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TRANSCRIPT
| October 13, 2016 |
The power of television
Capital Markets Day – October 13, 2016
Digital Ventures & CommerceDr. Christian Wegner
| October 13, 2016 || October 13, 2016 |
Agenda
2
Core assets
Portfolio strategy
Achievements
Summary
III
II
IV
I
| October 13, 2016 || October 13, 2016 |
Key achievements of Digital Ventures & Commerce
31) Revenue CAGR 2012-H1 2016 LTM 2) Weighted average revenue CAGR of all single acquisitions, LTM at closing – H1 2016 LTM 3) Ext. EBITDA of assets since acquisition
Rec. EBITDA increase
shows successful M&A3)
Lighthouse M&A dealStylight complements
lifestyle vertical
Cornerstone mass retail
OTC brand
Ne
w d
eals
Strong revenue growth
of acquisitions2)
LTM at entry LTM H1 2016
Pro Forma
Total dynamic revenue
growth since 20121)
+63%CAGR
~2.2x
>50%CAGR
| October 13, 2016 || October 13, 2016 |
Dynamic revenue growth since 2012
4Note: Based on new segment structure; 2012, 2013 as reported for Digital Commerce
External Revenues
599
465
321
108
20132012 H1 2016 LTM20152014
222
[in EUR m]
CAGR
+63%
| October 13, 2016 || October 13, 2016 |
Jun 05 +19%
Company ClosingRec. EBITDA
margin developmentExt. revenues (CAGR) since closing1)
Weighted average
Nov 15
May 13
Jan 14/Aug 12
Aug 15
May 13
Sep 12
Jul 14
Apr 15
Apr 15
+80%
+23%
+24%2)
+32%
+27%
+37%
+58%
+130%
+111%
>50%
All our acquired assets have substantially improved after closing …
51) CAGR LTM at closing – H1 2016 LTM 2) Average of weg.de and tropo, merger in progress
| October 13, 2016 || October 13, 2016 |
… and have shown strong value creation
61) Excludes internally transferred assets from EPIC to P7S1 (Valmano, Discavo) and transactions closed after H1 2016
2) Entry LTM figures partly based on local GAAP and management reports. LTM entry EBITDAs incl. air-time cost. For companies without monthly reporting
prior to closing, figures based on full year of acquisition year; H1 2016 LTM EBITDAs excl. airtime cost; EBITDA partly entity based
Ext. revenue growth of assets
since acquisition2)
Ext. EBITDA increase of assets
since acquisition2)
H1 2016 LTMLTM at entry
~1.8x
H1 2016 LTMLTM at entry
~2.2x
Active majority portfolio1)
Online Price Comparison
Lifestyle Commerce
Online Travel
| October 13, 2016 || October 13, 2016 |
We will further enhance growth by our future Value Creation Playbook
7
Idle TV advertising Digital transformation
Omnichannel sales Operational excellence, data & synergies
ValueCreation Playbook
Create and capture growth
opportunities driven by digital
transformation
Leverage competence centers
(brand, marketing, data, internet
operations) and shared services
(technology lab, data pool, HR)
Combine retail, digital
commerce, home shopping
and direct sales
Accelerate growth & reduce
marketing cost
| October 13, 2016 || October 13, 2016 |
Agenda
8
Core assets
Portfolio strategy
Achievements
Summary
III
II
IV
I
| October 13, 2016 || October 13, 2016 |
Our strategy at a glance
9
Through Digital Ventures & Commerce we
leverage our idle TV ad inventory to build up
profitable consumer businesses to become less
dependent from our traditional TV ad salesIdle TV
advertising
is our unique
competitive
advantage
| October 13, 2016 || October 13, 2016 |
Our investment approach for Digital Ventures & Commerce …
10
Buy & build approach
We focus on businesses/verticals with high EBITDA, defensible market models and
structural market growth
Our DNA is the combination of operational excellence, TV-driven growth
and private equity-like dealmaking
Dynamic organic growth plus value creation through M&A
Accelerate growth and reduce marketing costs
Generation of structural growth opportunities
E.g. marketing excellence, data pool and technology
E.g. data generation for our ad sales
TV advertising
Digital transformation & omnichannel commerce
Portfolio synergies
Strategic value to our core business
| October 13, 2016 || October 13, 2016 |
… following clear investment criteria for our portfolio
11
Criteria fit High Medium Low
Selection criteria for verticalsOnline
Travel
Online Price
Comparison
Online
Dating
Lifestyle
Commerce
Structural growth market
