Storytel AB (publ)

Welcome to Storytel Q3 Report 2025. During the questions and answers session, participants are able to ask questions by dialing pound key five on their telephone keypad. Now I will hand the conference over to the CEO, Bottle Ericsson Torp, and CFO, Stefan Vard. Please go ahead.

Good morning, everyone, and welcome to Storytel Group's Q3 2025 earnings call. We are pleased to report strong financial performance today across both our segments in streaming and publishing, with robust customer intake and record high profitability. This performance reinforced our confidence in achieving our guidance for 2025. which we will talk more about today. So I am Bodil Eriksson-Tor, the CEO of Storytel Group since a year. And also joining us today is our new CFO, Stefan Vård. So welcome to you, Stefan, to our first call from inside Storytel. And I'm sure that you're going to love it. So as we just said, we have delivered another strong quarter with over 2.6 million paying subscribers. Most of them, as you know, are highly engaged book lovers, and we increased our paying subscriber space with over 10% year over year. We continue a strong financial development, reflecting underlying growth in both our segments and we deliver revenue growth of 9% in constant currency. The growth was driven by focus on our customer experience, while we continued operational efficiencies led to our record high profitability and a strong cash flow generation. And regarding the ARPU, it decreased due to a main factor that is the FX effects of 4sec. but also due to our continued growth in markets outside the Nordics, where we are having lower price points, as we have been talking about before. The publishing segment achieved strong sales and growth, and also very improved profitability, partly driven by the successful acquisition of Bokfabriken, But I would also emphasize that the underlying growth excluding acquisition of bokfabriken remained very solid. So combined with continued progress in streaming, this is also highlighting our strength of our business model. We deliver a strong Q3 with an increased profitability of 26% year on year. And by that said, we also raised our 2025 margin guidance to the range of 18.0% to 19.5%. So here is our group financial highlights. Group net sales increased by 6% year-over-year to over 1 billion SEK. And as many other Swedish companies, we have also been affected by the strong currency headwind. In constant currency, our net sales increased by 9%. The solid development was driven by healthy growth in both our segments, as I said before, and gross profit increased by 6%, and the gross profit margin was on par with last year. We reached a record high EBITDA margin of 22.1%. Adjusted EBITDA increased by 26% to 224 million SEK. The net profit for the period increased with 150% to 138 million SEK during the quarter. The significant improvement in profitability was driven by increased operational efficiency. Overall, we are very satisfied with the financial development in Q3. And our financial position provides us a very high flexibility now for expanding our businesses. So it's important for us to continue to improve satisfaction and engagement for our customers. So when we look ahead, we will increase our investments in local relevant content and also the user experience in our services. This will continue to improve both engagement and satisfaction for our current and our future book lovers. So when we're looking into rolling 12, we see a strong development with strong momentum. On an annualized basis, our revenues are now close to 4 billion SEK. With a margin of 18.4%, this confirms our successful business model, as you can see. So let's continue with our two business segments. Over to you, Stefan.

Thank you, Bodil. We'll continue with a brief overview of our streaming performance. During the quarter, we added 56,000 new subs. And over the past 12 months, we have added 236,000 new subscribers. So solid growth, both on a quarterly and annualized level. Especially the Nordics was strong in the most recent quarter with the net ads of 36,000, while we added 58,000 for the full past 12 months. So a relatively strong intake from the Nordics in Q3. Outside the Nordics, we added 20,000 new subs in Q3 and 178,000 over the past four quarters. So relatively softer quarter outside the Nordics in Q3. At the end of the last quarter, our Nordic base was 1.32 million, while our base outside the Nordics was 1.28 for a total customer base of 2.6 million subs. So we're roughly evenly split between the Nordics and outside the Nordics. And it's a reasonable assumption that we soon will pass. The shift will tilt towards our international non-Nordic customer base going forward. As a consequence, we continue to see a decline in ARPU. We have lower average ARPU levels outside the Nordics, but that does not necessarily mean that we have lower profitability on those customers. On the CLV SAC ratio, we remain well above our target level of three. So supporting arguments for continued subscriber growth. Not only do we have a well diversified subscriber base in terms of markets, but we also have a highly engaged and loyal customer base visible in our low churn level, which continued to decline during the quarter to a new all-time low. Looking specifically at the financial performance of the streaming segment, we delivered a reported sales growth of 4% and 7% in constant currencies. Streaming gross margin was unchanged while our EBITDA margin improved 4.3 percentage points to EBITDA margin for the streaming segment of 17.9%. Operating leverage continued, so our growth in operating profit was 43% year on year. In our publishing segment, we delivered, as Bodil said earlier, strong growth, 14% year on year. 39 million of the annual increase for the first nine months. A total increase of 39 million of which Bokfabriken accounted for 22 million. And Bokfabriken has so far since we acquired the unit delivered very good results above our forecast. So we're very happy with that acquisition. It's a good example of how we can continue to grow our publishing business. The development was also driven by strong digital and physical sales with a good performance of new titles. Publishing EBITDA increased by 25% to 108 million for a margin of 33.4% up three percentage points year on year. We can continue to next. Looking at the cash flow generation, we transform or convert over 80% of our EBITDA to operating cash flow before changes in working capital. Cash flow from operation before again, so that cash flow grew by 37% and was 203 million in the quarter and on the trailing 12 month basis, it's at 658 million, corresponding to 90% of our run rate EBTA for the past 12 months. Working capital had a negative impact of 45 million in the quarter. In our view, this is normal variations and we will see a release of working capital in the final quarter. Fair expectations for the full year would be to have a relatively neutral impact from working capital in 2025. During the quarter we also repaid 50 million of our debt and that together with the increase in working capital explains the relatively softer total cash flow for the period compared with last year. Looking at the balance sheet. It's strong as not much to say that we have a cash and equivalence of just over half a billion. That's roughly on par with our interest being that our equity asset ratio continues to improve and it's currently at 50%. Speaking of our net debt, it's tiny, it's 23 million. We will go into net cash during the fourth quarter if we don't do any drastic investments. So we have a very good financial position. In addition to our strong operating profitability, we continue to see improved financing costs. So we will have a better financing situation going forward. We also have a significant amount of deferred tax assets, which are currently off balance sheet. These are primarily related to losses made in our now very profitable Swedish business. So we are quite certain that we will be able to utilize these deferred tax assets going forward, which will mean that we will have a fairly low paid tax rate. And that is also good for our cash flow generation going forward. With that, I'll hand it back to you, Bodie.