Good day, ladies and gentlemen. Welcome to the Q1 2020 results call of ProSiebenSat.1 Media SE. This conference is being recorded. Today's call is hosted by Mr. Dirk Voigtländer. Please go ahead, sir.
Good morning, ladies and gentlemen, and welcome to our first quarter 2020 results conference call, also from my side. Today's call is hosted by Rainer Beaujean, Chairman of the Executive Board and Group CFO, as well as Ralf Gierig, Deputy CFO of the Group. Rainer and Ralf will first lead you through the presentation and provide an update on the operational development as well as financial performance. The presentation will be followed by a Q&A session. As always, web links, dial-ins, and presentation material were made available via our email invitation sent out this morning. With these opening remarks, I now hand over to Rainer.
Thanks, Dirk. Good morning also from my side, and thank you for joining our analyst and investor call on ProSiebenSat.1's results for the first quarter 2020. As you all know, a lot has happened since our last call at the beginning of March. Today, I'm speaking not only in my role as CFO to you, but also as Chairman of the Executive Board. Since March 26, I have been sharing Executive Board responsibilities with Wolfgang Link, our CEO Seven.One Entertainment Group, and our Chief Human Resources Officer, Christine Scheffler. In my role as Chairman of the Executive Board, I'm representing this Board externally, but it is very important to all of us that Christine, Wolfgang, and I are working as one team in the interest of our company. After all, we are complementing our expertise in all the areas that are important for ProSiebenSat.1's future.
Wolfgang, with his many years of experience within the entertainment industry, will enhance the focus on our core business at the Executive Board level. We are a people's business. It was a logical step to bring Christine as Chief Human Resources Officer to the Board. I intend to add my track record in strategic and financial execution, both in times of crisis and beyond. With this, we believe we have established the right setup, not only to guide ProSiebenSat.1 through the current COVID-19 crisis, but also to implement and drive the group's transformation. In my CFO role, I highly value to have Ralf Gierig as our Deputy CFO at my side. You all know him extremely well, and he will also walk you through this presentation with me. Let's start.
You all know it, this COVID-19, we are facing a crisis on a global scale affecting our everyday personal life as well as the entire world economy. The International Monetary Fund expects a decline in global economic output of 3% in its latest forecast. Such a decline would be much greater than the ones resulting from the 2009 financial crisis, so that we are now facing the deepest recession since the Great Depression in the 1930s. Against this backdrop, we will start with a quick overview of the status quo in Germany and see under which conditions we are currently operating our business. We then have a look at the Q1 group financials and end with a summary of our strategic priorities going forward.
In the short term, our focus is clearly on dealing with the current economic downturn, and we will show you the measures implemented to guide our company safely through this crisis, all this on a very solid financial basis. Let's start on slide number three. Status quo in Germany. Being a company based in Munich, ProSiebenSat.1 is bound in the regulations of the Bavarian government. On March 21, the Bavarian government announced a wide range of restrictions that followed the guidelines of the federal government in Germany. Events and assemblies were prohibited, and schools and all facilities of leisure time activities were closed. Since April 20, some first steps back to public life have been taken with, for example, some shops being allowed to reopen and school partially reopening. Big events continue to be prohibited until late summer. Even our famous Munich Oktoberfest has been canceled.
We at ProSiebenSat.1 fully support these government restrictions. People's health and safety are the first priority. Nothing justifies taking unnecessary risks. We were therefore among the first companies translating the social distancing restrictions into our daily work. We sent around 2,500 employees into home office on the 16th of March. We are still working remote until today. Only the employees who are absolutely necessary for our broadcasting operations continue to work on-site under strict health and safety measures. We quickly adapted our TV productions, e.g., by creating totally new TV formats that fulfill the social distancing restrictions and started to offer new advertising formats for our customers that are appropriate for this situation. We prepared our company right from the beginning for a possibly longer period of difficult economic conditions. We took early and comprehensive action to manage costs and cash flow.
We will come to the details later. Thanks to the fast and comprehensive actions that our German Chancellor, Angela Merkel, and Bavarian Prime Minister, Markus Söder, took, Germany managed to slow down the infection rate and to flatten the curve, as you can see on this slide. The Austrian government reacted equally firmly and with tough but necessary measures, which not only benefited us as a border country, but also our colleagues at the ProSiebenSat.1 PULS 4 group. Against this backdrop, we do believe that the picture will brighten up faster in Germany and Austria as it may be the case in other countries. Nevertheless, there is no question that the shutdown of public life has a serious impact on the German economy, hitting private consumption in particular. Now, let's focus on how the situation affects our business. Please turn with me to slide number four.
During this crisis, TV clearly is the medium of the hour, with reach and view time increasing across all age groups. More than ever, people turn to TV in need of, first, information, and second, distraction, and we are serving both. Of course, next to TV, also video streaming is now naturally benefiting from the stay home time. If you look at the change in daily reach since the lockdown measures have started, you see that even ours are the top performers compared to other media genres, with the individual reach having grown by 8%, respectively 15%. Also online activities are quite strong, with a plus of 5%. In short, all three core areas of ProSiebenSat.1, TV, advertising, finance, video on demand, and online, are outperforming print, radio, out-of-home, and cinema. Such figures are putting our business in a promising position for the post-corona period.
Let's move to slide number five. However, already during the first weeks in this crisis, two trends became apparent. On the one hand, some of our businesses are clearly benefiting from the current stay home time as just described. On the other hand, as demand in almost all industries is declining, TV ad spending has been decreasing since the second half of March. Being a system-relevant company in the media sector, we, of course, are assuming our responsibility as media company by providing regular, relevant, and reliable news, and we are living up to our mission as entertainment house by providing distraction in form of the best entertainment. We set up a wide variety of regular corona programs on our channels. For example, two ProSieben Spezial editions on the development of COVID-19 each day, which reaches viewers well above the station average.
Our in-house production company, RedSeven, created virtually overnight successful live talk formats and gave the audience the opportunity to ask their individual questions to top virologists and responsible politicians in the studio. This has been something absolutely new and special and shows just how strongly ProSiebenSat.1 contributes to the pluralism of opinions. Of course, our TV channels are fulfilling people's longing for entertainment. Our latest Sat.1 hit, "Promis unter Palmen," reached up to 6.64 million people and top market shares of up to 20.8%. Our show, "The Masked Singer," recorded in its second season, again, impressive market shares, with 36.9% at the finale last week. Overall, 10.37 million people tuned in the last Tuesday to see which star was hidden under the mask. This underlines, more than anything else, that it is first-class entertainment that defines ProSiebenSat.1. Let's look at some of the numbers.