Attractive rev. and EBITDA margin potential
Protected from tech disruption
Entry barriers for global giants
Highly TV responsive
Asset-light business model potential
Digital transformation potential
Omnichannel sales potential
Data synergies
Sales Platforms for products of our customers
Additional ad sales potential
Attractive
market financials
Robust
business model
Strong
TV synergies
Non-TV synergies
Manageable risk
exposure
| October 13, 2016 || October 13, 2016 |
Balanced portfolio with our Top3 assets contributing 40% of revenues
121) Pro-forma revenues Including recent Parship Elite Group, Windstar and Stylight acquisition as well as remaining consolidation effects fromacquisition of Verivox and Etraveli
15%
Lifestyle Commerce
Online Dating
13%Online Price Comparison
13%
Online Travel
24%
35%
Pro forma ext. revenues H1 2016 LTM1)
~40% of revenues
Top 3 assets
Total: EUR 863m
| October 13, 2016 || October 13, 2016 |
Market share of
global giants
Our market leading assets face low competition from global giants
131) Pro-forma revenues incl. Parship Elite Group, Windstar and Stylight acquisition as well as remaining consolidation effects from acquisition of Verivox and etraveli 2) H1 2016 LTM-2018 3) 7Travel is #5 OTA and Etraveli #4 Flight centric OTA in Europe 4) Stylight is #1 Online Fashion Lead Gen aggregator in EU, Flaconi is #2 in Online Beauty and Care market in GER, Windstar is #8 in OTC retail market
Our core assets
Online TravelOnline Price Comparison
VenturesLifestyle
CommerceOnline Dating
Ext. revenues
H1 2016 LTM1) EUR 303m EUR 109m EUR 133mEUR 208mEUR 111m
Targeted
revenue CAGR2) +5-15% +10-20% +5%+20-30%+5-15%
Market
Position of core
assets
Top 5in EU3)
#2 in GER
#1 in GER
Top 10 in GER4)
#1in GER/A/CH
Mediumin EU
Lowin GER
n/ain GER/AT/CH
Intl. digital
gold standard n/a
Lowin GER/AT/CH
Lowin GER
| October 13, 2016 || October 13, 2016 |
We develop our portfolio based on our portfolio matrix
141) CAGR 2015-2018E
Scale to profit/partner Accelerate growth
OptimizeSell
Revenue
growth1)
Mid-term margin
potential
>10%
<10%
<20% >20%
| October 13, 2016 || October 13, 2016 |
Portfolio Strategy
Achievements
Summary
II
IV
I
Agenda
15
Core AssetsIII
TravelOnline
ComparisonDating
Lifestyle
CommerceVenturesA B C D E
| October 13, 2016 || October 13, 2016 |
7Travel has become the #5 Online Travel Agency in the European market
161) Excluding pure meta players, based on total transaction volume; Source: PhocusWright
#1
#2
#3
#4
#5
Key players in Online Travel in Europe1)
7Travel became #5 in the European Online
Travel industry in only three years
Structural market growth in European Online
Travel with >10% CAGR (2011-2015) and positive
outlook
7Travel is the only European Online Travel
player growing profitable
C D EA B Core Assets – Travel
| October 13, 2016 || October 13, 2016 |
Embrace strong Meta development
with superior consumer offering
Continue profitable
international expansion
Further improve data driven and
operational excellence
1.
2.
3.
Etraveli (Flight OTA)1) is our core Travel asset …
171) Core business
Growth strategies
Active in
46countries
C D EA B Core Assets – Travel
| October 13, 2016 || October 13, 2016 |
Operational excellence
Better monetization
Faster development and lower cost
Superior analytics
… significantly outgrowing all travel market segments
181) Etraveli internal study on year-on-year development of searches for Meta partners based on PhocusWright Study
Total transaction value growth in Europe Etraveli key strengths
Online travel
market
Total Travel
market
OTA market Flight Meta Etraveli
+45% CAGRCAGR (2014 – 2016E)
Our key strengths enable us to become the best global flight OTA embracing the strong Meta development
1)
>2x
>2x
C D EA B Core Assets – Travel
| October 13, 2016 || October 13, 2016 |
Low cost entry to a new country by …
… translating the website
… adapting air content & pricing
… configure a number of set ups for the specific country
1.
Based on initial results and assessments we decide to
further invest in certain countries by …
… localizing communications, sales channels, payment,
air content, pricing, add on products, etc.
2.
