Storytel Q1 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, Bodil Ericsson Torp, and Head of Finance, Jonas Olson. Please go ahead.
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 Ericsson Torp, the CEO of Storytel Group. Joining me today, filling in for Peter Messner, is our Head of Finance, Jonas Olson. As we celebrate 20 years of leading innovation in storytelling, I'm pleased that we have entered 2024 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 Bokfabriken 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 SEK 953 million. 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 2 percentage points, supported by a higher share of high-quality and cost-efficient content. Adjusted EBITDA increased by over 40% to SEK 150 million 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, an amount of SEK 15 million 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 SEK 88 million compared to SEK 28 million 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-Nordic core markets, contributed to the growth.
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 cost SAC compared to the same period last year, mainly due to increased marketing efficiency. We have focused on balancing both ARPU and healthy subscriber growth. The key ratio here is customer lifetime value to subscriber acquisition costs. Our success is 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 SEK 862 million. The growth was mainly driven by an 11% increase of the subscriber base. Non-Nordic core 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 SEK 369 million. Gross margin increased 1.2 percentage points. EBITDA increased 89% in the quarter to SEK 94 million, equaling a margin of 10.9%.
The improvement was driven by higher gross profit and lower operating expenses. Operating profit increased over 200% to SEK 61 million 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 SEK 283 million 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 SEK 66 million, a margin of over 23%. Driven by higher gross profit, operating profit doubled in the quarter to SEK 22 million. Looking forward, we are confident in our strategic investments in premium content. Later this year, for example, Norstedts förlag will publish Fredrik Backman's forthcoming book, Mina vänner. Backman's international success with translations into over 40 languages and film adaptations demonstrates the potential of this authorship. 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 SEK 88 million compared to SEK 28 million in the first quarter for the previous year. This improvement is primarily driven by a stronger operating result, where EBIT came in SEK 78 million 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 of our accrued profitability. Cash flow from operating activities totaled SEK 29 million compared to SEK 1 million for the same period in 2024. Cash flow from investing activities amounted to SEK -93 million compared to SEK -38 million 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 SEK 31 million. All in all, the total group cash flow for the period was SEK -73 million, 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 SEK 3.3 billion 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. With that, I hand back to Bodil.
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 e-books. For the past 10 years, we celebrated the heart of our business, our authors and narrators, through Storytel Awards. This year, we hosted ceremonies in Stockholm, Helsinki, Copenhagen, Oslo, Reykjavik, and Amsterdam, honoring the most loved Storytelists 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. Voice Switcher 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 are all welcome to join our Capital Market Day on May 15 here at headquarters on Riddarholmen Stockholm, or you could also join remotely. We are ready to open up for your questions.
To ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Derek Laliberté from ABG Sundal Collier. Please go ahead.
Thank you and good morning. Looking at the strong performance of the non-Nordics core region here, which would you say were the key market drivers of this strong growth? Thank you.
Hello. Yeah, this is a good question. The key here is actually that we have a really good, I would say we have a strong consumer offer, of course, since we have our local knowledge in the local catalogs at the streaming side. That is a very strong strength in the markets. We know what our users, customers, would like to read or listen to. We see that we are having this strong know-how of actually meeting the individual demand in the local markets, as well as we are good, I would say, when we're talking about efficiency regarding the marketing investments.
Storytel has an amazing market function that has been built up for the last two years, I would say. We see that we have a good leverage on our investments in those markets. The key will definitely be that we have the local competencies in the catalogs, and that's extremely important for us.
Thanks. I appreciate the color. Could you also say a bit on a country level, whether it was Poland or the Netherlands, Bulgaria, which were the strongest contributors to the region?
Yeah. As you know, Derek, we do not disclose so much numbers in the individual countries. You have heard that before. I would say that we have a strong momentum in the countries. As we have said before, we have a really good market situation in Poland. We have a strong, I would say, I mean, we are the market leader here, except Poland, actually, in the non-Nordic core region. Yeah, we are satisfied with the different investments that we have done in those different countries. We see very good opportunities there.
Okay, great. Looking at the Nordics, I know you can maybe give details about the specific markets. In Q1 here, we usually see a bit slower sort of seasonal intake. Can you give some flavor on why the subscribers were down by 5,000 subscribers sequentially here versus Q4?
I didn't hear the last. That was for, could you please repeat?
Yeah, yeah, for the Nordic markets, I note that the subscribers were down by 5,000 compared to Q4. If you could give some flavor on what's going on in the market.
