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European Corporate Day / Commerzbank AG / London

Roger Schweitzer | EVP Corporate Treasury and Finance

Henrik Pahls | SVP Corporate Finance

June 10, 2015

2 June 10, 2015 · Bertelsmann · European Corporate Day

Agenda

Bertelsmann at a Glance

Divisional Performance

Financial Performance

Strategy

Outlook


Revenues:

Op. EBITDA:

Revenues:

Op. EBITDA:

Revenues:

Op. EBITDA:

Revenues:

Op. EBITDA: Revenues:

Op. EBITDA:

Revenues:

Op. EBITDA:

5,808

1,334

Bertelsmann at a Glance – International media and services group with diversified revenue base

Revenues/Operating EBITDA in € millions (financial year 2014, continuing operations)

3,324

452

4,662

384

1,747

166

Revenues:

Operating EBITDA:

Employees:

16,675

2,374

112,037

Bertelsmann: 53% Bertelsmann: 100%

TV / Radio /

TV-Production Book Publishing Magazine Publishing Services

Bertelsmann: 75.1%

996

64

Bertelsmann: 100%

Printing

Revenue by region

35% Germany

14% France 18% Other

European Countries

19% United States

7% Other countries

Revenues by category

39% Own Products

and merchandise

11% Rights

and licenses 25% Services

25% Advertising

510

44

Education / Music

Bertelsmann: 100% Bertelsmann: 100%

6% UK


Bertelsmann at a Glance – Bertelsmann’s core businesses with strong international presence

2014 revenues by divisions (in € billions) 2014 revenues by regions (in %)

5.8 3.3 1.7

4.7 1.0 16.7

RTL Group Penguin Random House Gruner + Jahr

Arvato Be Printers Bertelsmann

37% 63% 8% 92% 51% 49%

47% 53% 38% 62% 35% 65%

German revenues (in %) International revenues (in %)

Germany

France

Other countries

Other European

countries

Great Britain

United States 19%

18%

14%

6%

7%

35%

16.7


Financial year 2014 – Summary and highlights

Group key figures

Financial status

Revenues and Operating

EBITDA at highest level

since 2007

Operating EBITDA up 2.7%,

14.2% EBITDA margin

Group profit impacted by

group transformation

Investments continue to be

high at €1.6 billion

Target rating Baa1/BBB+

with stable outlook

Maturity profile extended in

2014 at attractive funding terms

Strategy

Progress on all four

strategic priorities

Expansion of digital and

growth businesses

Significant progress in building

an education division


Group key figures – Strong operating performance, revenues and Operating EBITDA increased

+3.1%

2013

16.2 16.7

2014 2013 2014

2,311 2,374

885

573

2013 2014

14.3% 14.2%

EBITDA margin

Revenues (in € billions) Operating EBITDA (in € millions) Group profit (in € millions)

Note: 2013 restated


Group key figures – Group profit below prior year due to special items for continued Group transformation

(in € m) 2013 2014

Operating EBITDA 2,311 2,374

Depreciation/amortization -548 -605

Special items -46 -619

EBIT 1,717 1,150

Financial result -361 -295

Income taxes -413 -286

Earnings after taxes from discontinued operations -58 4

Group profit 885 573

Run-down of structurally

declining print and club

businesses

Expenses for profitability

improvement program

- Integration of Penguin

Random House

- Efficiency program at

Gruner + Jahr

- Profitability program at

Arvato

- Operational Excellence

Impairments at Hungarian TV

business

Positive special items in prior

year

Key effects

Note: 2013 restated

Run-down of structurally

declining print and club

businesses

Expenses for profitability

improvement program

- Integration of Penguin

Random House

- Efficiency program at

Gruner + Jahr

- Profitability program at

Arvato

- Operational Excellence

Impairments at Hungarian TV

business

Positive special items in prior

year


Group key figures Q1 2015 – Increase of operating result in Q1 2015 despite disposal of structurally declining businesses

(in € m) Q1 2014 Q1 2015 Change in %

Revenues 3,900 3,917 +0.4%

Operating EBITDA 434 463 +6.7%

Depreciation/amortization -152 -153 -0.7%

Special items -25 -69 –

EBIT 257 241 -6.2%

Financial result -67 -53 +21%

Income taxes -86 -45 +48%

Earnings after taxes from discontinued operations 2 –

Group profit 106 143 +35%

Note: Q1 2014 restated


Agenda




Strategy

Outlook


RTL Group – High profitability with stable revenues

• Stable revenues, strong prior-year result exceeded

• Mediengruppe RTL Deutschland with record results

• Continued expansion of families of channels

• Production business strengthened through

acquisition of 495 Productions

• Expansion of digital businesses through

acquisitions of StyleHaul and SpotXchange

• Impairments at RTL Hungary due to new advertising

tax

Operating EBITDA (in € m)

