Thank you very much. Yes, this is Jonas Tellander, CEO and Founder of Storytel. With me on this call, I have our Interim CFO, Jörgen Gullbrandson, and our CCO, Chief Commercial Officer, Ingrid Bojner.
If you go to the next slide, we can see that we have a very strong revenue growth. It's 45% now in Q4 2019 compared to Q4 2018. Most of this is driven from the Nordic market. I think 38% of this is from the Nordic market and 7% from the non-Nordic market. The subscriber growth drives a lot of this, but then also we have an ARPU improvement that has really boosted revenue. This is a really high number for us. Next slide, please.
If you look at the other highlights in the report, again, the leading targets for us is subscriber growth and revenue growth for our streaming business, and that's looking very strong now. Then we can see that the contribution margin is also moving upwards to 14% now from 10% a year ago. EBITDA margin, we have communicated a range of -14% to 16% for 2019 already early last year, then we corrected that range to -16% in the Q3 report, now we ended the year on -15.7%. That's all in line, and the Q4 was even a little bit better than that. Then we also refinanced our bank loans and extended the credits at Swedbank during the quarter, which we're very happy about.
I now hand over to Jörgen to talk about the details of these numbers.
Thank you, Jonas. Next slide, please. Looking at the details of the report, you can see it's a beautiful development quarter-on-quarter for the last five quarters. As Jonas said, the revenue came in at SEK 421 million, up from the SEK 299 million a year ago. Good development, even better when you look at the contribution profit at almost SEK 69 million, which is almost doubling the contribution profit we had a year ago. With the growing revenue, you don't get a doubling of the contribution margin, it's up to 14% compared to 10.4% a year ago. The paying subscribers, you see that, we have communicated that before as well, moving 1.083 million as an average for the quarter, we reach 1.1 million, as you know, on Christmas Day as well.
At ARPU development, you can definitely in the numbers and in the graphs see the positive improvement coming from the decrease in Q3 2019. We maintained this high level for Q4 2019 as well, coming in on a group level of SEK 130 per user. If you break it down, looking to the segments that we present, the Nordic countries are the bigger and the more profitable regions. You can see that we come in at SEK 352 million compared to SEK 259 million. Also a good contribution profit. This is where we make the money and a margin of almost 33%. I believe we can say it's the highest we've seen in the group. This was also for the ARPU, SEK 155 in the Nordic countries, which I believe is important by far .
Looking at the non-Nordic countries, the ones that grow a bit quicker than the, I wouldn't say mature markets in the Nordic, but more mature markets at least, where we saw a doubling in the revenue from Q4 last year until Q4 this year. The contribution profit is a negative one because this is where we invest in many newly started markets. However, the negative contribution profit is on the same level as it was a year ago, which means that the margin is much, much better, half the loss that we did last year. Great to see that we have a customer base in the non-Nordic countries now up to 326,000. It's a big number. It's really growing and becoming substantial in the group. Looking at ARPU as well, the ARPUs in these countries are lower, as you know.
It is great to see that actually the ARPU is increasing over time, and that the price increases that we do and continue to do actually do have an effect. Our guidance for the Q1, the forecast, new for this report, as you might have seen. We believe we will continue to grow our revenues to SEK 438 million in Q1. The good development here is when you compare the Q1 to Q4 last year's shift, we had almost no growth on the group level, only SEK 4 million growth, because the Q1 is usually a weaker quarter. This year we definitely think that we'll grow another SEK 17 million. It's a positive shift, and we have a good speed in the group. This growth in money-wise comes mainly from the non-Nordic countries where you see the more substantial growth.
Positive as well to see the increasing ARPU levels that we foresee and expect for Q1 in the non-Nordic countries of SEK 73. Mainly driven by the price increases that were done in Q4 and also done in Q1 2020. Next slide, please.
Yes, if you summarize the guidance that Jörgen told you about, that adds up to a 48% annual revenue growth for Q1 and a 38% subscriber growth. That's extremely strong. It's not something we expect to keep throughout the year.
