Storytel AB (publ)

Hi and good morning everyone and welcome to Storytel Group's earnings call for the third quarter of 2024. I am Bode Lerksson-Torp and I've been here as the CEO of Storytel Group since October 1st. Joining me today is Tite Messner, our CFO. I'm really glad to be here today. I've been working at Storytel now for four weeks and it has been really exciting. I've spent my time on meeting our brilliant team and getting to know our business. And I would say that I'm really eager to get an even deeper understanding, especially when it comes to our customers and users in the different markets as well as our products. I've spent over 25 years in the media industry working with media groups like Bonnier and Aller. And mainly during all those years I've been focused on driving growth for strong consumer brands with an emphasis on subscription-based models, combining content with excellent tech. And this is actually where I have my big passion. So someone called me a subscriber hunter and that's actually spot on. So one of my big goals here is to capture everyone entering our amazing Storytel world and never ever let them go. Sales and marketing are also in my DNA. So I'm really excited to continue our success to deliver even greater value to our customers and all our stakeholders. Thanks to the hard work done by our team here the group has delivered the best quarterly financial performance ever with record high revenues of 954 million SEC with an adjusted EBITDA margin of 18.7 percent. We are so proud to present these results. And with that I will hand over to Peter to talk about the details of our quarter performance. So let's move on Peter.

