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.