We expect still to land c loser to the 35% guidance we have. The reason we are currently very high is the substantial VAT decreases or reductions that we saw in Q3 last year. Again, a very strong guidance, and very proud of that. Let's take a look at the other financial targets and how that develops over time on the next slide.
Thank you, Jonas. Just looking back at the financial targets we had for 2019, and I'm pleased to say that we delivered on all of them, reaching the 1.1 million subscribers as we did on Christmas Day. The revenues are in line growth as well. Even though negative EBITDA came in below what we guided at 16%, we came in at 16.7%. Also worth noting that Q4 was actually 14.6%, so better than the yearly average.
We did reach streaming profitability on more than one market, and we did our launches as we will tell you about soon. Looking at the target for 2020. What we know now and the target we did for Q1, does not make us restate that we believe in it. These are the same numbers you've seen before. We should reach our one and a half million paying subs. We should reach between SEK 1.9 billion and SEK 2 billion in revenue. The EBITDA margin will improve from the -15.7% now, so between -10% and -12%. This is using same accounting methods as we've done in the past. It's like for like numbers. We will for sure reach profitability in at least two markets, maybe four, and launch in at least one, maybe three markets. Our long-term plan is also the same as we've done before.
We believe we will reach 40% on paying subs at least, 35% in revenue. We'll do this with still good KPIs, customer value versus acquisition costs, and launch in another 20 markets.
Next slide, please.
Okay. How are we going to reach our targets? We look primarily at the CLV/ SAC calculation. What are we doing then on the reach to reach the guidance that we have put forward? We're going to do a heavy improvement on the gross profit continuously with four markets having increased prices during January and February. We have also been helped by a recent reduction in VAT in both Holland and Germany, starting this year. The tech team and department, combined with the customer team, are working towards the long-term value for the customers in terms of lifetime, with large improvements on the feature side that are coming out during the year. We hope to improve also the CLV that way. Not least, we have the [SAC] development, which is a continuous improvement and optimization of our marketing efforts.
Next slide, please.
Looking at what we did last year in terms of new market launches, we launched five markets compared to 2018 when we launched six markets. We are projecting to launch 20 markets during the next coming three years. Next slide, please. If we look at the historic launches of different countries, we can see that over time we reach profitability. This is a combination, of course, by a scale effect in the market, as well as improvements and virality effects in the customer side, and also improvements on the lifetime of customers that keep on staying with us and our service. Looking forward, we have Poland, Finland, and Russia that are markets that we are seeing that we are going for profitability for this year and the next year. We have had a guidance of one to three more profitable markets for this year. Yes.
Very exciting. Thank you, Ingrid. Go to the next slide, please.
Looking at the market opportunity for Storytel, we are very bullish. We see that the audio revolution and audio trend continues to be incredibly strong and helpful for us. For the coming 10 years, we expect the overall audiobook market in the world to grow by 15% annually. Storytel should be able to take a good market share on that growing market. We currently have a market share of 5% globally, if you look at the non-U.S. markets, we have a market share of about 15%. We expect most of the growth to come from outside of the U.S. and hereby having Storytel capturing a 15%-20% share of that market growth. This looks for a bright future.
We do hard work every day to make sure that we have people loving, enjoying audiobooks around the world, and hope to be doing that for many years to come. Next slide. That's it for our presentation, and we now move over to a Q&A.
Thank you. If you do wish to ask a question, please press zero one on your telephone keypad. If you wish to withdraw your question, you may do so by pressing zero two to cancel.
The first question comes from the line of Derek Laliberte from ABG. Please go ahead.
Yes, good morning and congratulations on a strong end to 2019 and also a very good start to 2020. My first question, I was wondering if you could give some more details around the factors affecting the positive development in the contribution margin in the quarter in the Nordics. If you could break it down on how the market share of listens has developed as well as the reduced VAT effects from that and the marketing spend? Thanks.
