Welcome to Storytel Q3 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 CFO, Stefan Wård . Please go ahead.
Good morning, everyone, and welcome to Storytel Group's Q3 2024 earnings call. We are pleased to report strong financial performance today across both our segments in streaming and publishing, with robust customer intake and record-high profitability. This performance reinforces our confidence in achieving our guidance for 2025, which we will talk more about today. I am Bodil Ericsson Torp, the CEO of Storytel Group since a year, and also joining us today is our new CFO, Stefan Wård. Welcome to you, Stefan, to our first call from inside Storytel, and I'm sure that you're going to love it. As we just said, we have delivered another strong quarter with over 2.6 million paying subscribers. Most of them, as you know, are highly engaged book lovers, and we increased our paying subscribers' base with over 10% year-over-year.
We continue a strong financial development, reflecting underlying growth in both our segments, and we deliver revenue growth of 9% in constant currency. The growth was driven by a focus on our customer experience, while we continued operational efficiencies led to our record-high profitability and a strong cash flow generation. Regarding the ARPU, it decreased due to a main factor, that is the FX effects of Forsec, but also due to our continued growth in markets outside the Nordics, where we are having lower price points, as we have been talking about before. The publishing segment achieved strong sales and growth, and also very improved profitability, partly driven by the successful acquisition of Bokfabriken. I will also emphasize that the underlying growth, excluding the acquisition of Bokfabriken, remained very solid. Combined with continued progress in streaming, this is also highlighting our strength of our business model.
We delivered a strong Q3 with an increased profitability of 26% year-over-year, and by that said, we also raised our 2025 margin guidance to the range of 18.0%- 19.5%. Here are our group financial highlights. Group net sales increased by 6% year-over-year to over SEK 1 billion. As many other Swedish companies, we have also been affected by the strong currency headwind. In constant currency, our net sales increased by 9%. The solid development was driven by healthy growth in both our segments, as I said before, and gross profit increased by 6%, and the gross profit margin was on par with last year. We reached a record-high EBITDA margin of 22.1%. Adjusted EBITDA increased by 26% to SEK 224 million. The net profit for the period increased by 150% to SEK 138 million during the quarter. The significant improvement in profitability was driven by increased operational efficiency.
Overall, we are very satisfied with the financial development in Q3, and our financial position provides us very high flexibility now for further expanding our businesses. It is important for us to continue to improve satisfaction and engagement for our customers. When we look ahead, we will increase our investments in local, relevant content and also the user experience in our services. This will continue to improve both engagement and satisfaction for our current and our future book lovers. When we're looking into rolling 12, we see a strong development with strong momentum. On an annualized basis, our revenues are now close to SEK 4 billion, with a margin of 18.4%. This confirms our successful business model, as you can see. Let's continue with our two business segments, and over to you, Stefan.
Thank you, Bodil. We'll continue with a brief overview of our streaming performance. During the quarter, we added 56,000 new subs, and over the past 12 months, we have added 236,000 new subscribers. Solid growth both on a quarterly and annualized level. Especially the Nordics was strong in the most recent quarter, with net adds of 36,000, while we added 58,000 for the full past 12 months. A relatively strong intake from the Nordics in Q3. Outside the Nordics, we added 20,000 new subs in Q3 and 178,000 over the past four quarters. A relatively softer quarter outside the Nordics in Q3. At the end of the last quarter, our Nordic base was 1.32 million, while our base outside the Nordics was 1.28 million, for a total customer base of 2.6 million subs.
We're roughly evenly split between the Nordics and outside the Nordics, and it's a reasonable assumption that we soon will pass the shift and will tilt towards our international non-Nordic customer base going forward. As a consequence, we continue to see a decline in ARPU. We have lower average ARPU levels outside the Nordics, but that does not necessarily mean that we have lower profitability on those customers. On the CMV SAC ratio, we remain well above our target level of 3, supporting arguments for continued subscriber growth. Not only do we have a well-diversified subscriber base in terms of markets, but we also have a highly engaged and loyal customer base visible in our low churn level, which continued to decline during the quarter to a new all-time low.
Looking specifically at the financial performance of the streaming segment, we delivered a reported sales growth of 4% and 7% in constant currencies. Streaming gross margin was unchanged, while our EBITDA margin improved 4.3 percentage points to an EBITDA margin for the streaming segment of 17.9%. Operating leverage continued, so our growth in operating profit was 43% year-on-year. In our publishing segment, we delivered, as Bodil said earlier, strong growth, 14% year-on-year, SEK 39 million of the annual increase for the first nine months, a total increase of SEK 39 million, of which Bokfabriken accounted for SEK 22 million. Bokfabriken has so far, since we acquired the unit, delivered very good results above our forecast, so we're very happy with that acquisition. It's a good example of how we can continue to grow our publishing business.