Etraveli can expand internationally at low cost and risk
19
Geographic expansion through a proven low cost/low risk model in two steps
Etraveli is
profitablein all geographical
segments from
the first
month
C D EA B Core Assets – Travel
| October 13, 2016 || October 13, 2016 |
[TTV/month in EUR m]
Etraveli’s TTV1) development by region
Increasing international footprint will drive future growth
201) Total Transaction Volume 2) Business outside Nordics 3) Rest of Europe 4) Rest of World
Region Position Ambition
ROE3)
ROW4)
#1 #1
Top 3/4
Top 5
Top 2
Top 3
Top 5
Top 20 Top 5
Top 3
+22%
+88%
+73%
+75%
+110%
YoY growth 2016 vs. 2015
2016E
150
2015
108
2014
74
ROE
UK & Irland
GER/AT/CH
Nordics
ROW
>20%ptsincrease of
international
share 2014
vs. 20162)
C D EA B Core Assets – Travel
| October 13, 2016 || October 13, 2016 |
Verticals
Verivox is our core Online Price Comparison asset with multiple verticals
211) Fixed line and DSLNote: OTA = Online Travel Agency
Portfolio
synergies
that we
leverage
Energy TelCo1) InsuranceFinancial
Services OTA Car Rental New
We integrate existing portfolio products into Verivox to push existing and build new verticals
Depending on success, we focus on either one brand or a dual brand strategy
Dual
brand
strategy
C D EA B Core Assets – Online Comparison
| October 13, 2016 || October 13, 2016 |
Verivox will keep #1 position in Energy & gain shares in all other verticals
1) Source: Internal estimate based on company research, Bundesnetzagentur, OC&C, Roland Berger 2) incl. Preis24 3) CAGR LTM at closing – H1 2016 LTM, closing August 2015 4) Net return on net TV costNote: OCP = Online Comparison Portals
0-25%
25-50%
50-75%
75-100%
OCP market shares per vertical1)
TelCo Insurance
Financial
ServicesEnergy
22
CRM-based cross-/up-selling
to existing customer base
strengthens margins
Leading position in Energy
supports further market share
gains in other verticals#1
New verticals such as Travel
boost customer base and fuel
further growth
2)
Strong impact of TV, proven by
ROI of >140%4)
+32% revenue
growth since
acquisition3)
C D EA B Core Assets – Online Comparison
| October 13, 2016 || October 13, 2016 |
UK market is the most developed OCP
market in Europe – still growing with double-
digit growth rates
OCP revenues per household 2015
Compared to UK, substantial upside potential of German OCP market
231) Source: Internal estimate based on company research, Bundesnetzagentur, OC&C, Roland Berger 2) Source: Greenhill; Note: OCP = Online Comparison Portals
# of market
players with
>EUR 80m
revenues: 2 # of market
players with
>EUR 80m
revenues: 4
34
15
x2.3 German market with potential to more than
double in size in upcoming years as
buying/switching behaviors change
Verivox in strong position to profit from
market growth in current market setup
[in EUR]
C D EA B Core Assets – Online Comparison
2)
1)
| October 13, 2016 || October 13, 2016 |
Online Dating market overview1)
Parship as lighthouse investment in attractive matchmaking segment …
241) Germany 2) Based on revenues Sources: P7S1 consumer survey; P7S1 market model based on Singleboersenvergleich study
Price HighLow
Relationship
Sex/ Affair
Intention of
members
Dating & apps
Market revenues 2015 in EUR m
Adult DatingEUR
40m
EUR
59m
Matchmaking EUR
79m
Key players in Matchmaking segment1)
#1
#3
>80%share2)
Continuous leadership in
Matchmaking since 2006
#2
C D EA B Core Assets – Online Dating
| October 13, 2016 || October 13, 2016 |
… with meaningful recurring EBITDA margin potential
251) % EBITDA of revenue, Parship Elite Group 2016 figure; Mötesplatsen 2014 figure; Match.com (segment, not Group) 2015 figure; 2) Entity rec. EBITDA margin potential 3) German-speaking countries penetration 4) Matchmaking users among US adult single internet users; Source: P7S1 Consumer Survey
Purely digital, subscription-based
and asset-light business model
High renewal rate indicates high
customer satisfaction
High synergy potential with P7S1
38%
27%21%
25%
14%
High upside potential for market penetration
Margin
potential of
25-30%2)
Market with exceptional margins1)
Paid Online
Matchmaking4)
Parship Elite
Group
subscriber
penetration3)
#1Online dating service in German-
speaking countries focused on
attractive matchmaking segment
C D EA B Core Assets – Online Dating
| October 13, 2016 || October 13, 2016 |
