Television Franchise

Hello and welcome to TF1Q1 2024 Results Conference Call. My name is Alan. I will be your coordinator for today's event. Please note this call has been recorded and for the duration your lines will be on listen only. However, you have the opportunity to ask questions at the end. This can be done by pressing star 1 on your telephone keypad. If you require assistance at any time, please press star 0 and will be connected to an operator. I will now hand you to your host, Peer Alan Jirag, VP Finance Strategy

procurement to begin today's conference thank you thank you good evening everyone and thank you for joining us for our q1 results presentation during today's call I will present the business highlights of our two operating segments provide a more detailed breakdown of our financial results and lastly discuss our outlook we will then open the floor for questions for those of you who are joining us by the phone Note that we are displaying a presentation which you can follow through the webcast. You can also find the presentation on our corporate website. With that, let's turn to slide four to go over the quarterly highlights. First of all, we would like to share with you the key highlights of the first quarter. Let's look first at our audience results. CFM Group reinforced its audience leadership with increases in all segments. In Q1 2024, the audience of TF1 Group's channel stood at 34.5% for women below 50, up 1.3 points, and 31.4% for the 25-49-year-old, up 1.5 points. TF1+, the new streaming platform launched on the 8th of January in 2024, is a leader in terms of reach and attracted 35 million viewers in March, a new record. Next, our financial performance. Group advertising revenue was up 6.6% year-on-year, driven by a strong performance in linear and streaming. TF1 Plus got off to a very good start. Its advertising revenue grew by 43.5% to 29 million euros in the first quarter of 2024, reflecting the attractiveness of the platform. At the end of March 2024, linear advertising revenue was up 4.4% year-on-year, not cannibalized by streaming. Current operating profit from activities amounted to 37.3 million euros close to Q1 2023 figure, down 2.6 million euros. Current operating margin from activities was 7.3% compared to 8.3% in the first quarter of 2023. Net profit attributable to the group was 29.7 million euros, up 5.7% year-on-year. The group benefits from a solid financial position. Net cash stood at 564 million euros at the end of March 2024, up 59 million versus the end of December 2023. Now, let's turn to a detailed activity review of Q1 2024 for our media and UN studio businesses. In the first quarter of 2024, the group maintained an unrivaled reach, attracting 55% of French people every day, way above any media, such as YouTube and Netflix, for instance. The group gained significant share across all audiences and achieved the fastest growth in the French audiovisual sector. Audience share up one point in the four plus target compared to the first quarter of 2023, up 1.3 points in the women below 50 target and up 1.5 points in the individuals aged between 25 and 49. The TF1 channel stands well ahead in the sector and broke several records during the first quarter. In the women below 50 target, its audience share was 23.5% up 0.9 points, further widening the gap with its main competitor, 10.6 points. Among individuals aged between 25 and 49, its audience share was 21%, up 1.3 points, 8.6 points more than its nearest competitor. Moving on to slide 7. In Q1 2024, we had a solid lineup, performing well in both linear and streaming. The TF1 channel recorded 29 of the 30 highest ratings among women below 50, and 20 of the 30 highest ratings among individuals aged between 25 and 49, with the returns of its major franchises and new French dramas. During the first quarter of 2024, TFI increased its audience share on commercial targets on all main daily audience touchpoints. The afternoon slot, with the relaunch of Pribel-Lavie, Access, with our two daily soaps, and Primetime, with a strong lineup with three examples shown on the slide. This premium lineup also performed very well in streaming and reached record audiences. For example, we added up to 1.3 million streamers for Koh Lanta, representing the best BVOD audience ever for an entertainment show, and up to 0.9 million streamers for the French drama Rivière Perdue. With Plus Belle La Vie, we illustrate on the right-hand side of the slide our multi-channel and streaming strategy. 3 million viewers on average, 55% on TF1, 20% on streaming, 22% on TFX. Now let's discuss on slide 8 our nonlinear activity results. TF1 had a successful launch with a sharp rise in advertising revenue, up 44% to 29 million. TF1 Plus is a leader in terms of reach with 33 million streamers per month on average in the first quarter, compared with 28 streamers per month for My TF1 in 2023. This number grew from month to month during the first quarter to reach 35 million viewers in March, a new record. The platform recorded 285 million streamed hours, up 13%, according to Mediamétrie, which includes environments where TF1 Plus is not yet distributed, dragging the average down. Our internal data show a 79% increase in consumption on TF1 Plus only. This performance was notably driven by TF1 Plus' distinctive attributes, strong brand awareness, accessibility, visibility, attractive content, and a user-friendly interface. Awareness. We implemented a second wave of marketing campaigns including billboards and TV slots after the initial strong results in January. As a reminder, after our first billboard campaign, AD awareness reached 73%. Second pillar, accessibility. As already explained at the full year results, 2023 full year results, we have developed new long-term partnerships with all telcos and connected TV suppliers to accelerate accessibility for TF1+. TF1 is now accessible on almost all environments. 