Yes. Thank you, Derek. I think you are correct. The contribution margin improvements come from one part of it is, of course, the price increases or implicit price increases that came from the VAT reductions in Q3. We've seen some improvements also on the gross margin and the content cost deriving from a better product mix and a better profitability on some of our accounts. We've seen also that in the summer season of Q3, our marketing costs are very high, and then they drop down a bit in Q4, so it's natural to see a little bit lower marketing spend in Q4. Overall, very positive, and also comparing to last year, very positive.
Okay. Thank you. Secondly, could you give some more flavor around how each of the individual Nordic markets are performing? How does it look around Sweden, Norway, Finland, Denmark, and Iceland?
Yes. I think I will start with Denmark. As we presented last year, we did a consolidation of our platforms that we have in Denmark, with Mofibo being our strongest brand, and also our platform change towards the Storytel tech platform. We are continuing to have a strong result in our Danish market, and we see a continued strong development in the Icelandic market. As you can see, that is a recent market we've launched that is already a profitable market to us. I would say that we have a strong performance across the whole Nordic group.
Okay, thank you very much. Finally from me, more on a general note there. What would you say are the biggest risks to these long-term financial targets that you have? Is it related mainly to the competition landscape, or being able to access content in the same way as now, or more of a general audiobook penetration, sort of where that will help? Thank you.
I think if you look really long term, we see mostly opportunities in the sense that we are heavily weighted towards the audio consumption and audio revolution. In that space, there's also competition. You have podcast platforms growing stronger and stronger, and a lot of the creative talent being invested into the content for those platforms. I think that for the book industry in general, it's important to stay relevant and focused on the creative top talent, which always have come to the book industry, but it may not be a given that they continue to do that, but go elsewhere to podcasting platforms. For us, it's important to be also somehow present in that space, in the storytelling part of that space, and make sure that we keep having relevant content and good work.
Okay, thank you very much. It is very clear.
The next question comes from the line of Oskar Erixon from Carnegie. Please go ahead.
Thank you. Good morning, guys. First question is on Sweden. I know we discussed the Nordics more in general terms, but could you describe a bit how subscriber growth is developing in Sweden, given quite strong growth and increasing size of your local competitors? Thank you.
Yes. Thank you for that question. We continue to have a very strong market position in Sweden. There's been some statistics coming out from the Publishers Association and from Booksellers Association, and we keep being a strong market leader with about two-thirds of the overall market. I think that's very positive. We see also that the book market is now really pivoting from a physical market into a digital market, in particular in the adult fiction segment. The growth, there is underlying subscriber growth still in Sweden for Storytel. It's a double-digit growth still, and we're hoping to keep it that way, but need to stay very relevant and focused to make that happen also. I think Ingrid has some other thoughts on this.
Yes. I think we have actually reached a very important milestone during the fall with the 400,000 subscribers in the Swedish market. We continue to see positive growth, and we know it's a more competitive market that we have, but we have a strong presence, and we continue to work with our content to develop it at a continuous pace.
Great. Thank you. Two other market-related questions. Can you discuss how the launch has been in Germany, which is quite a particular market, I guess? Also, just very quickly, describe what markets are performing the best outside of the Nordics. Is it still Turkey, Mexico, those that have performed well previously? Thank you.
We don't normally comment too much on the details of all our markets. With regard to Germany, I think it's a similar stage to South Korea, that we're building up the market right now and the content offering and preparing for a bigger rollout, but we haven't really gotten to that big marketing spend point. In terms of the best top-performing market, maybe Ingrid could share some interesting flavor on that.
Yes, I think as we also wrote in our yearly report, it's all about the local product market fit that we continuously work on. For us, it's very important to start with the content, making sure that we have something that's relevant for the local customers, and then pairing that with the payment system that works best in their countries. When we start exploring our marketing opportunities, we can see that in some countries, as we also spoke about on the Capital Markets Day, the way people consume our product is very local. Secondly, they may differ a little bit between markets. For example, in Russia and Turkey that we spoke about on the Capital Markets Day, there's a heavy shift towards really wanting to learn something from listening to books and audiobooks.