Why Tinder is not a threat but a catalyst for Parship’s business
26Source: P7S1 Consumer Survey
While younger customers with lower income use
Tinder for first online dating experience …
27%36%
32%27%
41% 37%
2015
35-44
45+
2011
18-34
… they switch to Parship with rising income & interest
in long-term relationships
[in % share of subscribers by age group]
65% are
older than
29 years
60% are
younger than
29 years
Users’
household
income per
month
63% above
EUR 2,000
62% below
EUR 2,000
Age of
users
C D EA B Core Assets – Online Dating
| October 13, 2016 || October 13, 2016 |
We build up a highly synergetic Lifestyle Commerce Ecosystem …
27
Fashion Health,
Wellbeing & OTC
Beauty &
Accessories
Food & Functional
nutrition
TV channels, advertising, infomercials
Engagement platforms (7NXT)
Physical goods (Windstar, Teatox)
Lead Generation (Stylight)
Commerce platforms (Flaconi, Vitafy)
Pro
du
cts
Pla
tfo
rms
TV
C D EA B Core Assets – Lifestyle Commerce
| October 13, 2016 || October 13, 2016 |
… by leveraging TV power & digital platforms for high-margin products
281) e.g. fitness studios, perfumeries, pharmacies
Lifestyle
products with
high margins
TV power
to build brands
Omnichannel distribution
E-commerce
Home-
shopping
Retail
Special retail/
drug storesDirect sales
Other1)
Lead Gen &
Engagement platforms
C D EA B Core Assets – Lifestyle Commerce
| October 13, 2016 || October 13, 2016 |
How our Lifestyle Commerce Ecosystem works
29Note: CLV = Customer Lifetime Value
A full-fledged product and service portfolio locks the user in our Ecosystem and maximizes CLV
… based on our
physical products
Engagement
platform
Digital sales
platform
Physical
productLead Gen
… our 7NXTengagement
platforms …
… which include
nutrition
recommendations ...
… Stylight health and
beauty content leads
users to …
TV
TV formats and ads
create awareness …
C D EA B Core Assets – Lifestyle Commerce
ILLUSTRATIVE
| October 13, 2016 || October 13, 2016 |
Lifestyle verticals we focus on
30
Ecosystem levers
TV fit
Synergies with TV content
Difficult to disrupt
Intervertical synergies
Omnichannel sales potential
High margin products
Strong defensive, non-cyclical properties
FashionBeauty &
Accessories
Health,
Wellbeing & OTC
Food & Functional
nutrition
Strategic benefit for ad sales clients(e.g. data, sales platforms)
C D EA B Core Assets – Lifestyle Commerce
| October 13, 2016 || October 13, 2016 |
Fashion Health,
Wellbeing & OTC
Beauty &
Accessories
Food & Functional
nutrition
Where we stand with our Lifestyle Commerce Ecosystem
311) Minority shareholdings
Lifestyle Commerce verticals
7NXT
TV reach
Lead Gen platforms
Engagement
platforms
Omnichannel
sales approach
Physical goods
TV
Pla
tfo
rms
Pro
du
cts
1)
1)
7NXT
1)
Deep dive see
next slides
1)
Selected examples of TV formats
Lifestyle Commerce
Ecosystem
C D EA B Core Assets – Lifestyle Commerce
| October 13, 2016 || October 13, 2016 |
Stylight is #1 in the Lead Gen fashion market …
321) Based on monthly visits per local domain (GER); Sources: 7Commerce; Fashionunited; Google Play; OC&C analysis
Use Stylight traffic & content for lead
generation for own sales platforms &
sales of own products
Gather further user data from new
verticals to offer better products to SOM
customer
Attack print budget through highly
targeted niche content of Stylight21
Key players in fashion Lead Gen1)
#1
#2
#3
#4
Our goal is to continue and further
expand market leadership
C D EA B Core Assets – Lifestyle Commerce
| October 13, 2016 || October 13, 2016 |
… expanding to new segments and through internationalization
33
…
Potential new verticals Existing verticals
Expand through internationalization Expand through building new verticals
Launched in 15 countries already
Next to come: Ireland
Fashion is core vertical, Home & Living launched in H1 2016
Next to come: Beauty
New markets & verticals can be entered at low cost through
central operations and strong tech platform
C D EA B Core Assets – Lifestyle Commerce
| October 13, 2016 || October 13, 2016 |
Flaconi on its way to become a leading online player for beauty products
1) Online only 2) Incl. highly selectively distributed brands, e.g. Chanel, Estée Launder, Shisaido, LVMH among others 3) SKU = Stock keeping unit
>EUR 40m
Revenues
LTM H1 2016
CAGR >100%
Revenues,
H1 2016 LTM vs.
