Storytel AB (publ)

Hi and good morning, everyone, and welcome to Storytel Group's Q2 2025 earnings call. We are pleased to report continued solid financial performance across both our streaming and publishing segments, despite an uncertain environment and also strong currency headwind with a significant impact on our top line, which we will talk more about. Today I'm here, Bodle Ekson-Tvort, the CEO of Storytel Group, and joining me today is also head of finance Jonas Olsson. Some highlights here. We have delivered a second quarter with continued robust performance based upon a strong paying subscriber growth. We then increase of over 11% year on year, and we have now almost 2 million 550,000 paying subscribers. And as you know, most of them are highly engaged and really true book lovers. Furthermore, we deliver a solid financial development, reflecting a well balanced underlying growth across both our streaming and publishing segments, resulting in a growth of 8% in constant currency. And we have continued to focus on operational excellence and continued with a cost discipline that have also strengthened our gross margin, which in turn fueled improvements in both our EVTA and cash flow generation, as you can see. The publishing segment achieved strong sales growth and also improved profitability. That's really good, and it's partly driven by our recently acquisition of Bortfabriken. But I will also emphasize that underlying growth excluding the acquisition remains very solid combined with continued progress in streaming. This highlights the strength of our business model. And when we look into our strategic expansion into growth markets outside the Nordics, as well as extended customer segments, this has resulted in an expected decrease of ARPU. And as you have read today, this is, however, negative effects effects. That was the main factor for the ARPU decrease in and accounted for six out of 11. At our Capital Market Day in May, we presented our group-wide strategy for the first time. A strategy that aimed to increase the synergies between our two business units and solidify our position as the premier destination for consumers, authors and talents. I also presented our new group executive management team, and in August I'm happy to draw that we will have our new chief people also that will join our team. So let's take a look into our group financial highlights for the second quarter. Group net sales increased by 4% -over-year to 958 million SEK. And as many other Swedish companies, we have been affected by strong currency headwind. In constant currency, our net sales increased by 8%. The solid development was driven by a healthy growth in both streaming and particularly in the publishing segment. Gross profit increased by 6% and margin expanded by 0.9 percentage points. This was supported by a higher share of cost-efficient content and strong gross margins in our high growth streaming markets. So to adjusted EBITDA, adjusted EBITDA increased by 28% to 163 million SEK -over-year. And we're reaching a margin of 17%. This significant -over-year improvement from .8% is driven by an increased gross margin and further realization of our synergies and continued disciplined cost management. Our adjusted items were substantial last year, and as I mentioned to you on our Q1 earnings call, we will strive to reduce those to present just reported figures. However, our L-tip will be a part of adjusted items even going forward and amounted to 2 million SEK in the quarter. Overall, we are satisfied with the financial development in Q2. We have continued to have a very strong financial position and we could also conclude that our performance generated a strong cash flow from operations. Going forward further, we will wisely use the improved financial position since it provides us a strong capabilities for investments for further expansions in growth. As we look to the second half of the year, we will intensify our investments in locally relevant content and data and AI to create an even more personalized user experience. This will continue to improve both engagement and satisfaction for current and future book lovers. And as you may notice in the graph down to the right, the adjusted EBITDA margin has some variations, mainly due to some seasonal perils, both in the streaming and publishing businesses. However, looking into the rolling 12 month, our EBITDA margin is currently at .5% and we are very pleased with incremental EBITDA growth over time. So let's continue with our two segments. Looking into the performance in streaming our larger segments, as you know, our total paid subscriber base increased by over 11% year on year or 261,000 paying subscribers to an average of 2.55 million. Over a third of the subscriber intake came from our Nordic markets and amounted to 7% growth, while our non Nordic score region increased by 18% year on year and contributed with over 162,000 new subscribers. Our strategic expansion into growth markets outside the Nordics, as well as extended customer segments, resulted in an expected decrease of ARPU with 11 SEC year over year. However, the main factor was a negative currency effects accounted for 6 SEC. We have a continued focus on balancing both ARPU and healthy subscriber growth of book lovers. The key ratio here is customer lifetime value to subscriber acquisition cost with a continued strong ratio. Our success is evidenced by the development of paid churn, which remains at downward trend and shows all time low level for the second quarter. So let's take a closer look here. The streaming segment delivered an underlying growth of 7% in constant currency. As mentioned before, our currency headwind is strong, which means a 2% growth amounted to 853 million SEC in net sales. The underlying growth was driven by strong 11% increase of paying subscriber base. Non Nordic score contributed with the highest growth, where revenues increased by 14% in constant currency and with 18% in paying subscribers. Nordic net sales increased 4% in constant exchange rates in the quarter and showed a robust subscriber growth of 7%. The gross margin development was also solid and increased by 0.4 percentage points to over 42%. And EBITDA increased 19% in the quarter to 112 million SEC, equaling a margin of 13.2%. The improvement was driven by higher gross profit and lower operating expenses. And operating profit increased over 24% to 81 million SEC in the quarter. So let's look into our publishing segment. The publishing segment delivered another strong quarter with 14% -over-year revenue growth reaching a total of 299 million SEC. And our recent acquisition of BOOP Fabrician also contributed to net sales with 22 million SEC. The development was driven by strong digital and physical sales due to titus creating high demand, which contributed to a total of .5% in net sales. And this led to a strong overall performance. EBITDA in the publishing segment increased by 41% to 82 million SEC and the margin increased with over 5 percentage points to 27.4%. And now over to Jonas who will walk you through our financial performance and position.

