Thank you for tuning in. Welcome to Storytel's year-end report for 2021, and also for the Q4 2021. My name is Jonas Tellander. I'm still CEO and Founder of Storytel, and on my side I have
Ingrid Bojner, Deputy CEO and CCO.
Yeah, and Sofie Zettergren, CFO.
Good. Let's get started, shall we? Highlights in the report, streaming sales up 20% to SEK 605 million now in Q4 in streaming. Then the subscriber base a bit more, 24%. Storytel book sales up 20%, so that's in part thanks to the acquisition of Lind & Co. Also I think even more encouraging is the EBIT margin of our publishing houses. We'll get back to that soon. Net turnover, including streaming and books, increased 17% year-on-year. As you know, we have signed an agreement with to acquire Audiobooks.com and enter the US market, and this was completed now in the new year. Richard Stern was elected new director of the board, and Hans-Holger Albrecht became chairman of the board as Stefan Blom stepped down.
This is a graph showing the cumulative net add subscribers per month, per year. As you can see, we have over the years been able to get to a steeper and steeper slope every year. In 2021, we didn't. We were just shy of 2020 numbers and north of 2019 numbers. Obviously, we aspire for 2022 to get back on the more positive slope. Our top market is really what's driving our growth, and we have a very strong trend there. As you can see, the contribution margin dropped a little bit in Q3 and Q4 as we invested more heavily in marketing in these markets. Taking a look at the Storytel book side, again, a very positive trend year-on-year here from 2017 to 2021.
We can see that we have strong growth in part driven by acquisitions, but even more encouraging, as I said before, very, very strong EBIT margin. We can see that digitization of book markets correlate very well with the profit margin for the publishing houses. I hand over to Sofie to walk us through the numbers.
Yeah, some more details about the Q4 numbers in the streaming segment. As Jonas mentioned, we continue to grow our quarterly revenues to SEK 605 million in the quarter. SEK 459 million coming from the Nordic segment and SEK 146 million coming from the non-Nordic segment. We continue to have stable and also high ARPU level in the Nordics, SEK 146. We saw a strong growth trajectory in the Nordics in Q4, but also for the full year in 2021. We did increase our investments in Q4 in the top markets, including the Nordics. We saw a slight decline in the contribution margin as Jonas just showed on the slides.
We do expect that to jump up to the, sort of the levels where we have been during 2021, which is 30%, so for the next year. Then in the non-Nordic segment, we came in at 737,000 paying subscribers. Slightly increase actually in the ARPU level due to the geographical mix. We invested more heavily in our top markets during both Q3 and Q4. The top markets outside of the Nordic is Poland, Russia, Turkey, also Bulgaria showing very strong traction. That has had a negative implication also on the contribution margin in Q4. As with the Nordics, we do expect that to climb up again in 2022.
Yeah, I think I will pause it there, and I will hand back to Jonas, actually.
Yes. Last night we released a press release that I'm stepping down as CEO. The quote from the release is, "13 years ago, I stood in front of the investors in the Swedish Public Service broadcaster SVT's adaptation of Dragon's Den, Draknästet, trying to convince them that Storytel and audiobooks in the mobile phone would be big one day. Today, all my wildest dreams about Storytel have come true. The audiobook has also helped the book industry grow, which makes me extra proud. It's time for new leadership at Storytel. 17 years of full focus on Storytel has taken its toll. The team is now stronger than ever and will, under Ingrid's leadership, take big steps this year.
I look forward to continuing to create value in Storytel as an owner and board member." Yeah, it's, you know, it's of course sad, but for me it's a, you know, total focus on what you're doing. Right now I feel in my life I'd like to bring some other parts into the equation as well. Again, feel very proud for what I've been a part of, you know, creating in these years. You know, that the audiobook would become the leading
Format in the book industry was something I was dreaming about, but quite didn't really believe in, to be honest, because it was so far away. Now we're there. On the Nordic market we're there, and hopefully the rest of the world will see this, and we will be the driving force in that evolution. Yeah, welcome Ingrid. You are now, in a couple of hours, the new CEO of Storytel. There's a search process that started, and obviously Ingrid is one of the candidates there. We will see what happens during the springtime and what the board eventually decides. I hand over the remote to you, Ingrid.
