Viaplay Group AB (publ)

Good morning and welcome to Viya Play Group's Q4 and full year results. My name is Anna Hedenberg and joining me here today are our Group President and CEO Jörgen Madsen Lindeman and our CFO Johan Johansson. Welcome. Please note that today's call is being recorded. As always, you will be able to ask questions either by using your phone keypad or the message board, but more about that later. You can find all our results material, including the presentation deck on the investor relations section on our website. We won't be following the slides directly, but they contain all the key information for reference. With that, I hand over to Jørgen to walk us through the highlights of the Q4 results.

Thank you, Anna, and good morning, everyone. Our Q4 results are in line with our plan and expectations and we reiterate our ambition for 2025, low to mid single-digit percentage revenue growth and positive free cash flow for our core operations. Focus for 2024 will continue now into 2025 are difficult but necessary steps to adjust our cost structure, optimize our content strategy and strengthen monetization. Execution remains our absolute priority. We know what to do, and while we have made progress, there is still a lot to be done. As mentioned before, this is a long-term turnaround, and critical work remains in order to make us even more competitive and strengthen our business. We will continue driving operational performance improvements to ensure profitable growth and positive free cash flow. This means sharpening our product offering, securing fair and sustainable partnerships, and maintaining strict cost controls. At the same time, we are evaluating value-lead disagreement to protect partners and sponsors invested in Viaplay's future rather than legacy deals that no longer reflect market realities. Our corporations generated 5% organic sales growth driven by growth in all areas except linear TV advertising. Viaplay represents nearly half of our core revenues, so organic sales are 5% year-on-year. Our core D2C ARPU increased year-on-year reflecting ongoing price adjustments, most recently in Norway. We grew our core D2C subscriber base sequentially and year on year, driven by sports packages and the successful introduction of our HWAT tier, now rolled out in all core markets, including the Netherlands, this month. Account sharing restrictions now fully implemented in all core markets and delivering early positive trends. Piracy remains a major industry challenge, and in 2024 we significantly expanded our detection capabilities and enforcement measures. Working closely with partners, we strengthened legal actions against illegal IPTV providers, and in 2025 we will increase investments in anti-piracy technology and enforcement, ensuring that our content retains its full value. Our linear challenge subscription business accounted for 25% of core revenue in Q4. and grew 9% organically, driven by price adjustments and new distribution agreements. Advertising revenues accounted for 22% of core revenues, declining 3% organically. While radio and digital advertising grew, this was not enough to offset the structural decline in linear TV advertising. Our digital ad inventory increased by 36%, driven by the HWAT expansion, and we remain focused on accelerating digital ad sales further to make this a larger share of our advertising mix. Our HVAD launch this month in the Netherlands will further contribute to increase inventory and add value to our business subscribers and partners. Looking at the market trends, then the advertising market in Norway is estimated to have grown. However, as various broadcasters do not report linear sales separately, we estimate that the linear market has declined slightly, while total TV advertising sales, including digital, have increased. Sweden and Denmark saw linear TV advertising decline, with forecasts suggesting radio ad markets will continue to grow in Q1, while TV markets will remain under pressure. Sublicensing and other revenues accounted for 9% of core revenues, growing 13% organically. This growth was driven by sublicensing of sports and non-sports content, as well as scripted content sales. We continue to optimize our portfolio, ensuring that content investments deliver the right returns. We are actively engaging and discussing with both existing and new suppliers and distribution partners to build long-term commercially viable agreements. We will support our strategic direction, focused on capturing market shares and capitalizing on this customer-relevant position. We prioritize agreements that enhance both our partners' and Viaplay's long-term joint value creation and parting ways with those that do not. Cost control remains the top priority, and we are taking a disciplined ROI-driven and commercial consumer interest approach to content spending, ensuring that every investment generates the right audience and return. Core sales flows combined with proper cost flows, and in specific areas, reduction initiatives enable us to reduce EBIT losses year-on-year and sequentially. However, currency challenges due to a weak SEC remain a significant headwind, impacting reported results. Additionally, last year, Q4 included positive contribution from content production business, which we have since closed or sold. And Johan will talk more about that in a minute. Losses from non-corporations were under control and according to plan, and we continue working towards exiting Poland, the final remaining non-core markets efficiently while minimizing negative cash impact. Our objectives for 2025 remain drive profitable growth while minimizing value leaches across all areas, achieve positive cash flow, and continuing the focus of creating long-term value for partners and shareholders. We have made progress, but there is still much to do, and our focus remains on execution, ensuring that our content is relevant, competitively priced, and fairly monetized. That concludes my remarks, so over to you, Johan, for the financial update.

