can have an end-to-end company.

We have defined the key leaders, we have defined the operating model and we will implement this in fall. As we do that, I think it also gives us an opportunity to have a leaner holding structure and importantly will that set up will optionality as we look at the future of the group, but within all of that, the key is that we stay relentlessly focus on executing our organic growth agenda.

And with that, I pass over to Rainer.

Thanks Max. Good morning to all of you.

Before we delve into Q2 first six months financials, let me start with some personal remarks. As some of you know, I have had some touch-points with the broader media industry in the earlier part of my in carrier.

So, when I got in touch with Max for the first time, I was curious on how I can help drive to change with Max and the team to set all to deliver. The more we got into, the more excited I got about the opportunities, good positioning, top programs, leading viewer shares, strong brands and synergistic NuCom play for one media as a group, but there is also need for transformation.

The needs investments to lay foundations for the future growth, it is early days, but I expect that my focus as CFO, will be on three key areas in the coming weeks and months. First, increasing the focus on monetization, reviewing closely and driving return on investments; second, exploring more ways of driving down costs and increasing efficiencies; and third, increasing transparency to give you the tools to track the progress we make.

As Max said, this is a journey so bear with us whilst we are implementing the changes that are needed. Now to the results for the second quarter and the first six months 2019, Slide 20 shows that we achieved group revenue growth of 4% growth in Q2 and the first half 2019.

On organic, as defined as portfolio and currency adjusted basis, group revenues also grew 4% in Q2, which also is the best organic performance in the group could achieve in the past three quarters. As you can see on this chart, we also added more details about the organic revenue performance, which should also underpin that I will attach even greater importance to this KPI going forward.

While as revenues increase in Q2, the development of earnings was marked by the plans and already indicated investments recorded and expensive and particular in the entertainment segment. About two-thirds of the adjusted EBITDA decline can be attributed to incremental P&L investments in content, digital reach, and monetization.

Another two-third primarily stems from the decline of high-margin advertising revenues. As you know, we are undergoing a big investment program in our core business.

This affects this year's earning development, but it is necessary action, and as Max already outlined before, we see encouraging signs that these investments are paying off. Let me now continuous more color about the revenues and earnings performance of the entertainment segment on Page 21.

Entertainment segment Q2 revenues declined by 4% or €27 million, which was affected by net deconsolidation affected by net deconsolidation effects of maxdome, 7NXT and consolidation of esome in the amount of €23 million. Having said this, organic revenues only slightly declined by 0.8%, which we view as a decent performance given a still demanding TV advertising environment.

After minus 6% in Q4 2018 and minus 4% in Q1 2019, Q2 shows an encouraging stabilization of the segments underlying revenue performed. While TV core advertising revenues declined 3% in quarter two, all the other entertainment revenues combined through 11% organically with strong contributions for digital and smart advertising and the distribution business.

Q2 adjusted EBITDA, as expected declined to €186 million, which primarily reflects a high amount of already indicated P&L investments in program, digital platforms and monetization initiatives such as advertising technology. As much already pointed out, these investments have started to be a food with a strong audience share performance in the TV business, a growing reach and usage of our digital products, and then advanced and future-ready advertising technology, which will put us in the position to roll out increasingly automated and targeted advertising solutions on a broader scale.

The progress also becomes visible in terms of selected operational KPIs, which you can see on page 22. As Slide 22 shows, we achieved an overall positive performance in terms of key entertainment data points.

Total video viewtime, which is a good indicator of the usage of our content across all platforms in the German speaking markets, increased by 0.3% to 257 billion minutes or 4.3 billion hours, audience share and the target group 14 to 49 increased by 1.2 percentage points to 28.4%. And the gross advertising share was also marginally up in Q2.

The share of Digital and Smart Advertising revenues, which marks the progress we are making in terms of the transformation of our advertising business increased by 2 percentage points to 8%. The number of HD subscribers further increased by 7% to 9.8 million and last but not least, the share of Red Arrow's contribution to the local commissioned content on our TV channel portfolio has strongly increased by 5 percentage points to 24%.

This development illustrates the result of our strategy to increasingly produce the local formats in-house. Please turn to Page number 23.

In the content production and global sales segment, we saw dynamic revenue performance of both Red Arrow's TV content production business as well as a Digital Studio 71. Q2 two external segment revenues increased by 28% and, hence as led to a continuing positive performance often already strong first quarter.