Thank you very much Pudil and welcome to the third quarter earnings call also from my end. Let's start with some operational highlights. Foremost the the profitability improvements we continuously see and report are the result of the disciplined strategy execution balancing growth and profitability. During this third quarter our paying subscriber base grew by 10 percent to above 2.3 million paying subscribers and 40 percent of that growth was driven by our core Nordic markets. The size and therefore the growth of our subscriber base is however not the only focus. It's also the health of the subscriber base and that is evidenced by the paid churn development which continues to be on an all-time low. From a content cost perspective the increased consumption of our own high quality content from internal publishers again contributed to the improvements on gross margin level. Following the introduction of new pricing plans and differentiated promotions in the Nordics in the second quarter I'd like to particularly highlight our Finnish market where we saw an outstanding success with our premium for life campaign which also heavily contributed to the low churn. In total we saw our subscriber base in Finland growing by 30 percent here and here during this quarter. Our publishing houses continued to release bestseller lists and consumption topping titles during the quarter including another story tale original from the Red Revenge series of Danish author Nys Jacob and Emily Schaap's thriller 100 Days in July published by NUSTADS in Sweden to name just two of the highlights during this quarter. In September Swedish crime author Sami Jeri designed a multi-book deal with NUSTADS and Storytel showcasing again the dynamic synergies between our streaming platform and the publishing houses within the group. Let's turn to the financial highlights then. As Budil mentioned earlier Storytel Group again delivered the strongest ever financial results during this quarter. Group net sales increased by 7 percent or 8 percent at constant exchange rates to 954 million SEK. The adjusted gross profit margin improved by 4.6 percentage points -on-year to 45.7 percent. Our EBITDA performance was particularly strong with adjusted EBITDA reaching 178 million SEK which is up 76 percent -on-year. The record high margin of 18.7 percent during the third quarter also reflects positive seasonality effects in the personnel cost base due to reversals of vacation accruals as it is the main vacation period during the year. Else however the significant -over-year improvement is driven by the increase in revenues and gross profit and also by the cost efficiency measures that the group has been taken since last year. All these operational and financial improvements are reflected in our operational cash flow which was 146 million SEK and in our adjusted operating profit which improved to 105 million SEK which is a margin of 11 percent. Let us turn to our segment performance then. Looking first at the operational performance in streaming which is our largest segment we are again pleased with the very strong results. The total subscriber base grew by 10 percent -on-year or 222,000 subscribers. Up to an average number of subscribers of 2.36 million during the third quarter. More than 40 percent of that subscriber growth came from the Nordic markets which contributed with an 8 percent growth. While the non-Nordic core region grew 16 percent -on-year and contributed 129,000 new subscribers -on-year. The ARPU, the average revenue per user remained at a high level and organically decreased by 2 percent -on-year or 4.4 percent when including the adverse currency exchange effects as a result of the expected stronger subscriber intake in our lower priced tiers. As mentioned earlier we focus not only on the size but also on the health and therefore the profitability of the subscriber base which means all-time balancing of subscriber growth and ARPU. We manage this through the ratio of customer lifetime value to our subscriber acquisition costs and our success is evidenced by the development of paid churn which continuously is at an all-time low. When taking a closer look at the streaming segments financials then we see that total net sales were up to 852 million SEK which is a 5 percent increase -on-year or 8 percent at constant exchange rates. Revenue in the Nordic's region increased by 3 percent based on a subscriber increase of 8 percent and an ARPU decrease of 5 percent which is also impacted by adverse currency effects. Revenue in the non-Nordic's core region increased by 16 percent based on a subscriber increase of 16 percent and a slight ARPU decrease a little bit below 1 percent. Adjusted gross profit for the streaming segments increased by 11 percent to 354 million SEK with a margin of 41.6 percent which is two percentage points higher than in the third quarter last year. The total operational expenses significantly decreased such as the general and administrative expenses which decreased by 59 percent again including a positive seasonality effect on personnel expenses due to the reversal of vacation accruals during the summer. As a result the adjusted EBITDA contribution from the streaming segment increased by 56 percent to 121 million SEK and reflects a margin of 14.2 percent and the adjusted operating profit contribution from the streaming segment increased by 142 percent to 90 million SEK. Let's then turn to the publishing segment. The publishing segment reflects the financials of all the publishing houses within the Storytel Group. This is NUSDET's publishing group, Linden Company, Gummeros and Peoples as well as our global digital audio publisher StorySight. The total net sales in the publishing segment increased by 13 percent to 285 million SEK out of which the external sales which account for 54 percent of total sales increased by 11 percent to 154 million SEK and the group internal sales increased by 15 percent to 131 million SEK. As you can see in the bottom left chart on this slide the internal sales show a more stable and increasing development while the increase in the external sales over time is subject to certain seasonality patterns also defined by the print sales. Adjusted gross profit increased by 52 percent to 98 million SEK with a margin of 34.5 percent which is 8.8 percentage points higher than in the third quarter last year. Adjusted EBITDA contribution from the publishing segment was up 48 percent to 87 million SEK and reflects a margin of 30.5 percent and the adjusted operating profit contribution from the publishing segment was 47 million SEK and increased by 141 percent year on year. Both the gross profit and the EBITDA margins follow certain seasonality patterns due to different gross profit margins in print sales versus digital sales and also effects from inventory write downs. Overall the increase in margins is not only the result of higher revenues but in particular also due to the many operational improvements that have been implemented since last year. Let's take a look then at the group's cash flow statement which shows really the results of the discipline strategy execution and the past cost efficiency measures now. The cash flow from operating activities before changes in working capital increased by 88 percent to 148 million SEK where the change in working capital was 45 million SEK and explained by the seasonality on accrued expenses including royalty payments. The cash flow from investing activities reflects our investments into content, product and technology and was minus 44 million SEK and the cash flow from financing activities was minus 9 million SEK. All in all total group cash flow for the period was a positive 140 million SEK. With that record high cash flow generation let's have a brief look at the group's balance sheet. There are overall no major movements on very much all of the asset lines in the balance sheet with total assets at roughly 3 billion SEK and reflecting an equity to asset ratio of 43.9 percent. Cash and cash equivalents at the end of the period was at 448 million SEK. The only remaining financial debt is a revolving credit facility. Only after the end of the period we have extended the maturity of this revolving credit facility until April 2026 for which the related liabilities were still classified as current in the balance sheet as at the end of September. The new revolving credit facility is 700 million SEK of which 650 million SEK are currently utilized. How does this debt then translate into the group's leverage? Well firstly our operational cash flow defined as EBITDA excluding any items affecting comparability less any operational capital expenditures was on a record high level with 146 million SEK or 15.3 percent of revenues. The net interest bearing debt was 202 million SEK at the end of the period and represents a leverage ratio to the last 12 months of adjusted EBITDA of 0.4. As you can see the story tell group has significantly de-leveraged during the past 12 months down from a leverage ratio of 1.3 at the end of September last year. Finally so where do we stand regarding our financial guidance for this year based on this strong performance? As a recap our previous strategic shift towards an increased focus on efficiencies and profitable growth which was initiated in 2022 and reinforced this year has led to significantly higher profitability while still maintaining solid growth. With the continued strong competition particularly in our core Nordic markets we have applied a fairly disciplined approach to marketing spend and therefore we have chosen to revise our 2024 full year revenue growth guidance to around 8 percent. At the same time we now expect to be close or reach the previously outlined 2026 midterm targets of both adjusted EBITDA margin above 15 percent and operational cash flow above 10 percent of revenues already this year which is more than two years ahead of plan.

