Storytel AB (publ)

Good morning, everyone, and welcome to Storytel Group's Q1 2024 earnings call. We are pleased to report solid financial results, demonstrating strong momentum for the start of this year across both streaming and publishing. I am Bodil Eriksson Torp, the CEO of Storytel Group. Joining me today, filling in for Peter Messner, is our head of finance, Jonas Olsson. As we celebrate 20 years of leading innovation in storytelling, I'm pleased that we have entered 2025 with strong momentum for our first quarter based upon over 2.5 million paying subscribers. This first quarter delivered robust financial results, reflecting strong progress across both our streaming and publishing segments. The publishing segment achieved remarkable sales growth, driven by strong performance in both external and internal channels. Combined with continued advancements in streaming, this highlights the strength of our business model and reinforces our positive outlook for the rest of the year. The acquisition of Bokförbyggen further strengthened our content offering with a proven catalog of commercially successful titles that resonates well with our streaming audience. Here are our group financial highlights for the first quarter this year. Group net sales increased by 7.4% year over year to 953 million SEK. Especially our publishing segment and the non-Nordics core region with the streaming segment, making a particularly strong contribution to the sales increase. Gross profit margin improved by two percentage points, supported by a higher share of high quality and cost efficient content. Adjusted EBITDA increased by over 40% to 150 million SEK year over year, reaching a margin of 15.7%. The significant year-over-year improvement from 11.7% is driven by increased gross margin, further realization of our cost synergies and a continued cost discipline. We have had a substantial part of adjustment items recent quarters, and we strive to reduce those to present reported figures. However, Our LTIP will be a part of adjusted items even going forward and amounted to 15 million SEK in the quarter. Overall, we are pleased with our Q1 figures. We have a strong financial position and we could also conclude an improved cash flow from operations before change of working capital of 88 million SEK compared to 28 million SEK Q1 last year. 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 in publishing. As you can see in the graph down to the right, the adjusted EBITDA margin has been a bit volatile during the recent quarters, mainly due to seasonal patterns, both in the streaming and publishing businesses. However, looking into rolling 12 months, we are satisfied with this momentum over time. Looking at the performance in streaming, which is our largest segment, we are again pleased with the development. Our total paid subscriber base increased by 11% year on year or 245,000 subscribers to an average number of 2.5 million paying subscribers during the quarter, surpassing a milestone. Over a third of the subscriber intake came from our Nordic markets and amounted to 7% growth, while our non-Nordic core region increased by 16% year on year and contributed with 143,000 new subs. Strong releases in the Nordics together with expansion in the non-Nordics core markets contributed to the growth. And we also achieved stronger personalization capabilities through the quarter, resulting in improvements to the relevance of content recommendations for our customers across the platform. A robust editorial curation has enabled us to deliver the most effective content discovery experience ever. The ARPU remained at a high level, and organically decreased around 3% year-on-year as expected, explained by lower price tiers and changes in the geographical mix due to stronger growth outside the Nordic region. We have also successfully lowered our subscriber acquisition costs compared to the same period last year, mainly due to increased marketing efficiency. We have We have focus on balancing both ARPU and healthy subscriber growth. The key ratio here is customer lifetime value to subscriber acquisition costs. And there are successes evidenced by the development of paid churn, which continuously remains at a low level. Let's take a closer look here. The net sales for the segment increased by 6% from the comparative quarter to 862 million SEK. The growth was mainly driven by 11% increase of the subscriber base. Non-Nordic score contributed with especially strong growth where revenues increased by 18% and subs with 16%. Nordics grew 3% in the quarter and with a robust subscriber growth of 7%. Gross profit development was solid and increased 9% to 369 million SEK. Gross margin increased 1.2 percentage points. EBITDA increased 89% in the quarter to 94 million SEK, equaling a margin of 10%. The improvement was driven by higher gross profit and lower operating expenses and operating profit increased over 200% to 61 million SEK in the quarter. Now over to our publishing segment. The publishing segment had a very strong start this year, with 16% year-over-year revenue growth, reaching a total of 283 million SEK in the first quarter. Additionally, strong backlist sales from the February bookstore sales in Sweden particularly increased revenues for the quarter. EBITDA in the quarter improved 24% to 66 million SEK a margin of over 23%. Driven by higher gross profit, operating profit doubled in the quarter to 22 million SEK. Looking forward, we are confident in our strategic investments in premium content. Later this year, for example, Nordstedt's förlag will publish Fredrik Backman's forthcoming book, Lina Vendau. Backman's international success with translations into over 40 languages and film adaptions demonstrates the potential of this authorship. And now over to Jonas, who will tell us a bit more about the finance.

Thank you, Bodil. In the first quarter, we generated a solid cash flow from operating activities before changes in working capital amounting to 88 million SEK compared to 28 million in the first quarter for the previous year. This improvement is primarily driven by a stronger operating result where EBIT came in 78 million SEK higher in Q1 this year compared to last year. Changes in working capital were negative for the quarter, mainly due to seasonality effects in accrued expenses and royalty costs, where higher royalty payments are a direct result over approved profitability. Cash flow from operating activities totaled 29 million SEK compared to 1 million for the same period in 2024. Cash flow from investing activities amounted to minus 93 million SEK compared to minus 38 million SEK last year, mainly impacted by the acquisition of Bokfabriken during the quarter. Operational capex, including investments into content, product and technology, remained stable year over year at around 31 million. All in all, the total group cash flow for the period was minus 73 million SEK, but as mentioned, this includes the acquisition of Bokfabriken. Looking at the group's balance sheet, we maintain a stable financial position with total assets of 3.3 billion SEK and an equity to asset ratio of 47%. The slight decrease in both equity and total assets compared to year end is primarily due to currency effects, as the Swedish krona strengthened towards the end of the first quarter. However, compared to the first quarter of 2024, equity, total assets and cash and cash equivalents have increased, reflecting strong cash flows and positive results over the recent quarters. This leads up to the leverage ratio, where we see a significant improvement. Compared to the first quarter of 2024, the leverage ratio has substantially improved, driven by both a decrease in debt and an increase in cash and cash equivalents as a result of strong cash flow and a positive cash conversion. The leverage ratio now stands at 0.18, down from 1.0 at the end of Q1 2024. The slight increase compared to year end 2024 is mainly related to the acquisition of Bokfabriken. And with that, I hand back to Bodie.

Thank you, Jonas. We are proud of the footprint we have built over the past 20 years in Storytel. Storytel Group has a unique position in the Storytel ecosystem, connecting stories with a broad range of readers across print, audiobooks and ebooks. For the past 10 years, we celebrated the heart of our business, our authors and narrators through Storyteller Awards. This year, we hosted ceremonies in Stockholm, Helsinki, Copenhagen, Oslo, Reykjavik, and Amsterdam, honoring the most loved storytellers by our audience. Innovation has always been a part of our DNA. We see AI as a powerful tool to enhance our service and customer experience, while also improving efficiency and strengthening our financial development. VoidSwitcher has been especially well received and we have continued to scale it across our markets. AI will remain a key focus area for us moving forward, ensuring we make the most out of our resources to keep innovating and enhancing both our streaming and services products. also in order to ensure continued growth with improved profitability. As you know, we have been reviewing our strategy going forward, and you're all welcome to join our capital market day on the May 15 here at headquarters on Ridderholm in Stockholm, or you could also join us remotely. And now we are ready to open up for your questions.