That's something also we then work with on the local level to pair the content on the best way. This is how we work with every market that we go into, and I think we will not be able to comment even more deeply, but yes.
You should basically look to our more, the markets that we are in profitability on or expect to come into profitability on, and those are the locomotives for most of our top-line growth in the coming year.
Great. Very clear. A final question, and I'll leave it. A final question. Penguin Random House, you discussed a bit before at the CMD, but obviously withdrew their Anglophone and Spanish content from unlimited streaming services. Do you consider English content important in market launches specifically, or do you see it as a non-event? Would be great with some more insight there. Thank you.
Yeah. Great question. Penguin Random House, they withdraw from all the streaming services globally here a month ago. To us, for their English content catalog, it's very small impact and effect on the consumption. 85% of the consumption is local language, and only 10%-15% is English language. Penguin Random House is a small subset of the English part, so doesn't really have a huge effect. In the Spanish region, of course, they have a strong position, and a lot of the content that's being consumed there is from one of their publishers.
I think just like with Netflix six or seven years ago, when you saw some of the major labels withdrawing from their service, you saw them investing more heavily into their own content catalog. I think that's where you're pushed as a streaming company to go in terms of investing more. We'll see more investments in Storytel originals content in the Spanish region going forward.
Okay, great. Thank you.
The next question comes from the line of Hjalmar Ahlberg from Kepler Cheuvreux. Please go ahead.
Thank you. Maybe a follow-up on, you discussed the local content being a key again when launching a new market and being successful, how do you see competition developing here? Are they trying to replicate this or is it difficult to do that?
Yes. Thank you. I think having a strong position and a strong brand name also in the publishing industry is something really good for us. Also owning publishing houses, that makes us relevant and trustworthy as a partner for building up content locally. I don't want to comment exactly on how the competition is thinking, but I can clearly see that we are the most local streaming service when it comes to audio. This is a road that we believe is the right road to go.
Okay, thanks. You mentioned publishing there, which had a quite good quarter, at least from my perspective. What was driving the growth and margin there? Was there something, I know Q4 is also a strong quarter, but do you think the pickup in growth and contribution margin was something sustainable looking into 2020 and beyond?
You refer to our publishing houses.
Yeah
[audio distortion]
No, that's typically what you see is the seasonality effect of the Christmas season, which is always very strong in that area. It used to be stronger. It's more leveling out now. Overall, I think the growth that we see in print publishing is more driven by a couple of acquisitions we made when we moved in first Massolit and B. Wahlströms then Printz Publishing into the Norstedts publishing house, which is largely driving that growth. Otherwise, I think that in the book markets in both Sweden, Denmark, and Finland are largely flat or low single-digit growth.
Okay, thanks. A last question on the ARPU levels in your forecast. You're seeing it coming down a bit in the Nordics and coming up a bit in the non-Nordics. Can you give some more flavor? That is just mix between countries or something else driving that?
Yeah. Starting with the positive news, looking at the increase in revenue in the non-Nordic countries, that's mainly driven by the price increases that we give ourselves. As you see with the growing catalogs that we have in the countries, we dare to increase the prices, and the customers stay. In some markets, we've seen the VAT rates going down, like we mentioned in Germany and the Netherlands, which also impacts this positive story. That's good news.
Looking at the Nordic market, we were impacted partly by billed per day. We had actually one day less in Q1 than we had in Q4, which affects it by [SEK 1.49]. That's one impact into this one. The main part is, it will be a mix of the countries coming into this one.
Also I think there's been more family accounts being signed up, which have a lower ARPU. That drives down ARPU slightly.
While being very positive when you look into the Customer Lifetime Value because the family subscription models, even though lower ARPU, brings in more money per payer and also makes the customer stay for a longer time.
