Good morning, welcome to ARN Media's FY25 Full-Y ear Results Presentation. Today, we are video streaming from our North Sydney studios, a small but very symbolic change. My name is Michael Stephenson, I'm the Chief Executive Officer of ARN Media, and this morning I'm joined by Alexis Poole, our Chief Financial Officer. Today, I will share with you our company highlights and a summary of our full year results before handing over to Alexis to walk through the financial results in detail. I'm then going to take the opportunity to share with you our vision for the future of our company before opening up for questions. There are three key things that we'd really like you to take away from today's presentation. The first is, FY25 has been a year of transformation.
Secondly, we've reset the cost base of the business, and we're committed to ongoing productivity improvement. Finally, we have a very clear plan to diversify and grow our revenue to deliver improved returns for our shareholders. Turning to slide 6. Last year, we made a commitment to transform our business, to create a leaner, fitter, and increasingly more digital organization. It required us to make some very difficult but necessary decisions. We have had an unrelenting focus on disciplined cost and capital management. We've simplified the organizational structure, improved systems and processes, and implemented new ways of working to create a more efficient operating model. We've made an investment in digital capability. We've developed a clear digital strategy, and we've positioned iHeart at the very center of our organization. Our regional performance has been excellent, with strong audience revenue and EBITDA contributions.
I'm pleased with what we've achieved so far. Of course, there is still a lot more to do. Revenue was AUD 285 million for the year, down 10% on the prior period, impacted by a softer advertising market and the impact of changing community and advertiser expectations. We've made good progress on deleveraging, with net debt reduced and well within our target range. Underlying EBITDA was AUD 47.5 million, down 23% year-on-year, and ahead of the guidance that we gave in October. Alexis will share more detail of that later in our presentation. Turning now to slide 8. Over the past few months, our focus has been on addressing the key areas of the business that are critical to our long-term success. Firstly, the brand safety.
The right to hold a broadcast license is a privilege, and it's one that we take really seriously. During the year, we've implemented a broad range of brand safety initiatives to ensure that the content that we create meets community standards, meets regulatory requirements, and importantly, it meets advertiser expectations. This was my first job as the CEO of ARN, and it remains my number one priority. We're in the process of divesting several non-core assets, including Cody Hong Kong, so we can focus on our core entertainment business and our Australian operations. Divesting Hong Kong continues to be a major priority. We also continue to focus on improved cost discipline. I'm pleased to say that we've now realized AUD 31 million in structural cost out.
We've identified a total of AUD 55 million worth of cost out to be delivered by the end of 2027, well ahead of our previously stated target of AUD 40 million. Alexis will give you more color on this a little bit later. At the same time, and importantly, we've finalized seven very important strategic projects that will support our long-term growth in the digital world. We've renewed our long-term partnership with iHeart for a further 10 years. We've developed a world-class data proposition, and we've implemented a new integrated content strategy designed to grow audiences and deliver diversified premium revenue. Turning to slide 9. Our executive team rebuild is now complete. Our new team brings broad industry experience, combined with deep domain expertise, digital and data capability.
Each and every person has been handpicked based on their proven track record, to deliver not only results, but also our business transformation. At our upfront presentation, I shared with you our vision for the future of our company: to transition from a radio business to an entertainment company. Audio, video, social, and in-real-life experience. Today, I'm going to take the opportunity to share some more detail about that strategy, the importance of iHeart to our business, and the huge opportunity for growth that comes as we enter the AUD 5 billion digital video market. Right now, I'll hand to Alexis to walk you through our financial results in detail.
Thanks, Stephenson. Good morning, everyone. Before I share details of our financial performance, please note, during FY25, we made the strategic decision to dispose of our Motive investment and divest Cody Hong Kong. As a result, both businesses have been classified as discontinued operations in the financial statements. We also completed a review of revenue recognition, with income restated in line with AASB 15 requirements, details of which are set out on slide 35. For FY25, from a financial perspective, there are four key messages I would like to focus on. First, ARN's balance sheet has been strengthened. Net debt has fallen, facilities have been refinanced, and liquidity headroom is robust. Second, cash generation is strong. Third, the cost base has been structurally reset, and we have embedded a productivity discipline for our future.