In terms of Red Arrow, to positive development was primarily driven by the production companies under left right as well as our German content production hub RedSeven. Also as shown on the Slide, internal revenues generated with our German speaking TV operations notably increased by 67% from €14 million to €23 million.

Again, this development shows the increasing importance of Red Arrow for our local content initiative and gives us much better control over our most successful programs. Studio 71 also continued to grow strongly with an increase in revenues of 41% or €17 million.

The Company benefits from strong grows and its key markets Germany and the United States.Segment adjusted EBITDA margin to €9 million euros and reflects a less favorable revenue mix as well as cost seasonality into two. In the first half, however, adjusted EBITDA improves 28%, which mirrors the revenue increase and shows a stable margin development to.

These terms need to Page number 24. The positive financial performance also becomes visible in terms of the segments KPIs.Almost all indicators through a positive development with a dynamic increase in terms of hours being produced by Red Arrow as well as monthly minutes watched as Studio 71.

The lesser was largely driven by a significant increase in the number of YouTube channel subscribers which grew from 1.1 billion to 1.4 billion people globally. From my point of view, it is worth highlighting the Studio 71's monthly usage worldwide has already reached almost 65% of ProSieben 1's TV channel usage in the German market.

All the Studio 71's monetization potential still is below the level of our TV business. I'm convinced that the Company will become an increasingly important contributor for the group in the future.

Let me continue with the revenue of the financial performance of the NuCom Group on Page number 25. Our Commerce segment also known as the NuComgroup, achieved revenue growth of 18% to €119 million in Q2.

The development was driven by a double digit growth in all verticals and benefited from consolidation effects of around home and consumer advice e-harmony and matchmaking. For full year our currency adjusted revenue growth of 7% which is mainly the result of a soft development into consumer advice vertical.

Here we so an organic revenue decline in the mid-single digit euro million range, which is related to a volatile energy price comparison markets whilst Q1 benefited from the insolvency of an energy provider, which led to above every switching requests, tariff developments and limited bonus incentives currency doing a foster consumer propensity to switch. All other portfolio companies combined have grown about 13% in revenues organically in Q2, which demonstrates the good progress we are seeing in the other verticals.

Adjusted EBITDA in the segment increased by 8%, which is largely as a result of the organic growth. The acquisitions of Aroundhome and eharmony are great strategic fit to newcomers portfolio, but as plans it will take time onto their revenue feeds through to bottom-line.

Please move with me to page number 26. The operational KPIs on the commerce segments show a positive development in every category.

While the number of transactions terms of consumer advice and the number of frustrations in matchmaking has benefited from exhibitions. The strong growth of transaction and the beauty and lifestyle vertical of plus 35% illustrates the vibrant development we are seeing there.

In order to further stimulate these already strong growth and to secure further market share gains in a rapidly expanding online beauty market. We will step up investments for Flaconi in the second half, particularly in terms of advertising, as well as the expansion of the business and product.

Let me now finish my part of the presentation with the confirmation of our full year financial targets on page number 27. We continue to target mid-single-digit percentage group revenue growth and full year 2019.

This growth will be primarily driven by our non-TV core advertising business, which has grown 12% in the first half. This being set, we are optimistic that our group revenue targets can be achieved even under consideration of a potential continued lackluster TV advertising performance.

You also confirm our adjusted EBITDA margin targets range of 22% to 25%. This range takes into account already announced incremental investments in the entertainment segment of in total €120 million, as well as additional investments in our online beauty destination Flaconi to capture a bigger part of our dynamically growing market.

These notes that the level of investments and entertainment in Q3 will be similar to Q2 with a counter balancing cost development in Q4. Why we continue to work on cost efficiency improvements across the group, the ultimate outcome in terms of adjusted EBITDA and adjusted net income and full year 2019 bill as highlighted before significantly depend on the TV advertising market development.

Last but not least, I would like to confirm a financial leverage at the upper end of the target range by year-end 2019, which will be supported by free cash flow driven net debt reduction. With this, I went back to Max for closing remarks.

Thank you, Rainer. Before we go to questions, I just thought I'll give you if nothing else, the 3 things I want you to take away.

Number one, our transformation is on track is what's in progress. But revenue growth of plus 4% local content paying off digital growing 20% plus and continued productive and synergistic diversification with NuCom and Red Arrow studios we are on track.

Two, we are confident about half year 2019. We have a strong local content line up, promising productions drawing coming of its own, the launch of addressable TV spots and further initiatives.

Three, remember its transformation journey. We are choosing to invest in our business to build for future growth, both top and bottom line and total shareholder return.

Thank you.