The development was also driven by strong digital and physical sales, with a good performance on new titles. Publishing EBITDA increased by 25% to SEK 108 million for a margin of 33.4%, up 3 percentage points year-on-year. We can continue to the next. Looking at the cash flow generation, we transform or convert over 80% of our EBITDA to operating cash flow before changes in working capital. Cash flow from operation before, yeah, so that cash flow grew by 37% and was SEK 203 million in the quarter. On a trailing 12-month basis, it's at SEK 658 million, corresponding to 90% of our run rate EBITDA for the past 12 months. Working capital had a negative impact of SEK 45 million in the quarter. In our view, this is normal variations, and we will see a release of working capital in the final quarter.
Fair expectations for the full year would be to have a relatively neutral impact from working capital in 2025. During the quarter, we also repaid SEK 50 million of our debt, and that, together with an increase in working capital, explains the relatively softer total cash flow for the period compared with last year. Looking at the balance sheet, it's strong. Not much to say there. We have cash and equivalents of just over half a billion. That's roughly on par with our interest-paying debt. Our equity-to-asset ratio continues to improve, and it's currently at 50%. Speaking of our net debt, it's tiny. It's SEK 23 million. We will go into net cash during the fourth quarter if we don't do any drastic investments. We have a very good financial position.
In addition to our strong operating profitability, we continue to see improved financing costs, so we will have a better financing situation going forward. We also have a significant amount of deferred tax assets, which are currently off balance sheet. These are primarily related to losses made in our now very profitable Swedish business, so we are quite certain that we will be able to utilize these deferred tax assets going forward, which will mean that we will have a fairly low paid tax rate, and that is also good for our cash flow generation going forward. With that, I'll hand it back to you, Bodil.
Thank you, Stefan. Super good. Thank you for highlighting our strong financials and our position. We summarized this quarter, and we are satisfied with our operational performance and our solid subscriber growth. It's also that our highly engaged book lovers have led to an all-time low churn rate again. That's really good. Our substantial cash generation provides us a very strong financial position, and we will continue to expand into new and existing markets in a prudent way. We have launched our services into Estonia during the quarter, while also a new partnership in Chile will be supporting growth over time. This is to continue the path that we are doing. Our strategic focus is super clear for us. We continue to strengthen our leading position in the Nordics, and we will also accelerate our growth in our core non-Nordics markets.
That's super important for us, and expand into new adjacent markets. This strong momentum, coupled with our high degree of financial flexibility, supported by an active M&A agenda, positions us now very well for the future. We will continue to hopefully end also with a really good year here. Now over to your questions.
If you wish 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. Great to have Stefan on board as well here. I was wondering, you delivered obviously a really strong margin here in Q3, driven by lower costs. Looks like mainly lower OpEx. What were the key components of that, and is this level, so to speak, sustainable into Q4?
Thank you, Derek. Stefan here. Yes, the primary reason on an annualized basis, we had some costs last year in Q3 that related to headcount reductions that are not apparent this year. Other than that, we just continue to work with improving our efficiencies. As Bodil mentioned earlier, during the first half, we trimmed the OpEx base. Part of it will be sustainable, and we definitely see a higher profitability level going forward, hence our raised full-year guidance. I hope that answered your question.
Okay, great. Yeah, very clear. I was also wondering on the summer months here, strong performance in terms of intake. Can you say something about what you've experienced in the Nordics here with regards to sort of how efficient your conversion of customers has been and what you've seen on the competition front as well? Thank you.
Yes, I think we always, and we have also increased our efficiency in our martech function, and that is also what we are seeing from the figures, while our growth is increasing in the Nordics in a good way. The competition is what it is. I mean, it's the same as it has been before. I think we've done a good job during this quarter to also have the increase in the Nordics when it comes to the subscriber base. That goes to the efficiency and the good function that we have for the martech, I would say. Also, monitor and be agile in doing the right things in the tactical marketing is also important.
Great. Looking at non-Nordics core markets here, I think you said that Poland and the Netherlands continue to be strong, but is there anything else to highlight in terms of particular tail or headwinds that have had any meaningful impact in any of these countries?
I would say we have a strong, good momentum in Poland and the Netherlands, and that is what we're also telling in the report today. Of course, we are in a good path, and we're taking market shares there. I won't say that we have any different headwinds that we see. It's more about gaining shares and increasing the momentum that we have in those markets. It's important for us to continue to grow there. Also, as Stefan mentioned in the call, this will, going forward, change a little bit regarding the balance where we see the growth and the customer base in the pay base regarding Nordic and the growth non-Nordic course. This is, of course, super important for us, and we have a good momentum there.