Thanks Peter this performance is a clear statement of the group's strong financial position and I would say it also opens open ups for many strategic opportunities. I will work closely with our team to review our business plans and evaluate the different possibilities that we foresee and with that we conclude this presentation and open up for your questions.

If you wish to ask a question please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question please dial pound key six on your telephone keypad. The next question comes from Derek Laliberté from ABG Sundal Kalia. Please go ahead.

Okay good morning and thank you and also great to have you on the call Bodil. I wondered if you could start out by maybe sharing some of your I know it's early but some of your key observations perhaps after being on the inside so to speak for about the month now. Thank you.

Yes thank you. As I said I'm really happy to be here and I've been here for four weeks now. So of course I'm deeply impressed about the work that has been done by the team here. All the strategy executions by combining a discipline strategy for marketing investments and also the cost efficiency but also securing the market positions within the different markets that we are in a leading position as well as we are a challenger. That's really impressive work that has been done and so far I would say even though it's really early time I'm really impressed by the highly skilled team that we have here within the company regardless of the different disciplines that goes into tech, product, marketing, publishing and also finance to mention some of the skills. So the company is in a really good position now and of course my responsibility is to take it to the next level but even though it's quite early stage.

Got it, sounds great and if we could move to the Nordic streaming here. It's very solid the intake in subscribers here during the summer. You mentioned this really strong 30% growth in Finland. I wonder if you could break it down a little bit and explain what you how the sort of individual Nordic markets performed here.

Yeah thank you Derek and welcome to our call and good morning. I mean as you know we're not breaking out the single countries but it was worth to really highlight and mention the success in Finland because you need to put that a little bit into the perspective of our expectations for this year and the overall intake and the balancing really between the profitability of the customer base, the health and at the same time the growth outlook in the Nordics as well. What we have been doing in starting in Q2 really as I mentioned on the operational highlights with the new pricing plans and in particularly the for life campaigns. They are really a very important item in building up a subscriber base that has continuously a very low churn. You can understand that a for life proposition for a consumer is very powerful right. It comes at a certain short-term cost for us as an operator because we obviously give a for life at 50% discount but it comes with a commitment of consumer to really stay hopefully for the long term and we have seen it's still early on but we have seen these positive developments in the continuously low churn. In fact it's the lowest churn that we continuously have in our business. So the combination of exactly these pricing innovations with a very strong consumer proposition and the very low churn is exactly that balancing act between how much do you want to push subscriber growth in the short term at higher ARPU or how sustainable and long-term thinking with maybe a short-term impact on that growth you have. But Finland has shown and we are the number two in Finland as you know. Finland has shown that we gained market share with a 30% increase on subscriber growth. That was a clear sentiment that these pricing innovations and the campaigns that we have been running, a student for life campaign and also a time-limited premium for life campaign have really been successful. So we look very forward to and that overall supported not only but to a large extent the very strong intake of subscribers in Nordics during this quarter.