Thank you. That's very symbolic. Thank you so much. It's a big shoes to fill for us in the management team and for myself, but I feel that we are very strong as a team, and we have a good strategy in place. We have pivoted the strategy over the last year, moving more towards mature audiobook markets. I think you're in good hands, or you're leaving it in good hands.
Just iterating which market we're in and what's really happening in that market. We are definitely in a growing market in the audiobook world, and we took a very big step the fall which came in now in January, our acquisition of Audiobooks.com. Now we are also present Storytel at the biggest, largest market for audiobooks in the U.S. We're very proud to be there. Of course, this is going to be one of the pillars for us to continue the growth towards the percentage market share that we expect that we can have in 2030. Of course, focusing going forward, we have a fantastic product, and we have lots of customers enjoying our product every day.
Throughout the world, we have plenty of subscribers, and we believe that we will get even more, capitalizing on the growth that is there. Accelerating growth is, of course, super important for us. We will continue to focus on the top markets and, of course, the more mature audiobook markets. We will pivot a bit of the investments towards those markets and continue to invest heavily in content, because that's, of course, how we grow. We both need a very good app and a UX experience, user experience, but we, of course, also need the content. We will also continue to do investments in proprietary content catalog. It's very important for us, including, of course, also, books segment.
Last but not least, of course, we have to build a scalable organization and ensure that we do this in a smart way, so that we can scale, and that we are efficient, and that we have high performers, that together comes together as a team and and do this. That is also in the plans, to ensure that we have a smooth and lean and mean operations, for us going forward. What will this then mean? Well, basically, we will continue on our growth journey and trajectory. That has been something of a stronghold for Storytel ever since Jonas started it. These are numbers from 2016, and we've had basically a CAGR of 30% since.
We also want to remind them that we were profitable at that time, so we have a solid and sound profitability in our core markets. Over the past years we've done heavy investments, both of course in marketing and spreading our brand, but of course also in content. We see that pivoting our investment strategy towards the larger markets where we have good traction, this will also lead to that this negative continuation of the EBITDA will stop and rather go up to the neutral. What does that mean in terms of total 2020? I leave to you, Sofie. Our guidance for 2022.
Thank you so much, Ingrid. For 2021, I think we came out strong or ended the year strong. The subscriber base, we reached 1.81 million subscribers, which was just below the latest forecast, I think mainly driven by higher expectations in some countries during the year, I think especially India, to mention one country which would contribute a lot to the volume but not so much to the revenue given the low ARPU level. On the streaming revenue side, we did reach our target of SEK 2.25 billion.
Also on the EBITDA level, we came in spot on our latest forecast of -6%, and then if we look a little bit more ahead in the future, starting in the near term future with Q1 2022, we have decided to discontinue the subscriber base forecast, mainly due to the number of countries we have, more than 25 countries, and also a lot of different subscription models, making it more complex. Really, what we steer the company towards is to increase our streaming revenue. That is what creates value for the company, and that's what we want to continue also to forecast on. Of course, we will continue to provide subscriber-based numbers on a quarterly basis as well. The streaming revenue is expected to grow with 34%-35% in Q1.
31%-32% using constant exchange rates. The split between the Nordics and the non-Nordics, if you see the Nordics is pretty much on the same level as in Q4, which is a typical trend for us given that Q1 has fewer days in the quarter, so that has an effect of approximately 2%. Adjusting for that, we would see an increase. And then in the non-Nordics, what's really driving the increase there is, of course, the acquisition of Audiobooks.com, so we're growing the revenues with almost SEK 100 million from Q4.