93% of set-top boxes, 95% of connected TV manufacturers, and 100% of mobile apps. Then, visibility. We show here an example of where we stand with Telco. First, visibility is effective on 13 million set-top boxes at the end of March, and the rest will be rolled out throughout 2024. And also, as you have seen in the press, we have also contracts with connected TV and OEMs, so we are on track with our roadmap. Then the lineup, it brings together more than 15,000 hours of content available at any time, very much in line with market standards and with rights extended to up to 48 months. We are continuously improving the platform to meet the best standards of user experience editorialization and recommendation features. Now turning to Newen Studio on page 9. At Newen Studio, revenue was similar to the first quarter 2023 figure at 59 million euros, down 3%. The first quarter was marked by the launch of Plus Belle La Vie, Encore Plus Belle for TF1, as well as the delivery of Cuckoo for Channel 5 and continued positive momentum in cinema with the film Chasse Gardée, released in theaters in late 2023 and distributed by TF1 Studios. 1.9 million tickets sold, and the remake also of the movie Salaires de la Peur, Wages of Fear, for Netflix. The second season of the prestigious production Marie Antoinette was shot in the first quarter and is planned to be delivered in H2 for Canal+. New and Studio Current Operating Profits from Activities stands in positive territory, slightly below 1 million euros, up year-on-year. Let's move to a more detailed breakdown of our financial results for the first quarter of 2024. You will find the details of our consolidated financial statements, management report and financial statement appendix on our website. On page 11, The group's consolidated revenue amounted to 512 million euros in the first quarter of 2024, up 6.7% year-on-year, driven by growth in advertising revenue. Advertising revenue in the media segment amounted to 363 million euros in the first quarter of 2024, up 6.6%, driven by the return of most advertising sectors in Linear and the launch of the new streaming platform TF1+. Advertising revenue generated by TF1 Plus grew by 43.5% to 29 million euros in the first quarter of 2024, reflecting the attractiveness of the platform. UN Studio posted a total revenue of 59 million euros, down 3%, but close to Q1 2023 in absolute terms. On page 12. The group's current operating profits from activities amounted to 37 million euros in the first quarter of 2024, close to Q1 2023, and above the company compiled consensus. The group's current operating margin from activities was 7.3% compared to 8.3% in the first quarter of 2023. The group's programming costs were 217 million euros, up 17 million euros due to premium programs on linear channels and streaming, within a stronger advertising market and in the context of TF1 Plus launch. Current operating profits from activities in the media segment came to 37 million euros. This includes specific costs related to TF1 Plus launch in the first quarter. As mentioned earlier, Neuron Studio current operating profit was back in positive territory and totaled 0.7 million up year on year. On the income statement on page 13, I've already commented on the consolidated revenue and current operating profits from activities. Looking further down, operating profit after other operating income and expense stood at 34 million euros, including 2.5 euros of non-recurring expenses related to the group's digital acceleration plan. Net profit attributable to the group was 29.7 million euros, up 5.7 year-on-year, notably benefiting from a cash income. Now let's look at the change in net cash position. Net cash stood at €564 million at end March 2024, compared with €505 million at the end of December 2023, which represents an increase of €55 million. Free cash flow amounted to 28 million euros before change in working cap and 61 million euros after changes in working capital, reflecting operating cash flow of 92 million euros, up 4 million year-on-year, net capex roughly stable and lower amount of lease obligations, positive operating working capital requirements, notably due to positive cash collection at the ad sales house. Acquisitions at disposal for 4 million, notably linked to a small acquisition in Germany, Doghouse, from UN, announced at the beginning of this year. Overall net cash position of 564 million euros. Let's now have a look at our outlook and targets for the rest of the year. On page 16, some strong franchises are set to return in the second quarter, such as Secret Story, Masked Singer and HPE, which are serialized programs with strong linear and non-linear potential. A key event in 2024 will be the Euro 2024 tournament, which TF1 will broadcast starting in June, providing premium content with great appeal for advertisers. In digital, The group will also add pioneering features to TF1 Plus in the second quarter, such as Synchro, a recommendation engine designed to make it easier to select streaming content for co-viewing. TF1 Plus will also take the advantage of the Euro to launch a new AI-enhanced version of Top Chrono, providing custom post-match highlights. After its very promising start in France, where it has achieved high visitor numbers and usage figures, TF1 Plus will expand into new markets moving into Belgium and Luxembourg from June. TF1 Plus will be rolled out across other territories in the following months and aims to become the leading free streaming platform for French speakers worldwide. In this context, on page 17, we are maintaining the guidance we provided when reporting for our full year results. Keep growing digital, building on the promising launch of TF1+. Maintain a broadly stable margin, current operating margin from activities. Continue to generate solid cash flow, enabling the group to aim for a growing dividend policy over the next few years. So in a nutshell, growth in advertising revenue, successful launch of TF1+, and guidance maintained. I'm now ready to take your questions.

