Viaplay Group AB (publ)

Good morning, everyone, and welcome to Vioplay Group's Q3 results conference call. My name is Anna Hedenberg, and joining me here this morning is our group president and CEO, Jörgen Mansson Lindemann, and our CSO, Johan Johansson. Before we start, please be aware that today's call is being recorded. After the presentation, we will open up for Q&A. If you're listening via the web link, feel free to post your question on the message board at any time, and I'll read them out loud during the Q&A. If you prefer to ask your question live, you can do so by using your phone keypad, but more about that later. You can find all our results materials, including the presentation deck, on the investor relations section of our website. We won't be following the slides directly, but they contain all the key information for reference. With that, I'll hand over to Jørgen to walk us through the highlights of the quarter.

Thank you, Anna, and good morning, everyone. We have continued to execute on our strategy and plan. There is still work ahead of us, but our transformation remains on track, supported by clear priorities, financial discipline, and a sharp focus on long-term value creation. We are becoming a more relevant and commercial entertainment company focused on monetization, performance improvement, and return on investment. The work to team up with Alente has continued to progress well. To date, we have received approval from the relevant authorities in Norway and Denmark. In Sweden, we have received confirmation from the Swedish Inspectorate of Strategic Products under the Foreign Direct Investment Act that the notification is left without action. Competition approval from the Swedish Competition Authority has, as of today, not yet been granted. We expect to finalize the acquisition and close during the fourth quarter. Once completed, this transaction will mark the next step in our transformation and building on our Nordic core. Together with Alente, we will build on our shared strength to create a consumer and customer-focused Nordic entertainment business, commercially driven, long-term in its outlook, and fit for purpose. We see clear strategic complementary between BioPlan Alente, combining our content and streaming expertise with one of the region's most established TV and broadband platforms. The combination supports our ability to develop new products that serve our customers and creates a foundation for future possibilities and value creation. Our world-class sports portfolio once again delivered millions of viewing hours across our markets. The new Premier League season began with strong engagement and Viaplay Premier Sunday returned bigger than ever, doubling its live shows and reaching audiences across all five markets. Formula One and Premier League remain the most watched sport on our platform. In Norway, our new partnership with TV2 makes more than 3,000 football matches per year available to a broader audience, a great example on how collaboration can create greater value for customers and partners. Looking ahead, audiences have to look forward to in Q4, the UEFA Champions League alongside continued Premier League and Formula One coverage and the return of the, if skiing, the World Cup winter, this winter. Local storytelling also continued to engage audiences across our market. The new season of Paradise Hotel Sverige was one of the most watched titles in the quarter, while Robinson Expedition and Svenska Fall delivered strong performances. Together, these formats show the strengths of our strategy, combining long-term audience favorites with new ideas that build loyalty and drive return on investment. Our corporations delivered in line with our strategic priorities. Organic sales were down 3%. However, when excluding sub-licensing and other, which last year included exceptionally high levels of scripted sales, organic sales were up 0.5% year-on-year, with strong performance on D2C and digital advertising in particular. Wireless streaming service grew organically by 1% year-on-year, as growth in direct-to-consumer subscriptions and higher ARPU offset the decline within business-to-business. This reflects our continued focus on value over volume. Linear subscription sales declined by 1% organically, as expected, while advertising revenues grew by 2%, supported by digital, HVAD, and radio, reflecting our strategy to offset the structural decline in linear through digital growth. Sublicensing and other sales decreased by 37% year-on-year, reflecting a normalization after last year's exceptional scripted content sales with a proportional cost impact as related production costs are recognized in the same period as the associated sales. This was partly offset by increased sport sublicensing. The underlying cooperating income before ACIs and IACs slightly improved year-on-year, supported by higher advertising and wire place sales, sport sub-licensing revenues and continued cost discipline. The reported result was slightly lower than last year, reflecting higher sports content costs, which we have to a large extent mitigated with sub-licensing and other cost savings and minor negative currency effects. Overall costs were lower compared to the same period last year, driven by efficiency gains and reduced cryptic content costs, partly offset by the increase in sport content costs. Our focus remains on efficiency, profitability, operational delivery, and cash flow generation. Looking further ahead, our long-term financing guidance reflects a balanced outlook for the combined group. We expect revenues to remain broadly stable on average, as growth within Viaply is offset by gradual decline in Atlanta's DTH business. The focus will therefore be on margin expansion, driven by continuous strong focus on ROI in regards to our content investments. efficiency improvement, disciplined capital allocation, and cost management. This is what will enable us to reach double-digit EVA margins by 2028. We also welcome the recent proposal in Sweden to strengthen the legal framework against illegal IPTV. These efforts are an important step forward that competition and protecting the value of legitimate content distribution. Our priorities remain clear. relevant commercial storytelling, operational delivery, continued monetization of our strong content portfolio, and we are disciplined in our capital allocation, focused on return of investment and commitment to reducing leverage over time. So we're executing our plan with focus as we continue to build a stronger, more relevant Viaplay group that creates long-term value for our shareholders, partners, and audiences across the Nordics. And now I'll hand over to you, Johan.