The full-year 2022 targets, same as with the quarterly forecast, no subscriber target, but the streaming revenue target is set to 30%-34%, and we feel really confident in that number that we will be able to reach it. It only includes the organic growth and the acquisition of Audiobooks.com, so no other revenues that we can't really control, such as the Spotify agreement, is included. On the profitability side, as Ingrid said, pivoting our strategy and also focusing more on operational excellence and just making sure that we are as lean and mean as possible, we do expect the EBITDA trend to shift towards a more positive level. We expect it to land at between -3%-0% for the full year.
With that, we will hand over to, or move over to Q&A with our analysts. I see some hands there. Dennis, do you want to go first? From Carnegie.
Thank you very much, and good morning, everyone. Could we start with discussing the situation with Spotify? Just to be clear, is the review initiated from your side? If so, why would you decide to not continue with the partnership?
Um, so should.
You do it.
Yeah.
It's, I mean, we are informing about it now. It is under review. We want to continue the dialogue, I think, from both sides and see how a partnership could be constructed. I think that's all we can say right now.
For us, we just want to be very clear that it's not included in our guidance given that it is a partnership, and in a partnership you need to be two sides, and we can only control our side, of course. Given that we provided the announcement of the partnership already in May last year, it has taken longer time than we expected from the beginning. We still, I mean, the last communication that it would be launched in half year one, we don't have any more updates except for that it is under review, so it's not that we will not do it. It's not dead, so to say.
We want to make it less of a more important pillar of our strategy because we believe that we will not be reliant on Spotify to grow next year, rather on our organic growth and the acquisition of Audiobooks.com.
Right. Concerning your organic growth and also with the additions from audio books, how should we think about the full year 30%-34% streaming growth target? I mean, what needs to happen for you to reach the higher end of that range?
Yeah, I mean, as you know, for 2021, we have been growing at approximately 20% with organic growth, and on top of that, we will add Audiobooks.com, so that's basically where we think we can end in the mid or higher range with those two pillars. Then of course, our ambition is to grow as much as possible, but this is what we see right now, and we don't want to overpromise anything, but rather be very sure on what we can deliver.
I think pivoting our strategy towards the main markets where we also have a higher ARPU is of course in that number. It's important for us to have our top markets performing as expected and what we have in the plans. That is an important factor in the growth.
Perfect, then finally from my side, what are you anticipating regarding Audiobooks.com here in 2022? I'm talking about Audiobooks.com. Now that it has been consolidated, would you be able to provide any more comments with regards to, I mean, growth profile or growth expectations for 2022 contribution margins? In general, just a view on the growth profitability balance during the year.
We've had Audiobooks.com indoors, so to speak, for approximately one plus month. We're working together with them to have a very good plan in place and just continue the momentum that they currently have. We're not going to give you any more details on that, but maybe come back to that more later during the year.
Got it. Thank you.
Thank you, Dennis. Stefan from Pareto.
Okay, thanks. Can you give some color on this performing non-Nordic markets, Poland, Netherlands, Russia, how the subscriber intake is, what type of gross margin, profitability level? You have communicated that you are profitable in the Netherlands. Is it close in any of the other mature markets?
Yeah, very good question, Stefan. We do have communicated that we want our markets to turn profitable after five years, and there are some markets that is sort of in that timeframe. Of course, there's some markets such as Poland, Russia that is very close, but that actually was EBITDA positive during the year. Poland is one example, but as we have communicated now several times, we increased investments in the top markets during the second half year, which means that Poland is not profitable on a total level. I think Poland is a very strong market, one of our strongest outside of the Nordics, together with the Netherlands.
In terms of margin structure, let us come back to maybe some more details regarding that. The gross margin profile is pretty similar in our top markets as it is in the Nordics. We have a strong gross margin profile of more than over 40% at least. On the EBITDA level, it's the Netherlands, as you said, that is positive.
Thanks. Can I just follow up also on the question regarding India? There was some, you know, issues with the payment structure and that could have sort of a temporary character, and you said that the churn increased over the second half. What can you give any sort of color on what the situation is there now? I mean, do you have a strong catalog or is this something that could be sort of improved, the situation could improve over 2022? Or how should we think about that market?
