Storytel AB (publ)

Hello and good morning everyone. Welcome to Storytel Group's earnings call for the fourth quarter and the year-end report 2024. I am Bodil Eriksson Torp, the CEO of Storytel Group. Joining me today is our CFO Peter Messner. We have achieved several key milestones that demonstrates the strength of our business and our position as a leader in the audiobook streaming and publishing industry. It is a strong accomplishment and it's a direct result of the team's dedication and commitment to delivering the best storytelling experience to our customers, combined with a prudent way of working for increased cost efficiency. We have achieved outstanding results, exceeding 1 billion SEK in revenue for the first time in a single quarter. And we are very pleased to share a strong operational and financial performance for the fourth quarter, 2024. This confirms that we successfully executed and delivered on our profitable growth strategy. Our increased cost efficiencies Prudent marketing investments in selected markets and constantly sharpening our attractive offerings has gained results. Our total paid subscriber base grew 11% year-on-year, reaching over 2.4 million average paying subscribers. It's a new record. And not only are we attracting new listeners, but we are also keeping them engaged as evidenced by our all-time low paid churn rate. Our ARPU remained at a high level, even if we saw a decrease of 4.5% due to changes in both the geographical and the customer mix versus last year, which was fully expected. We are proud over our own content. that continues to engage consumers. Strong consumption from our own publishers drive this success, which is also reflected in the strong financial performance of the entire publishing segment. And we are excited to build even stronger IP universes in different formats with our acquisitions of the full rights to the beloved Swedish children's characters, Sune and Bert. So let's take a look at our group financial highlights for the fourth quarter 2024. Group revenue were up 9% and exceeded 1 billion SEK, the highest level of revenue for a single quarter so far, which of course is a key milestone. This was driven by a solid development in both streaming and especially in publishing. Our publishing segment had had a strong quarter driven by Christmas sales of both printed books as well as increased sales of digital books. We have also made significant progress in improving our profitability. Our gross profit margin for the entire group reached an all-time high of 46.4%, also here with a remarkable improvement in our publishing segment. Our adjusted EBITDA margin increased to 18.6% for the quarter and 15.8% for the full year, reflecting our disciplined approach to cost management and prude investments. For the full year, our adjusted EBITDA more than doubled to 602 million SEK. This demonstrates our commitment to operating efficiency and maximizing the value we create in our offerings. Overall, we are pleased with our Q4 and the full year's results. And we have a strong financial position as reflected by being almost debt-free due to the strong cash flow generation in the business. We will wisely use this improved financial position in relation to the fast evolving audiobooks landscape where we need to be dedicated to move fast and continue to be relevant and deliver the best offering to our customers in all aspects, both in streaming and publishing. So with that said, I will hand over to Peter who will provide more details on our financial performance.