Thank you, Jørgen, and good morning, everyone. As we close 2024, we remain focused on the financial discipline, cost efficiency, and strengthening our cash flow. Our Q4 results are in line with our guidance, and while we're taking important steps to improve cost efficiency and optimize working capital, much work remains. These efforts take time, and execution will continue to be critical as we work towards the targets of low to mid single-digit revenue growth and positive free cash flow for corporations in 2025, leading up to our long-term ambitions of double-digit margins and healthy free cash flow generation. I will come back to 2025, but first some key points on the Q4 results. Once again, Our organic sales growth was higher than reported growth, reflecting the divestment of the remaining studios operations and the ongoing impact of currency fluctuations. FX had a negative effect on core operations, lowering the reported sales while also inflating our costs compared to last year. As a result, core EBIT, excluding ISE and associated company income, was negatively impacted by approximately 300 million for the full year, which is in line with what we highlighted in last result calls. Operating expenses declined year on year in Q4, reflecting lower accelerated democratization from content sales and savings in non-sport content. These cost reductions were partly offset by higher SG&A expenses, as core markets now absorb the full cost for central functions, which were previously partly allocated to non-core operations. The comps in Q4 includes the full impact of headcount savings made last year, as I highlighted previously. For the non-core markets, we've made a loss of 36 million in Q4, and $88 million for the full year, which is in line with our guidance, approximately $0.1 billion loss. The reported negative IAC of $304 million comprises negative $144 million in currency revaluation effects, as we have been unable to hedge our US dollar and euro exposure. Currency fluctuations on acquired content and other U.S.-denominated liabilities have resulted in this on-balance revaluation effect. Given the magnitude, volatility, and nature of these effects, we report them as ISE and will continue to do so until we are able to implement sustainable hedging strategy. Additionally, as in previous quarters, currency revaluation effects related to provisions for content made in 2023 are included in the IEC, as these were initially recognized at different exchange rates and continue to be revalued. The IEC also comprises 20 million in redundancy costs related to restructuring program, 143 million of asset write-downs mainly related to the investment in US-based Pitcher Start, which have not performed according to plan. and a positive contribution of 3 million from the divestment of holding in NSR Scandinavia. Our associated company income for Q4 was 38 million, bringing the full year total to 151 million. This primarily reflects our share of Alente's earnings and was in line with expectations. We did not receive any further dividend payment from Alente in Q4, which means that the total dividend for the year amounted to 100 million. On cash flow, group cash flow for Q4 amounted to 384 million, which comprised core EBITDA of 210 million. Net impact of 636 million for core segment mainly from positive working capital change. Negative free cash flow of 462 million for the non-core operations. Core free cash flow of 845.5 million was supported by seasonal revenue strength improvements and changes in payment terms with partners and reductions in scripted content payments following the change in content strategy last year. For the full year group, free cash flow was negative 2 billion, which is in line with our guidance of negative 1.7 to 2.2 billion. Our financial net debt excluding 284 million in net lease liabilities amounted to 829 million at the end of Q4, with cash and cash equivalents of 1 billion, total borrowings of 2 billion, and 189 million in prepaid borrowing expenses. We had utilized 200 million of the 3.392 revolving credit facility at the end of Q4. Looking ahead into 2025, our focus remains on delivering low to mid thing in the revenue growth and generating free, positive cash flow for core operations. Achieving this will require strict cost control, efficient resource allocation, and optimizing cash flows across our business. With 80% of our core OPEX tied to content, mostly to sports, optimizing this cost remains a priority. Cost efficiency in this area, together with continued improvements in core EBIT, driven by disciplined cost management and revenue growth, is a priority. With the implementation of initiatives during 2024, for example, the sub-licensing new product launches, together with contracted step-ups in sports content cost, we would see tougher comps in the second half of the year and some lighter structured comps in the first half of the year. In addition to cost management, FX movements will remain a factor in 2025, as we continue to have significant exposures to US dollar, euro, and the NOC, and are currently unhedged. As a result, the impact of FX on EBIT in 2025 will be determined by the prevailing exchange rates. Managing foreign exchange rate volatility remains an important consideration and we will continue to evaluate potential solutions to mitigate future impacts where possible. Beyond revenue and cost control, improving working capital efficiency is key to delivering positive free cash flow. With the capital in transcript strategy now materially phased out, we are carefully working to improve payment cycles for sports and content drives. Working capital will stabilize and we have now set the majority of the scripted content commitments from previous years and continue to refine capital efficiency in commercial agreements. At the same time, liquidity management remains a priority, ensuring disciplined use of financing facilities and tight cost control to strengthen our financial position. While some measures will yield immediate results, long-term content investment and partnership will take time to fully reflect in our financials, remain focused on financial execution improving profitability and strengthening our capital position as we work towards our 2025 targets. Thank you.