Welcome to Storytel Q2 Report 2025. During the questions and answers session, participants are able to ask questions by dialing #Q5 on their telephone keypad. Now, I will hand the conference over to the CEO, Bodil Eriksson Torp. Please go ahead.
Hi and good morning, everyone, and welcome to Storytel AB's Q2 2025 earnings call. We are pleased to report continued solid financial performance across both our streaming and publishing segments, despite an uncertain environment and also a strong currency headwind with a significant impact on our top line, which we will talk more about. Today, I'm here with Bodil Eriksson Torp, the CEO of Storytel AB, and joining me today is also Head of Finance, Jonas Olson. Some highlights here: we have delivered a second quarter with continued robust performance based upon a strong paying subscriber growth, with an increase of over 11% year-on-year, and we have now almost 2,550,000 paying subscribers. As you know, most of them are highly engaged and really true book lovers.
Furthermore, we deliver solid financial development, reflecting a well-balanced underlying growth across both our streaming and publishing segments, resulting in a growth of 8% in constant currency. We have continued to focus on operational excellence and continued with a cost discipline that has also strengthened our gross margin, which in turn fueled improvements in both our EBITDA and cash flow generation, as you can see. The publishing segment achieved strong sales growth and also improved profitability. That's really good, and it's partly driven by our recent acquisition of Bookfabriken. I will also emphasize that underlying growth, excluding the acquisition, remains very solid. Combined with continued progress in streaming, this highlights the strength of our business model. When we look into our strategic expansion into growth markets outside the Nordics, as well as extended customer segments, this has resulted in an expected decrease of ARPU.
As you have read today, this is however negative effects that was the main factor for the ARPU decrease and accounted for 6% out of 11%. At our Capital Market Day in May, we presented our group-wide strategy for the first time, a strategy that aimed to increase the synergies between our two business units and solidify our position as the premier destination for consumers, authors, and talents. I also presented our new group executive management team, and in August, I'm happy to know that we will have our new Chief People Officer that will join our team. Let's take a look into our group financial highlights for the second quarter. Group net sales increased by 4% year-over-year to SEK 958 million. As many other Swedish companies, we have been affected by a strong currency headwind. In constant currency, our net sales increased by 8%.
The solid development was driven by healthy growth in both streaming and particularly in the publishing segment. Gross profit increased by 6% and margin expanded by 0.9 percentage points. This was supported by a higher share of cost-efficient content and stronger gross margins in our high-growth streaming markets. Adjusted EBITDA increased by 28% to SEK 163 million year-over-year, and we're reaching a margin of 17%. This significant year-over-year improvement from 13.8% is driven by an increased gross margin and further realization of our synergies and continued disciplined cost management. Our adjusted items were substantial last year, and as I mentioned to you on our Q1 earnings call, we will strive to reduce those to present just reported figures. However, our LTV will be a part of adjusted items even going forward and amounted to SEK 2 million in the quarter. Overall, we are satisfied with the financial development in Q2.
We have continued to have a very strong financial position, and we could also conclude that our performance generated a strong cash flow from operations. Going forward, we will wisely use the improved financial position since it provides us strong capabilities for investments for further expansions in growth. As we look to the second half of the year, we will intensify our investments in locally relevant content and data and AI to create an even more personalized user experience. This will continue to improve both engagement and satisfaction for our current and future book lovers. As you may notice in the graph down to the right, the adjusted EBITDA margin has some variations, mainly due to some seasonal pairs, both in the streaming and publishing businesses.
However, looking into the rolling 12-month, our EBITDA margin is currently at 17.5%, and we are very pleased with the incremental EBITDA growth over time. Let's continue with our two segments. Looking into the performance in streaming, our larger segment, as you know, our total paid subscriber base increased by over 11% year-on-year, or 261,000 paying subscribers to an average of 2.55 million. 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 18% year-on-year and contributed with over 162,000 new subscribers. Our strategic expansion into growth markets outside the Nordics, as well as extended customer segments, resulted in an expected decrease of ARPU with 11 SEK year-over-year. However, the main factor was a negative currency effect, accounted for 6 SEK.
We have a continued focus on balancing both ARPU and healthy subscriber growth of book lovers. The key ratio here is customer lifetime value to subscriber acquisition cost, with a continued strong ratio. Our success is evidenced by the development of paid churn, which remains at a downward trend and shows an all-time low level for the second quarter. Let's take a closer look here. The streaming segment delivered an underlying growth of 7% in constant currency. As mentioned before, our currency headwind is strong, which means a 2% growth amounted to SEK 853 million in net sales. The underlying growth was driven by a strong 11% increase of paying subscriber base. Non-Nordic core contributed with the highest growth, where revenues increased by 14% in constant currency and with 18% in paying subscribers.