All these are March versus February comparisons. Total video view time, which is the time users spend consuming our offerings across all platforms, increased by a very strong 16%. What's particularly remarkable, especially young adults are tuning into the classic television. The number of daily net viewers between 14 and 29 years increased by nearly 11%. This is even 4 percentage points more than in the classic target group of 14 to 49-year-olds. In April, this positive trend continued, by the way. In terms of TV audience, we experienced the strongest April since 2012. Within our core target group of 14 to 49-year-olds, our programs attracted 10% more viewers than one year ago. Joyn counted almost four million unique users by the end of the first quarter, a plus of 12%. The streaming platform's video views grew almost equally strong with 11%.
By the way, it was in particular ProSiebenSat.1's content and channels which were in greatest demand on Joyn. These video views increased even by + 26%, a true sign that we definitely understand what our local viewers want to see. Joyn also just offered a free three-month trial for our premium version, Joyn PLUS+. That's a unique opportunity for us to convince our existing customers and new ones of our broad premium library. At the same time, we are confident that our free advertising finance version will gain more and more viewers in times of economic stagnation or downturn, with people trying to spend less money. Next to video streaming, also our podcast universe can be seen as a winner in the first quarter.
Its reach increased by +50% compared to the last quarter in 2019. Now we've also launched the premium audio on-demand platform FYEO (For Your Ears Only), tapping into this market potential. With regard to NuCom Group, due to its diversified portfolio, the crisis affects some assets of our commerce group more, such in the leisure and travel-related businesses of car rental comparison and experiences, whereas our matchmaking and many beauty and lifestyle products experience high demand with multiple customers buying our dating online for the first time. For example, Parship Group counted +19% more registrations during the Easter days than during Easter 2019 and implemented, on a very short notice, the Video Date, a feature for one-on-one video communication, allowing singles on Parship and ElitePartner to date virtually. All these positive developments are, however, contrasted by declining TV ad spending.
Private consumption currently declines significantly in the lockdown, also marketing spending decreases. It is not a surprise that the entire advertising market is affected by advertisers reviewing their marketing campaigns in this situation. The bottom part of the slide shows the industries that are relevant for TV and that are currently cutting the most advertising spending. Obviously, the tourism sector is the one with the highest reduction of 34.9%, as closed borders won't allow booking a holiday trip. The building industry and gastronomy suffer from cuts at around 20%. The segment individual needs comprises a mix of businesses covering personal needs, including mainly toys and other types of accessories. The food industry reduced its TV ad spending by around 6%. Let us move to slide number six.
As just shown, the fact is this television is unfolding its greatest strength right now. It has the highest net reach combined with the highest advertising impact. For advertisers, this means that they can quickly reach a large audience and thus a large number of potential customers. On top of that, with net reach currently increasing, the cost per thousand contacts even declines at the moment. What is even more important for advertisers, in times of crisis, market shares change more quickly upwards and downwards. Analyses by the German Society for Consumer Research after the last financial crisis in 2009 have shown that advertising customers who, despite the difficult environment, have continued to maintain a comparably high level of advertising pressure, have achieved an above-average return on these investments. They gained market share. Winning brands thus acted countercyclically.
In periods of recession, they launched more new products and increased their advertising investments. In addition, they specifically targeted the acquisition of new customers. In contrast, cutting off advertising during the crisis led to losses in both market share and sales. These will be difficult to recover even in the long term. Keeping this in mind, I hand over to our Deputy CFO, Ralf Gierig, for the group financials.
Good morning, ladies and gentlemen. Let me start my part of the presentation with the revenue overview for the Group and our segments. Please be reminded that we renamed the entertainment segment to Seven.One Entertainment Group. Group revenues in the first quarter have slightly increased by 1% to EUR 926 million. While we have seen an overall good and satisfying development until mid-March, fully in line with our initial full-year 2020 targets, the worsening of the COVID-19 crisis and implementation of lockdown measures also in Germany had a visible negative impact on the Seven.One Entertainment Group and some of our NuCom assets since then. Seven.One Entertainment revenues, therefore, declined by -3%. This development reflects a 6% decline of core TV advertising revenues and an increase by 14%, or EUR 15 million, of all other segment revenues combined.
Despite overall softening ad trends, the digital and smart advertising revenues again posted strong double-digit growth of +32%. Red Arrow Studios achieved a stable revenue performance. Within this segment, revenues of the production business declined by 16%. Whilst we saw first postponement of productions, the revenue development is primarily a result of tougher comparable figures in the last year, when the production business grew 41%, especially as a result of higher volume of scripted productions in the U.K. Global Sales and Studio71 together fully offset this decline, which led to a stable segment revenues of EUR 134 million. Last but not least, NuCom Group both benefited from solid 8% organic revenue growth and consolidation effects related to Aroundhome, which helped the segment to grow 15% overall.
While assets like Billiger Mietwagen and Aroundhome were already negatively affected by the COVID-19 crisis and lockdown measures, strong growth of other portfolio assets like Flaconi, WindStar, Parship Group more than compensated this development. Please now turn to page nine. Group adjusted EBITDA declined by 17%, which can largely be attributed to lower advertising revenues of the Seven.One Entertainment Group. Since cost measures have only been implemented at the end of the quarter, and hence, did not have a compensating effect yet, the drop through from lower advertising revenues was meaningful. Please also note that we recognized bad debt related to SevenVentures in the mid-single digit million EUR range, which affected the profitability of the segment as well. On the other hand, Red Arrow Studios posted a flat adjusted EBITDA development in line with the development in external segment revenues.
Despite targeted better profitability at eharmony, a less favorable business mix, as well as continued growth investments, somewhat burdened the adjusted EBITDA development of the NuCom Group. The reported decrease has basically been caused by a pronounced revenue decline in the high margin online car rental business, billiger-mietwagen.de. All other assets combined delivered an earnings development largely in line with our plan. Last but not least, I would like to comment on a new disclosure of the reconciliation result, which primarily includes the holding cost of ProSiebenSat.1 Group. As can be seen on the slide, the results amounted to - EUR 8 million in Q1 2020 after -EUR 16 million in Q1 2019. We now continue on page 10. Let me now continue with a couple of comments about our P&L items below adjusted EBITDA.