There are some seasonalities. If you compare year-on-year, it is + 11% on the subscription base. No, it is 7 in the Nordics. I am sorry. It is total 11. In the Nordics, it is 7%. That we actually, I mean, we will try to increase so we do not see the seasonality effects. It is important to actually also compare year-on-year. At this time, it is a 7% increase in the subscriber base compared to Q1 last year. I would say that we could always be better.
Got it. Yeah, so it's nothing to do with sort of general market weakness or tougher competition or something like that. It's more of a seasonal. Okay, great. Looking at the cost side, I note the gross margin, I mean, clearly improved again year-over-year here, but still a bit lower compared to the prior three quarters. While if I look at the sort of individual segments, it still looks like there were improvements. What's driving this sort of small downtick in the gross margin Q1 ?
This, I would say, is the effect of seasonality as well. We always see that the gross margin goes down a little bit in the Q1.
All right. On the sales and marketing costs, though, were I think clearly higher here than what you had in any single quarter last year. What is driving that, please?
Yeah, that's also expected and according to plan, of course. That goes into how we interact and accelerate our different markets in the marketing investment, of course, in searching of new subscribers and higher intakes. We have planned for these investments, and it's important to actually also gain market shares in the markets where we are growing.
One additional.
Okay, great. Yeah.
Sorry. One additional thing that we could add is that the Q4 publishing sales were high, and that also leads to a higher gross margin that we have in the Q4.
All right. No, that sounds good. I am sure you'll get continued good returns on the marketing investments. On a more general basis here, Spotify has clearly increased their investments in audiobooks in the European market pretty broadly, it seems. Are you experiencing any effects from this in the markets that you operate in? Thank you.
Not for the moment. We do not do that. We are just monitoring. As always, we are following and monitoring all the competitors that we have in the different markets, even though it is global competitors or it is locals. We are quite used to having a lot of competitors on the different markets. The short answer is actually no.
Perfect. Finally, I noticed this global company, also RBm edia, is sort of increasing its presence in Sweden. Do you have any thoughts about how that potentially could affect the local market long-term?
Not for the moment.
Okay. Thank you very much.
I also add that we have, I mean, we have this really strong local presence with our local catalogs, and that it's also important to remember when we compete with local players.
All right. Great. Thank you.
Thank you, Derek.
The next question comes from Joachim Gunell from DNB Markets. Please go ahead.
Thank you and good morning. I have three questions. If we just start off a bit here that you do not provide a full-year 2025 outlook yet, then I would assume that we will have to wait two more weeks before we get some more firm commentary there. When you commented in the Q4 report that we should see continued good growth, do you think that the Q1 growth rate is representative for what is good?
Can you hear me? Bodil and Jonas, I don't know if you are on mute or if the conference got disconnected, but I'm still here.
The conference call will continue shortly.
Yes. Can you hear us?
Yeah, I can still hear you. I do not know if I am still in the lobby here. I had a question. I do not know if you got that one.
No, we did not. Please go ahead again.
Okay, perfect. Thank you. Okay, starting off then, I have three questions. The first one is essentially which refers to growth rate for 2025. You have not really committed to a firm guidance yet. I would assume that we will have to wait for two more weeks on the CMD before you provide that. In the Q4 outlook, you essentially said that expect continued good growth, good profitable growth. Do you think the 7% growth rate we saw here in Q1 is representative for what you envision as good growth rate for the remainder of the year?
I would say it's in the line with the year, with the start of the year.
Okay. If we call it raise the line of sight a bit here. It seems like the music streaming industry, at least, has entered more of a price inflationary market where labels want even more frequent price increases. I mean, they call it streaming 2.0 to focus on more monetization here. Do you think that we could see a similar push from publishing houses in your industry to raise prices, to increase the remuneration to content creators and so forth, also for you to capitalize on the breadth of content and feature leadership?
That's a really good and relevant question, I would say. I mean, the price strategy and the price and the product packaging is, of course, strategically extremely important for us. We are monitoring everything that is happening within the streaming industry and the publishing industry. We will come back to that at Capital Market Day. There are, of course, different ways to go forward. There are definitely opportunities that you also had mentioned here. It's too early to say today what we will do. We will be back on the price and the product strategy the May 15.
I will hold my breath for two more weeks. Just finally, then, there's a.
Yeah, I will also emphasize that it's really interesting to also see how the price in the markets, in the industry, is actually evolving.