Okay, sounds promising. I was also wondering, I mean, you've talked for quite some time about further differentiating your product from competitors' offerings. Where would you say you are on this journey? What benefits are you experiencing from what you've achieved so far, and what should we expect in the future?
We increased our efforts to deliver the best streaming service to our customers, of course. We have also launched different features during this quarter that go into seamless reading and listening function, for example, and also the audio around Dolby. We are on a good way of increasing our deliveries to our customers to actually make it more to increase the customer experience in the app. That is also important since, I mean, we had the big launch of VoiceSwitcher, and then it was a time where we didn't really release any features. We are into that momentum now that we have actually launched some features, and we will continue to do that.
We have good progress in product and tech, and also a new setup there with organizational setup that are also more focused on delivering the product features to the market to increase our strength in the app, of course.
Got it. Finally, you announced yesterday this Klarna partnership. Can you talk about the potential you see in this deal in terms of what it could mean for distribution and conversion?
I would say, I mean, we launched it yesterday, so it's in the very beginning. This is, I mean, Klarna's network is reaching over 100 million consumers worldwide, and this goes into different tiers models across 14 markets. Of course, we are very hopeful that this will be a really good partnership for us. I mean, also, when it comes to Klarna's customers, we know that they are really tech-savvy, and they also want to have new services regarding streaming. There's a good collaboration, and it's a good fit with Klarna's customer. We will come back to this, but we are very happy and have a good forecast that we will have some good business values out of this partnership.
Great. I'd also like to ask on that. I think you mentioned before about adding this additional expansion or additional markets. I'm not sure if it was six to eight in total over the years, and we've clearly had your announcements on Estonia and also the partnership in Chile. What should we expect going forward, and sort of what type of approach will you take? I've noticed with these two launches that you've gone for a partnership model to quicker get an attractive catalog up and running in the service.
I think you should expect that we continue to add markets to our footprint, and we can both reignite existing markets where we've been active in the past and already have a catalog. We can go into new markets, completely new markets, as in Estonia, for example. We can go in organically, or we can go in through acquisitions, and we can also go in via partnerships. These are just two examples that we're executing on that strategy. It's a fair assumption to continue that we will continue to do so. That's the best answer I can give you, Derek.
Okay, perfect. That was all for me.
The next question comes from Joakim Gunnell from DNB Carnegie. Please go ahead.
Thank you, and good morning. On these raised margin ambitions for 2025, since we're only one quarter to go, and on a trailing 12-month basis, you're already delivering 18.4% adjusted EBITDA. How should we just think more conceptually about this still fairly broad interval? I thought that it's only Q4 to go, and essentially, what scenarios do you play with here in order to hit either the high end or the low end of that range?
As you stated, Joakim, we're already delivering within our range, so we felt that we needed to revise, to lift our communicated range a notch upwards, and that is what we have done. Other than that, I don't think you should read too much into it. We're confident that we will deliver on our targets for the full year and expect to finish the year in a good way.
Great. Since there's been a lot of industry chatter about both Spotify launching, but also potential relaunch of Audible in the Nordics over the coming quarters, you discussed a bit about the steps you are taking to differentiate the service and then improve the listening and reading experience, right? Just remind us what you see as Storytel's deepest competitive moats, whether it's, of course, the local content, UI/ UX, brand, price, etc., and how durable these are.
I can start.
You can start, and I can fill in.
Yes. Our deepest moat is our existing customer base that is not churning and very loyal and have a very high activity of our content. The content that we build over a long time, that's its core to our strategy, and it's a very good moat for us. Hopefully, if new entrants come in, we hope that they will help evolve the entire cake.
Yeah.
We are used to intense competition, and this will be nothing new for us. We have our content-based strategy, and think that is what has helped us win so far.
Yeah, and we should also remind ourselves this is really a local game, so it's also about having the right competencies and know-how regarding the local game in the different markets. Since we know that over 80% is consumed in a local language, it's super important to have relevant local content, and we are very good on that. There's a long history of knowledge in that area in the company. Also, like Stefan said, it's about our customer base that are really engaged book lovers that have been with us for a long time, and the churn is all-time low. They are actually having really good and high engagement and loyalty to Storytel. This is also a mode where we know that our customers want to have their bookshelf in our app. That is the main mode, I would say.
