Business performance 2017 and strategy implementation March 27, 2018 in Berlin Successful financial year 2017 – Improved organic growth, further progress in strategy implementation

Business performance Strategy implementation • Increase in revenues to €17.2bn, • Progress on all strategic priorities: organic growth of 1.7% Bertelsmann exhibits higher growth and becomes more digital, more international and more diversified • Operating EBITDA of more than €2.6bn at record level • Share increase Penguin Random House • Group profit of €1.2bn above prior year • Growth platforms developed further

2 March 27, 2018 · Annual Press Conference Business performance 2017 Group key figures – Organic revenue growth, operating EBITDA at record level, Group profit above prior year

Revenues Operating EBITDA Group profit (in € bn) (in € m) (in € m)

Organic +1.7% EBITDA margin Reported +1.4% 15.2% 15.3% +5.4%

17.0 17.2 2,568 2,636 1,137 1,198

2016 2017 2016 2017 2016 2017

4 March 27, 2018 · Annual Press Conference Long-term Group development – Improved growth momentum, continued increase in profits in € bn Organic -0.3% +0.4% +0.9% +1.7% growth p. a.

Revenues 17.2 15.3 Sold businesses1) 2.0 2.6

Operating EBITDA 1.2

Group profit

2011 20122) 20132) 20142) 2015 20162) 2017 1) Including effects from IFRS 11 changes 2) Restated

5 March 27, 2018 · Annual Press Conference Group profit – Again exceeding 1 billion euros and above high prior-year level

in € m 2016 2017 Major effects Operating EBITDA 2,568 2,636 • Further increase in operating EBITDA mainly due to TV, music and Depreciation and amortization -630 -657 Special items -139 -83 • Lower burden from special items due to increased capital gains from EBIT 1,799 1,896 fund activities Financial result -244 -219 • Improved financial result mainly because Income taxes -419 -472 of lower interest expense • Higher tax expense due to increase in Earnings after taxes from discontinued operations 1 -7 profits and revaluation of deferred taxes Group profit 1,137 1,198 resulting from the US tax reform

6 March 27, 2018 · Annual Press Conference Financial position – Financial metrics in line with targets despite share increase Penguin Random House

Operating free cash flow Economic investments Leverage Factor (in € m) (in € m)

1,799 1,822 1,776 2016 2.5

2017 2.5 1,262 Target ≤2.5

Ratings

Baa1, stable

BBB+, stable

2016 2017 2016 2017

7 March 27, 2018 · Annual Press Conference Media businesses (1/2) – RTL Group again with record revenues and earnings, Penguin Random House organically stable

Growth Growth Organic +1.8% Organic +0.0% Reported +2.2% Reported -0.1%

Revenues 6,237 6,373 Revenues 3,361 3,359 (in € m) (in € m)

1,405 1,478 Op. EBITDA Op. EBITDA 537 521 (in € m) (in € m) 2016 2017 2016 2017 EBITDA margin 22.5% 23.2% EBITDA margin 16.0% 15.5%

• Record earnings at Mediengruppe RTL Deutschland • Revenues and profits impacted by negative exchange rate effects • French TV business with significant advertising share gain • Expansion Spanish-speaking business (acquisition Ediciones B) • New productions at Fremantle Media (e. g. American Gods) • Strong bestseller performance (461 “New York Times” bestsellers) • Expansion digital advertising sales (e. g. step-up SpotX) • Numerous literary awards (e. g. Nobel Prize for Literature)

8 March 27, 2018 · Annual Press Conference Media businesses (2/2) – EBITDA increase at Gruner + Jahr, BMG revenues exceeding 500 million euros for the first time

Growth Growth Organic -1.6% Organic +18.5% Reported -4.2% Reported +21.8%

Revenues 1,580 1,513 Revenues 507 (in € m) (in € m) 416

95 104 Op. EBITDA 137 145 Op. EBITDA (in € m) (in € m) 2016 2017 2016 2017 EBITDA margin 8.7% 9.6% EBITDA margin 22.8% 20.5%

• Revenue development impacted by further portfolio measures • Continued strong growth organically and through acquisitions • Earnings and margin increase during continuous transformation • EBITDA further improved, exceeding €100m for the first time • G+J Germany with new titles, increase in revenues and earnings • Significant expansion of recording business (esp. acquisition BBR) • Digital businesses with double-digit revenue growth • Further international expansion

9 March 27, 2018 · Annual Press Conference Services businesses – Growth at Arvato, Bertelsmann Printing Group with stable profitability

Growth Growth Organic +2.9% Organic -1.0% Reported +1.6% Reported -1.6%

Revenues 3,763 3,823 Revenues 1,709 1,681 (in € m) (in € m)

Op. EBITDA 356 320 Op. EBITDA 121 118 (in € m) (in € m) 2016 2017 2016 2017 EBITDA margin 9.5% 8.4% EBITDA margin 7.1% 7.0%