Okay thanks for the favor and on that note with the different pricing and subscription packages here how does this flex time-limited subscription perform? Are you seeing for example younger audiences coming in here because of the the lower price point and

the raw characteristics of that subscription? I mean that has been one of the reasons obviously to introduce the pricing and the way how we package that product. If you think back a few years and where we really come from in a time up until 2022 where we essentially had in the Nordics and overall an unlimited plan only we went or the group went really into very differentiated pricing tiers. And one reason for that is not only the competitive part but it's of course also the segmentation of our consumers and really to respond to the various different concerns.

Yes hello can you can you hear me

now? Hi Derrik yes something technically must have happened here with the provider so I'm not sure how long you could really follow but just let me know what kind of answer part you still got and otherwise I will simply repeat.

Oh yeah I think we're good on the subscription packages thanks for that. I was wondering if we could jump into I know you're not commenting too deeply on the individual market so to speak but looking at the non-Nordics core streaming segment here I mean I would have expected somewhat higher subscriber intake than what we've had here in Q2 and Q3 so I'm wondering sort of it's still good growth but what's really going on there and is something holding this back or is it the price increases you've rolled out for example?

Yeah exactly so let me start with the final item that you mentioned if you take a look at the ARPU development in the non-Nordics core you see a sequential improvement on the ARPU which is the result of the price increases in particularly in the Netherlands and in Poland. So that had an impact and when you do price increases without adding other services or features then of course this is always a balancing game we are testing a little bit the grounds how much of a price increase can you do without impacting the short term profile and therefore the intake right. So there is an effect obviously on the subscriber base. What we however also did during the third quarter and we just launched this something like two weeks ago in the Netherlands is we introduced new pricing tiers. The Netherlands and some of our outside of the core Nordic markets are not yet changed to our pricing tiers that we have here in the Nordics which is a basic or a flex a premium and unlimited and family plans. So we have introduced this in the Netherlands as well and planned for that introduction and therefore it made sense to balance the various efforts and the promotions and the campaigns accordingly. So the intake was stronger towards the end of the quarter but the quarter averages if you compare them to the second quarter averages are impacted so to say by that but it's a combination of the price increases that nevertheless increase the ARPU. The ARPU overall in non-Nordics core declined by a little bit but that is also impacted by the currency exchange effects. Overall the -over-year increase in ARPU was a positive almost two and a half percent. So there's a very positive ARPU development. Subscriber intake exactly as I say a little bit slower but intentionally because we have been balancing exactly these two items but I would expect that to change now given what I just said what we introduced in the Netherlands and what we continuously focus on in some of the other markets.

Thank you that's great clarity and on the can you say something in general on the pricing here it seems overall I mean we have temporarily higher churn or slower intake but the price increases have been received pretty well I would say over the last couple of years here. So what's the plan here will you raise prices further?

I need to be very careful with an answer which you hopefully understand based on the sensitivity also towards our competitors but as you said the price increases that that we did in the Nordics in the beginning of 2023 have been very well received. What happens as you can understand is that the composition of the consumer base in the various pricing tiers changes over time when you have new intakes that may preferably join lower priced tiers and than you had before which is of course also reflected in the ARPU development in the Nordics over time. With price increases being now passed if we enter the next year two years ago there may be an opportunity but I think it would be too early for us to really commit to anything but pricing and overall packaging is always something strategically that you need to take a look at into your marketing mix right so it is something that every provider in that space has to take a look at.

Okay perfect and finally from you now with the strong cash flows here and the balance as well as you mentioned when it comes to M&A is this something you're actively pursuing now and if so what type of targets are you primarily considering?

I mean exactly as you said if we wouldn't do now any investments with the likely net cash position that we would achieve at one point in 2025 as Budil mentioned earlier this opens up for for many different strategic opportunities and M&A is one of those opportunities in the toolbox that we would look at. We always have open ears and open eyes to see are there interesting targets is there something that really fits in there at the same time this is the time of the year not only for budgeting but also for strategy revision. Since May we have new board members a new chair Budil just entered four weeks ago so we take a look a very close look at our strategic plans and our business plans and we will update the market if there is anything to update about but the general answer is of course we will always take a look at especially because we are now in such a strong financial position to be able to really take a look at

that. Okay great thank you.