Nordic net sales increased 4% in constant exchange rates in the quarter and showed a robust subscriber growth of 7%. The gross margin development was also solid and increased by 0.4 percentage points to over 42%. EBITDA increased 19% in the quarter to SEK 112 million, equaling a margin of 13.2%. Improvement was driven by higher gross profit and lower operating expenses. Operating profit increased over 24% to SEK 81 million in the quarter. Let's look into our publishing segment. The publishing segment delivered another strong quarter, with 14% year-over-year revenue growth reaching a total of SEK 299 million. Our recent acquisition of Bookfabriken also contributed to net sales with SEK 22 million. The development was driven by strong digital and physical sales due to titles creating high demand, which contributed to a strong overall performance.
EBITDA in the publishing segment increased by 41% to SEK 82 million, and the margin increased with over 5 percentage points to 27.4%. Now over to Jonas, who will walk you through our financial performance and position.
Thank you, Bodil. For the second quarter, we continued to generate a solid cash flow from operating activities before changes in working capital, amounting to SEK 140 million compared to SEK 106 million in the second quarter for the previous year. This improvement is primarily driven by a stronger operating result, where EBIT came in SEK 35 million higher in Q2 this year compared to last year. Changes in working capital were positive for the quarter, primarily driven by seasonality in accrued expenses. The corresponding quarter last year was also impacted by one-time effects relating to restructuring. Operational cash flow, including investments into content, product, and technology, are approximately on the same level as last year and totaled SEK 41 million compared to SEK 40 million in the same quarter in 2024. This represents 4.3% of net sales and is in line with the communicated targets of below 5%.
Cash flow from investing activities amounted to minus SEK 154 million compared to minus SEK 66 million last year. During the quarter, we have paid dividends to our shareholders of SEK 77 million, and we also repaid SEK 50 million on our credit facility. All in all, the total group cash flow for the period was minus SEK 49 million, and this includes the dividend paid in May. Looking at the group's balance sheet, we maintain a stable financial position with total assets of almost SEK 3.2 billion and an equity-to-asset ratio of 46%. The slight decrease in both equity and total assets compared to year-end is primarily due to currency effects, as the Swedish krona is stronger compared to December 2024. However, compared to the second quarter of 2024, equity, total assets, and cash have increased, reflecting continued strong cash flows and earnings development over the recent quarters.
Our credit facility has been reclassified to other current liabilities from non-current liabilities, as the current credit facility will be renewed during the second half of 2025. This leads up to the leverage ratio. Compared to last year, the leverage ratio has continued to decrease, driven by both a decrease in debt and as a result of strong cash generation. The leverage ratio now stands at 0.17, down from 0.78 at the end of the second quarter last year. The slight increase compared to year-end 2024 is mainly related to the acquisition of Bookfabriken. Overall, we have a very strong financial position that supports the strategic direction going forward. With that, I hand back to Bodil.
Thank you, Jonas, for highlighting our strong financial position. To summarize this quarter, we have achieved a high intake of paying subscribers, particularly with strong growth in non-Nordic core. We have maintained organic growth while improving profitability, and our substantial cash generation provides a very strong financial position for us, enabling us to invest prudently in future growth in line with our strategy. Our large and highly engaged base of book lovers has led to an all-time low churn rate, and we will continue to enhance our offering and customer experience, as demonstrated by the launch of a new in-app reading experience this quarter. Our new Group Executive Management Team is fully committed to achieving our new financial targets. We hold a unique position in the Storytel ecosystem, effectively connecting diverse stories with a broad range of readers across print, audiobooks, and e-books.
Our strategic focus is super clear: strengthen our leading position in the Nordics, accelerate growth in our core non-Nordic markets, and expand into new adjacent markets. We are also actively broadening our audience segmentation to unlock new growth opportunities and increase engagement across a wider range of customer profiles. This strong momentum, coupled with our high degree of financial flexibility, positions us well for the future, supported by an active M&A agenda. Not last but not least, we are on track to deliver on full-year guidance for 2025. Now over to your questions.
If you wish to ask a question, please dial #Q5 on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial #Q6 on your telephone keypad. Next question comes from Joachim Gunnal from DNB Carnegie. Please go ahead.
Thank you. When we think about the fact that you are on track to meet your full-year guide, you commented here, Bodil, what different scenarios do you envision to unfold here for you to either hit the bottom or top of the respective range on both growth and the profitability intervals?
Oh, that's a really good question, I would say. Of course, we will strive and aim for hitting the top. That goes by the rules. We have a range of different marketing investments in the different regions that we are operating in. It comes with the effect of the different allocation of marketing investments, I would say, as the main factor here to hit the top or over the top or the bottom. The efficiency in our marketing investments is highly important for your question. I will also say, as you know from the Capital Market Day, we have an active M&A agenda, and we're working with that intensively. We will also see the outcome of this, how it will impact our future guidance and the result of when we end this year. There are some different perspectives.