Hi. Good morning.

I have a couple of questions please. Firstly, I noticed you are slightly more conservative now or cautious on the advertising outlook and expect a decline in key advertising for the year versus flat to slightly down before.

Just wondering if you could may be quantify the level of decline that you expect and maybe what sort of assumption you are making on the level of item bookings in Q4? The second question is relates to that I saw, I mean, previously you shared we should expect EBITDA decline of $270 million that was obviously based on a slightly better advertising environment so I was just wondering if you could give us an update on EBITDA decline that you expect this year and determined?

And thirdly, on NuCom, to get your target of billion of revenue for this year, I mean, and big M&A coming in H2, I mean, it does imply a big acceleration in second half double-digit organic growth, and given the steady earnings in Q2, just wondering what gives you the confidence and what are the various drivers of that improvement in second half? Thanks.

Good morning Lisa. I'll take your first question.

So, look, I think on TV so if you look at the first half, we have seen TV ads to be average 3.5%. In our planning, we are making conservative assumptions and so we are making negative growth assumptions on TV ads in the second half.

Even though the comparative are easier and as I have said in the past, you know market doesn't have a lot of forward visibility. We could end up doing better.

We could end up doing a little bit worse but I'm comfortable with our range of forecasting and importantly in our Q4 swing, it isn't built on an unreasonable TV advertising growth assumption. So fundamentally, we think TV advertising will continue to be weak but as I think you already seen in Q2, and maybe even more pronounced in July.

The acceleration of digital and smart advertising is really beginning to counterweight that in a very, very meaningful way and we have all the confidence to continue seeing this going forward. I'll answer question three and then I'll talk over to Rainer on EBITDA.

So NuCom, look, all in, we feel very good about the new portfolio, yes, Q2 there was specific weakness on because the energy markets are bit compressed. Energy markets have been bumpy in the past.

I mean, it's fundamentally a question of, how much price competition is in that market. We have a very active program that looks very well for the balance of the year both on energy but also in accelerating telco and financial verticals.

And we are doing incredibly well on Flaconi, have a very strong program running into the balance of the year and the same is true through across the portfolio. So I think all in our outlook is positive organically.

And with that, I'll pass to Rainer on EBITDA.

Thanks Max. Thanks, Lisa, for your question.

There is no update on our EBITDA guidance after the year-end, we see exactly what we've said before. It all depends overall on the advertising market, as Max already answered the question, when you look on the, when you ask the question for the TV outlook and the advertising market for the full year.

My first question is you've announced last year a share buyback, which was never completed. Now given the share price is quite weak actually these days, I was wondering if that could potentially be an opportunity for you to relaunch that share buyback?

My second question is on Mediaset, if you just could get a view on how you plan to cooperate with Mediaset? And then, finally, can you repeat the July numbers you gave on the call?

And also maybe give us indication on the August TV ad trends given you don't have the World Cup comps at that stage?

Yes, let me answer on the share buyback. First of all, we are not happy with the share price development overall, obviously not.

But on the other side, we also have to see what kind of opportunities we will have in the future. And the share buyback is always, it's a good signal for investors, for sure, you know, that we believes in our share, but also can send other signals, that you believe that there is potential in the Company.

And, for instance, I already can announce, because I will do it tomorrow that it will buy some shares too. And that's the reason why we are not planning currently to look on to share buyback program.

To your second question on Annick on Mediaset, well, look, we have a long standing and good relationship with Mediaset, as we do across the European media Alliance, which we set up many years ago. In fact, both Mediaset and TFR, shareholders in Studio71, or global digital video payer and we have constant conversations where there may be growth, uncertainty opportunities, and I think I've mentioned this in the past, mainly in the areas of streaming technology, advertising technology, and opportunities to expand European growth across some of our NuCom assets.

And let's see what the future brings. On three, August ad trends, that the crystal ball question because then the next question becomes what is September, what is Q4?

It's all very hard to tell. But we are comfortable I think with the way we're forecasting the business and we're comfortable with the guidance that we're providing for the year and I think would not want to comment further than that.

Thank you very much.

Can you just repeat the numbers of July that you've given during the call, they were quite quick so...

Yes, I'm happy to that. So July is plus 8% Entertainment and total advertising growth with plus 4% underlying TV advertising growth, and plus 68% digital and smart advertising growth.

I will say that July is both a small month. And I think you made the point, I think, the competitors are bit easier.

So I think it's encouraging, but, I wouldn't be cautious, and I wouldn't run away with those numbers either.