Lastly, the revenue mix is improving, led by profitable digital growth and our resilient regional business. Turning to the FY25 results in detail. FY25 was a year of disciplined execution against a more challenging external backdrop. Total revenue declined 10% to AUD 285 million, with declines in metro offset by digital growth and stable results in regional. Operating costs reduced by 4% to AUD 187 million. Excluding reinvestments in content and capability, this represents a 12% underlying reduction. Underlying EBITDA was AUD 47.5 million, down 23% year-on-year, as material cost reductions partially offset lower revenue. Net profit after tax was AUD 16 million, down 41%, which is consistent with the revenue headwinds and investment we've made to reposition the business for sustainable growth. Most importantly, the business continues to generate strong cash.
Free cash flow increased by 6% to AUD 40 million, operating cash flow conversion of 108%, Free cash conversion of 234% was achieved. This cash discipline enabled us to reduce net debt to AUD 64 million and successfully refinance our facilities in December, extending debt maturity by three years. Turning to slide 12, the drivers of EBITDA are outlined. During the year, AUD 24 million of costs was removed from the business and AUD 15 million was deliberately reinvested into talent, tech, and digital capability. The cost reduction also helped offset inflationary pressures and, more significantly, the impact of lower revenue. While revenue declined by AUD 32 million, largely driven by the metro broadcast business, we are encouraged by the resilience of our local regional model.
Strong audiences and disciplined local sales execution meant local regional revenues declined by just 1%. We are also encouraged by the strong momentum in streaming. This demonstrates that our strategy of creating compelling content and maximizing its value through multi-platform distribution is working. We are improving our returns on our content investment in a rapidly evolving media landscape. While we are disappointed with the 16% decline in metro, which reflects softer advertising conditions and changing advertiser preferences, we are also taking decisive action. As Steve outlined earlier, this includes: our brand safety work stream, revenue diversification, improved commercialization, and expanding the distribution of our content across multiple platforms. To focus on digital. Digital revenue now represents 10% of our group revenue, and it is becoming materially more profitable.
In FY 25, digital audio revenue reached AUD 27 million, growing 7%, driven by the doubling of live streaming revenue. Digital's 7% growth was achieved despite podcast revenue decline, following the deliberate exit of low-margin third-party agreements with owner minimum revenue guarantees. A conscious trade-off was made to improve earnings, prioritize content ownership, reinvest in ARN-owned podcasts, and deepen integration into the iHeart ecosystem. This is an example of our improved financial discipline. Before I move on to cost, in summary, for revenue, despite pressure in metro, our local regional model continues to perform, and we see continued positive momentum in digital, reinforcing the direction of our strategic reset. ARN's disciplined cost management was delivered in a meaningful reset of the cost base.
Following AUD 6.5 million of savings in FY24, we removed AUD 24 million of costs in FY25, while selectively reinvesting in talent, tech, and digital capability, resulting in a net reduction of operating costs and a more efficient operating model. Stepping out our multi-year cost app program on slide 17. Over the past 18 months, ARN has delivered a total of AUD 31 million of cost savings against the original commitment to reduce costs by AUD 40 million over three years. In 2025, we embedded a stronger productivity mindset, enabling us to increase the total cost savings target to AUD 55 million over the 2024-2027 period, well above the original ambition. We have already actioned this year's AUD 16 million of initiatives, which will deliver savings in FY26 and FY27.
While we remain focused on costs, we are also improving productivity through automation and responsible use of AI. In 2025, we delivered AI training to employees, ensuring the organization is equipped to adopt these tools effectively. This will help lower admin burdens and support smarter strategic thinking and decision-making. We have already deployed AI across our operations, and we are partnering with leading experts to identify where it can be further embedded across the business. This approach is designed to ensure we embed these tools in the right way to deliver efficiency and avoid the buildup of future AI technical debt. As mentioned earlier, strong cash generation remains a defining feature of ARN's financial performance. Operating cash flow from continued operations was AUD 35 million for the year. This includes AUD 10 million of positive working capital improvements.
Our working capital improvements were achieved by focusing on the basics of cash cycles, actions which can be further improved on in FY26. Cash payments of $13.5 million relating to significant items were made, supporting the delivery of our transformation program. Operating cash conversion remains strong, and free cash flow from continuing operations was $40 million, with free cash flow conversions of 234%, driven primarily by the proceeds from the sale of selected regional properties and the divestment of non-core assets. Together, these outcomes demonstrate our continued focus on disciplined capital management. Turning to the balance sheet. In 2025, ARN also delivered a material strengthening of the balance sheet. The balance sheet reflects disciplined working capital management and non-core asset sales, with proceeds applied to debt reduction, including a partial divestment of our SCA shareholding in the H2.