Thank you, Budil, and a warm welcome also from my end for this fourth quarter earnings call. Looking at the operation performance in streaming, which is our largest segment, we're again very pleased with the strong results. The total paid subscriber base grew by 11% year-on-year, or 240,000 subscribers, to an average number of subscribers of 2.44 million during the fourth quarter. A strong 40% of that subscriber growth came from our Nordic markets, which showed an 8% growth, while our non-Nordic core region grew by 17% year on year and contributed 137,000 new subscribers. As Putin mentioned, the ARPU remained at a high level and organically decreased by 4.5% year-on-year as a result of the expected stronger subscriber intake in our lower price tiers and the changes in the geographical mix due to the stronger growth outside the higher ARPU Nordic region. The way we manage both ARPU and subscriber growth is through a balanced way with having the overall health and therefore profitability of the subscriber base in mind. The key ratio here is customer lifetime value to subscriber acquisition costs. And our success is evidenced by the development of paid return, which continuously is and remains at an all time low. When taking a closer look at the streaming segments financials, we see that the total net sales were 879 million SIG, up 7% year-on-year or 6% at constant exchange rates. Revenue in the Nordics region increased by 3% based on a subscriber increase of 8% and an output decrease of 5% year-over-year. Revenue in the non-Nordics core region increased by 13% based on a subscriber increase of 17% and an ARPU decrease of 3% year-on-year. The gross profit for the streaming segment increased by 11% to 377 million SEK, reflecting a margin of 42.9%, which is 1.5 percentage points higher than the fourth quarter last year. Total operational expenses significantly decreased, such as the general and administrative expenses, which decreased by 31% year over year, as a result of the cost efficiency measures executed since last year. As a result, the adjusted EBITDA contribution from the streaming segment increased by 73% to 129 million SIG, which reflects a margin of 14.7%. And the adjusted operating profit contribution from the streaming segment is increased by 102% to 93 million SIG. Let's then turn to the publishing segment. And as a reminder, our publishing segment reflects the financials of all the publishing houses within the Storytel Group. That is Neustadt's publishing group, Linden Company, Gummerus, and Peoples, as well as our global digital-only audio publisher, StorySight. The total net sales in the publishing segment increased by 15% to 332 million SIG, of which the external sales represented 61% of total sales and increased by 17% to 201 million SIG, while the group internal sales that represented 46% of total sales during the fourth quarter increased by 13% to 131 million SIG. As is shown on the bottom left chart, internal sales show a more stable development over time, which is driven by our streaming segment performance, while the increase in external sales over time is subject to certain seasonality patterns, in particular in relation to print sales. The fourth quarter is historically the strongest quarter with Christmas sales positively impacting the total numbers here. The adjusted gross profit increased by 132% to 112 million SIG, reflecting a gross profit margin of 33.8%. As a result, the adjusted EBITDA contribution from the publishing segment was up 98% to 99 million SIG, which reflects a margin of 29.9%, and the operating profit contribution from the publishing segment was 51 million SIG. Both the gross profit and the EBITDA margins follow overall certain seasonality patterns due to the different gross profit margins in print sales as compared to digital sales, but also effects from inventory write downs over time. Overall, the increase in margins is not only the result of higher sales, but also due to the many operational improvements that have been implemented across our publishing houses since 2023. Let's turn to the group's cash flow statements then. The cash flow statement reflects the results of the disciplined strategy execution and the past cost efficiency measures and led to a record high cash flow in the fourth quarter 2024. The cash flow from operating activities before changes in working capital was 228 million SIG, while the change in working capital was 44 million SIG and is mainly due to seasonality in accrued expenses where the comparable period the year before was impacted by changes in the overall business. Cash flow from operating activities after changes in working capital was there for 272 million SIG in the fourth quarter, which is more than during the entire previous year 2023, where it was 248 million SIG. Cashflow from investing activities comprises our operational investments into content, product, and technology, and was minus 99 million SIG, including the initial purchase price consideration for the IP acquisition of the Sune and Beth characters in Sweden that Budil mentioned before. Cashflow from financing activities was minus 9 million SIG, and all in all, total group cashflow for the period was positive 164 million SIG. With that record high cash flow generation, let's move on to the group's balance sheet. The balance sheet reflects a stable yet improved financial position with total assets at around 3.4 billion SEK, which reflect an equity to asset ratio of 45.8%. Cash and cash equivalents were 623 million SEK at the end of the period as a result of the aforementioned strong cash flow generation. The only remaining financial debt is a revolving credit facility. During the fourth quarter, we have extended the maturity of that facility until early April 2026. The related liabilities are classified as non-current in the balance sheet, and they were previously classified as current in the previous two quarters due to the extension effect and the maturity. The new facility is 700 million SIG, of which 650 million SIG are currently utilized. So how does this debt translate then into the group's leverage ratio? Well, firstly, our operational cash flow, which we define as EBITDA excluding any items affecting comparability, less any operational investments and cutbacks, was on a record high level with 153 million SIG or almost 15% of revenues. The net interest bearing debt was only 27 million SIG at the end of the period and represents a leverage ratio to the last 12 months of adjusted EBITDA of 0.05. As Bodil mentioned earlier, this means that Storytel Group essentially is debt-free as of now, which is a massive achievement from the transformation of the past three years. With that, I hand back to Bodil.

Thank you, Peter, for guiding us through our segment's performance and our financial details. All in all, we are very pleased to report that Storytel Group beat the full year guidance for 2024. An organic revenue growth of 9% with an adjusted EBITDA margin of 15.8% and an operational cash flow of 12.1% for 2024 are definitely strong numbers. The performance reflects our disciplined execution of our profitable growth strategy, and we have already reached our mid-term targets for 2026 for both adjusted EBITDA margin and also operational cash flow. So let's look forward. The strong momentum out of 2024 is the robust foundation for this year, 2025. We have been working with AI as a toolbox in several teams for quite a long time now, and we will continue to focus on the possibilities of AI that can deliver value for our customers, but also for our increased efficiency. We are using AI to create a more magical experience for our listeners. One example is our voice switcher. When you as a listener don't prefer the narrator, you switch to an alternative AI voice. We're rolling out this feature in more languages and countries in this year, all to increase user satisfaction and engagement. We are also exploring the potential of AI in content creation. For a couple of weeks, we launched an AI-written book called New Horizon. This was a test to find out the relevance of a fully written AI book, or on the other side, the importance of a human factor in combination with AI. We are here, we are dedicated to exploring the full potential of AI. We will continue to invest in original content to expand our audiobook library. We have also acquired the full rights to the popular children's characters Suna and Bert in 2024, and the majority stake in the Swedish publisher, Bokfabriken. We have delivered a strong cash flow during 2024 that creates financial flexibility and headroom for us now. At this time, we are reviewing our strategy and together with the board, we will set the direction for 2028 with an updated strategy and updated business plans. and we will share our new mid-term financial targets for 2028 during the spring. For this year, 2025, and subject to our strategic review, we expect continued organic growth with improved profitability. 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.