Yes, thanks for taking my questions. I would like to take them one by one.

First, I know maybe some additional comments on your first part with how do you view if you can say something on the group's leverage targets, the dividend policy, the current structure? Maybe some additional comments would be appreciated.

Thanks for your question. And you're totally right.

These are my first five weeks. And for sure you look on everything.

Leverage targets are already outlined that in my outlook. We believe that we will be at the year-end to the high end approximately and 2.5 times net debt to EBITDA.

Dividend policy is in place, and that's what we have to accept and it's fine. And the group structure marks already outlines several times that we said we are working on getting it overall more in the segment areas and that we will separate entertainment to make it more efficient.

And that's clearly something where I believe this is the right way, and all the things which I found here we thoughts. And I'm very optimistic that it will help us to drive the Company to a better future if we go this path consequently, and that's exactly what we're doing here.

If my follow up on that. I mean, I understand the comments on leverage for '19.

But would you say it is too early for you to comment on whether you think the leverage target is actually sensible, or whether it could be potential change in view. I mean, same about the dividend policy, say it's in place, and then we have to accept it and it's fine.

But that doesn't necessarily sound as if you are, behind it, to be honest?

I'm behind it. And the targets are assisting.

And that's the reason why I would like to mention it. Because at the end of the day, if you want to change it, then you change it, but this is not our target, so dividend policy is in fact that has been changed, it's fine.

And the leverage targets is also something where you always which we also feel very comfortable with. And again, that's also something when you work further down and for sure our target is to reduce the leverage target from the 2.5 times further down.

But you always have to look and that's what we also do. We look on opportunities.

And if there are opportunities, and you have to discuss it at that time when it's when it's happening.

Okay, that's good. Second question on Joyn, how should we think about the ad load comparable specifically to Seven TV?

I mean, is it fair to say that literally with 3 times the amount of traffic we are basically looking at 3 times the amount of volume? And then related to that on your smart advertising on smart TVs?

I noticed that on Samsung, there is still to date, no advertising, shown on Joyn. Obviously, I think that's, that's a temporary thing.

Do we have any sort of idea on when Samsung will greenlight the pre-rolls and what sort of impact would you expect that to have? Given that, I mean, July plus 68%?

I would assume Joyn plays a major role in that, if you could comment on that?

Yes. So I think all-in still early days on Joyn, but I think we're pleased with the launch.

Your comment on Samsung is, right. We are, because it's complex, working through every technical access infrastructure.

So that we can have ubiquity and people's ability to access Joyn, so we just uploaded Apple TV, for example. And they are some technical issues with Samsung that are temporary, and I would expect we'll solve as we flow through the quarter.

I think in advertising loads, shall I say face smarter and more educated than we were on 7 TV before. We also have much better technologies of 7 TV, I think, was very annoying at times, because you've got the same apps and so forth.

So, we're balancing monetizing well. And I think you can see this in the July numbers.

But also let me be very clear that for the moment, we're really focused on building up our user base and so not quite 3 times, but not terribly far off. And that was it on a Joyn or did I miss a piece.

Maybe an headwind on the, I mean, the Eurosport player and Discovery basically giving the rights away to the zone.

Yes. That was a deliberate joint decision discussed amongst us and it was very simple choice that we felt.

Just having Bundesliga Friday games isn't fundamentally big enough to make a massive difference. And so our joint choice was that off and then using that money to double down on originals and content is a better strategy.

We are looking at our sport strategy going forward. And as I think, I commented earlier 2020 is the year of the Olympics via discovery, we have all the Olympics rights and maybe that will be a good kick off and hopping of more things to come.

I've got three questions that I could. So Max maybe not only focusing on the TV business, I'm going to start off with a question on NuCom.

Obviously, you've given a little bit of color on the top 9 for this year. I wanted if you could just clarify the investment that you flagged in Flaconi and whether that would be incremental or self-funded for maybe sensitive profit guidance on income that would be helpful?

That's the first question. And secondly, I want to just talk about Joyn.

You previously indicated in investment on less investment €50 million to 2019. In the context of the initial traction you've got and as we think about the investment next year.

You think that will be similar level, the same or any higher? That's second question.

And then finally, I want to just check that I understand the guidance for the full year. You said previously, you said that the, it's based on advertising stable, it's slightly declining and you guys can clarify that a little bit in your comments so far.

And I use an intensity saying that the non-TV advertising parts of your business are growing a little bit faster and you previously expected. And therefore, you reiterated the guidance and or if there is some other interpretation?

Thank you very much.