Thank you, Jörgen, and good morning, everyone. Turning now to profitability and cash flow. Core operating income before associated company income and IFC amounts to negative 56 million compared to last year of negative 49 million. And it's broadly in line with last year, despite higher sport content costs and tougher year-on-year comps. Adjusting for currency effect. Core EBIT before associated company income and ISE improved slightly compared to Q3 last year. Reported core operating expenses were down 4% during the year or 2% when adjusting for kerosene. The reduction mainly reflected lower content distribution cost following fewer scripted sales when comparing to the exceptionally high levels throughout last year. as well as savings in non-sport content costs and SG&A, which partly upset by higher sport content costs. The sport content costs increased year-on-year due to contractual step-ups in rights fees for the new systems, while non-sport content and SG&A costs declined as we continued to optimize spend and maintain tight cost control across the group. Currency remains a factor in this quarter, although to a lesser extent in earlier in the year. The stronger Swedish krona had a negative impact of around 81 million on sales, as revenues in Norwegian krona, EU and UK were translated at less favorable rates. Reported costs, however, benefited from a net positive FX impact. The total FX impact on core EBIT was slightly negative. We still expect the full year FX headwind on EBIT of around 100 to 150 million, excluding unrealized revaluation effects booked as IEC. Group three cash flow for the quarter, including financing cost and the 200 million dividend from Malente, was negative 1.193 billion, reflecting seasonal working capital movements of approximately 1 billion. Core free cash flow was negative 1.154 billion, while the non-core segment contributed a cash outflow of 39 million in line with expectations. The working capital outflow mainly reflected sports payments, which are seasonally higher in Q3, partly offset by positive movements in content-related working capital and other items. As just mentioned, dividends received from Alente amounted to $200 million, while interest, tax, and capex together resulted in a cash outflow of approximately $180 million. The finance net was negative $142 million for the quarter. At the end of the quarter, financial net debt amounted to $2.0 billion. We had 1.5 billion in cash and cash equivalents and 3.7 billion in borrowing. At the end of the quarter, we had a drawdown of 1.8 billion of the RCEP due to the seasonal peak in sports payments in Q3. Our financial guidance for 2025 remains unchanged following the update we did in July, which incorporates our land acquisition on a pro forma basis. As Jørgen said, the regulatory processes are progressing and we expect to close the transaction during the fourth quarter. The pro forma guidance reflects the combined group as if a land had been fully consolidated from the start of the year. For core net sales, the guidance of 21 to 22 billion includes Alemtec's external revenues adjusted for related pop-party sales between the two companies. For core EBITDA, the guidance range of 0.8 to 1.1 billion represents the combined EBITDA of Viaplace Corporations and Alemtec as if Alente had been fully consolidated for the year. Finally, the adjusted operating fee cash flow guidance of 0.5 to 0.75 billion reflects the expected underlying cash generation of the combined group. It includes Alente's cash flow contribution and excludes interest, acquisition-related cost, and one-off working capital effects related to the new financing structure. The new financing structure that follows the transaction will not substantially increase the interest cost and remains fully aligned with our deleveraging ambitions. On a performer basis, leverage is around 5.5 times based on the top end of our EBTA guidance range and including the working capital term loan facility. As cash flow strengthens and EBTA grows, we expect leverage to decline gradually over the medium term. Execution remains our key focus. We continue to deliver on our cost reduction initiatives, improve working capital efficiency, and manage the business with discipline. We have done a lot to strengthen the foundation, but there is still work ahead of us. As part of our transformation, we remain focused on improving profitability, increasing cash flow, and reducing leverage over time. That concludes my remarks.