Thank you. You mentioned a bit about.
I'm sorry to interrupt you. Just one more thing, it's also about the growth in going into new markets or unlock new markets. I will add that as well.
Yeah, that was essentially my follow-up question because you commented a bit on that. You could see some increased investments here for the remainder of the year, especially on the technology side to personalize the listener experience, right? When we talk about or when we think about these six to eight new markets that you've flirted with and intentions to expand into, do today's figures already capture some of these investments, or is that incremental for H2 and into 2026?
It's incremental going further, that was captured by the goal for 2028.
Lovely. Just finally, from my side, we're in the middle of the high season for audiobooks right now, especially in the Nordics. Can you comment a bit on how successful the customer intake has been thus far this year?
We are in the peak season in the summer, and we have big marketing investments in all our markets that we have, our core markets, and of course, the Nordics as well. I think it's a little bit too early to say what the summer will give. We are in the midst of actually daily monitoring all our results of our different activities that we are doing in the different media channels to reach new customers.
Understood. Thank you, and have a great summer.
You too. Thank you. Have a good summer.
Next question comes from Stefan Ward from Pareto Securities. Please go ahead.
Hello. Just to follow up on the recent questions here. To clarify, the targets for 2025, they are set organically at the CMD and not including M&A, or how should we interpret that?
That was said organically.
Yeah, any M&A comes on top of that, basically.
It's correct, yeah.
Perfect. A few questions on the competitive situation. It looks like you're successful in the market with continued solid subscriber intake and lower churn, decreasing churn rates, yeah, while keeping ARPU levels relatively flat year to date. Can you just give a description of how any changes in the competitive environment?
I would say there's super sharp competition out in the market, as we have met for many years, I would say, but it's not decreasing. I would say the competition is definitely increasing. We need to be on our toes in every market, and it's also extremely important to monitor our daily activities in the different markets. I think it's super important to be fast and also always think about the reallocation of marketing investments, which we have a good market function, and I would say it's the best in Europe. I used to say that. It's needed to be monitored daily, and I would say the competition is super hard.
Super hard, but you still manage to bring down churn rates. How is that possible?
We have our business model where we combine the content and all the publishing that we have in-house, and the knowledge about this is also to meet the customers' wishes and needs and to secure that our customers always will be kept in a story and that we can deliver a relevant story to every single customer. I think this is a quid pro quo. It's a proof that we're actually delivering really good on our customer value proposition. That said, it's not the time where we can lay back. We need to move forward to also increase our value proposition to the customers. I think we deliver good on the content side, and we really are glad and appreciate that we have that low churn downtrend. It's a really, really good work done by the team in Storytel. There's a good and deep knowledge about the local markets.
We're also relevant in the local markets with local content, and that's our strength, I would say. 85% of the content is consumed in the local language. This is also important for us.
On the gross margin expansion, it seems to be steadily increasing the gross margin. Can you give some color on how that is done? Maybe any details on what the acquisitions of Bookfabriken has meant for the gross margin would be interesting. If there's any additional improvements to be made during the second half of this year, that would be helpful.
Yes, the effect of Bookfabriken, we have a slight increase of the gross profit, but we don't want to go into the details on that one for certain reasons. If we look at the growth that we have, when we're growing in the growth region, there we have a lower content cost, and therefore the gross margin is increasing somewhat.
Okay, interesting. The film acquisition, I guess, is still one of the most consumed catalogs or titles that you have. How has that improved the profitability?
I can't really disclose that in detail regarding the single Sunna, but we have, of course, a high degree of consumption regarding Sunna. When it comes to profitability, we don't disclose that, actually.
Okay, fair enough. A couple of questions also for housekeeping here. How has the business in overseas developed? Audiobooks.com, is it stable as it used to be, or has there been any changes there?
There haven't been any changes. We increased our cooperation with Audiobook.com, but I think it's a really stable business for us. It's the same as we have said before. It's stable, and it's a good business that also has a good cash flow generation.
Can you give us any details if it's growing in terms of subscribers, or is it flat, or any color on that?
We don't use to actually comment Audiobook.com separately because that goes into our non-Nordic course, but we have a growth there.
Okay. A final question from my side is how we should think about the tax rate. There's still quite a lot of tax losses that you can utilize. Can you guide us anything on how we should think about the tax rate going forward?
Yes, we have still quite a significant amount of unutilized tax losses, as you can read in our annual report. As you can see in the annual report for 2024, it's some SEK 300 million or above that that will be used in the future as we see it.
Yeah, any guidance on how you will utilize that over what time period, and what would it mean for the sort of efficient tax rate for, say, 2025-2026? Can you give any guidance on that just for housekeeping?