India is a fantastic market and color of a lot of different languages. We have a strong catalog, as you said, which is great. That's a good starting point in any market. There is also some positive trends in the consumer segment around audiobooks. What we experienced last year was really something on the payment side, and recurring payment was something that we couldn't really do. We have solved that problem, so that has come back. What we did during the time was to experiment with longer subscription periods since the recurring monthly payment was something that we couldn't do.
That was also one of the factors why it got a little bit up and down, because of six-month subscriptions at the end stopped, and then some people came back and some did not. The churn also was a reflection of that. Now it's solved. Then it has to do with how we decide to continue our investment there and et cetera.
Okay, thanks.
Derek from ABG, please go ahead.
Hello, thank you very much. I'd like to start off by asking you, Jonas. I mean, I must say, of course, this decision of yours is quite a bit unfortunately, but certainly understandable, and I'm glad that you will continue to be active in the company. I was just wondering, could you elaborate a bit more on why you felt that now was the right time for you to hand over? And also, what you as a continued member of the board, what you're looking for, type of aspects or rather characteristics in the next sort of permanent whoever you decide on, and basically what type of profile in terms of skills and experience that you're looking for? Thank you.
Yeah. I mean, there's never a good time to leave really. You just have to dig deep inside yourself and see what your motivation level is and whether you know, think that you can give the energy and devotion and effort that's required really to take us to the next step. I mean, I've been able to, with the team, to take us to this level, and I'm incredibly proud of that.
I just, you know, asked myself, you know, "What's the next five or 10 years going to look like?" I realized that I think I can make a really, really strong impact as a main shareholder and as a very strong force in the, on the board side and also, you know, participating in whatever, you know, potential M&As or partnership discussions, et cetera, that I can do with my background. I think, you know, it's just a decision I landed in and that I feel very comfortable with and very happy about. I don't want to comment on the CEO process. It's going to be a search process that's being kicked off now, and we'll just see how that plays out.
Thank you for that clarity. Yeah, that's really understandable about the candidates. Just one more here right now if I may. I mean, the organic growth clearly has come down a bit and we now have the guidance for this year while you maintain the 2023 target. I was just wondering here that at least from my initial calculations, it seems that you're basically guiding for about 17% organic growth or so this year if we exclude the audiobooks acquisition. We still need quite a bit of a ramp-up in 2023, probably need 30% growth or more.
I was just looking how is this plan looking? Will it continue to be acquisition-driven in order to reach that target or are you expecting rather a meaningful ramp-up in the existing markets? Thank you.
I mean, just a, you know, final comment from my side maybe. I mean, what we're looking at is a book market that is in transition and where the audiobooks is taking over more and more. We can also see that there's a very positive correlation between the publishing side of the business and the digitization or streaming side and audiobook side. We have the eyes on the long goal. I mean, what we're looking at is a combination of organic growth and M&A-driven growth, and we've historically proven that we are very good at, you know, spotting and also acquiring companies in this space. I think you should expect going forward and up until the SEK 30 billion mark that we're shooting at for 2030, for this to be a combination of M&A-driven growth and organic growth.
All right. Great. Thank you for that.
Thank you, Derek. Should we go to Joakim from DNB? Please go ahead.
Thank you. Good morning, guys.
Good morning.
Could you please just provide your thoughts on what you see as the main barriers to achieve your 2022 target in terms of growth as of now?
Yeah, I can start. I mean, I think Ingrid said it very well. I mean, it is the top markets that really needs to deliver on what we have the targets that we have set up, basically. I mean, we do feel confident that we will be able to defend our market share in the Nordics. We have seen a very strong growth trajectory in 2021. Then outside of the Nordic, it is the markets that we have already touched upon, the Netherlands, Poland, Russia, Turkey, Bulgaria. Then of course, the Audiobooks.com acquisition will be a big contributor outside of the Nordics. We will come back with some more details, I think, on the strategy there, and some more details on the numbers.