The next question comes from Fiona Orford Williams from Edison Group. Please go ahead.

Good morning thank you I'm quite new to this story so if the other analysts will forgive me if I go something a little bit more basic. You're talking about a range of tiers. Can you just tell me a little bit more about how they vary is it by content is it by access and then the objective of having those tiers. Are you trying to tempt people in at the lowest prices and then manage them up through the tiers to become more profitable for you? Thank you.

Yeah thanks Fiona. I tried to condense the answer not to go into too many details about that exactly as you said but a little bit of history so as I mentioned before when Derek was on the call and the story tell had in the core Nordic regions and generally speaking with the exclusion of our business with audiobooks.com in North America really which is a credit model similar to Audible. A subscription business with an unlimited tier and unlimited means you pay a fixed amount per month as a consumer and you can use as many hours as you want listening to the content that you prefer and content being books but even reading books we have ebooks of course on our platform as well. So when we started to differentiate the different pricing tiers now differ in the price that you pay per month and what you get for the different pricing ranges is different hours for your subscription. So the basic plan in the Nordics is general a 20 hour plan with the flex element where the unused hours can be taken over and rolled over into the next month up to 100 hours so you can save these hours if you want to listen to them later on. The middle package so to say is premium package where you get 100 hours and the unlimited is still the unlimited hour pricing plan. Then there are family packages that particularly target and the basic proposition here is obviously well why do you want to pay for unlimited at a higher pricing tag if you are not interested to listen let's say more than two books per month and the 20 hours is roughly on average a two book proposition. So it addresses the needs of very different customer segments and they are very interesting reading books. The upselling or the cross-selling that you refer to that is not in our industry as sophisticated as you may think that it is coming from different other industries. It is more really a customer segmentation opportunity for selecting the right one but of course there are these opportunities there as well depending on certain campaigns that we would run during the year. Okay that's

very

helpful thank you

and you were talking about this premium for life model that you have in Finland. Is that suitable for other markets and are you intending to roll it out?

Yeah so the premium for life was a time limited campaign. What we rolled out in general in the Nordics during the second quarter and continued into the third quarter was foremost a student for life campaign and the idea behind that was students reflecting younger audiences in general are a little bit more price sensitive, might be a little bit more casual in their usage of audiobooks with all the other content and all the other entertainment that they are consuming. So we wanted to really create an offer that is very compelling for students and students for life means a 50% discount on the premium offer for life if you show that you are a student and have to get your degree. So that was the offer. So it was a time limited campaign and in the same way a 50% discount on the premium tier if you continuously stay with the service in an uninterrupted way. So that was the offering. It can be very useful for students who are interested in the premium for life model. It's very suitable in other markets. It depends a little bit on the competitive situation and where we stand. So we obviously take a very close look at what is happening competitively, what is the overall growth and the penetration in the respective market and does it make sense from a timing perspective to really offer that. But it is based on the success that we had and again we had a 30% subscriber growth year on year in Finland. We're very pleased with these results so we might consider that in other markets as well.

Okay thank you very much.

The next question comes from Joakim Gunnell from DNB Markets. Please go ahead.

Thank you and welcome Bodil. Now you're stuck with us analysts.

Thank you. I'm happy to get.

Yeah if we take a step back, I mean you highlighted this also that the case in Storytel up until 2022 was about offensive growth. 2022 has been about the turnaround and in the past two years we've seen a refocus and step change in profitability and cash flow. So any call it high level thoughts from you with how you envision the story to unfold for Storytel over the coming three years. Is it more of the same or are there certain other aspects that attracted you to this role?