We don't go into the details on when we will use this. Just for clarifying, this is in Sweden where we have these tax losses. We are paying tax in some Swedish entities as well as in our business in other countries.
I think we need to come back to that, Stefan, and guide around that question specifically.
That's helpful. Yeah, thanks a lot. Very, very good report, I think. Good work.
Thank you, Stefan. Happy summer.
Happy summer.
Next question comes from Derek Laloberte from ABG Sundal Collier. Please go ahead.
Thank you very much and good morning. I had a question on the ARPU area. You mentioned that you have a $0.06 impact from FX on the streaming segment, which leaves $0.05 in sort of an additional decrease there. I suppose this is, of course, related to the non-Nordic markets growing faster. I am just wondering, have you had any sort of new major offerings that you have been marketing in the quarter? Does this relate to any specific market, or is it more of a broad-based effort to take in new subscribers? Hello?
Broadening our new subscriber base, it's a little bit also that we have lower price points in the markets that are outside the Nordics, and we are growing faster there.
Okay, great. I didn't hear your full response. I'm not sure if something's wrong with the line.
I can't hear. No, it's something we do.
Yeah, I hear it better now.
Okay. I just said that this is more about broadening our customer base and also the geographical mix. We don't have had any new offerings or tiers. It's not about that. It's more about that we have an inflow of new customers and subscribers into lower tiers to some extent. That is also planned since we want to catch the book lovers of tomorrow. There are two different parts, and it is the geographical mix, but also by broadening the customer base.
Okay, great.
Was it better?
Absolutely. You continue to show a really impressive subscriber growth outside of the Nordics. Looking at the sequential increase here, it was quite a bit smaller than in Q1. I'm just wondering what the outlook is there, if you expect the intake outside of the Nordics to ramp up during the second half, or how does that look? Thanks.
The Nordic area is still extremely important for us to grow the market share, but we will also increase our marketing investments in the non-Nordic course in Europe. We have a good momentum in Poland, for example. We will increase our investment there in this region.
Okay, that's fair. Looking at when I think in Q1, we saw some increased marketing expenses. Is it fair to assume that those sort of increased efforts were mainly related to the Nordics, or was it more of a mixture there?
No, this was actually a broad initiative during all the markets.
All right, okay.
Especially in Poland.
Okay, great. On the publishing segment here, you mentioned that you delivered a really solid result. Apart from Bookfabriken, what were the sort of key factors in driving this growth? I was wondering, just to clarify, I think I saw two different figures on the contribution from Bookfabriken. Just wondering if it was SEK 11 million or SEK 22 million in sales contribution in the quarter.
It should be 22.
Yeah, regarding the contribution, for the publishing segment, it's SEK 22 million, but for the group, it's SEK 11 million as some of these sales are between the publishing segment and the streaming segment.
You also asked about the drivers behind, except Bookfabriken, correct?
Yes, yes.
I will just add also that we actually had really good sales in both physical and digital books. That was positive, I would say, since maybe you used to think that the physical sales is kind of declining, but we had really good physical sales as well.
Okay, great. Just wondering, because we discussed Audiobooks.com before, just wondering if I read it correctly. I think you said in the report you have a 5% year-on-year subscriber increase, or was that in revenues?
That's correct.
Okay, so subscribers. Okay, perfect. Thank you. Thank you very much. Those were all my questions, and have a nice summer.
Thank you very much, and have a nice summer. You too. Continue your summer.
As a reminder, if you wish to ask a question, please dial #Q5 on your telephone keypad.
There are no more phone questions at this time. I hand the conference back to the speakers for any written questions or closing comments.
Yes, we have one written question from Mats Langard. How do you see the competitive landscape, and do you see any meaningful competition from Spotify?
Good question. The competitive landscape is, as I said before, intense, and we have both local players as well as global players in the different markets. We are used to have very hard competition. I would say the positive is that all the writings and that we can read that Spotify is launching audiobooks is that you actually have an extra, there's an extra way of building the category faster. This will support to build audiobooks in the different markets, and that is positive, and that could also mean that we could increase our market shares. I would say we are confident in our business and our business model where we have all the competence regarding highly local market and the defined target group of book lovers. We think that the competition will also increase growing overall market, and that is an option for us to capitalize on that. Thank you for your question also. Okay, do we have any more questions?
Nope.
Thank you for joining us today. Looking ahead, we are well positioned to meet growing demand for local language content, as I said, with strong foundations in our 10 core markets and a growing local catalog. Our financial strength creates a strong position for both organic growth and acquisitions across publishing and streaming. The opportunities ahead really energize me and our team here. Thank you, thankful for everyone who's joining us on our journey, and also thank you for participation today and joining us today. We're looking forward to our next quarter. We keep in touch and have a nice summer.