Hi, Umar. So, on NuCom, look, we're making on top investments in -- I think to the tune of 10 million somewhere there about, and that's really because, we think we have fantastic growth case.

We're growing 40%, we are buy the way now expanding in Poland. UTE e-commerce is still underdeveloped.

We have more opportunities to link an asset like Flaconi into the access that we have to influence communities. We're looking at creating broader private label offerings and so forth.

So, we're just really working this all lot and I think is a good example of the kind of growth energy and excitement we can get out of NuCom. On Joyn, we would and think that's will we have guided before or there about see a similar investment levels in 2020.

On 2019 guidance, the the guidance I think is what is and its the range that we have provided. There are many moving pieces and I think, we have accessed, we know I think a reasonably conservative view on TV advertising and we are doing well in accelerating our digital footprint.

And then if I may, Umar, given you are the most permanent -- which by the way, I think is highly legitimate, but I always look at it and I think, look, there is for us to win in entertainment, we have to fundamentally reverse prove two points, number one, we need to prove that we can kept more viewers in the future and while that's a work in progress, I think we're beginning to do that if you look at total viewer share and if you look at the total amount of minutes that are being consumed. And number two, we have to prove out that we can overcompensate what may very well be structural decline in TV advertising with more digital advertising stage.

One, and again, we're beginning to do that not completely but I think you can see the trends, and then the stage two, with smart advertising products that access more of the market and by the way monetize better for us and again, you can see that we're beginning to do that, which is also why you see right we are continuing to put all our personal money in this business, because we have belief in it. Thank you.

Okay. Understand that Max.

May just a follow up in that context on Joyn And then trying to grow offline on of viewers outside of transitional television, do you think that 50 million investment per annum in that platform is enough? And if you all looking to build a platform of scale.

Do you think the scope for you invest more?

You know the $50 million are the net loss of by the way to partner so that's two times $50 million net loss, if you look at the absolute investments flowing in. They are significantly above and then actually to look after number, but why this may be, if you look at the total investments they surely are two to three times.

Omar, Ralf speaking. Obviously, if you can assume Joyn business with revenues in excess of $100 million already and when you compare this to the net loss, which in total is on about $100 million.

You can see that we have a substantial investment jointly with Discovery into the venture. And we believe, according to what we plan, that this will suffice.

Actually, let me, because it's a really good question, it's, are you putting enough firepower into the side? I think the other thing that we're doing is we are uniquely using the broader entertainment infrastructure that we have to feed and drive Joyn, whether that is trailers that are saying after you've watched episode on Monday evening, if you want to see the next episode, you can see it live on Joyn right now, instead of waiting until next week, whether that is cross-wiring fan communities or whether it is making our staff available.

So, there is both, if you want monetary, tangible money, but there's a lot that we are feeding in, that doesn't show up in the P&L, but at the end of the day, somebody else did it would cost 10s and 10s of millions.

Yes, sir. Good morning, everyone.

And thanks for taking the question. So I'm go to show them, please.

So, Max, you mentioned the fact that your first half was at the best since 2015 in terms of market share, just wondering if you could make this analyze this looking at the absolute viewing time. I mean, how does H1 '19 compare to previous years?

Secondly, you mentioned 68% growth in digital and smarter resizing in July. Is it fair to assume that now that the d-force joint venture has been approved, growth would accelerate from that level?

And then thirdly, maybe a question for Rainer as well, you did a deal with General Atlantic a couple of years ago, valuing Commerce at 1.8. Obviously, that doesn't seem to be the number which the market retains right now.

So would you consider other, let's say value crystallization opportunities around Commerce or and other assets? Thank you.

Thank you very much, Adrian. So on your first question, I think on absolute viewing time, given linear viewing is declining if you were to compare the numbers in absolute viewing that probably be 5% to 10% below.

The bit, that I think is really interesting to me, as you know, as we started to measure total video view time, and by the way, we're working hard on measuring net reach across all trends and platforms, but it's actually quite difficult. So we just don't have those numbers yet.

But for me, that's a really important metric because fundamentally, my viewers are in entertainment, we are in the business of producing great content that people want to see. And the first measure of successes are more people seeing it in a very economical, whether they're seeing it in the linear viewing experience on Joyn digitally, or whatever.

And I think that's quite a meaningful, important proof point. On your second question of digital and smart ad growth, so yes, you cross the wire, I was going to make a comment on this.