LTM at closing
#2 in Germany
after Douglas1)
Customers
>850k
Brands2)
>240
Key facts
SKUs3) active
>15k
34
Growing internationally at low cost
Two strategic options to accelerate growth
Expanding Flaconi product categories
1.
2.
C D EA B Core Assets – Lifestyle Commerce
| October 13, 2016 || October 13, 2016 |
Off
lin
e
Premium brandsLow budget brands
On
lin
e
Competitive environment
Digital capabilities
Flaconi operates in a favorable competitive environment
35
Market characterized by selective
distribution systems limiting threat of
new entrants
Three domestic competitors: Douglas,
parfumdreams and iParfumerie
Two pure play EU competitors:
feelunique, lookfantastic
Scattered local retailers lack skills to
digitalize their business
Focus on rather ‘bringing store online’
than digital pure play
Main competitor Douglas focuses on
brick & mortar stores
Competition in domestic market
C D EA B Core Assets – Lifestyle Commerce
| October 13, 2016 || October 13, 2016 |
Windstar is our first cornerstone mass retail OTC brand …
36
Unique provider of care and nutrition
products with focus on key growth
segments (e.g. digestion & rheumatism
OTC products)
>10 new products
yearly
>120 partner
suppliers
Attractive
double-digit
margins
High reliability and cost efficiency leading
to strong supplier network
Low brand awareness so far, leading to
high potential for new customers through
TV media push
C D EA B Core Assets – Lifestyle Commerce
| October 13, 2016 || October 13, 2016 |
German retail OTC market1)
+16%
+3%
CAGR (2015-2020E)
… that is outperforming the retail OTC market
371) By revenues; Source: P7S1 market model based on Nielsen Panel / BAH report 2014 2) in Germany
990933
854
2018E2015 2020E
Key players in retail OTC market2)
Our goal is to become #5 in the retail
OTC market
#1
#2
#3
#8
…
[in EUR m]
C D EA B Core Assets – Lifestyle Commerce
| October 13, 2016 || October 13, 2016 |
We will significantly push Windstar's brand awareness through TV
38Note: Product performance study with selected set of brands only, incl. the top 3 in terms of brand awareness though; Source: WSM OTC Consumer Study 2014, I-Consult Brand Study 2015
… yet low brand awarenessHigh perceived product efficacy …
Competition
Windstar
46%
0%
20%
40%
60%
16%16%
24%
0%
20%
40%
60%
80%
100% Competition
Windstar
High
upside potential
due to TV
media push
C D EA B Core Assets – Lifestyle Commerce
| October 13, 2016 || October 13, 2016 |
Test media fit and learn about
potential new markets
(national and international)
Build up deal funnel for
potential strategic
investments
Monetize idle TV
advertising inventory
and stimulate TV ad market
SevenVentures continues successful M4R/E dealmaking …
39
Equity
Exit participation
Revenue share
Minimum guarantee
What we get from M4R/E deals Rationale
C D EA B Core Assets – Ventures
| October 13, 2016 || October 13, 2016 |
Use M4R/E deals to proof business models, test management skills and evaluate
media impact of assets to reduce investment risk
… and has become a proven funnel for our strategic investments
40Note: Selected examples
Online Travel Online Price Comparison Lifestyle Commerce
Strategic investments started as media investments
C D EA B Core Assets – Ventures
| October 13, 2016 || October 13, 2016 |
Agenda
41
Core assets
Portfolio strategy
Achievements
Summary
III
II
IV
I
| October 13, 2016 || October 13, 2016 |
Summary of our strategy
42
Our strategic priority
Leverage our unique combination
of TV and Commerce capabilities
Expand existing and build new
commerce verticals
Pursue bolt-on M&A of profitable
assets
Our key strategies
Grow Travel into European leader
Expand Online Price Comparison
market share
Extend Dating market leadership
Build Lifestyle Commerce
Ecosystem
Continue “String of Pearls” M&A
strategy
| October 13, 2016 || October 13, 2016 |
[in EUR m]
863
108
New 2018 target
1,172
H1 2016 LTM pro forma2012
Successful growth allows us to set new ambitious 2018 revenue growth target
431) incl. recent acquisitions, e.g. Parship Elite Group; Note: Based on new segment structure; 2012 as reported
Digital Ventures & Commerce CMD target (ext. revenues)
CAGR
+13%
Vast majority of our future growth will be organic
Rec.
EBITDA
margin
target range
of 20-25%
1)