Thank you. If you'd like to ask a question or make a contribution on today's call, please press star 1 on your telephone keypad. To withdraw your question, please press star 2. You'll be advised when to ask your question. We will take our first question from Julian Roche. Bartley, your line is open. Please go ahead.

Oui, bonsoir. First question is, can you give us some color on Q2 advertising trends? That's the first question. Number two, I might have missed it. You gave in the presentation the streaming hours for TF1 Plus at 285 million. Could we get the total hours across all platforms, including linear? And then number three, you generated some more cash flow again. So you are... even more under geared than before. Any things you are intending to do with the cash or not? Thank you.

Thank you. Regarding Q2, as you know, Julien, we are not guiding on revenue. What I can tell you for the year, if you take the various sources that you have, you see that people are expecting advertising revenue for the TV market between 2.5% and 5%. I think IREP gave a forecast at around 3% for the year, so no reason we won't follow this trend. For Q2, I think the overall market is more dynamic than in 2023, as you know. It's more favorable. Regarding the total hours for TF1 group, it's 4.75 billion hours for the group. Regarding the cash flow, the net cash position benefited from a positive working cap inflow, which is not unusual at this stage of the year. If you look at last year, we benefited, as you know, from the cash collection from the football World Cup in Qatar, but the amount was positive as well, but slightly distorted last year. Regarding cash flow, it's a matter that is regularly discussed with the board. We think that having a net cash position is important to us to to navigate through potential volatile cycles on the advertising market. For this year, the board has decided to increase our dividend policy by 10%, as you've seen, and to aim for a growing dividend policy in the coming year.

We will take our next question from Jerome Bowden, AutoBHF. Your line is open. Please go ahead.

Yes. Good evening, everyone. Just two quick follow-up on Julian's question. First of all, on the advertising trend, could you maybe give a bit of color on the trend for TF1 Plus? Is it accelerating, decelerating compared to Q1? That's my first question. Second question on cost. Do you plan, so still always for TF1+, do you mention a marketing campaign and billboard campaign? Do you plan to continue all over the year, or is it just a Q1 effect? And maybe just a third question, a quick follow-up on the working cap. So is it fair to assume a decline for the rest of the year? Thank you.

Thank you, Jérôme. On the advertising trend for TF1+, we're not gaining on it, as you know. You know that we stand with TF1+, on the 2 billion market, which is growing by 10 or 15% per year. We had last year a 5% market share, and our aim is to double this market share in the mid-term. This translates into dynamic growth over the period. Regarding cost, first, everything is planned in our guidance or encompassed in our guidance. We will have another campaign for TF1+. but it's already taken into account in our guidance of a broadly stable margin. And we're not guiding on your third question regarding working capital. This is a focus for the house, having a sustainable free cash flow generation. But as you know, last year was positively impacted by the cash collection on the Qatar World Cup, which improved our free cash flow generation for the year, which is not reproducible this year.

Thank you very much.

We will take our next question from Christophe Cherbank. Bernstein, your line is open. Please go ahead.

Yes, good evening. Thanks for taking me on the line. The first one was on TF1+. The number of streamers is up 23%. The number of hours is up 13%. And the ad revenues are up 44%. So what's the bridge? Meaning, what's the breakdown between the increase in ad load and pricing? And still on TF1+, you mentioned the 13%. total hours, if I'm correct, and then the 79% jump in, let's say, pure TF1 environment. Do you expect to close the gap or the gap to narrow at some stage? And what is the progress on distribution for TF1 plus? That's the first question, or two first questions, sorry. And the third question is on new N. A few months ago, or let's say a few years ago, we were expecting some impact of the SMAD decrease, the expected investment by uh as a platform and so far we have not seen much uh at new and level so at what stage do you expect to ramp up in revenues coming from those degrees thank you thank you sorry just getting back on your first question i have the two others okay okay okay i get it um