So the cartel authorities have approved the RTL d-force joint venture with us, which I think is a really good an encouraging sign. Because it creates a really important infrastructure point in the market where advertisers and agencies can now access the totality of addressable and smart inventory across TV and across digital and across RTL universe in one place, and I think in scaling that that will be very meaningful.

And yes, I think underpins a continued positive outlook on digital and smart advertising growth. 68 is a big, it's a big number.

I think if you look at the first half of 26%, would we expect that 26 to accelerate in the second half? The answer is yes, to be, but I don't want to quantify that number On NuCom valuation, we are trust on entertainment.

I think we're very focused in operationalizing NuCom. We've had a lot of work day, and I think we have put very good teams in place.

We have a very clear strategy around for the consumer needs and verticals. We have absorbed and voted on the number of businesses, and we're beginning to turn year and growth on those.

And so I think all of that is progressing very well. As I have had in the past, at the right moment in the future, we will look at value personalization opportunities, and the most obvious being at some point in time to IPO NuComand/or IPO asset classes within those.

But for the moment, we're in way in executing and operating mode. Thank you.

Hi. Three questions for me, please.

First, just a question on the, on advertising, Dentsu have just missed numbers and guidance today, specifically on multinationals advertising into Asia. I'm just wondering whether you seen any deterioration within the mix of the advertising news reported, nationals starting to cut back in July and August.

Second question for Rainer, M&A is back up again. You've spent €101 million in the first half.

Previous CFOs talked about ongoing M&A of around two €200 million. But you were quite significantly below that last year.

So are you going should we be thinking that M&A spend on a recurring basis going back up to the kind of €200 million level on a full year basis? And lastly, another question for Rainer, is advertising work is significantly deteriorated in the second half.

What would be sacrifice the dividends, the Joyn investment programming spend or M&A? Thanks.

Laurie, I will take the first one. I used heard a term Asia but where multinationals are going in Asia, I think has a real impact on what is happening here.

I look at I said before, the advertising market, have little visibility. There are some sectors that are strong and weak, but the we don't see any accelerating signals.

I'll give you an example. I mean, automotive has been a weaker part of that market certainly last year and this year.

But there's actually some momentum coming in because both VW and BMW are launching, big e-mobility campaigns and we're participating in those. So it's just, what I'm trying to make is incredibly difficult to manage our forecast markets because at the end of the day, it's an aggregation of individual players and industry.

And as I said before, we are comfortable I think with the guidance range and forecasting that we have put in for the year.

So let me answer the second question M&A. Honestly, I don't want to put all the number in the market, because it's opportunity driven.

When we have something which is attractive, then we will look into it. And then we decide based on numbers very disciplined, if we can't do it, if we want to do it, and if it creates value for the Company overall.

And that's the only thing I would like to say to that.

And trust, by the way on the 100 million to make a comment, because I think there are quarter-on-quarter good 100 million. We've used them to take over minority shareholders that we had a Studio 71.

And we have a strong belief set on Studio 71. And we're one of the top 3 global digital video players.

I just had a long meeting with the global YouTube and Google executives on what we might do more. And so I think that's money very well spent, we have taken on minority shareholders on virtual mines.

And let me remind you, that active agent is the technology engine that is driving our RTL, I'd say joint venture. And so again, that's when we feel like very value accretive money being spent and the third is we bought Regiondo, which is an important component of taking our experience business to the next level, because experience says are one of the fastest growing and most highly valued sectors globally.

And we have a pole position and we want to be the ones that enable people in Germany based to book any experience they want anywhere and at any point in time. And Regiondo is adding very important capabilities for us to do so.

And the last question, it's a difficult one. Because at the end of the day, our belief is that we reach our numbers at the year-end.

That's reason why we reiterated our guidance. From a margin point of view for the EBITDA margin between 22% and 25%.

And I feel comfortable and that's for sure what you do, when you come you on-board. If you look on the current analyst forecast and I've seen that the most of the analysts have an EBITDA margin between 22% and 23%.

And here overall, I feel comfortable. So whatever happens, we, and Max already said that in his speech.

We reiterated that an outlook statement also for the top-line with the mid-single-digit growth number. We feel also profitable.

So therefore, for me, it's more or less that we have to deliver and what we promise. And that's exactly how I would like to play it and there's something you to tell, that we will discuss.

So just in terms of priorities here, we'll come first out of those four?

Overall, as I said there is always a mixture between things and then we have to see what is necessary, what is not necessary, again we feel comfortable with our guidance for the year.

