Interim Report 2020 At a Glance Key Figures (IFRS) in € millions H1 2020 H1 2019 Business Development Group revenues 7,848 8,612 Operating EBITDA 1,009 1,292 EBITDA margin in percent1) 12.9 15.0 Group profit 488 502 Investments2) 402 578 Consolidated Balance Sheet 6/30/2020 12/31/2019 Equity 10,170 10,445 Equity ratio in percent 34.2 38.2 Total assets 29,733 27,317 Economic debt3) 6,464 6,511 Due to rounding, there may be slight variances in the percentages calculated in this report. 1) Operating EBITDA as a percentage of revenues. 2) Taking into account the financial debt assumed and payments from transactions with non-controlling interests without a change of control, investments amounted to €1,139 million (H1 2019: €612 million). 3) Net financial debt less 50 percent of the par value of the hybrid bonds plus pension provisions, profit participation capital and lease liabilities. Contents 2 Highlights of the First Six Months 21 Condensed Interim Consolidated Financial Statements 4 Foreword 21 Consolidated Income Statement 6 Group Interim Management Report 22 Consolidated Statement of Comprehensive Income Fundamental Information about the Group 23 Consolidated Balance Sheet 24 Consolidated Cash Flow Statement 7 Corporate Profile 25 Consolidated Statement of Changes in Equity 7 Strategy 26 Segment Information 8 Value-Oriented Management System 27 Selected Explanatory Notes Report on Economic Position 38 Responsibility Statement 9 Corporate Environment 39 Additional Information 10 Significant Events in the Current 39 Production Credits/Contact Financial Year 10 Results of Operations 12 Net Assets and Financial Position 15 Performance of the Group Divisions 19 Significant Events after the Balance Sheet Date 19 Risks and Opportunities 19 Outlook Interactive Interim Report The Bertelsmann Interim Report 2020 can also be accessed online at ir2020.bertelsmann.com Bertelsmann Interim Report January–June 2020 1 Highlights of the First Six Months • Record reach levels and market share gains in key markets. • Bertelsmann acquires full ownership of the world’s largest trade publishing group. • Streaming services TV Now in Germany and Videoland in the Netherlands show continued strong growth in • Growth in the leading book market, the United States: subscribers. Strong bestsellers, total availability of its titles in digital formats, and state-of-the-art logistics prove advantageous • Fremantle restarts film and TV production in many during the coronavirus pandemic. territories following coronavirus-related shutdowns. • Penguin Random House connects with audiences www.rtlgroup.com worldwide through virtual events, social media campaigns and online book recommendations. www.penguinrandomhouse.com • The international information services provider Experian • Mohn Media wins another major customer in the retail acquired a majority stake in Arvato Financial Solutions’ sector and strengthens the important brochure segment. Risk Management division. • Edeka and the DeutschlandCard multi-partner rewards • Arvato Supply Chain Solutions recorded strong demand program renew their long-standing and successful for e-commerce services in the first half of the year and partnership for another five years. further expanded its logistics network. • The Bertelsmann Printing Group puts two new sheet- • Arvato Systems became further established as a leader fed printing presses into operation at Mohn Media and in cloud, according to analyst evaluations, and supported Vogel Druck. numerous customers in realizing home office solutions. www.bertelsmann-printing-group.com • Between March and June, Majorel swiftly set up more than 35,000 remote workstations for its own employees worldwide. www.arvato.com 2 Highlights of the First Six Months • G+J teamed up with the Audio Alliance to establish new • BMG continues to deliver organic growth. podcasts such as “Die Stunde Null – Deutschlands Weg aus der Krise” (Zero Hour – Germany’s Way out of the • Creative success and key signings in the label and Crisis), the “Stern” podcast “Wir und Corona” (Us and publishing business. Corona), and “Geolino Spezial – Gemeinsam gegen Corona.” ( Geolino Special – Together against Corona). • Strong streaming business and support for artists and songwriters during the coronavirus pandemic. • G+J provided coverage of the coronavirus pandemic in a variety of special publications, such as the first joint www.bmg.com special issue of the traditional brands “Stern,” “Capital” and “Geo,” and the “#stayathomeandcook” campaign by “Essen & Trinken” and “Chefkoch.” www.guj.com • The Bertelsmann Education Group benefits from increased • Bertelsmann Investments’ global investment network demand for online education and training. grows to more than 240 companies and funds. • Relias