During the year, we also refinanced our debt facility, extending maturity by three years and reducing the facility size by AUD 20 million, reflecting a more efficient capital structure. Overall, the balance sheet is conservatively positioned with strong liquidity, significant headroom, and flexibilities to support strategy execution. Turning to slide 20, you will see ARN's leverage on continued operations has reduced materially and is currently below target, with significant headroom. At closing, net leverage was 1.66x , and in January 2026, a further 3% shareholding in SCA was sold, which further improved net debt by AUD 5 million, and improved leverage on a pro forma base to 1.5x . The remaining SCA shareholding formed part of the group's liquid asset base and preserves optionality for future capital deployment.
In summary, leverage is well below target, net debt has reduced materially, and the group has significant liquidity headroom and balance sheet flexibility. Before I hand back to Stephenson, to recap on ARN's financial performance: ARN has reset its cost base, strengthened cash generation, materially de-risked the balance sheet, accelerated the shift to higher quality digital revenue and earnings, and created operating leverage to deliver long-term value creation and EPS growth. I'll now hand back to Stephenson.
Thanks, Alexis. In October, I shared our vision for the future of our company to transition from a traditional radio business to an entertainment company. Audio, video, social, and in-real-life experience. A company focused on the creation, distribution, and monetization of content across all audio and video and social platforms. Turning to slide 23. We have a very clear strategy: create great content, distribute it broadly, amplify it on social platforms to engage our audiences, and importantly, our advertisers. That's our plan. Our focus is on maximizing the return on our existing content and talent investment by using our leading radio brands, our number 1 radio shows, and our radio stars to create content for every other platform. Content for radio, content for podcasts, content for video, and content for social platforms.One cost base and multiple revenue streams.
I'd like to share with you an example of our strategy in action. A little over two weeks ago, we hosted 100 listeners and 50 marketers at an exclusive experience with Margot Robbie and Jacob Elordi, right here in North Sydney. We had with us two of the biggest stars in the world. This was a live, in-person experience, which was, of course, also broadcast as Smallzy's daily radio show. It became a podcast. It was live-streamed on iHeart, right here in Australia, and also in the U.S. It became global. Video content was created by our teams, then amplified on every social platform. This is the best example so far of ARN becoming an entertainment company. This is a clear demonstration of our content strategy.
Radio remains the very foundation of our business, what we're building around it is something bigger: a platform that brings together audio, video, social, and live experiences to create one connected entertainment ecosystem. If I could get you just turn to slide 24. At the very center of our digital strategy is iHeart, the world's largest free streaming platform. I'm pleased to say that we've just completed a 10-year renewal of our long-term agreement. This agreement creates long-term competitive advantage for ARN. It gives us access to global development and global product teams via a long-term license agreement, without the onerous capital cost that some others have. The good news is that we're already leveraging iHeart's commercial products and their global partnerships to accelerate our own innovation right here in Australia, in audio, and importantly, now in video.
Our partnership materially enhances our ability to lead the next phase of digital transformation in this country. Turning to slide 25. Critical to our long-term plan is the development of our next-generation data platform. We are building a first-party data asset that will dramatically improve the monetization of our digital audiences. We've already signed partnerships with Westpac, Experian, and Azira to enrich our audience segments with banking, consumer lifestyle, and location-based data. We've built 800 audience segments for advertisers, and we've already launched attribution reporting. This allows advertisers to link their advertising on iHeart back to store visits or real business outcomes. It proves the effectiveness of their advertising campaigns when they partner with ARN. This year, we'll also complete the implementation of our data lakehouse. We'll implement a customer data platform, and we'll expand our suite of clean rooms for audience matching with advertisers. All very important things.
Turning to slide 26. We see the convergence of audio and video as a clear medium-term growth opportunity for ARN. Our approach is both disciplined and it's incremental. To start with, we're going to extend our existing radio and podcast assets into video formats. This will help improve the engagement, but also broaden distribution. Increased utilization of our existing studio capability and use of our existing video technology enables video production at scale, importantly, with no incremental cost. This strategy is expected to diversify revenue whilst improving the long-term monetization of core audio assets. Turning to slide 27. The implementation of our strategy will fundamentally change the shape of our revenue. Today, whilst 40% of our audience is delivered on a digital platform, only 10% of our revenue is digital.