Maybe a quick follow-up on your M&A strategy I mean, what is your leftover firepower for H2? I mean you said it's opportunity-driven, but do you actually have any opportunities in H2 looking at your leverage ratio and targets for the full year will be the first question.

And then, secondly, where do you see your long, or let's say mid-term profitability in your entertainment segment. I mean, we all aware that you at the moment are investing heavily into advertising technology and content et cetera.

But do you see for example let's say overall higher production costs and especially when you compare yourself let's say five years ago when you maybe broadcasted to U.S. content?

And lastly, it's just a quick follow-up on, regarding Joyn and the Discovery bit that they sold the Bundesliga rights. And were you aware of that when you got into that corporation, because I think it's one of the most attractive assets you have for a potential premium or potential paying customers for your plans in winter?

Thank you.

So for the M&A strategy and firepower, for sure, all depends on the EBITDAR which you are buying because it's a multi calculation game. On the other side, our guidance was at the upper end of the 2.5 times is based on slower M&A further on.

So, we have to see what is happening and then it is opportunity driven and if you find something which is attractive, then we have to discuss it, but currently I will say we are comfortable with our guidance and on top of that, what I said at the beginning, its opportunity driven. It can clash on long and medium-term profitability in entertainment.

First of all, we focus on the rent numbers, if you all know that's difficult enough, what we have discussed already in that case we have fundamentally to prove that we can up in Q4 our numbers that's based on the advertising market we mentioned several times doing this. They are doing this call and if you are comfortable and we take it from that in March then.

Just to add one point on entertainment. So, yes, there are elements where we are adding cost, because we're creating more locally meaningful programs and there is some degree off fragmentation I guess going forward.

But at the same point in time, as all reach becomes targetable that reach is a lot more valuable so I am a very big believer also that in mid to long term profitability in entertainment can and will be very attractive. On Joyn, yes, that was a company Joyn discussion with Discovery and we decided that together not because not attractive, its terribly attractive but there is the only Friday gain and so its a two thin slice we felt relative to cost to make a big difference.

And so we jointly decided to use that money and double down on original content creation, and then work on the spot strategy. I think really kicking in Olympic next year.

Maybe just a question follow-up on entertainment again, so you feel comfortable that you can reach let's say historical margins within that segment in the mid to long-term?

Overall, we are not margin-driven in that case. We are more of the absolute numbers which is relevant for us at the year end.

Okay. Understand the point, here I'm taking about the maintain so let's say next three to five years.

It is too early to forecast that reduction. Let's finish the year and than we can full discuss that again.

I think and we are more looking on the absolute number like we also did in the past, because that's relevant because that's generating cash generating and that's generating profitability and opportunities also for the future.

I've got just 3 quick ones. Firstly, just on Joyn, Max, I think you said, but can you just confirm, that the 68% growth in July is not really coming from Joyn because you haven't started to push the monetization.

It's more about kind of core online as opposed to Joyn. Second one was just on d-force.

Can you give us a quick rundown of what that actually means in terms of the commercial offer? And then the third one was just on Studio71.

How much of the revenues of Studio71 are coming from Germany?

So, on Joyn, no, the 68% in July are meaningfully impacted by the launch of Joyn. So I think it's actually a positive sign that Joyn is beginning to impact the expansion of our digital growth strategy.

On Studio71, Germany is realizing about 25% of the global footprint, no. Because this digit million, thank you.

And on the d-force, what I means in terms of commercial offer is that and then when the mix of working, kind of bringing this to life technically, but it fundamentally means that we're able to make addressable TV, addressable/targetable digital inventory available across the infrastructure that RTL has all infrastructure, put back together, and offer that to clients. And we have about I think, 60 clients also, that have initial interest.

Then as these things go, first, we needed to set it up, which we've done. We needed approval, which we've done.

Now we need to start going live, and I think as we go live, and we get into Q3 and into the future, we will begin giving you more detail and one numbers on how that is going.

But -- so presumably, you've got 2 separate sales forces, but sharing of the infrastructure. Is that the way we should think about it so that there's one interface for the buyer?

No, it's a programmatic platform, so the inventory is already interested. Of course, the pricing effect completely independent by both companies.

But I have one programmatic base where I can access all, the inventory. And that makes it much, much easier, much faster, and less complicated for clients and agencies to access, addressable and smart inventories.

Thanks, just four actually quick questions. First one Max is in terms of you've mentioned total view time, a number of times in the presentation.

And it was sort of encouraging to see the fact that that actually has stabilized. Can you actually give us a sort of breakdown in terms of that total view time between linear and nonlinear so we can actually track that performance so we can understand how that relates to the advertising share that you've given on that side as well as the first question.