So you know that we've accounted for 285 million hours for the first quarter, but this is a mediametry figure. A mediametry, as I said, is also taking into account environments where TF1 Plus is not available right now. So we are not comparing purely TF1 Plus versus MyTF1. If we take, and we've put it in the slide for this reason, if we take pure data that we can measure in-house, there is a strong increase in terms of consumption of our stream within TF1, and this percentage year on year is plus 79 percent. because TF1 Plus is not yet rolled out everywhere. Canal, for example, SFR in the first quarter was not rolled out. This is the case right now as we speak, but not in the figures that you have in the first quarter. So this is dragging down the average. But the consumption that we can measure on TF1 Plus is way higher. On the visibility, We said that at the end of March, in our full year presentation, we would reach 30% of first visibility and target 55% at the end of the year. You're perfectly right. What I can tell you, if we do the math quickly, we've shown on our slide on first visibility that we have a first visibility agreement with all telcos, which is important. And as we speak, at the end of March, we had the first visibility on 13 million boxes in France, which is on a total install base of around 22 million. Not every box is technically addressable for this. You add the number of technically compatible OTT TVs, You see that we have a good proportion of first visibility agreements, and we have signed with all the telcos, and the rolling out is going to take place throughout the year. So we are definitely on track on this one. And regarding UN, you're right. But as you have seen, in 2022, Netflix spent $17 billion worldwide for content. 13 million only in 2023. So, and it's expected to come back to higher levels, but it's not only dependent on the smart decree. It's, you know, the economics of the overall platforms.

Okay, thank you. And just a quick follow-up.

The fundamentals of the market are good. The demand is there.

Okay, and just a quick add-up, a housecleaning question. The financial income was pretty high on the numbers, so it seems 8 million or 6 million net, which compares to cash. So that's something we should expect as a normal run rate for every quarter, or is there any one-off there?

No particular one-off, but the level of cash that we have on the balance sheet is varying a lot throughout the year. So reasoning with an average is better than reasoning with the end of period cash position. So every quarter won't be completely comparable. The average level of cash that we have on the balance sheet will vary from quarter to quarter.

Thank you. Once again, please press star one to ask for a question. We'll take our next question from Connor O'Shea Kepler Churu. Your line is open. Please go ahead.

Yes, thank you. Thank you for taking my questions. Three quick questions as well. Firstly, in the media unit, non-advertising growth was 14% in Q1. You put that down to music and interactive. I'm just wondering what what we should expect in the following quarters. Were there any one-offs driving growth in the first quarter in that line? Secondly, just on the advertising trends, understanding that you're not giving specific guidance, but I wonder if you could just give us a sense of year-to-date which sectors are spending more and whether you're seeing any impact so far from the launch of Amazon Prime I think it was on April 10th. And then the final question, just on Nguyen, just what we could, I think there's a strong pipe in the second half of the year, but is there anything coming up before that for around Q2 that could drive a return to growth? Thank you.

Okay. Thank you, Canal. On the media and advertising revenue, you're perfectly right. Interactive revenue contributed positively and thanks to the lineup that we had during the first quarter. This is one point. Then we have on our music business, we have a show that is starting in France called Molière, which is also a driver to the growth of non-advertising revenue. plus another technical effect in our production, production division, where we had revenue from to BBC, which was, yeah, another part of this growth. Regarding the advertising trends and the sector, I can tell you that most sectors were back in Q1, especially the car, the food industry, but I can also mention travel, pharmacy, cleaning, fashion, leisure, energy, and drinks, so pretty much everybody. On Amazon Prime, Yeah, the launch, we are following that. We don't see any major effect at this stage. You know that their reach is rather limited at this stage. And regarding the new year, the curve of the year is probably following the same shape as last year. But it depends. Some deliveries are slipping from one quarter to another. It's not always easy to predict. But you know that a quarterly basis is not always meaningful for UN activities.

Understood. So on non-advertising media revenue, we should expect growth, maybe not as dramatic, but growth for the following quarters as things stand today?

It's always hard to predict with interactive revenues. On the show that I mentioned, I think it's not necessarily replicable for the quarter, but we'll... Nothing very specific on this line.

Okay, that's it. Thanks, Piyar.

Thanks.

As a final reminder, if you'd like to ask a question, please press star 1 on your telephone keypad now. We'll pause for just a quick moment to allow everyone an opportunity to signal for questions. There are no further questions on the line, so I will now hand you back to your host for closing or additional remarks.

Thank you. Once again, thank you very much for joining us tonight. Maybe just to summarize, pretty solid Q1 results with growth in advertising revenue, successful launch for TF1+, which enabled us to maintain our guidance for the year.

Thank you very much.