Maybe I will disappoint you a little bit now but I think it's way too early to actually point out the direction in this call for the upcoming three years. But I'm confident in the strategy that is running for the moment and all the teams that are working within the company with really high skills and putting out different questions, opportunities and the plan forward. So as we said before both Peter and I that we are in the moment where we revise our business plans looking into the strategies and also thinking about how we can accelerate our business in the long term of course to a business that we really can see that we are growing but also remain the profitability level and I think the company is really doing well and the teams are the efforts are good in different perspectives. But as always in all companies there are room for improvements of course. I mean I have my background also in when it comes to marketing and sales so of course it's interesting to look into how we can accelerate our sales within the different countries. But regarding the upcoming three years I will wait a little bit more before I state the plan for that. But I will come back soon to you and answer a little bit more specific in those questions.

Thank you and Peter so from the capital markets day material in 2023 you provided a bridge on how you would deliver 12% EBTA margins by 2026. From the optics of it it would look like roughly three percentage points then would stem from gross margin improvements basically and now not even one and a half years after this you have already improved the gross margin by some four percentage points and are by 2024 at your I mean at a higher target here. So on the EBTA level so just help us a bit with how we should think here. How much more is there room to improve the gross margin from these levels and the current progress is that the best indicator for your long-term profitability potential?

Yeah thanks Joakim for that. I mean there is I think we indicated this previously as well. We are working a lot on various elements and it has been a balancing act. You can be a growth company and then you disregard a little bit the profitability. You can do the other way around and not focus a lot on the growth and push a lot your profitability and the middle path is the more difficult one that we chose to do because we like to be very ambitious. So it is a profitable growth strategy here and the profitability comes really through all the various measures. We have focused a lot on our own content and that is really the synergistic reason why we have both the streaming and a publishing segment and in the publishing segment the various publishing houses in our business because we are creating content and then we are distributing content. So the focus on content creation, the focus on high quality content that really attracts and engages our audience, that is one of the key drivers here which we might have underestimated to be honest how great that content actually is that can drive our internal consumption and by that improve our margin. How much more is possible there? I would leave that question a little bit open because it is also a it must be an intentional decision of how much do you actually want to do there because there is always a trade-off between how far you want to go and what that means as an effect on royalty payments in the end potentially as well. On marketing efficiency we put a lot of focus on that with the team in the last two years and we have gained a lot of grounds and overall on the cost base as well. So you can always expect that every other company what Boodil just mentioned there's always room for improvement because there will be new technologies, there will be process improvements based on how we can further optimize certain steps, we can simplify certain procedures so there is always a possibility to improve the profitability margin and then there will be a trade-off as a balancing act and as part of the strategy that we are revising of how much more do we want to invest in growth and do we want that to cost us a little bit on the profitability or not and that we will update the market on but I think it's fair to say from where we are right now you shouldn't expect major deviations. We have already achieved two out of three midterm targets, we are still on a path to deliver all the midterm targets if we want that and that we will update the market when the time is right.

Okay and finally so we're two years now in from the consolidation of audiobooks.com almost. I mean it appears to be performing actually quite well on a standalone basis but just comment a bit on I mean if there are any synergies at OAL when it comes to the offering, the technical platform, the payment solution etc or is it perhaps time to review the industrial logic of running this business as a part of Storytel? Have you come any closer to some sort of integration is the real question here?

Yeah also here I think it's the same answer. We will take a look at all kinds of things as part of our strategy process including what kind of positioning do we see and do we want to continue on with audiobooks.com. It's now three years into consolidation so the business was acquired at the end of 2021, the closing was early 2022 so it's the third full year and I think it's fair to say that in the beginning of that period the company followed the company exactly that very high profitability contributing business in the shape that it is. We have seen a great development during this year. We have upgraded our own budget in the US with audiobooks.com twice during the year. We had the highest as we mentioned I think in the in the second quarter call we had the highest subscriber numbers during the second quarter with an intake. The contribution audiobooks.com has to the group is above average from a cash flow or from an EBITDA perspective so it is a very valuable asset that we have here and we will take a closer look as we will take a closer look at everything in our group as part of our general business plan revision and strategy process.