The second question you talked about, obviously, some initial programmatic sales which I think you said you'd already done 18 sales, but obviously, potentially 60 in the second half. Can you talk about the pricing of that in terms of those 19geo campaigns and what the pricing differentials were so we can understand that?

The third question is on Joyn. I think I heard correctly that you talked about the potentially to grow that geographically.

I don't know whether you can expand on that, or whether it's too soon to do so. And then just Rainer, a just on the last question just on guidance.

I know, this has probably been asked in several different ways. But just to be clear, the historical guidance was talked about as a €50 million EBITDA impact this year on the consolidated numbers.

But with the Flaconi investments of €10 million that was mentioned on the call, should we now think that widens from 50 to 60? Or is there something that I've missed?

Those are four questions. Thanks.

So let me take you for three on total view time. So if you take if you take on total view time, if you want the amount of linear decline, and then you look at how we are feeling are relative to that linear declines.

Two thirds of that is the growth in market audiences in about one third is the growth in digital. And by the way, if you, if you recall, one of the KPI pages, if you look at our total footprint about 8%, I think it's all digital.

On the one hand, one could say, well, that's really small shouldn't be bigger and the answer is yes. But I think it's a fantastic opportunity, because it also shows how much scalability, we still have going forward.

On programmatic sales, pricing of campaigns, I don't want to comment specifically, yes. All in we think, as campaigns become addressable, there is pricing opportunity to the tune of 50%to 100%.

But for the moment, we're really just focused on, scaling that business. And you know, it's a very new thing in Germany, helping our client partners and our agency partners understand what it is we have to offer and scale up and on drawing potential growth geographically.

The answer is yes, we have, to big just European media players that have expressed strong interest to think about and look with us, whether this could travel beyond? I think the answer yes, is a lot of timing and sequencing.

We're very, very focused in completing the build out of our a water and free offering, we're very focused in putting the premium layer together for launch in winter, and that is absorbing 100% of the energy and team that we have available. As and when that is done, we will begin taking a look at when how and with what kind of structure we might look at opportunities beyond our core market.

I'll just ask a quick follow that just go back to that slide 22 in the deck with total due time, 267 billion minutes of that. What is the actual break down of that in terms of digital versus linear to compare with the 92 and 8% basically, so core advertisers on one hand digital smart?

Richard, it's Dirk speaking, so just to comment. As you see on same slide, also the daily linear TV consumption, which was down 2%.

And this obviously has affected the whole market and in the total market, we have gained audience share, which is, I'd say to around about two-thirds of linear TV viewing gains we have achieved by audience share gains. The rest basically why we are up in total is the right from our digital assets, as well as Studio 71 in Germany, but it's not including Studio71's global business.

Okay.

And by the way digital, yes, go ahead Max.

I was just going to make a comment, because all of you look at linear viewing numbers, which continue to show a decline. And one would think sometimes that the kind of accelerated.

You got to be careful with those numbers, because, for example, they don't measure at all today. What we're doing is called on streaming platforms, and so forth.

So that's why, we're now looking increasingly as total video view time, so the total amount of what's being consumed and the measure that we're working hard on, is to be able to look at total reach. And then be able to duplicate that reach across everything, because I think that's the truest view of how many people are watching our staff and whether they're doing that in a linear or digital experience.

So I'm completely agnostic to.

So let me answer your last question and please take into account that, everything, which we have already announced especially the incremental investments in our entertainment segment of the approximately €120 million, as well as the additional investments in our online beauty destinations Flaconi. Our part of our guidance range, which we have given out.

And also have in mind, again, that the level of investment and entertainment in Q3 will be approximately similar to our Q2 investments. And then we have to counterbalance these investments with cost development in Q4.

And there is also one of the things we're working on is cost efficiency improvements across the group. And for sure, the ultimate outcome in terms of adjusted EBITDA and adjusted net income in the full year 2019 will depend significantly on TV advertising markets, development for the year-end.

So therefore, yes, the extra investment of whatever the number will be 10 million, 20 million for Flaconi. We'll impact the year, but it's all included in our guidance.

And again, I feel comfortable with a numbers which we have seen margin wise between 22% and 23% from the analysts, which we can see currently.

Okay. Thank you.

Okay, ladies and gentlemen, this was the last question for the call. We thank you for your participation.

And if you have any follow ups, please do not hesitate to get in touch with Dirk and team. And with this, we wish you a very good day.

Thank you.