Most importantly, the adjusted net income development largely reflects the beforementioned decline of group adjusted EBITDA in the amount of EUR 33 million. In addition, a higher loss from the Joyn JV in the amount of - EUR 14 million had an impact on the group's adjusted net income, too. I would like to remind you that the result from the Joyn JV last year was still limited to around - EUR 8 million as launch costs had not affected its result yet. In this context, I would like to highlight the good progress we have made with Joyn over the past couple of months. In the meantime, the product is being used by about 4 million unique users, as Rainer already mentioned, which is about 10% of our TV audience. Therefore, we continue to see this investment as strategically important and are therefore committed to continue to invest in the JV.
The decline in reported net income by EUR 85 million is mainly due to an overall lower operating profitability, as well as a decrease of other financial result to amount to - EUR 9 million, largely resulting from valuation effects. Last but not least, let me comment on the development of our free cash flow before M&A. Compared to the prior year, we could achieve an improvement by EUR 33 million despite a decline in operating profits, showing that our strict cash management pays off. Our focus on cost control and cash flow management will continue throughout the year. On slide 11, we would like to provide you an update in terms of the group's liquidity, the level of net debt and financial leverage, as well as the debt instruments and their maturities.
Given the beforementioned slightly negative free cash flow before M&A, group net debt increased slightly from EUR 2.245 billion to EUR 2.294 billion. However, most importantly, the group had significant cash and cash equivalents in the amount of EUR 898 million, as well as an undrawn RCF in the amount of EUR 750 million at the end of Q1. Since then, to strengthen further our liquidity position, we have partly drawn the RCF in the amount of EUR 350 million and thereby secured access to our liquidity reserves. The Group still has remaining EUR 400 million of RCF available, which offers additional substantial financial flexibility. As can also be seen on the slide, the lion's share of the group's debt will only mature in April 2024. Only senior notes in the amount of EUR 600 million will mature in April 2021.
While we could make use of the cash reserves and liquidity resulting from growing the RCF, we are also preparing alternative debt refinancing of this instrument. In addition, I would like to highlight again that the group's financing instruments are without any maintenance financial covenants. With this, I hand back to Rainer.
Thank you, Ralf. Let's now focus on the countermeasures we have taken to position our company securely in the crisis. First, let's talk about our strategic priorities going forward. In the short term, the focus is clearly on weathering the storm that is going on around us. We have taken strong and decisive countermeasures, which I will run you through in more detail in a moment. I'm also looking ahead. We have strong fundamentals in place, and I'm convinced that COVID-19 also presents an opportunity for us to take advantage of the lasting changes in consumer behavior, which we are likely to see. Entertainment is at the core of our business. We have a market-leading position in what we do in the German-speaking countries. We have to make more of our core competencies.
Having Wolfgang on the Board and working together closely will be immensely helpful in this respect. We have spoken about synergies between our businesses before, but I want to increase the focus on these. To this end, my colleagues and I will review each and every part of the Group and its contribution to the core and vice versa. As a consequence, we will continue to implement portfolio measures as we have successfully done before. To be absolutely clear. We will do this at the optimal point in time to realize or crystallize value for our shareholders. You will also have heard ProSiebenSat.1 talk about transformation before. There have been some success stories. We have continuously diversified our group revenues in recent years, so that today, only 48% of our revenues depend on TV core advertising. We are focusing more on our digital reach.
In less than a year, we set up a new streaming platform for Germany, and our digital viewing time grew by + 30% in 2019. Europe-wide, we are in a leading position in smart advertising and addressable TV, which clearly helps us to better monetize our reach. Going forward, we will review all strategic initiatives for midterm financial impact, in particular, with regard to the return on capital employed, and sharpen the focus on implementation and execution. My colleagues and I want to see measurable progress in what we do, and we work hard on accelerating this progress wherever this can be done. The fact that our channel, ProSieben, was market leader in prime time in April, something that has not happened for seven years, is a first step here, clearly showing that our focus on local production is translating in the market share gains.
Furthermore, we keep driving our data strategy with implementing our single sign-on solution, 7Pass, in all our apps. Please move with me to slide number 13, where we show you the countermeasures we have initiated. The first priority is on making our company storm-proof. As mentioned in recent trading updates and today's press release, we are preparing ourselves for several crisis scenarios, including a long-lasting and material macro downturn. As a result, we have implemented several cost and cash saving measures, which we will adjust to the level of our revenue development. For the time being, we decided, other than previously planned, not to increase our program costs, but to reduce it by EUR 50 million from EUR 1.03 billion to EUR 980 million.
We think this will not harm our audience share or ability to generate eyeballs, both on TV and online, as our key competitors, RTL Group and the public broadcasters, currently have limitations in terms of live sports broadcasting. We also have good flexibility resulting from library content, which is reflected in our significant program assets of more than EUR 1 billion. Other measures include the reduction of personal expenses, such like through the short-time work instrument, the reduction of other operating expenses like marketing, consulting, and travel, or the postponement of growth projects. A summary of these measures, as well as the assumed impact on costs and cash, can be seen on the right-hand side of the slide. It is worth mentioning that our cost structures of our three segments differ meaningfully, which the graph on the left-hand side of the slide shows.
While the Seven.One Entertainment Group has a large part of approximately 65% of largely or rather fixed cost, the largely fixed cost base of both Red Arrow Studios and NuCom Group is limited to 15%-20%. This being said, a pronounced decline in advertising revenues in the entertainment segment would lead to a notably higher drop through in terms of earnings than a revenue slowdown of Red Arrow Studios and the NuCom Group, where costs are, to a large extent, revenue related. Please turn with me to page number 14. As we have already communicated end of April, we are expecting our business to be heavily impacted by COVID-19 across all segments. The last two weeks of March already saw first effects. For the month of April 2020, TV core advertising revenues were down by around 40% compared to the previous year.
Red Arrow Studios' business continues to be impacted by postponement of productions, while there's a mixed picture for NuCom Group, with some assets being more affected by the restrictions of public life than others. Our financial outlook 2020 for March was explicitly made without considering the possible negative implications of COVID-19. Due to the significant economic uncertainty that results from the pandemic with regard to the duration and severity, it is currently not possible for us to provide a reliable outlook for the second quarter and the full year. We, therefore, withdrew our financial outlook for the full year 2020 on April 22nd. We also decided together with the supervisory board on April 22nd to propose that annual general shareholder meeting to not pay out a dividend for fiscal year 2019. This step ensures liquidity, also in a possibly longer-lasting COVID-19 crisis, of an additional EUR 192 million.