• CRM Solutions: Growth, profitability impacted by start-up costs • Stable development in an overall declining market • SCM Solutions: Business and network expansion, start-up costs • Extension of important customer contracts, e. g. in retail segment • Financial Solutions: Investments in Solaris Bank and Intervalor • Further expansion of gravure printing business in UK • Systems: Extension of services in media and utilities segments • Market share gains in replication business

Note: 2016 restated

10 March 27, 2018 · Annual Press Conference Education and fund businesses – Increase in revenues and EBITDA at Education Group, funds with significant EBIT contribution

Growth Organic +12.5% Reported +32.6%

Revenues 189 EBIT 141 (in € m) (in € m) 142

Op. EBITDA 35 (in € m) -17 3 2016 2017 2016 2017

• Significant revenue growth and overall positive EBITDA • Significant contribution to Group profit, especially through exits • Relias: Further organic and acquisitive business expansion • Successful IPOs of four BAI investments • Udacity: Number of students tripled, new Nanodegrees • More than 40 new investments, numerous follow-on investments • Alliant and HotChalk with significant efficiency gains • Focus on sectors with high relevance for the Group

11 March 27, 2018 · Annual Press Conference Strategy implementation Group strategy – Strategic framework

Strategic priorities Target portfolio

1 Strengthening the core Higher growth

2 Digital transformation More digital Financial performance 3 Growth platforms More international More diversified 4 Growth regions

13 March 27, 2018 · Annual Press Conference Group strategy – Strategic framework

Strategic priorities Target portfolio

1 Strengthening the core Higher growth

2 Digital transformation More digital Financial performance 3 Growth platforms More international More diversified 4 Growth regions

14 March 27, 2018 · Annual Press Conference 1 Strengthening the core – Share in Penguin Random House increased from 53% to 75%

75% majority in world‘s largest and most international trade publishing group

75% 100% Increased profit share for Bertelsmann shareholders

Bertelsmann now with 25% strategic majority in all divisions

15 March 27, 2018 · Annual Press Conference 1 Strengthening the core– World‘s largest trade publishing group

Strong bestseller performance Leading market positions Positive market development 15,000 Growing book market new titles annually Literacy Children and with 300 rate young adults books imprints

2m Stable business models books sold each day

in more than 100 Healthy coexistence countries e-books/print books

16 March 27, 2018 · Annual Press Conference 2 Digital transformation – Local content as driver of digital transformation

Investments in own content and exclusive rights …... to strengthen linear channels … ... and online offers

Share of own productions1) Audience share, adults 14-59 years

86% 88% 73% 28.4% 28.9% 3) 46% >20k hours of content 26.7% 24.4% +31% video views4) 2010 2017 2010 2017 +80% paying subscribers4) 2015 2016 20172017

• 4,800 hours of own productions in 20172) • Lead over main competitor further increased • Expansion of linear and non-linear • Sports highlights such as Formula 1 and • Exceptional advertising reach with 93% of content offer Europa League secured 100 ad slots with highest reach • Strengthening of direct customer • Seven new fictional shows in 2018 • Growth of TV advertising revenue above relationships in hybrid market (free/paid) • Improvement of user experience

1) AGF/GfK, share of own productions, coproductions and contract productions of total program in hours 2) Only including first runs of own productions, excluding n-tv and RTL2 3) Including RTL2 4) December 2017 vs. December 2016

17 March 27, 2018 · Annual Press Conference 3 Growth platforms – Basis created for further organic expansion

2011 Investments €4.6bn 2017

Digital

Digital

Old structure

18 March 27, 2018 · Annual Press Conference 3 Growth platforms: Examples – Expansion of BMG, Arvato SCM and Financial Solutions as well as Bertelsmann Education Group

• Significant business expansion

• Expansion of locations in Germany, • Expansion into new segments Netherlands, Poland and the US (assessments, learning, analytics) • Growth especially in verticals hightech, • More than 6,000 customers • Creative and commercial successes healthcare and e-commerce for • 17% organic revenue growth in 2017 consumer products • 5% revenue growth in 2017

• New Nanodegrees in digital , robotics, deep learning and virtual reality • Revenues in 2017 +22%, • Organic growth in receivables >€500m for the first time management • Number of students more than tripled in 10th • World‘s 4th largest 2017 to approx. 50,000 anniversary • Increase of share in Brazilian financial player in music rights 2018 services company Intervalor • Represents 2.5m songs • 7% revenue growth in 2017 and recordings

19 March 27, 2018 · Annual Press Conference 4 Growth regions – Expansion of existing activities, further investments in digital and education businesses