Thank you Bodil. For the second quarter, we continue to generate a solid cash flow from operating activities before changes in working capital amounting to 140 million SEC compared to 106 million SEC in the second quarter for the previous year. This improvement is primarily driven by a stronger operating result where EBITDA came in 35 million SEC higher in Q2 this year compared to last year. Changes in working capital were positive for the quarter, primarily driven by seasonality in accrued expenses. The corresponding quarter last year was also impacted by one-time effects relating to restructuring. Operational cash flow, including investments into content, product and technology are approximately on the same level as last year and total 41 million SEC compared to 40 million SEC in the same quarter in 2024. This represents .3% of net sales and is in line with the communicated targets of below 5%. Cash flow from investing activities amounted to minus 154 million SEC compared to minus 66 million SEC last year. During the quarter, we have paid dividend to our shareholders of 77 million SEC and we also repaid 50 million on our credit facility. All in all, the total group cash flow for the period was minus 49 million SEC and this includes the dividend paid in May. Looking at the group's balance sheet, we maintain a stable financial position with total assets of almost 3.2 billion SEC and an equity to asset ratio of 46%. The slight decrease in both equity and total assets compared to year end is primarily due to currency effects as the Swedish Krona is stronger compared to December 2024. However, compared to the second quarter of 2024, equity, total assets and cash have increased reflecting continued strong cash flows and earnings development over the recent quarters. Our credit facility have been reclassified to other current liabilities from non-current liabilities as the current credit facility will be renewed during the second half of 2025. This leads up to the leverage ratio. Compared to last year, the leverage ratio has continued to decrease driven by both a decrease in debt and as a result of strong cash generation. The leverage ratio now stands at 0.17 down from 0.78 at the end of the second quarter last year. The slight increase compared to year end 2024 is mainly related to the acquisition of Bokfabriket. Overall, we have a very strong financial position that supports the strategic direction going forward. Thank

you Jonas for highlighting our strong financial position. To summarize this quarter, we have achieved a high intake of paying subscribers, particularly with strong growth in non-Nordic core. We have maintained organic growth while improving profitability and our substantial cash generation provides a very strong financial position for us enabling us to invest prudently in future growth in line with our strategy. Our large and highly engaged base of book lovers has led to an all-time low churn rate and we will continue to enhance our offering and customer experience as demonstrated by the launch of a new in-app reading experience this quarter. Our new group executive management team is fully committed to achieving our new financial targets. So we hold a unique position in the storytelling ecosystem, effectively connecting diverse stories with a broad range of readers across print, audio books and e-books. Our strategic focus is super clear, strengthen our leading position in the Nordics, accelerate growth in our core non-Nordic markets and expand into new adjacent markets. We are also actively broadening our audience segmentation to unlock new growth opportunities and increase engagement across a wide range of customer profiles. So this strong momentum coupled with our high degree of financial flexibility position as well for the future supported by an active M&A agenda and not last but not least, we are on track to deliver on full year guidance for 2025. Now over to your questions.

Next question comes from Joachim Gunnel from DNB Carnegie. Please go ahead.

Thank you. So when we think about the fact that you are on track to meet your full year guide you commented here Bodil, what different scenarios do you envision to unfold here for you to either hit the bottom or top of the respective range on both growth and the profitability intervals?

Oh, that's a really good question, I would say. Of course, we will strive and aim for hit the top. That goes by the rules. But of course, I mean, we have a range of different marketing investments in the different regions that we are operating in. And of course, it comes with the effect of the different allocation of marketing investments, I would say, as the main factor here to hit the top or over the top or the bottom. So the efficiency in our marketing investments is highly important for your question. And I will also say, there's also, as you know, from the capital market, we have an active M&A agenda. And we're working with that intensively. And we will also see the outcome of this, how it will impact our future guidance and the result of when we end this year. So there are some different perspectives. Thank you. I'm sorry to interrupt you. There's one more thing. And it's also about the growth in going into new markets or unlock new markets. I will add that

as well.