What's important, this is a one-time measure, and we, of course, do confirm our dividend policy with a payout ratio of 50% for group-adjusted net income. This is not a decision we took lightly, but it was the right decision because it is our responsibility to protect our business and our people in this extraordinary situation. Our Annual General Shareholder Meeting will take place as originally planned on the 10th of June. This year, in form of a non-physical meeting due to the governmental lockdown measures. After all, the health of our shareholders and employees is our top priority. All these are extraordinary measures in extraordinary times, and you can be assured that we are extremely focused on our cost, liquidity, and cash flow management, and on identifying additional revenue sources as we did during the last financial crisis, when we invented our media for equity business model.
All this to build a base for ProSiebenSat.1's future. Please turn with me to page number 15. Corona won't be in our lives forever. Even if we don't know when, one thing is for certain, it will pass. We are already now focusing, once the situation has normalized, on continuing to execute our strategy with high speed and a top priority on our entertainment business. We want to focus more on what we are really good at, entertainment and infotainment in all its facets. This also means driving local content and digital innovation, creating even more synergies with Joyn, with Arrow Studios and NuCom, all this to strengthen and monetize our reach. Above all, our goal is to achieve sustainable and profitable growth in the entertainment business, by far our biggest contributor to revenues, earnings, and cash flow.
With respect to our other businesses, especially in this situation, it clearly pays off to have a more diversified portfolio and be less dependent on advertising. As I mentioned earlier, we will test each part of the business to see whether it is accretive to the overall group. In this context, when the market returns to a more normal state, we will look at our portfolio across the group and analyze if we still are the best possible owner of the individual assets and where we can crystallize value. For example, in case of the envisaged IPO of the dating vertical, once we have realized the benefits from integrating The Meet Group with our existing operations, Parship and eharmony. Please note that the Meet transaction is subject to shareholder and regulatory approvals. I cannot stress this enough, we will focus much more closely on execution.
This in particular applies to the strategic measures we have announced as part of our transformation program. We have already had a number of successes, but we need to sharpen our focus on the measures and accelerate them whenever this is feasible. In all this, our objectives are clear. We will put a greater focus on profitability, cash flow, and return on capital employed throughout our entire business. With Seven.One Entertainment Group, we are aiming to create the leading entertainment player in the German-speaking countries by combining all our three pillars synergistically. Of course, we want to create long-term value for our stakeholders. These are surely extraordinary times for all of us, but we are doing everything we can to guide ProSiebenSat.1 through this global crisis, and we are convinced that we are on the right track with the measures we have initiated.
Our employees are putting every energy and effort in adapting our program, sales offering, production, and NuCom Group services and products to this continuously changing situation. My colleagues and I are extremely grateful for this extraordinary engagement. You can only master crisis as a strong and committed team, and we at ProSiebenSat.1 having everything it takes to do so. Thank you very much for your attention, and please stay safe.
Thank you. If you'd like to ask a question, please signal by pressing star one on your telephone keypad. If you're using speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, to ask a question, please press star one. We will pause now for just a moment to assemble the queue. We will take our first question today from Julien Roch from Barclays. Please go ahead.
Good morning. First question is, anything you can tell us on May trends? Germany has eased confinement rules, have anything changed post that, especially advertising? That's my first question. The second question, Rainer, you said a couple of times that you'd look at the portfolio to see whether you're the best owner of the asset, potential disposals. You mentioned focus on entertainment, you also said it'd be good to be diversified. Can you give us some initial thought about what you think is core, non-core? You mentioned an IPO of dating, will you try to sell international production again? Some more colors would be great. The last question is, how much cash do you need on your balance sheet to be comfortable operating on a day-to-day basis? Because I guess the answer is not zero. Thank you.
Well, thanks, Julien. Let me start with the first question. May trading. You're totally right. We have announced today that April is -40%. If you would have asked me yesterday, I would have said that the -40% is a number which is also a number which is not bad as an orientation for May. We also have to see how the development after the change of the rules in Germany is changing. We don't know. We have seen some add-on bookings, which are okay for May, but we also have a way to go. For us, more relevant is what is happening in June, July, August, and so on. That's the scenarios where we prepared on. I already said that in my speech. We have different scenarios.
We are consequent on costs, and we have done everything to make ourselves ready also to last a longer crisis. To your second question, yeah, when we look at our portfolio, and I also said that in my speech, we clearly have to look on synergies. What kind of synergies we can use. We have also said in our announcement that we will concentrate on the German-speaking areas and the content of the German-speaking areas. Then we try to search the highest synergies for NuCom, Red Arrow Studios, Studio71, and everything else. That's the approach. We have to see what can play in. Could Red Arrow Studios in the U.S. play in? Yes, if they concentrate their formats also for the German-speaking areas. Is this a good format? Yes. We have to see how this will develop.
I only would like to mention that we consequently will look on our portfolio. For matchmaking, it's obviously clear, because matchmaking, that's getting a size, a very international business, where our TV advertising out of entertainment is not as helpful anymore in a certain time of period. Currently it is, because ElitePartner, Parship, all these are German companies. That's how we look into it. The first step, and that's what you also have to have in mind, is that we have to get good through the crisis. We are not ready for fire sales. You also asked me about our balance sheet. You have seen that we've already drawn EUR 350 million of our revolver. We have another EUR 400 million. Our cash position is very strong.
That also works a little bit together with the third question, how much money do I need on the balance sheet? That's perhaps a question for my partner here, Ralf, who for sure also is responsible for treasury.
Well, hi, Julien. I think the short answer is, given that we have the RCF available, the number can be nil, because the RCF provides a very flexible instrument. You should also know that we are operating group-wide cash pooling. We centralize the cash. Obviously, intra-month, we need to cater for working capital needs, for swings. When are the payments made and when are the revenues received? This is a very small amplitude, I would say. Given the RCF, the short answer is zero.
Ralf, when you say small amplitude of working capital, surely you can't operate with zero on the balance sheet. When you say small, do you only need EUR 10 million to operate or is it EUR 50 million?