2014

5,808

2013

5,824

2014

2013

1,334 1,324

22.7% 23.0%

Note: 2013 restated

Revenues (in € m)

EBITDA margin

-0.3%


Penguin Random House – Positive business development, successful merger

• Organic growth, expansion of market positions

• Strong performance of US publishers with film

adaptations of bestsellers as well as children’s and

juvenile books

• Numerous literary awards, including Pulitzer Prize

for Dan Fagin; more than 500 titles on New York

Times Best Seller list

• Further expansion of digital business, more than

100 million e-books sold

• Continued successful integration

• Acquisition of trade-book publishers from Santillana;

strengthening position in Spain, No. 1 in Latin

America 2014

3,324

2013

2,654

2014

2013

452

363

13.7% 13.6% +25.2%

Note: 2013 restated

Operating EBITDA (in € m) Revenues (in € m)

EBITDA margin


Gruner + Jahr – Continuation of transformation, 100% acquisition through Bertelsmann

• Revenue decline due to divestments (particularly

sale of Brown Printing) as well as declining

advertising and circulation revenues

• Operating EBITDA stable excluding print business

sold in 2014

• Digital business in core markets grew 26%, to 17%

of total revenues

• Expansion of digital business through numerous

new e-mags and apps, investments in Veeseo and

Trnd

• Efficiency program in Germany and France

• Bertelsmann sole owner since November 1, 2014

2014

1,747

2013

2,014

2014

2013

166 193

9.6% 9.5% -13.3%

Note: 2013 restated


EBITDA margin


Arvato – Expansion of e-commerce and financial services

• Significant revenue growth

• Operating result impacted by start-up losses for

new businesses and margin pressure in some

business units

• Leading European e-commerce services provider

for fashion and lifestyle

• Strengthening of leading position in growing market

for financial services and risk management

• High demand for IT solutions

• Profitability program

2014

4,662

2013

4,388

2014

2013

384 397

9.0% 8.2% +6.2%

Note: 2013 restated


EBITDA margin


Be Printers – Ensuring competitiveness in structurally declining markets

• Decline in revenues and earnings due to decreasing

volumes and prices as well as continued

overcapacities in the European businesses

• Ensuring competitiveness in terms of quality and

costs

• Closing of Prinovis printing plant in Itzehoe

• Sale of printing plants in Italy, calendar business

and printing plant participation in Colombia

• Stable development of US business

2014

996

2013

1,122

92

64

2014

2013

8.2% 6.4% -11.2%

Note: 2013 restated


EBITDA margin


Corporate Investments – Further growth and efficiency improvements at BMG Rights Management, progress in downscaling of structurally declining businesses

2014

510

2013

546

20

44

2014

2013

3.7% 8.6% -6.6%

Note: 2013 restated


EBITDA margin

Music rights – BMG

• Growth organically and through acquisitions of music publishers Talpa

and Union Square, and rights catalogs Montana and Hal David

• Germany’s most successful music publisher in 2014

• Holds more than 2.5 million song and recording rights including

600,000 master rights

• Funds activities expanded portfolio:

BDMI (digital domain startup-investments in US and Europe)

BAI (11 new investments in 2014)

Fund activities in growth regions (Brazil, India)

• Remaining club and direct-marketing businesses:

Sale of club businesses in Czech Republic, Slovakia and Spain

Withdrawal from German-language club and direct-marketing

business

Education – Relias Learning

• Target segments in the education sector (1) E-learning (2) Universities

specializing in health and human sciences (3) Services

• Takeover of leading US e-learning provider Relias Learning essential

step to develop education as a key pillar

Further operating activities


Agenda




Strategy

Outlook


Leverage Factor < 2.5x

Financial status – Leverage Factor above target due to increased pensions obligations

Coverage Ratio > 4.0x

Equity Ratio > 25%

Economic debt (in € millions)

Credit

Rating

Baa1, outlook: stable

BBB+, outlook: stable

39%

2013

41%

2012

32%

2011

34%

2010

35%

2014

2014

7.5x

2013

5.9x

2012

6.4x

2011

5.2x

2010

4.1x

2014

2.7x

2013

2.0x

2012

2.3x

2011

2.4x

2010

2.3x

413 413413 413

997953

413681

2014

6,039

2,698

1,238

2012

4,773

2,146

1,218

2011

4,913

1,738

1,809

2010

1,181

4,915

1,565

1,024

1,913

1,689

2013

4,216

1,941

Net debt

Profit Participation Capital

Operating Leases

Pensions

1) After modifications.