Great. Finally, there is a lot going on on the user experience side that you highlighted, Bodil, at Storytel. From a more philosophical standpoint here, in a world with increasingly, call it, shorter and shorter attention span amongst the consumers, I think, I mean, audiobooks and e-books favor more longer duration reward center, right? How do you think about product development to tap into that, call it, more quick fix attention opportunity in your industry?
I think that the product development is a core and key question also going forward for us. Since our company has been in kind of transformation phase for the last two or three years, having focused on profitable growth in a very, very good way. We need to maybe take some step further now to see how we can increase and enhance the customer value. One thing is actually regarding the features, the products, and still lead this game. That will be very important for us.
Okay, thank you. See you on May 15th.
Yeah, you're welcome. Thank you.
The next question comes from Stefan Wård from Pareto Securities. Please go ahead.
Yes, hello. I have some clarifications on the sort of one-off related items, both on the operating level, but especially on the financial level. Seems to be FX relating to Audiobooks.com and then a little bit around the net financials. With you being almost in net cash now, how should we think about the net financial line ordinary? Will this be FX relating to Audiobooks.com? Can you clarify that and how we should keep track of it going forward? On the ERC, on the operating level, what to expect for the remaining nine months of 2025?
Thank you for the question. As you said, the one-time off item that we have in the finance net is driven by FX, primarily the USD rate, U.S. dollar rate. There is an, without going into too much detail, this is related to the financing of the ABC, as we would not expect, depending, of course, on the FX rate, we would not expect this going forward at the same level.
Okay. In terms of how much are you paying costs of the remaining debt on the balance sheet? What is the sort of interest rate? Will you amortize that if the cash flow is good? What should we expect when calculating net financials?
Here, we have to wait to the capital markets day, given the strategy going forward. The quarterly run rate for the interest is around SEK 8 million.
Okay. The quarterly cost for the debt is around SEK 8 million?
Yes, that's correct.
Okay, thanks. This long-term incentive program, can you clarify a little bit around that?
This is primarily driven by our stock value. That is why we have it as a one-time item, because that is something that's more or less out of our control.
Okay. Thanks a lot. Some questions on the content catalog, if we could get an update on how many titles, your own titles, for instance. I would like to ask, I am not sure if you will give me an answer, but the Sune catalog, how much of the listening does that account for? What are the sort of implications on profitability from having acquired the entire Sune catalog?
Yeah. Hi, Stefan. I think that we do not really disclose the figures regarding the return on investment of just Sune. I would say, do you hear me? Yeah.
Yes, I hear you.
Yeah, good. We have in plan for this year, five new Sune audiobooks, actually, in Sweden. That will be three of them will have Victor Beer from I Just WantTo Be Cool as a deputy narrator for Drive Attention. We are actually exploring and making a lot of plans regarding Sune and that investment, of course. Håkan Bråkan will also have a movie in December. We will follow up the premiere with Håkan Bråkan audiobooks as well. We have a lot of different products going on. We will elaborate a little bit more about that also going further. I would say, I mean, we are really well positioned to actually produce what our subscribers and customers want to listen and read. That we will, of course, increase. That is also important going further on to increase the competence around that.
It is not really relevant how many titles there are. It is more relevant to say that we have the relevant content and we are good in producing audiobooks that are also exclusive from our Storyside department. I mean, that is a success factor for us. I think it will be for the future as well. That is a content differentiator.
Yeah, I understand. A lot of my other questions were answered by the previous analysts on the call. Thank you. It looks like a solid set of numbers, even though this one-off caused a minor deviation.
Thank you, Stefan.
If you wish to ask a question, please dial pound key five on your telephone keypad. No more questions at this time. I hand the conference back to the speakers for any written questions or closing comments.
Hello, everyone. Thank you for very good questions. Looking ahead, we are well positioned to meet growing demand for local language content, as we talked about, Stefan, with. We have strong foundations in our 10 core markets and a growing local catalog. Our financial strength creates a great position for both organic growth and acquisitions across publishing and streaming. I just got a signal now that we have one more question. Is that correct?
Yeah, we have a late question from Henrik Larsen.
Okay.
Could you elaborate about other operating items in the quarter and income group, total of SEK 20+ million?
Yes. This is mainly related to our investments in ElevenLabs that have been sold during the quarter.
Was that the last question? Yes, it is. Thank you for the last question. The opportunities ahead really energize our team at Storytel Group. I'm thankful for everyone who is joining us on our journey forward. Thank you for your participation today. You are very welcome on the May 15 when we have our Capital Market Day. Have a nice day. Thank you.