Yeah. You have to see we don't have a lot of trapped cash. What we're doing currently is that we collect everything together. I centralized that. In our current situation, you always need EUR 40 million- EUR 50 million approximately as a number to play with. On the other side, we always have, and that what Ralf wanted to mention, we have a lot of flexibility on our balance sheet to collect more money if it's necessary. This EUR 40 million- EUR 50 million is a number which is not wrong. I come out of machinery industry. If you have a very international business, then you have trapped cash somewhere around. This is not a huge amount of money which we have.
Okay. Very clear. Thank you very much.
Thank you. Our next question comes from Stefan Klett from Commerzbank. Please go ahead.
Yeah. Hi. Morning, gentlemen. I have three questions, if I may. I appreciate that you're not able to guide for any revenues. Can you tell us what kind of SG&A cost you are budgeting for this year? Last year, roughly EUR 1.2 billion. Secondly, I would like to know if you are starting to divest some of your assets, maybe in, let's say, 2021, when times are better. Should we expect that you deleveraging your balance sheet or should we expect that you pay to shareholders? The last one is, I would like to know what kind of dialogue, particularly you, Rainer, as having taken over, you have with the Italian and the Czech majority shareholders at the moment. Thank you.
Let me start with the second question, the first one Ralf will take it. When we divest, for sure, we first will look on our deleveraging, because at the end of the day, we always have communicated that we want to be an investment-grade company. That means that we have clearly on a net debt to EBITDA ratio between 1.5x and 2.5x . 2.5x is not the right number which I feel comfortable with. At the end of the day, clearly we are an investment-grade company. I will have to mention, dependent on the EBITDA development, the relation can be worse, and that's a little bit the situation. What is also very relevant, we have cut our dividend for this year, means for 2019, the payout.
We will be a company who will pay a dividend again, because that's our participation, because we believe a dividend is an important piece, and our dividend policy, only to remind you, is 50% of our adjusted net income. That's what we stick to, and that we want to get back to. Third question, dialogue with Mediaset and CMI, both are shareholders. We always offer meetings on a regular basis between me, the IR team. We always do that after these calls, and we always do that. On the other side, with Mediaset, we are also in the alliance with Studio71, so therefore we have also constant points to talk to each other. If you ask me if we are already in negotiation, no, we are not. This discussion never happened up to now.
At the end of the day, the situation is as it is. With Daniel, for sure, he's also one of our major shareholders. For sure I will also talk to him as I do to all other shareholders who are interested in talking to me, because that's my job and my clear understanding that we need and want to have a good relationship to everybody. Again, every idea someone has is something which can be helpful, and shareholders are normally very smart people. People, especially investing in us, are smart. We hope that more people get into it in the future, and because we also see that there's more value. Therefore, in our opinion, that's our positioning to that point. Ralf, first question.
Rainer, can I just follow up?
Yeah.
Rainer, what's your personal stance then on the MediaForEurope alliance? I would like to know about that as well, because we never spoke about that. Now in your new role, it's probably very important for all the participants to learn what you think about that.
Yeah. Honestly, for me, it's always, first of all, you have to have something on the table, then you have a look onto it, you validate it. We have to take a stakeholder approach, and that's what we always would do. Currently there is, for me at least, nothing on the table, so therefore I can't judge it. Because I always believe if people have this idea, could be smart, but then we have to see what our interests are. As we already said, we are a company which is well-positioned in the German environment. We are mission-critical here in Germany. We are a Bavarian company. Our stakeholders and all the people in Germany love what we do. Then we have to see what the outcome could be, and let's discuss, let's put something on the table. Officially, there's nothing there.
Therefore, I'm not commenting rumors. That's my positioning to it.
Sure.
Okay, Stefan, with regards to your first question on SG&A, I think as we already outlined in our presentation, we are very focused in this COVID-19 situation on cost and cash flow management, which obviously also includes SG&A. Looking at the various line items, yeah, obviously, we are very reluctant to hire new employees, yeah. We will only do this for essential positions. Basically, we have a hiring freeze. We are applying short-time work in a number of portfolio assets already, such as in Austria, in our NuCom assets. We are also obviously reviewing and taking action in our U.S. portfolio. Yeah. We are also obviously focused on, yeah, reduction in other SG&A, like travel expense. No one can travel, yeah. All the video applications which are available are saving our day-to-day life. Obviously, we are also looking into marketing expense, et cetera.
Be assured, yeah, we are very focused on cost. In addition, we are very much focused on optimizing our cash position, yeah. We are looking into payment terms. We are looking into CapEx-related projects, whether we should cancel or postpone, yeah. I don't want to give one number, yeah. It's a number of measures and obviously, much will depend on the, let's say, the intensity and duration of the COVID-19 crisis and accompanying lockdown measures and the potential strength of a recovery, yeah. We have to take it month by month, but rest assured, yeah, we are very much focused on this subject.
Okay, thank you. Fair enough.
Thank you. Our next question comes from Annick Maas from Exane BNP Paribas. Please go ahead.
Good morning. My first question is on NuCom Q2 trends. I think you suggested that Jochen Schweizer and Mietwagen have a severe impact in Q2. What about Flaconi and the dating business, or the beauty and the dating business? Are they equally as good as in Q1, or will we see some weakness there as well, at least from what you see today? Secondly, just you mentioned, I think that Joyn PLUS+ subscribers are up 11%. Just curious to see if that includes those that are participating in the free trial, and if you maybe could give us a conversion rate of the free trial, it would be great. Again, on Joyn, you suggested that you keep on committed to spending in that business.
Is the spending timeline, I guess, the same as it was before coronavirus, or could we expect maybe less spending this year and then more in the latter years? Maybe one final one, just how do you think about the programming grid going into next year from where we stand today? Are we expecting the old programming grid going back or do we still keep some restrictions there? Thank you.
Let me start with the first one, NuCom trends. First of all, for sure, as you stated correctly, especially SilverT ours, billiger-mietwagen.de as well as Jochen Schweizer, have problems in Q2. Totally counter effect, also for the beauty and lifestyle business, especially also the matchmaking business, because people are really using it. I would say, and it's difficult to forecast again, but what we could see in April is a trend that we have for Flaconi, for instance, a very good growth rate, I would say double-digit growth, as well as for matchmaking. By the way, also when you look on competitors as in the matchmaking field yesterday, you could also see the announcement of The Meet Group. You also could see that they had a good performance also in Q1.