Economic debt

Operating EBITDA1)

Operating EBITDA

Financial result)1

Equity

Total assets


Repaid in 2014

217 100

750

430

785

60

750

500

100

650* 600*

2014 2015 2016 2019 2022 2023 2024 2027 2032 2075

Hybrid Bonds Bonds Promissory notes

1,200

1,329

2,705

Syndi-

cated

loan

(until

2019)

Liquidity

967

Financing Activities in FY 2014/2015

• Jan/Feb/Mar 2014: €750m bond and €217m promissory notes repaid

• Jul 2014: Amendment of Syndicated Loan: margin lowered, extension until July 2019

• Oct 2014: €500m bond, 10yrs, coupon 1.75%

• Nov 2014: €100m private placement of 5yrs floater

• Apr 2015: Issuance of two hybrid bonds with a total volume of €1.25bn, tenure of 60yrs, NC8/12

in € millions

Financial status – Issuance of hybrid bonds in April 2015 has strengthened financial profile and extended maturity profile

160 31 Dec

2013

31 Dec

2014

NC8

* For illustrative purposes only.

1,250

NC12


Agenda




Strategy

Outlook


Strategy – Medium term target: Diversified group with three pillars

0

Media Services Education

Bertelsmann

Education


RTL: Expansion of families

of channels, growth of

platform revenues

PRH: Integration

progressing, strong

publishing performance with

increasing market shares

G+J: 100%-acquisition

Be Printers: Sale of

Be Printers Italy

Direct to consumer: Decision

to close German business,

exit Spain and Eastern

Europe

Launch of group-wide

cost/profitability

improvement programs

Strategy – Ongoing implementation of transformation and growth strategy based on 4 priorities

Strengthening the core

1 2 3 4

Digital transformation Growth platforms Growth regions

RTL: European leader in

online video, acquisition of

multi-channel network

StyleHaul and online video

advertising marketplace

SpotXchange

PRH: Global leader in e-

books (100k titles available)

G+J: Expansion of digital

content and digital

advertising

Arvato: Growing services for

companies in IT/high-tech

sector and e-commerce

services

RTL/Fremantle: Acquisition

495 productions

Arvato: Growth of financial

solutions

Arvato: Growth of

e-commerce services

business, acquisition of

e-commerce service

provider Netrada

BMG: Further catalog

acquisitions

Education (e-learning):

Acquisition of Relias

Learning and investment in

Udacity

RTL: Channel launches in

Southeast Asia through CBS

JV

PRH: Acquisition of

Santillana trade book

publishing in Latin America

BAI: Continuation of strong

value creation

India: First direct

investments in education

and digital media segments

Strategy execution: strong progress in 2014 Target portfolio

characteristics

Higher growth

More digital

More

international


Group strategy – Investments of more than €2 billion in growth businesses

€+1.2 billion

revenue growth

of growth businesses

since 2011

Investments > €2 billion

2011 2012 2013 2014


Agenda




Strategy

Outlook


Outlook – Continuous expansion of growth businesses and active run-down of structurally declining businesses

Structurally declining businesses

Stable businesses

Growth businesses

63%64%

22% 27%

~5%

~40%

2014

9%

2011

15%

Trend

~55%

Share of Group revenues

Organic development and acquisitions

Securing a strong market position and

high profitability

Strengthening competitive position,

transformation or withdrawal

Strategic priorities


Outlook – Revenues of €20 billion with a target EBITDA margin of > 15%

Outlook 2015

Market development

• Global economic growth

• Mixed market conditions

Strategy

Continued transformation and further

implementation along strategic priorities

Group development

• Increased revenues

• Higher operating EBITDA

Target

> 20

2014

16.7

Target

Education Existing

businesses

Growth

regions

14% > 15% EBITDA

margin

Revenues (in € bn)