I think the other markets, it's not that we are not focusing or not doing anything in those markets, but it's rather that those markets will contribute more on the long term, the SEK 30 billion targets that we have in 2030. The subscribers that we have there will of course continue to enjoy the service, and we will focus more our strategy on product-led growth, content-led growth, and of course, partnership is something that we want to focus more on in the future.
I think we can add to the fact that we are in some of the more international countries, where the audiobook industry is still fairly immature. We want to go back a little bit, back to basics, basically, and do whatever we did back in the days when audiobook revolution started here in the Nordics. Be more entrepreneurial and less driven out of heavy marketing investments. I think that's the shift, and that will of course take a little bit longer time in terms of revenues, since the ARPU is relatively lower.
Understood. I mean, today it seems that you are, I mean, slightly flirting with the call it somewhat of a new segment structure, talking about the top 10 markets, as opposed to the call it Nordics, non-Nordics. Would it make sense to perhaps move to a reporting structure, shedding more light on, yeah, call it the top 10 markets? In particular, I mean, in the Nordics to be more granular on the fact that, okay, hey, this is actually a streaming business that is free cash flow positive, et cetera. What’s the trade-offs from your part there?
Yeah. I mean, let us come back to that. I think what we can say is that we are planning to have a strategy update or a strategy day in the near-term future. We haven't set an exact date yet. I think we will come back with some more flavor on the different segments that we have. And as you are alluding to, Joakim, we have different segments which we can really show that we are highly profitable in some of our markets. If we also include the book segment, as Jonas said, which is growing both on the top line, and the EBIT margin is improving as the digitalization continues, we see very high profit margins in those regions.
We have the sort of investment or the countries where we invest a lot in. Yes, let us come back and try to be very clear in how we create value, and how that looks in the different segments.
That's very clear. Yeah, just a final one from me, just from a, call it, broader perspective, what's your thoughts on that? I mean, you're operating a platform company that tends to benefit from this, like, type of flywheel effect. I mean, bigger gets bigger, and you can offer a better product to your customers. With that in mind, how come you are not growing faster than, call it, the overall audiobook market in the Nordics?
I think we have been focusing quite a lot on expansion and building a very solid content catalog. Those are things that we have been really good at. We have also operated a fairly complex environment with different payment systems in different parts of the world in order to make our product also have a local product market fit. What I do think is now in the making with our head of tech and head of product is a much more cleaner way of looking at how we operate and of course also building a very scalable model.
I think all the different departments, and that's why I was saying that we have a strong team. I think we have a strong team at Storytel in all the different departments in order to actually execute on this and make all of the different parts move together even better, as you said, in the flywheel. We need to do some investments, but we will continue to work and develop an even better both tech platform, but also on the content side.
Thank you for that, Ingrid. That's all for me.
Thank you, Joakim. Matthias from Kepler, do you have a question? Kepler Cheuvreux.
I'm happy with the answers provided. Thank you very much.
Okay, you're happy.
Okay.
I think I have maybe some more hands up from Stefan from Pareto.
Thanks. It's a follow-up, I guess. Yeah, on the strategy, it sounds like you will have a CMD event in the near term and probably will clarify some things, but it looks quite, it doesn't fit the old strategy that you should be in plus 40 market. Doesn't fit at all with the points that you communicate today. Can we sort of conclude that you will not go for being expanding into 40 markets plus by the end of 2023?
I think we don't want to comment on that guidance, but what we will do is to build a scalable operating model that can help us to go to the countries that we think are the most important for us. The expansion strategy is really to pivot towards the market where we have a more mature. It's not mature, but when you say that, it feels like it's not growing that much, but it's actually a really healthy underlying growth in mature markets as well. That was what we will do. If we grow to the 40 or the 50s or the 30s, it's more about really making a dent in the markets we are in, and focus it on being scalable.
Follow-on question there. The print books segment has surprised quite positively over the past couple of years. Is that something that you would consider, maybe acquiring publishing houses outside the Nordics, or how should we think about that?