That's overall a business, especially in the crisis, which is very attractive and works very well. Joyn PLUS+, all this kind of stuff in Joyn, for sure, is very successful in this crisis. Again, have in mind, we are not only a subscription-based model. Most of our business model is based on AVoD. Therefore for us, subscription is one part of the revenue streams, and we have to see how the cancellation rate is after the free period finished. You have seen that we have started with a three-month period. Again, for sure people love the product. You could see that in the statistics. We will see how this works out. I think it's much too early to make a trend out of a low number in subscription, which we have currently.
For sure, it's part of the revenue streams for the future, and that's something that we have to work on. Joyn funding. Good question. For sure, similar situation like we have in our current business, but here we are investing because that's our future. We don't have huge cutbacks. Automatically, we'll have cutbacks if you have content which can't be produced because you ordered it due to the cancellation of productions. That's then perhaps an issue. Overall, cost-cutting is not one of the major issues in Joyn which we have, because here, as well as digital and smart, we want to grow. Again, also that's a number perhaps which you also have to have in mind when TV cash ads are going down digital and smart in April, and that's what I at least know, were also good and positive and with growth.
You can see that our business model overall works. Again, nobody knows how May, June, and the outer months will work. Currently, we are pretty happy with the initiatives which we have taken and programming grid. Ralf, perhaps you start to answer it.
Yes, Annick. As you know, we are very cost-focused, in particular in this situation. How we deal with the programming grid, and your question is probably also related to associated costs, will be a function of where we are later this year. Should the situation have completely normalized, we should probably see normal levels in program spend. Should the situation not have normalized, obviously we will continue our cautious path. It's way too premature to provide any figure, any number. Let's deal with Q2 and the outer year, we will cross the bridge when we get to 2021.
Okay. Thank you very much.
Thank you. We will now take our next question from Lisa Yang from Goldman Sachs. Please go ahead.
Good morning. Hope everyone is well. I have a few questions, please. Firstly, would it be possible to get a trend in April for digital advertising? We gave TV down 40, but what was digital? If we can get any color on the developments within NuCom, that would be great as well. The second question is regarding to your programming costs going down EUR 50 million year-on-year. Is that a P&L or cash impact, or should we expect any major difference between the two? The third one is on the portfolio review. You said earlier you want to be investment-grade, and be below 2.5x , but you're already at 2.7x. Obviously you have the Meet acquisitions and maybe those likely to go down.
Should we expect to see any potential measures or asset sale, like before the end of the year to maybe get closer to your target leverage? The last question, just wondering if you can elaborate on the board's decision not to appoint a CEO. That's a bit unusual, but keen to hear thoughts. Thank you.
Let me start with the last question. Why am I not CEO? Why I'm a Chairman? The situation is that we really wanted to make clear that we work as a team. As a Chairman, for sure I take the responsibility for strategy, for NuCom, for Red Arrow Studios and so on and so on. At the end of the day, it gives the company a clear focus on that this is a different approach than perhaps always in the past. We live it, and you can feel it when you talk to our people, that we really want to make sure, and I personally want to make sure, that this is not a one-man show. It's more or less a team approach, and that also is in my title, and that's the reason why I've taken this title.
Let's start with the first point here on the list, trend in April. As I already said, we have for digital growth in April, approximately 17%. Again, this is not a forecast for the rest of the year, because we have to see how this will develop. NuCom, similar situation overall, because we have well-performing companies in NuCom. On the other side, we also have some of them which are not doing as well. It's, again, also a low double-single digit growth on the top line for April. You can see how robust our business model is. All this is not as relevant as our TV cash adds because our profitability is driven by that. Therefore, even if everything else is performing good, at the end, the most relevant factor for us is the TV cash add development.
We are not, as I already said, in a fire sale mode. That's the reason why really we have to see how we come through the crisis. We will further look on our portfolio, and based on that, we will make our decision which companies, which part of the company really pays into our future and which really helps us. Again, we have a synergistic approach, NuCom, Studio71, as well as Red Arrow Studios. We want to drive synergies, because we believe that this is the value of our company, especially synergies with our strong and our focus entertainment business. That's the basis for our decision. Again, we will wait up to the point when the clouds are away. We know how corona will develop, and then we will make our decisions, and we will see.
I'm not under pressure, because Ralf and team have done a great job in the past to have a covenant-free debt portfolio. Ralf also presented in his part of the presentation our current debt positioning. Therefore, we are not in a hurry to do something pretty fast. We have the time, so we don't need the government to help us here or something like that like you have heard from perhaps other companies. We are well-positioned. Overall, I feel very, very comfortable that we can take the time to make the right decision, then we will do it. Ralf, programming costs.
Okay. With respect to how do EUR 50 million of programming costs translate or reduction in programming costs translate into cash, you can assume that this highly translates into cash. Yeah. This is what we can say.
Okay. Thank you very much.
Thank you. We'll now take our next question from Catherine O'Neill from Citi.
Hello. Thank you. I just wanted to come back on the Meet acquisition. Clearly, I think it looks like you're still committed. I just wondered if you could provide any details of whether there's a break clause or how that would work if you decided not to pursue that. Secondly, on content production, are you able to talk about the trends in April and how we should think about the phasing of growth across the year, given production has stopped for a period? Are you seeing a resumption of production? Finally on the 2021 bond, apologize if you've already discussed this, I might have missed it, but I just wondered what you're thinking in terms of refinancing or repaying that bond.
Meet acquisition, there is no break clause in it. We are very happy that this is not the case because we believe that's a good acquisition. As I said, look on the numbers which they provided yesterday. We have to see how antitrust shareholder approval in the Meet group happen, perhaps we can close in the second half of the year, which we already announced before. Content production, that's for sure more difficult based on the situation for the sales, because based on the situation that they are for sure everything stopped pretty soon, and especially our U.S. business. There we have a decline in sales. Again, here also more important for us is how we get out of it and how fast we get out of it, and that's something which we don't know currently.
With respect to your refinancing question, how do we deal with the 2021 notes? As far as we have modeled the situation, we can repay the notes out of existing resources. Yeah. However, we will obviously opportunistically also screen the market for, let's say, refinancing opportunities, which can either lie in the German Schuldschein market or also in the senior bond market, yeah. No decisions made as of yet.
Also to add to Ralf, due to our cash position, we are not in a hurry here, because this is opportunistic. Totally right, Ralf, because at the end of the day, if you look on our liquidity situation, if you look our current performance, what we all do to save cash, we feel comfortable.