Over time, any decline that we might see in traditional revenues will be more than offset by the growth in digital revenue. Importantly, this growth will come predominantly from podcasts, which attracts a CPM that is 3.0x to 5.0x higher than the traditional radio yields. In addition, the creation of video content using our existing talent and the monetization of short-form video on social, is going to allow us to participate not only in the AUD 5 billion digital video market, but also in the AUD 2 billion social video market. This clear gap between audience share, revenue contribution, and margin, highlights the significant runway ahead for monetization, and supports the digital transformation program that we're undertaking as a business. Turning to page 29. Our plan is going to be executed across three phases over five years.
In the near term, we'll be focused on the creation of strategic foundations, stabilizing the core radio business, divesting non-core assets, and maintaining tight cost control. In the midterm, we'll be focused on accelerating our digital transformation, leveraging our investment in data, our investment in video, and our investment in digital capability to allow us to enter new and emerging markets. Right the way through the cycle, we'll invest time and resource into the development of innovative new products, new services, and digital adjacencies that will allow us to enter high-value growth markets that are predominantly digital and diversify revenues. If I could ask you to turn to page 30. Our outlook. We expect the total audio market to be flat in FY26, with low single-digit declines in radio markets being offset by the growth in digital revenues.
We expect our metro radio share to improve throughout the year, our regional radio share to be broadly flat, and digital revenues to grow in the mid-teens. We'll continue with the divestment of the Cody Hong Kong business and be focused on executing our plan to deliver AUD 55 million worth of cost out by the end of FY27. turning to page 31. As I mentioned earlier, there are three key things that we'd really like you to take away from today's presentation. FY25 has been a year of transformation for our company. we've reset the cost base of the business, and as a leadership group, we're committed to the ongoing improvement of productivity. finally, we have a very clear plan to diversify and grow our revenue to deliver improved returns for our shareholders. Thank you very much for your time.
We'll now open for questions.
Good morning. I'm Fiona Ellis-Jones, Head of News and Information at ARN.
Okay.
I'll be moderating today's Q&A. If you have any specific questions for Stephenson and Alexis, please feel free to put them in the chat, and we'll endeavor to get through as many as we can. Analysts will have the opportunity to ask questions verbally, but first, let's kick off with a few questions that we've received already. First, to Stephenson. Stephenson, what is your view on the outlook for the ad spend market in 2026?
Yeah, thanks, Fi. look, there's obviously no doubt that the ad market was challenged in FY25. you know, the impact of the broader economy, the impact of inflationary pressure on household budgets, and of course, the broader geopolitical landscape all impacting markets. Traditional radio revenues and markets were not immune to that, but of course, showed that they were incredibly resilient, as they have done right the way through the past five or 10 years. As I look forward into FY26, and as per our outlook statement, I expect that the total audio market will continue to be broadly flat.
Any declines that we see in traditional radio markets being more than offset, by the growth in digital revenues, of course, driven by the growth in live streaming that we spoke about, and the growth in podcast revenues more broadly.
Stephenson, we do have an audio question now. Here's Encho Raykovski from E&P Financial Group. Enscho, go ahead.
Morning, Steveo. Morning, Alexis. You can hear me okay?
Yeah. How you going, Encho?
Oh, I think you can see me in my study. There you go. In person as well, I suspect.
Power of video.
Thanks-
Who would have thought?
Exactly, exactly. Hopefully you can hear me okay. I wanted to just explore your outlook comments, and just the comments you had made that you expect to gain share in metro, in FY26. I suppose, can you talk about what you think will be different in FY26 relative to FY25? I'm just conscious that obviously you didn't gain share in FY25. In fact, it went the other way. Strategically, what gives you comfort the initiatives can actually put you in place to share gains as opposed to losses?
Yeah, I think you're right to point out, obviously we did lose some share in our traditional radio business, specifically in the metro market in 2025. We lost 3.1 points to be at 21.1% share of that market. The revenue, obviously the impact or decline was impacted by a number of things. One, I spoke about the broader economy and the impact that market has on our revenues. Also, in addition to that, we did. We spoke today about a full business transformation and a reset, and we have done that. That did include our commercial teams. There is a transitionary period. I expect that to improve in 2026.