Yeah, I mean, definitely there's no reason why we would be restricted to the Nordic region on that front. I mean, we can see that we have been very successful with the Nordic publishing houses. I mean, take Norstedts as an example with pretty stable revenue numbers. The profit has, you know, the average profit for the last two years has basically doubled above where we started a couple of years ago, and we see that trend even more strongly in some smaller publishing houses like Lind & Co, for instance. We're definitely looking at very broadly on publishing houses and in particular in markets where we believe, you know, we can be a good force in driving digitization as well on the consumer side.
Thanks. Then a final question for me, just, of educational character. How can you give some information about potential partnerships, how that could look? What sort of partnerships would you, should we consider that you are looking for?
Yeah, we're actually building up our capabilities stronger in that area internally right now. We have and we still enjoy a good partnership agreement with Telia in the Nordics, which has been a good source of energy for both companies. I think that could be a very good way of launching or growing in more long tail countries where we still are not so mature. Telecom operators, then of course, there's so many different partnerships that you can do. I think it's important to say that we will look for partners that would benefit both of us. We know that a lot of people enjoy Storytel while driving or while working out or walking or running.
Of course, there might be interesting partnerships for us in those, type of, industries.
Yeah, I mean, I think we have a product, you know, reading is activity everybody loves. I mean, there's no parent in the world that doesn't want their kids to read more, and we just see that we can be a good force for good, and that's something that attracts, you know, companies that we speak to, that, you know, we can add that flavor to their brand and to their business and also do something good for society. You know, at the same time, partnerships takes time. Telia, we've been working with them for eight years and, you know, it's built up a pretty decent amount of revenues over these years.
It requires also an integration and a business model where payments are being made and the customers are being acquired as part of that partnership. That's, you know, what we are looking for really is to extend our reach and go to the other platforms. It will be, you know, one by one rather than being 10 or 20 partnerships at a go because, you know, you need technical integration and you need to handle the relationship in a good way.
Thank you very much.
Thank you, Stefan. Derek, do you have another question?
Thank you. Yeah, just one more. I was wondering if you could give any comment around the balance sheet. I mean, clearly you have quite a bit of cash left and you also have clearly some flexibility with the RCF and the new bridge loan here. I mean, how are you looking at this in terms of your investment plans coming up here and also given that you have a pretty elevated CapEx, also if you could comment on what we should expect there going forward if it should continue to rise and anything, if there are any covenants or anything, how this is impacting your sort of p lanning for investments and where the EBITDA should land. Thank you.
Yes. As you alluded to Derek, we have a strong funding in our cash right now. We ended the year with about SEK 1 billion in cash, and then we have the SEK 500 million bridge loan and the SEK 850 million RCF from Swedbank. Of course we did pay for Audiobooks.com in the beginning of the year, but that still leaves us with a solid cash. We don't have any pressure I think to go to the stock market to raise any cash. We do have a strong relationship with Swedbank, and there is no risk of breaching any covenants of course.
What I can say about the EBIT, I mean, as we mentioned, we are sort of breaking the trend with the increasing negative losses, but we have the CapEx, as you say. So we do have a negative cash flow that we need to fund, but I don't see any risk of not being able to fund the organic growth during 2022.
All right. That's very clear. Thanks for that.
Good. If no other questions, shall we round off?
I think Joakim has one.
Joakim has one.
Joakim has one.
The final one. Yeah.
One more question.
Just a final, brief one. In terms of the original content slate, now with the Audiobooks.com acquisition on a broader quality U.S. presence, and the recent releases with regards to the Conan Doyle as well as the Pottermore, would it make sense to really, I mean, accelerate the investments into an English, I mean, a solid English original content slate, or will you continue to really emphasize this localized approach that you have in the past?
I think, now when we are in the U.S., English is also a local language. I think that's my first answer to your question. How we invest in our catalog in different languages, I don't think we usually talk about that so much, but we want to invest in catalog in all the markets where we are.
Thank you.
Good. Shall we leave it by that? I say goodbye for now from my end, and you'll see more of at least Ingrid in a couple of months.
Yes. See you.
Yes
See you next quarter.
See you next quarter.
Yes. Bye-bye.
Bye.
Bye.