Okay. Sorry, I just wanted to come back on production. I know you said you don't know yet how the resumption will look, are you seeing any signs of any production starting up? I'd heard that perhaps in Germany that was the case, is that something you're seeing or not?
You have to decide between two things, with scripted and unscripted productions. For sure, and that's the advantage of our portfolio currently, if you watch German TV, because we have a lot of unscripted productions. At the end of the day, you have to make some way, somehow, in short period, a decision, what you want to produce up to what time. Therefore, we hope, especially for the German part, since yesterday, the opening has started, that all the trends which we could see in April perhaps will look different in May. That's the reason why we are a little bit cautious in going on further how these things will develop. Let's wait and see how this all works. Austria, very important for us. Germany, very important for us in our portfolio. I think both countries has done this crisis very well.
Big compliment to Angela Merkel. Big compliment especially also to Markus Söder who leads us here in Bavaria, because that's very well done. Therefore, at the end of the day, we feel optimistic, we don't know. We will see how this will develop.
Okay. Thank you.
We will now go to Conor O'Shea from Kepler Cheuvreux.
Yes. Thank you. Morning, everybody. A few questions from my side as well. First question, just on the operating leverage or drop-through that you expect in the second quarter for the entertainment business. You obviously helpfully gave the breakdown of costs in the presentation, that was pre some of the exceptional cost-cutting measures. I think some of your European peers in the French market, for example, have set themselves a target of absorbing about half the decline in revenues in the second quarter through cost-cutting measures or avoidance of direct costs, despite expecting a decline in advertising revenues of 50%. Is that a number that you think that you could achieve on your side? Second question, just on NuCom. Obviously, the margins were weaker in the first quarter, despite limited impact from COVID-19, only on really the smaller activities within the portfolio.
Can you give us a sense of what we could expect in terms of the underlying margins for full year, notwithstanding the uncertainties on COVID? The third question, just on the cash. I appreciate you answered in terms of the cash impact from the lower programming costs, but can you give us a sense of what we could expect cash versus P&L programming cost net gap full year, and also what the situation means for your working capital? Are there any strains there or conversely, is it easier because there are a lower number of in-house production projects? Thank you.
Richard, let me start with your first question regarding operating leverage Q2 in entertainment. What you should expect is Conor, sorry. Before any measures in terms of program spend, there will be very high drop-through. Entertainment business is to a largest extent a fixed cost business.
Hence, revenues have a high impact on profitability if they decline. This you experienced also in the past. Obviously, as I said, in particular in the entertainment business, we are very much focused on cost management, cash flow management. As I said, much will depend on the duration, intensity of the COVID-19 situation and the lockdown measures and the potential or the strengths of a recovery. The margins in NuCom are weaker in Q1 despite limited impact of Corona. I think we elaborated in our presentation that.
Good
The high margin billiger-mietwagen business was already affected. We will see more severe impacts on, let's say, the leisure and experience-related businesses also in Q2. Again, much will again depend on how does the situation evolve. I don't want to put out a margin target for now for the full year, because it's pretty impossible to predict how the overall economic situation will develop. Please understand.
The cash impact from lower programming costs, I think I already answered one of your predecessor's questions. If we reduce by EUR 50 million, this will have a high positive cash impact. Yes. We are also optimizing, obviously, working capital as much as we can. We are improving payment terms, et cetera. Overall, I would say that we have the cost and cash flow situation pretty much under control. To provide you with any, let's say, financial targets in this type of situation would not be wise.
Okay. Ralf, you expect directionally the gap between cash programming costs and P&L programming costs to be lower full year 2020 than we've seen in 2019 and previous years. Would that be fair?
Yeah, could be the case. Yes.
Okay. Many thanks.
Thank you. We will now take our next question from Omar Sheikh from Morgan Stanley.
Morning, everyone. Just a couple from me, if I may. First, Rainer, I wonder if you could give us a sense of your planning assumptions for how advertising may potentially recover from the second quarter. Do you currently expect that the second quarter will be the trough and that you will start to see a gradual improvement from Q3 onwards? Obviously, you don't have much visibility, but just based on your conversations with advertisers so far in relation to deferrals versus cancellations. That's the first question. Secondly, Rainer, I was wondering whether you could just share your views on the dividend. You've obviously sort of confirmed the commitment to the 50% payout, but obviously by the end of this year, you're going to have significantly higher leverage than your target.
Obviously notwithstanding the potential to pay that down with an IPO of some of your NuCom assets potentially next year, what is your sort of conceptual view on whether you think you have the right level of distribution to shareholders in the form of dividends at this point? Thank you very much.
Let me start with the first one. You have a lot of discussions currently, especially with the agencies about the market, and a similar situation like we have, and you also have seen some of the agency also announcing that in the market, that they don't know. The situation is what we have done, we consequently worked on our cost. We have different scenarios in place. I also have a scenario, for instance, that corona will last six months plus two months recovery, as well as three months and everything else. We manage costs consequent on the worst-case scenario. That's what we do. Then we react to every positive momentum in that situation. What you haven't are cancellations. What you have are postponements.
We are talking to agencies currently, which tell us, "Can we already book or prepare for our customers or get spaces in the second half of the year?" Especially for sure in the fourth quarter, because a lot of people are expecting that then everybody gets out of the crisis, and then there will be perhaps a push. If this is the truth or not, we have to see because nobody knows currently. Due to the construction of the contract, you get a discount if you take a certain volume. You don't have that situation that you have a lot of cancellations. It's more or less postponements, which we have to address, which is totally in line with our communication currently, that we also don't know how this will develop. I can't say more currently.
Dividend payout, we hope, and that's our assumption, that our EBIT and our profitability gets better again, so that we also should be then able to pay out a dividend. That's also our assumption. We will see. We are strongly committed, and I only can repeat it, and we had a long discussion in-house. What we can do, what we can't do, and because a dividend payment is for sure something which our shareholders really appreciate. For sure was a tough discussion and it has also to do with the situation as being an SE, where we didn't have the allowance like others to postpone the general shareholder meeting to the second half of the year. That's the reason why we also stick to the 10th of June, and based on that, it's conservative, right?
Consequent to say, in this situation, by not knowing how it will go on further, that we save this money for this year and announce consequently in the market that we will pay a dividend for next year again.
Okay. That's very clear, Rainer. Thanks very much.
Okay. We will now take our next question from Richard Eary from UBS. Please go ahead.