Okay, perfect. That was all from me. Thank you.
The next question comes from the line of Joachim Gunell from DNB. Please go ahead.
Thank you. Good morning.
Good morning.
I came in a bit late here to the call. If you touch upon this, perhaps you could clarify once again. I've noticed price hikes in both Russia and Turkey since the CMD. I think you already mentioned Poland and Mexico back down. Perhaps you can talk a bit about the timing of this hike. How much is driven by, say, inflation versus markets becoming more mature and your ambition basically to improve Customer Lifetime Value? Then the follow-up would obviously be if you have seen any impact on churn.
Thank you. Yes. Any pricing decision is a combination of different factors. We start by the customer side and make sure that we have a catalog that we have really put money into and invested in, and then we feel that it's time for a price increase. When it comes to Turkey, yes, you may also think about the inflation being, of course, a part in this game. It's a combination of factors. You asked about the churn. We have actually not seen any real effect on the churn side. We have, for some of these markets, introduced a price to new subscribers. We can continue to see that we see a good growth. We also have then kept a lower price for our remaining customers for a while.
That's a nice way of introducing a price increase to the market and also taking care of the customers we already have.
Again, a grandfathering principle that Netflix has used for many, many years is what Ingrid refers to.
Clear. The regions where you seem to accelerate your international expansion seems to be, I mean, further down the line, Latin America and perhaps Middle East, given the scalability of the content catalog. Your push into LATAM seems to be paying off in terms of popularity in terms of your app, but not so much in, say, the United Arab Emirates. Any thoughts on why that is?
I think we found a local product market fit. I think it speaks about in Mexico and also feeling very bullish about the rest of the LATAM region. I think we haven't quite found that yet in Arabic. In India, it's also taken us some time, but we expect to solve that this year by introducing a new type of subscription for the Indian customer. Step by step, we try to solve this for each of these markets.
Our approach to United Arab Emirates, we have also invested heavily in our catalog there. That's also what we have really decided to do. The marketing hasn't really been the focus for us yet. It is also positive to see that we have now introduced the Arabic content in our Nordic apps in Sweden and.
All right, for Jörgen then, as 2020 will be somewhat of a consolidation year with somewhat fewer markets launched, can you talk about, I mean, cash flows going into 2020, say, versus 2019 levels?
Yes. Consolidation year, yes, in a way. We will continue to grow by 35%, as you know. It's consolidation in the Storytel way. We haven't guided the detail on this one, but with the growth, we will continue to lose money, that is for sure. As you can see in the report, we have plenty of cash, and we have additional credit lines available with Swedbank as well. I think we are in a good position to support this growth for the coming years.
Great. No, do we have any final question or do you want to close the call? A final question?
One final question, just could you perhaps, when will you provide further details on the financial implications of the eventual capitalization of content and development costs?
Yeah, this will come during the year. We haven't set an exact date, but sometime during this year, we will start to capitalize those assets as well. You will see it in one of the quarters during 2020. That's where we're coming.
Thank you very much.
Final question then.
We have a last question from Dennis Berggren from Pareto Securities. Please go ahead.
Okay, good morning. Just a quick question. Can you provide some color on the Storytel offering and how it's currently impacting customer lifetime trends and specifically churn?
We don't have any data on that yet. I mean, basically last summer we introduced Storytel, the magazine subscription to our subscribers, and we had a good sign-up and then a good conversion in October as people started to pay for that subscription. It cost SEK 50 extra on top of your Storytel subscription. We only have four months so far, so we don't have any firm data that can validate the improvement on the survival rate from the customer lifetime for the customers who sign up for that. We need to get back to that in the next call.
Okay, perfect. Looking forward to that.
Yeah. Thank you very much, everybody. Excellent questions and looking forward to talk to you again in three months from now. Until then, stay tuned, listen to more audiobooks, and stay as followers and investors in Storytel. Thank you very much.
Thank you.