provides prevention and hygiene courses free of • Focus on supporting the existing portfolio during the charge to customers during the coronavirus pandemic. coronavirus pandemic, as well as 15 new investments via the BAI and BDMI funds. • Udacity introduces new nanodegrees in emerging tech- nologies and sees increased demand from B2B sector. • Expansion of global activities through fund investments, including in Vertex Ventures in Southeast Asia and India www.bertelsmann-education-group.com and Alpha Intelligence Capital in Europe. www.bertelsmann-investments.com Bertelsmann Interim Report January–June 2020 3 Thomas Rabe Chairman and CEO of Bertelsmann Dear Readers, Dear Friends of Bertelsmann, The first half of 2020 was dominated by the coronavirus pandemic, which, since its outbreak in China, has been a challenge for us as a globally active company. Bertelsmann accepted the challenge, and our measures to counter the economic effects of the pandemic are bearing fruit. We have increased our reach and market share in the TV market and expanded our growth businesses. We have partially offset the decline in advertising revenues through our countermeasures, thanks to the diversified positioning of our Group’s portfolio and the high proportion of digital business models. Book publishing, the music business, Arvato’s services businesses and the education business have proven to be particularly robust. The first signs of stabilization are also emerging: Ad bookings at RTL Group are picking up again, and the advertising markets are showing signs of recovery. Specifically, Bertelsmann generated revenues of €7.8 billion in the first six months of 2020, compared to €8.6 billion in the same period last year, and operating EBITDA of over €1 billion. Net income amounted to €488 million. In the first six months of 2019, the figure was €502 million. Bertelsmann took effective measures against the pandemic all over the world, early on and at every level. Every effort was made to protect employees. About 70 percent of employees worked productively from home; concurrently, strict hygiene standards were introduced at the plants and distribution centers. In the course of taking countermeasures, the Executive Board secured Bertelsmann’s liquidity. To reduce the outflow of funds, cost measures were initiated and investments reduced without impairing the substance of the businesses. At the same time, the Annual General Meeting of Bertelsmann resolved to suspend dividend payments in fiscal year 2020. In sum, Bertelsmann is creatively, operationally and financially well prepared for a post-pandemic world. 4 Foreword All economic challenges notwithstanding, the first half of 2020 was a time of strategic progress. To strengthen our core, we fully acquired Penguin Random House – another milestone in the almost 200-year history of the book business at Bertelsmann. RTL Group gained market share in its core markets, and the internationalization of the Bertelsmann Content Alliance was further advanced. As the digital transformation of our businesses continued, the RTL streaming services TV Now in Germany and Videoland in the Netherlands recorded a 45 percent increase in paying subscribers to 1.77 million. At Penguin Random House, the digital availability of most books, newly expanded digital formats for its authors, and digitally strengthened state-of-the-art book distribution proved to be a competitive advantage in times of lockdowns to meet the growing demand for books. Throughout the Group, the technical prerequisites for working from home were established. Among our growth platforms, BMG recorded organic growth of 4 percent, thanks to the increase in music streaming. Arvato Supply Chain Solutions grew its global network of locations by opening new distribution centers and expanding existing ones in locations including the United States, Russia and Turkey. In May, the information service provider Experian acquired a majority stake in Arvato Financial Solutions’ risk-management business in order to strengthen its joint market position. Our education business benefited from the increased demand for online training and education. Our network of holdings, primarily in the growth regions, grew to more than 240 companies and funds. Alongside 15 new investments through the BAI and BDMI funds, there were also divestments or partial sales of individual holdings. We will continue on the course set in the first half of 2020 so that we can successfully complete the year. Yours, Thomas Rabe Bertelsmann Interim Report January–June 2020 5 Group Interim Management Report In the first half of 2020, Bertelsmann held its ground in a challenging business environment. The second quarter of 2020, in particular, was severely impacted by the coronavirus pandemic