Yeah, many thanks for the call. A number of my questions have already been asked, I just wanted to try and get some clarity around the cost out program. Obviously, you've outlined where you're going to take cost out, you haven't really given any sort of numbers beyond the EUR 50 million on the programming side. I can appreciate that that's subject to obviously how the coronavirus impacts the business and obviously how deep and how long that goes in terms of actually how you think about your cost program exercise. I don't know whether you can give us a range of numbers of whether that's like a EUR 50 million-EUR 100 million potential cost out savings to offset the revenue decline or not. That would be the first question. Thanks.
Richard, this is Ralf answering your question. What you can assume is that we will be doing more than just the EUR 50 million on programming, but the quantum of which will clearly depend on the scenario in which we will operate. We have implemented all necessary measures for the respective SG&A line items. As I already said, we virtually have a hiring freeze. We are applying this short-time work measure, which is provided by both the German and Austrian governments. We are pushing out CapEx-relevant projects, et cetera. I deliberately do not want to provide a range because we will have to deal with the situation as the situation develops. However, certainly it will be more than just the EUR 50 on program.
Okay. No, that's clear. Just secondly, going back to a number of other questions that people have asked is, just to get your comments correct, when you said that May trading was probably similar to what April trading was at -40%, and then you were indicating digital was still double digits, +10%, and I presume that's carried on until May. Are we assuming that May is the worst month, or are we assuming that May is similar to April? Or is it still too soon because of late bookings?
It is 100% too soon because at the end of the day, you know how our lead time is. We now have to see how the on-top bookings look like. We started, like always in this time, the month lower than the 40%, which we reached at the end of the day in April. Now every day we get on-top bookings, and we have to see how this will end up in May. Again, for me, April, May are very relevant, but more important is June, July, August, September, and especially what we see in the fourth quarter. Have in mind our seasonality. Our seasonality, that's what we have in mind always. The last quarter is the most relevant one.
Perhaps this year, depending how long this crisis goes, the last quarter could be the most relevant one during the last two to three to four years based on two effects. First is, it's always very strong in the Christmas season. Second, lots of people postponed their investments for the second half. Therefore, what we are trying currently with our programs, and I have to repeat and to say thank you to a lot of people in-house, because all the people who worked here did a great job in March, in the second half, and a super great job in April, because that was the best performance we ever had on our program. That's, at the end, the basis for success going on further.
We have seen and we have shown in our statistic how successful TV is as a medium. That's clearly for us, the basis also for this consequent business model, to focus on entertainment and to consequently take advantage of that. Program first, we will see how the advertisers will behave. Based on that, hopefully then, we know it better in three months. Again, yesterday in Germany, we started to announce that the treatments are getting better for the people. People can go out again, now we have to see how Germans will take it and how the behavior in consuming and so on will change. Based on that, perhaps we can see trends. Hopefully, we are not getting a second wave. As we did in the past, Germany, Austria are very disciplined people, very disciplined countries, well-managed.
Therefore, I'm optimistic that the decision was done right, and we will know and see that in the next four to six weeks.
No, that's clear. Thank you very much.
Thank you. Our next question comes from Patrick Schmidt from Warburg Research.
Yes, good morning, gentlemen. Thanks. Just one last question left for me. If we step aside from the current crisis for a moment, could you maybe elaborate a little bit on your measures in terms of entertainment and sales approach? Maybe with the leave of Michaela Tod, some changes might have happened there, and you also restructured your entertainment a little bit. Could you maybe elaborate on that a little bit? Maybe not pointing out to the current crisis, which obviously is a bit difficult, I guess, but more generally spoken. Thank you.
Wolfgang Link, who is well-known in the industry, has taken over the role in our board, which shows how strong and how important entertainment is. Also for the sales part, with Michaela going out, we are well-positioned with the people which we have. We have a lot of people around who are doing a great job. You will get further announcements in the future, how we will position also in the sales part. Again, we are well-positioned with Wolfgang in the responsible role. We have Thomas Wagner, who is one of the sales guys in our industry, well-known, very strong, and he managed us on the sales top line very well through the crisis. He did in the past, he will do in the future. I can't say more currently, but that's clearly for us the positioning.
What kind of things we are working on, we are working more consequent and very strict on digital and smart. I also announced that 7Pass, so our registration wall is an important factor. We are pushing that a lot currently in the crisis because the consumption of our websites is very strong. Therefore, registration, getting data from our customer is important. That underlines our focus on digital. Also as I said before, Joyn, an important factor for advertising, but also our own platforms overall, as well as NuCom. All those digital pieces are hopefully shown in the past, shows again how important that is for us. That's clearly the focus where we are on. Addressable TV, I shouldn't forget. Again, that's more difficult currently in the crisis because we need the sales forces also on the street.
That's all perhaps not working out in a Corona crisis, but we want to get stronger out of this crisis and that I also have shown in my part a statistic and that's also the message to the advertisers currently. We do that, for instance, with our portfolio. When you have so many people at home watching TV, for sure you can create great brands and getting stronger due to advertising. That's what we do with our NuCom assets. That's what we do with all the things which make sense, because that's also for us an opportunity to make our company stronger going on further. You can see the success. I already mentioned Flaconi. We have forgotten to mention WindStar and some others who are doing very well in the crisis, and hopefully will do also afterwards.
Perfect. Thank you. Maybe could you elaborate a little bit more on maybe what went wrong in the past, especially 2019, where you kind of underperformed your closest peer, RTL, and I think it was not only due to the audience share or their different approach to agency in terms of providing discounts, et cetera. Maybe you were too aggressive in the past, with this respect or what could you comment on that, maybe? Thank you.
Honestly, I doubt that we underperformed due to the fact at the end of the day that we haven't seen the disclosure for the relevant markets in a comparable way. I would say statistically, when you look on the numbers which we have provided and put it together, means digital and smart as well as entertainment, how they announce their numbers, in TV cash ads all together, then we for sure, we are pretty similar, to their performance in the relevant markets.
Okay.
Oh, I'm sorry. Go ahead.
No, sorry. You're, let's say, fine with your current relationship and strategy with agency, your direct advertising partners, et cetera?
Yes, we are.
Okay, perfect. Thank you.
Okay, ladies and gentlemen, this was the last question for today's call. As always, my colleagues in the Investor Relations team and myself will be available for follow-up questions. Thank you. Goodbye, and stay safe.
That will conclude today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.