Great can I just question a quick follow-up here. So you commented a bit on the several strategic opportunities as you say entering that cash territory into next year so I know it's a board question but from a CFO standpoint Peter can you comment a bit on what's your preferences when it comes to the best possible uses of capital here if it is to pay down debt and the RCF or in-state dividend buybacks or actually pursue M&A.

It's not about what I as a person or in my role really prefer here Joakim. It's really taking a closer look at exactly what you mentioned. I mean you can continue deleveraging but we are already at a leverage of 0.4 which is fairly low and reflects the health from a balance sheet perspective so that opens up the opportunity to do more. M&A could be one thing and M&A could be very different things as well. You can think of IP, you can think of content acquisitions, you can think of consolidation in the market, you can think of all kinds of things right so that the toolbox that we can apply and potential targets could be quite manyfold and it is that process that we have with our board of directors to decide the balancing in particular from a long term and therefore from a sustainable strategic development perspective what is the best thing to do but it's independent of what I personally would want or would not want to do.

It's always worth the shot thank you.

That's appreciated thank you Joakim.

As a reminder if you wish to ask a question please dial pound key five on your telephone keypad. The next question comes from Stefan Watt from Pareto Securities. Please go ahead.

Hello, I'm happy to read the report today. Really strong performance so congratulations and well done on that. I'd like to ask you a few follow-up questions on the OPEC side. There's a very substantial decrease in the G&A costs especially on an annual basis not so much on a sequential basis but can you describe if there's more room to do on the G&A? It seems like that's where most of the OPEC leverage or operating leverage has come from and also if you could describe a little bit about how the efficiency improvement in sales and marketing has materialized. What you've done that and what to expect for sales and marketing going forward would be helpful. Thank you.

Hi Stefan. Well as I mentioned on the G&A costs in particular so if you think back of how we updated the market with various cost efficiency measures we've started to make organizational changes in particularly in our content and publishing side here in Sweden towards the end of last year. Q3 executing starting implemented Q4 last year and then major operational restructurings at the beginning of this year with an overall 13% headcount reduction. A lot of that is now fully built into the cost base that was implemented during the first quarter then you still had certain effects during the second quarter and you have the run rate effects now fully implemented in the third quarter. So that explains a fair deal. What you also have in the third quarter and I mentioned it on the slideset in the presentation earlier that the way how we are handling our personal expenses from a vacation accrual perspective is that we are accruing the vacation pay and then when vacation is taken and from a Swedish and Scandinavian perspective the huge vacation time is during the summer then you have a reverse of these accruals which have a positive impact on your margin or on the cost base first and then on the margin. So that is not necessarily now reflecting in the quarter from a run rate perspective because you should reflect that correction going up a little bit from a cost perspective into the fourth quarter but overall year on year nevertheless you have a significant reduction in our operating cost. On the marketing and on the marketing efficiency side exactly as you said and as we updated I believe the market since I came in from the second quarter earnings call last year there have been a lot of low hanging fruits that have been taken. There have been a lot of continuous improvements in the overall marketing way and the marketing efficiency you need to think of subscriber acquisition costs and the way how we define at what point in time in what market and what channel are we acquiring customers. How much does that cost and how much in particular does it relate to the customer lifetime value we can expect from such subscribers and that is a balancing act that I referred to earlier as well especially when we do certain campaigns like the for life campaigns then it has a certain short-term impact but it has a very positive long-term impact as well in terms of the lower turn and the health of the subscriber base. So there is always room for improvement and continuous fine tuning in all these measures also taking a look at how the world is continuously developing and what I mean by that is how different media channels are involving what the competitive environment is how we focus or refocus maybe on certain consumer segments within our overall segmentation strategy. So there's always something that we will be able to do but I would not expect necessarily from CFO perspective the huge jumps that we've seen in the last two years because these were really the more disruptive changes as part of the transformation and now it's really going to be more fine tuning.