I probably, you know, as we cycle over the challenges of FY25, I think you see that more back-weighted than front-weighted. Of course, there is we spoke about the impact of ensuring that the content that we create meets advertiser and community expectations, and we're doing a lot of work around that. I suspect as that flows through and the changes that we've made, flows through into ad markets, we'll see more revenue, and that will impact, obviously, our share in a positive sense.
Okay. Thanks, Stephenson.
No problem.
Sorry, I've got a, I've got a follow-up, if you don't mind.
Mm-hmm.
The decision to suspend the dividend, I mean, can you talk about that and what drove that decision? I mean, you've spoken about cash generation being strong. You've obviously reduced net debt as well. Can you perhaps, in that context, provide a bit more color around that decision?
Yeah, sure. You're right, we did so cash generation was strong. We have reduced net debt through the period. We also highlighted in our presentation, obviously, we're very focused on the divestment of non-core assets. The board has made a strategic decision to hold on dividends for this period as we go through that divestment process.
Okay. The Cody divestment, can you give us any more color on where that's at? Have you got some interested parties? You know, what's the sort of timing we should expect to divestment taking place?
Yeah. Obviously, the Cody divestment is the most significant part of the assets that we are divesting. It's fair to say that that has been an asset for sale for a period of time. Both Alexis and I are heavily involved in spending a fair bit of time with our team in Hong Kong, and our advisor in Hong Kong, and have actually spent a fair bit of time on the ground in Hong Kong, working with the prospective purchasers of that particular business. We have a number of options on the table right now, which we're considering, and at the appropriate time, we'll be able to update the market. There's not, there's no update at this stage.
Okay. Thank you.
Encho Raykovski there from E&P Financial Group. Another question for you here, Steve, from Xiao Yang. Xiao asks: What level of inflationary impact and reinvestment would you expect to offset the AUD 17.5 million cost out for FY26?
You know, well, thank you for your question. We continue to focus on obviously managing the cost base of this business, to ensure that we can return an improved and increased return to our shareholders. Part of that will be managing the impact that inflation has. We've seen through the walkthroughs that Alexis took you through, the impact of inflation has been different in both of the two years, and we are planning our forecast role based on managing to inflation in and around low single digits.
Okay. A question here for Alexis. Alexis, could you please explain the AUD 47 million provision in Cody Outdoor?
Yes. We've worked very closely with our auditors on, following AASB 5. With that, included in that provision, is a provision potentially for an outcome of a sale, and as well, with the ongoing trading, results of Hong Kong.
Another question here for Stephenson. In the H2 of 2025, you outlined ARN's new strategy. How are you tracking it against executing this new strategy?
Yeah, as I said in our presentation, I'm happy with the progress so far. I'm also very aware that there's a lot more work to do. We've put a line in the sand that says we're going to transition from a traditional business to a more digital business and entertainment business. That will allow us to create and distribute content across multiple platforms, and monetize that content off the one cost base, which I think is important to drive profitability in the short, medium, and long term. We've obviously gone through a complete organizational redesign. We've put a new team in place. We've got a very clear strategy, which I've outlined today to you in this presentation, communicating that to our teams broadly, now we'll begin to execute.
We're in the executional phase. You know, it's the vast majority of my time is spent on how we execute that plan across our entire business, diversify revenues, and generate greater profits for our shareholders.
Another question here on the cost out. ARN has reinvested some of the cost savings back into the business. Where has this investment occurred, and what outcomes are you expecting?
Again, you know, if I refer back to the slides that Alexis took us through, the investment that we've made has been incremental and responsible. That investment today is into talent and content, and obviously investment into the development of our digital and data capability. You know, I expect to see the benefit of those investments flow through revenues, and therefore flow through earnings, as we head through 2026 and beyond. Creating a digital capability in this business, and creating more Australian content that we can monetize across all platforms, is core to our strategy of becoming and being an entertainment company that can deliver better returns.
Just on the question of dividend.
Yeah, as per Encho's earlier question, I think, you know, the board has made a strategic decision to hold dividend for this particular period as we go through the divestment of non-core assets, including Cody Hong Kong, which I spoke to.
Steve, thanks so much for your time today.
Thanks, Fi. To everybody on the call, thank you for your time. As I said earlier on, 2025 has been a year of transformation for our company. We've been very focused on the management of our costs and capital management. We've done an excellent job, I think, so far, there is a lot more to do. We have a very clear plan at ARN to diversify our revenues and deliver a greater return for our shareholders. On that basis, I would thank you very much for your continued interest in our company, and I look forward to seeing you with the half-year results.