Brazil India China Arvato Penguin Education Group Increase of share Random House Expansion of Relias and in Intervalor Extension of growth of Udacity offerings in regional Education Group languages Bertelsmann Investments Expansion of Udacity 29 new and 7 follow-on 10 years BAI 2018 Bertelsmann Investments investments (Mobike and Bertelsmann Investments Investment in Eruditus SEE among others), 111 investments Expansion of education Executive Education, capital gains and 4 IPOs 15 exits business in cooperation with 6 follow-on investments Bozano Investimentos in digital businesses 7 IPOs

20 March 27, 2018 · Annual Press Conference HR strategy – Optimal framework for transforming Bertelsmann

Talent Management Digital Learning • Internal placement rate of 81% • 90,000 employees in 46 countries • Career programs for creative, with access to 13,000 online entrepreneurial and IT talents courses • Bertelsmann Exchange Initiative • 75,000 scholarships with Google 1 Strengthening the core and Udacity 2 Digital transformation To Empower. To Create. To Inspire. Creativity Corporate Responsibility 3 Growth platforms • Trainee program for creatives and • 13 focus topics – from diversity graduates to freedom of press 4 Growth regions • Creative Leadership Curriculum • Minimum health standards and Bootcamps implemented • Creativity Award

21 March 27, 2018 · Annual Press Conference Group strategy – Strategic framework

Strategic priorities Target portfolio

1 Strengthening the core Higher growth

2 Digital transformation More digital Financial performance 3 Growth platforms More international More diversified 4 Growth regions

22 March 27, 2018 · Annual Press Conference Target portfolio – Growth businesses already accounting for almost one third of Group revenues

Share of Group revenues in %

Growth businesses 32% 20% ~40%

Stable businesses 64% 64% ~60%

Structurally declining businesses 16% 4% 2011 2017 Target

23 March 27, 2018 · Annual Press Conference Target portfolio – Share of digital revenues improved from 30% to 46% since 2011

Share of Group revenues in %

Advertising, products, 13% sales, customers Digital revenues 2017 Growth Digital 30% 27% (in € bn) since 2011 Distribution 17% 46% >50% Advertising 0.7 3.8×

19% Products 1.6 2.5× Sales 0.9 2.4× Customers 1.4 1.8×

Other 70% Distribution 3.3 1.3× 54% <50% Group 7.9 1.7×

2011 2017 Target

24 March 27, 2018 · Annual Press Conference Target portfolio – Increasing internationalization

Share of Group revenues in %

Other countries 6% 7% ~10% • Revenues outside of Europe increased US 14% 20% by more than 50% since 2011 ~30% • Expansion of activities in countries with sustainable positive growth potential

Europe 80% 73% US Brazil India China ~60%

2011 2017 Target

25 March 27, 2018 · Annual Press Conference Group structure – Balanced portfolio with eight divisions, strategic majority in all divisions

92% 75% 53% 75% 75% 100% 49% 100% 100% 100% 100% 100%

Media Services Education Funds

26 March 27, 2018 · Annual Press Conference Group strategy – Strategic framework

Strategic priorities Target portfolio

1 Strengthening the core Higher growth

2 Digital transformation More digital Financial performance 3 Growth platforms More international More diversified 4 Growth regions

27 March 27, 2018 · Annual Press Conference Financial performance – Further improvement of revenues and profits envisaged in € bn

Revenues 20.0

17.2 15.3 Sold 2.0 businesses1) 3.0 2.6 Operating EBITDA 2.2

>1.0 1.2 Group profit 0.6

2011 2017 Target 1) Including effects from IFRS 11 changes

28 March 27, 2018 · Annual Press Conference Arvato CRM Solutions – Review of strategic options

Status quo However … Outlook • Growing and profitable • Significant investment • Evaluation of strategic options: business requirements ahead due to – Sale (without France) • Revenues €1bn technological developments – Partial sale • 36,000 employees • Alternative investment options: – • 90 locations in 19 countries Eight growth platforms with higher • Closing in second half of 2018 investment priority • Leading positions, e. g. in Germany

Figures without France

29 March 27, 2018 · Annual Press Conference Competitive environment– Structural change of competitive landscape, Bertelsmann sustainably well positioned

New dimensionofcompetition Bertelsmann’s responses

Global platforms with increasing relevance in Offer brand-safe Build digital Investments in the media sector advertising capabilities and premium content environments with own digital (ca. €5bn annually) high reach businesses

Provide products/services Push for regulatory to and cooperate level playing field with platforms

30 March 27, 2018 · Annual Press Conference Summary and outlook – Successful transformation continued, even stronger focus on organic growth going forward

2017 2018 Key developments Outlook • Organic growth improved • Further improvement of growth profile, especially through • Operating EBITDA at record level organic expansion of existing growth platforms • Group profit of €1.2bn • Continued high operating profitability • Further progress towards target portfolio • Group profit to remain in excess of €1bn

31 March 27, 2018 · Annual Press Conference