Perfect thank you very much Peter for that clarification. I would also like sort of an update educational wise on how the publishing segment is functioning now with StorySide having been moved to this segment for a few quarters because it changed the gross margin profile quite a lot and overall profitability I'm surprised at least me on the positive side. So can you just sort of describe how this business looks like now any level of detail is appreciated please?

Yeah it's always great that we can surprise you Stefan. I know that's not so easy actually so that's I take that really as a compliment. So when we introduced the new segment financials and the segmentation in the way how we show the operating segments in the second quarter what we said back then was that we followed the way how we already have been operating. So there was a little bit of a lag how we updated our segment financials and the overall operating segments in the external report as compared to how under the previous CEO we already started to work with the segments anyway. And as I briefly mentioned as a reminder in the presentation the publishing segment reflects all the financials and therefore the operations of all the various publishing houses. So it is our more traditional print publishing houses like NUSDET's publishing group it is Linden Company it is Gummeros and it is Peoples and then it is also Storyfide which is a purely digital audio publisher. And the way how we run them is of course in both a a collaborative way but also in an independent way because they still have their very own value propositions either out there to the market based on their imprints the way how they work with the authors but also how they focus on and that could be different genres and different formats. So there's a very distinct leadership per publisher but nevertheless a collaboration in terms of what do we want to achieve from a group level. And then on top of that publishing segment and that setup you obviously have that collaboration with the streaming segment because roughly half of the retail group so that is exactly that synergetic value. If you take a look at the gross margin profile in streaming and the gross margin profile in publishing and then at the gross margin profile of the entire group that gross profit margin in the group is higher than the single one. So one plus one is three in that respect because of the synergetic nature that we have of our interim publishers and the way how we can use that high quality content in distribution.

That's a great description. Thank you very much for that. I have a question also regarding the Netherlands. Spotify has launched there. Have you signed a content deal with them or can you give any insights to how they have secured content for that market or and what has been the sort of initial impression from that? I know it's early days but if you have anything to say would be up.

Yeah it is indeed early days so I cannot comment too much on that. We actually started I mentioned it I think on the question from Derek in relation to our subscriber development in the Nordic core markets where the Netherlands is one of the key markets right. Roughly a week, a week and a half before Spotify launched we actually launched our own new pricing here so we previously only had an unlimited product offering in the Netherlands and we differentiated that in alignment or in similar to what we have here in the Nordics which is a basic flex introduction a little bit different from the number of hours that you can consume a premium and unlimited and also the family packages. So as we started very close to when Spotify started with their launch is very difficult actually to extract now certain developments because they are interfering with each other. We're not licensing any content to Spotify in the Netherlands that is fair to say. Other than that it's too early. We have totally expected that Spotify would launch in the Netherlands. They not only launched there they also launched in the other Benelux countries and in France but from our core market overlap so to say only the Netherlands is really relevant for ourselves to look into. If I compare to what happened in the fourth quarter of last year when Spotify launched in the US and we have now almost a year of data for our audiobooks.com development then I'm actually very positive looking forward to the overall category of audiobooks being lifted by yet another very big player entering the market and doing a lot of promotion for audiobooks as well. I think we mentioned that several times we have seen a lot of tailwinds in the US because of Spotify's entry. They have essentially made the cake much much bigger by converting their own music listeners to also listening to audiobooks and that is a very positive impact on that entire industry. So something similar I'm very much looking forward to in the Netherlands as well but again it's a little bit early days to share any conclusions out of that.

Okay thank you very much great great numbers thanks a lot.

Thank you Stefan.

There are no more questions at this time so I hand the conference back to the speakers for any closing comments.

Yes thank you so much for relevant and good questions and thank you Peter for really interesting and detailed answers in many of the questions. Of course I'm looking forward to the next chapter here and hopefully I could also join with a bit more of answers to the questions on the next call. During the time I will work on and together with our dedicated team here at Storytel and also our board of directors I'm quite confident that we have all the driving forces to continue our success. So I'm really looking forward to this. Thank you for joining us today and we're looking forward to meeting you soon again.