Yeah, that was essentially my follow up question because you commented a bit on that you could see some increased investments here for the remainder of the year, especially on the technology side to personalize the listener experience, right? But when we talk about or when we think about this six to eight new markets that you've flirted with the intentions to expand into, do today's figures already capture some of these investments or is that incremental for age two and into 2026?

It's incremental going further. So that was captured by the goal for 2028.

Lovely. And just finally, from my side, we're in the middle of the high season for for audiobooks right now, especially in the Nordics. So can you comment a bit on how successful the customer intake has been thus far this year?

We are in in I mean, we are in in the peak season in the summer and we have big marketing investments in all our markets that we have our core markets and of course, the Nordics as well. So so I think it's a little bit too early to say what the summer will give. We are in the midst of actually, you know, daily monitoring all our results over different activities that we are doing in the different media channels to to recruit new customers.

Understood. Thank you and have a good summer.

You too. Thank you. Have a good summer.

Next question comes from Stefan Ward from Pareto Securities. Please go ahead.

Hello, just to follow up on the recent questions here. To clarify the targets for 2025, they are set organically at the CMD and not including M&A or how should we interpret that?

That's what that was said organically.

Yeah, so any M&A comes on top of that.

It's correct.

Yeah. Perfect. Then a few questions on the on the competitive situation. It looks like you're successful in the market with continued solid subscriber intake and declining or lower churn, decreasing churn rates. While keeping ARPA levels relatively flat year to date. Can you just give a description of how any changes in the competitive environment?

I would say there's a super sharp competition out in the market as we have met for many years, I would say, but it's not decreasing. I would say the competition is definitely increasing. So we need to be on our toes in every market. And we also extremely important to monitor our daily activities in the different markets. And it's a I think it's super important to be fast and also always think about the relocation of marketing investments, which we we have a good market function. And I would say it's the best in Europe. I used to say that and but it's it's it's needed to be monitored, monitored daily. And it's I would say the competition is super hard.

The problem is still managed to bring down churn rates. How is that?

That is thanks to our I mean, we have, you know, I mean, our business model where we combines the content and all the publishing that we have in house and the knowledge about this is also to meet the customers, which is the needs and to secure that our customers always always will be kept in a story and that we can deliver a relevant story to every single customer. And I think this is I mean, this is a quick. It's a it's a proof of that. We're actually delivering really good on our customer value proposition. But said with that, it's it's not the time where we can lay back. It's we need to move forward to also increase our value proposition to the customers. But I think we deliver good on on the content side. And and I mean, it's it's really we really are glad and appreciate that we have that low churn downtrend. And it's a really, really work done by the team in in storage. There's a good and deep knowledge about the local markets. So we're also relevant in the local markets with local content. And that's our strength. I would say, you know, 85 of the companies is consumed in the local language. So so this is also important for us.

Yeah. On the gross margin expansion, it seems to be steadily increasing the gross margin. Can you can you give some color on how that is done? Maybe any details on on what the acquisition of book Fabricen has meant for for for the gross margin would be interesting. And also if there's any additional improvements to be made during the second second half of this year.

Yes, the effect of book Fabricen, we have a slight increase of the gross profit, but we don't want to go into the details on that one for certain reasons. Then if you look at the growth that we have, if when we're growing in the growth region, there we have a lower content cost and therefore the gross margin is increasing somewhat.

Interesting. The acquisition, I guess, is still one of the most consumed catalogs or titles that you have. How has that improved the profitability?

I can't really disclose that in detail regarding the single Sunne. But we we have, of course, a high degree of consumption regarding Sunne. And and what it goes to when it comes to profitability, we don't disclose that actually.

No. OK. Fair enough. Then a couple of questions also for housekeeping here. How has the business in overseas developed? Audio books.com, is it stable as it used to be or has there been any changes there?

There hasn't been any changes. We increase our cooperation with the audio book dot com. But I think it's it's a really stable business for us. And it's it's yeah, it's it's the same as we have said before. It is stable and it's a good business that also has a good flow generation.

Can you give us any details if it's growing in terms of subscribers or is it flat or any color on that?

We don't use to actually comment audio book dot com separately because that's in goes into our non Nordic course. But but it's we have a growth there.

OK. And then a final question from my side is how we should think about the tax rate. There's still some quite a lot of tax losses that you can utilize. How can you guide us anything on how we should should think about the tax rate going forward?

Yes, we have still quite a significant amount of unutilized tax losses, as you can read in our annual report. So as you can see in the annual report for 2024, it's some three hundred million or above that. That will be used in the future as we see it.