BACKUP


Strengthening the core – Expansion of reach in core markets

28.2%

23.4%

15.4%

#1

#1

#2

12.6%

#1

Market share Goals of the merger

Integration

Innovation

Internationality

1

Latin America

#1


7

17

36

Digital transformation – Video as the core of RTL Group’s digital strategy

# Company

1 Google/YouTube

2 Facebook

3 AOL

4 RTL Group

5 VEVO

6 Maker Studios

7 Yahoo Sites

8 Fullscreen

9 Hulu

10 Dailymotion

RTL Group video views Full year, in billions

Strong growth Top 10 Global Player

2014

2013

2012

2

×5


• Acquisition of No. 1 fashion & beauty MCN StyleHaul

• RTL Group second largest player on YouTube1)

Digital transformation – Accelerated digital transformation of TV business

32,000 YouTube channels

globally

No. 1 media company in online videos in Europe

High growth of digital revenues

Global monetization opportunities

• €295 million online revenues in 2014

• Revenues from online video advertising +22% versus

prior year

• Acquisition of leading online video marketplace

SpotXchange

• Establishment of strong branded-content environments

+26% growth of online revenues

vs. prior year

1) MCN ranking by unique viewers, average Q4/2014 Comscore, without music

2


Growth platforms – Growth through innovative services and targeted acquisitions

European market leader

in e-commerce services

> 70 online shops for renowned brands

> 60 million shipments per year

> 3,000 employees

3

sales know-how

worldwide business activities

online marketing

transportation management

B2B logistics

financial services

e-commerce know-how

competency in

fashion industry

distribution network

B2C logistics

local expertise

customer relationships


Growth platforms – Intensified development of activities in financial solutions segment

Focus Outlook Activities 2014

Internationalization

Innovations

Expansion of

services portfolio

Integration of Gothia Financial

Group completed

Cooperation with incubator

Startupbootcamp FinTech

Acquisition of AfterPay

Further expansion of international

business activities; in 2015, acquisition

of an interest in Intervalor, one of the

leading providers of financial services

in Brazil

Development of fraud detection

solutions for digital business models

Europe-wide rollout of solutions for

„purchase on account“

3


Growth platforms – Further expansion of BMG, creative success, leading music publisher in Germany

BMG No. 4 globally in music rights management Significant expansion

• Double-digit organic revenues growth

• Most successful music publisher in Germany

with a cumulative singles chart share of 18%

• Business expansion through investment

• Integration benefits

• Successful market entry in China

53

1,900,000

Grammy

and 52 Echo

nominations

10

countries

(+ global partner network)

publishing copyrights

(owned/administered)

600,000 master recordings

(owned/under license)

3


Growth platforms – Three target segments to build Education division

Corporate and consumer e-learning

Higher education –

health and human sciences

Higher education services

US$19bn

globally

US$160bn

globally

US$1bn

USA

Target segments Market attractiveness

Macro drivers

• Increasing importance of education in a knowledge society

• Massive expansion of private educational offerings

• Growing demand in emerging markets

• Broad access to education via online services

Overall characteristics

• Fragmented markets

• High growth

• High profitability

• Strong entrepreneurship

3

Market size


• Building a global e-learning enterprise

• Leading US-based e-learning provider for healthcare

• 2,500+ online courses, 2+ million users, 25+ million courses

completed per year

• Building a network of health and human sciences universities

• Alliant is a leading US university focusing on psychology

• 3,700 students at 10 international locations

• Building a services provider focusing on premium universities

and colleges in the healthcare segment

• US services provider for universities/colleges, e.g., (digital)

program design, marketing, IT services

• 8 partner universities, 61 programs with 5,000 students

Corporate and

consumer e-learning

Higher education –

Health and human sciences

Higher education services

Growth platforms – First direct investments, revenue target €1 billion

3


Growth regions – High potential through existing businesses, digital business models and education; €1 billion revenue target

Existing businesses and investments

4

BRAZIL

CHINA

INDIA

• 11 additional investments, highest number since

start of BAI, continued value creation

• BMG market entry

• Strengthened presence of content businesses

through Penguin Random House, market leader

for English-language books

• Investments into digital businesses and education

• Acquisition of Objetiva (Santillana)

• Investment in education fund

Business expansion in 2014

http://100che.cn/

http://images.google.com/url?sa=i&rct=j&q=&source=images&cd=&cad=rja&docid=kt6RkU3Ex6WILM&tbnid=pJVSp7nJuyr10M:&ved=0CAUQjRw&url=http://en.wikipedia.org/wiki/File:Fremantle_Media_logo.svg&ei=PRi2UauJPI_20gWTqYHAAw&bvm=bv.47534661,d.bGE&psig=AFQjCNHfouoBy9U7KEI3EplFdu08wGp6ZQ&ust=1370974651554114



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