Yes. And how any guidance on how you will utilize that over what time period and what would it mean for the for the sort of efficient tax rate for say twenty five, twenty six. Can you give any guidance on that for housekeeping?

We don't go into the details on when when we will use this. And just for clarifying, this is in Sweden where we have these tax losses. So we are paying tax in some Swedish entities and as well as in our business in other countries. I

think

we we need to come back to that, Stefan, and guide around that question specifically.

That's good, it's helpful. Thanks a lot. Very, very good report, I think. Good work.

Thank you, Stefan.

Happy summer. Happy summer. The next question comes from Derek Laliberté from ABG

Sundal Collier. Please go ahead.

Thank you very much and good morning. I had a question on the ARC here. You mentioned that you have a six sec impact from effects on the streaming segment, which lose five sec in sort of an additional decrease there. I suppose this is of course related to the non-Nordic markets growing faster. But just wondering, have you had any sort of new major offerings that you have been marketing in the quarter and does this relate to sort of any specific market or is it more of a broad-based

effort to take in new subscribers? Hello. We are

broadening our new subscriber base. So it's a little bit also that we have lower price points in the markets that are outside the Nordics and we are growing faster there.

Okay, great. I didn't hear your full response. I'm not sure if something's wrong with the line. You didn't

hear? No? Yeah,

I hear it better now. Okay,

yeah, I just said that this is more about broadening our customer base and also the geographical mix. So we don't have had any new offerings or tiers. It's not about that. It's more about that we have an inflow of new customers and subscribers into lower tiers to some extent. And that is also planned since we want to catch the book lovers of tomorrow. So there are two different parts and it is the geographical mix, but also by broadening the customer base. Okay,

great. And you continue to show a really impressive subscribe growth outside of the Nordics. But looking at the sequential increase here was quite a bit smaller than in Q1. So I'm just wondering what the outlook is there if you expect an intake outside of the Nordics to ramp up during the second half or how does that look?

Thanks. The Nordic area is still extremely important for us to grow the market share, but also we will increase our marketing investments in the non-Nordic course in Europe. We have a good momentum in Poland, for example. So of course we will increase our investment there in this region.

Okay, but then looking at when I think in Q1 we saw some increased marketing expenses. Is it fair to assume that those sort of increased efforts were mainly related to the Nordic markets or was it more of a mixture there?

No, this was actually a broad initiative during all the markets.

Alright, okay. And finally the old...

Especially in Poland.

Okay, great. And on the publishing segment here you mentioned that you delivered a really solid result. I mean apart from Bokfabriken, what were the sort of key factors in driving this growth? And also I was wondering, just to clarify, I think I saw two different figures on the contribution from Bokfabriken, so just wondering if it was 11 million or 22 million in sales contribution in the quarter.

It should be 22.

Yeah, regarding the contribution for the publishing segment it's 22 million, but for the group it's 11 million as some of these sales are between the publishing segment and the streaming segment.

And you also asked about the drivers, except Bokfabriken, correct? Yes,

yes.

Yeah, so I will just add also that we actually had really good sales in both physical and digital books, so that was positive I would say, since maybe you used to think that the physical sales is kind of declining, but we had really good physical sales as well.

Okay, great. And then just, great, just wondering because we discussed audiobooks.com before, just wondering if I read it correctly. I think you said in the report you have a 5% -on-year subscriber increase or revenue.

That's correct.

Okay, so subscribe then. Okay, perfect. Thank you very much. Those were all my questions and have a nice summer.

Thank you very much and have a nice summer you too. Continue the summer. And then

we have... Yes,

and we have one written question from Mats Langard. How do you see the competitive landscape and do you see any meaningful competition from Spotify?

Good question. The competitive landscape is, as I said before, intense and we have both local players and as well as global players in the different markets, so we are used to have very hard competition. I would say the positive is that all the writings and that we can read that Spotify is launching audiobooks is that you actually have an extra...there's an extra way of building the category faster. So this will support to build audiobooks in the different markets and that is positive and that could also mean that we could increase our market shares. So I would say we are confident in our business and our business model where we have all the competence regarding highly local market and the fine target group of book lovers. So we think that the competition will also increase growing overall market and that is an option for us to capitalize on that.

Thank

you for your question

also.

Okay, do we have any more questions? No. So thank you for joining us today. Looking ahead, we are well positioned to meet growing demand for local language content, as I said, with strong foundations in our 10 core markets and a growing local catalog. So our financial strength creates a strong position for both organic growth and acquisitions across publishing and streaming. Your opportunities ahead really energized me and my, our team here. So I'm thankful for everyone who's joining us on our journey and also thank you for participation today and joining us today and we're looking forward to our next quarter. We keep in touch and have a nice summer.