We can also add that Audible has been in the market in the past, as you mentioned, and we face competition from Spotify in, for example, the Netherlands, and we're still able to grow our subscriber base very strongly in that market.
Great. When it comes to providing tools for creators to manage, promote, and grow their audiobook business, where are Storytel in relation to your ambition when it comes to, say, visualizing different types of data statistics on listeners and those kinds of things to your authors and publishers?
I would say we are in a moment where we are digging deep into this. We will actually come back on that because we also need to see how we will be better on delivering that kind of data and services to all the authors. That is a project that is ongoing as we speak.
Understood. Just the final one from me. How are your AI initiatives, like the AI narration and Voice Switcher, tracking versus expectations? I think there was some, of course, initial traction of this, but can you say anything about user engagement trends suggesting if these are preferred new features, or does your loyal book lovers prefer the classic experience?
I think there are good, I mean, there's a good user experience in voice switches. We know that there's a lot of users that actually want to switch the voice when they don't like the voice. It's nine out of 10, and there's a high engagement in using the voice switches. We are actually increasing our Voice Switcher to more titles and more languages as we speak to scale it in a bigger way than we have done. It's attractive, and it's a really good feature in the app that is highly engaging, I would say. It's in a good traction.
We have an intense AI agenda currently ongoing within the company, both from efficiency but also from product enhancement perspectives.
Yes, that goes group-wide in the whole company, and that is an intense agenda also regarding education.
That's helpful. Bodil, Stefan, thank you very much, and have a great day.
Thank you.
The next question comes from Georg Attling from Pareto Securities. Please go ahead.
Morning, Bodil and Stefan. I have a couple of questions, if I may, just also starting on the margin guidance here for this year and looking at the financial targets in 2028 of about 20% margin. That looks quite conservative considering you're almost there in the higher end of this year's range. I'm just wondering, is this a reflection of you just staying conservative, or are you seeing areas where you would like to accelerate cost growth?
Regarding the current year, I think the high end of our updated guidance is not conservative. It's a stretch to reach that. We're at 18.4% on an annualized level, and the updated high end is 19.5%. I think we have a balanced guidance for the rest of the year that is not too conservative. Regarding our mid-term targets, we say that we're going to be above 20%. That could always be specified, but I think our progress just shows that is a reasonable expectation to be above 20% in 2028. Exactly where we will end up, there will be plenty of time to see, to be more specific about that.
Yeah, that's clear. Also, wondering about the Netherlands. You pointed out as one of the markets in the Nordic core that's the strongest, which is interesting considering Spotify's entrance there a year or so ago. I'm just wondering if you can give us some more color to how the market has developed since Spotify entered because it seems like, if anything, it's been positive for you.
It looks, to our best understanding, that we do not exactly compete on the same customers in that market and that they are actually helping to evolve the entire market, and that would be a very positive scenario for the audiobook format. That's our view. The Netherlands is still in a relatively early phase compared to the Nordics, so there's still a lot of growth in the total market to be done. When we do strategic marketing in the Netherlands, it pays off in a nice way. We're able to grow our own subscriber base. I hope that helps.
Yeah, that's helpful. Just a final question from me. There were some comments in some local media here a couple of months ago that you are in talks with Spotify about licensing your content to Spotify in the Nordics, if I understand it. Could you give some more color on where you stand with regards to this?
Yeah, I mean, we don't comment on rumors. It's more about we are open to discuss different business agreements when it's having good opportunities, and that goes into all the players in the market. That is all I can say.
Okay, that's all I have. Thank you very much.
As a reminder, if you wish to ask a question, please dial pound key, five on your telephone keypad. There are no more phone questions at this time, so I hand the conference back to the speakers for any written questions or closing comments.
We have a couple of written questions here. The first one concerns AI, if we see a case where AI becomes a threat to our business model and how we use AI to improve our business. Any comments there, Bodil?
I would say that we are actually using AI in a wide range in the company. Every team is now in both educational mode, but also we have been using AI for a very long time when it comes to, for example, product and tech, also back in the days with all the machine learning. I would say that we are in the front line when it comes to the AI capabilities, and we are searching, of course, for efficiency increase and also getting the best out of it to our customers when it comes to customer value. There is a big scope for this, and we're having a strong focus on AI in the company. What was the question more?
The other one was whether AI will become a threat to our business model, and that could be bundled into if we think that AI can help large international competitors challenge us in our home market. I can give a short answer to that, that we do not see AI as a threat to our business model, nor do we see it as an enabler for international competitors to threaten us in our home market, since having a good offering is based on what content you can access, and that is regardless of whether the technique that we use to produce or distribute the content. We are certain that we need to work a lot with the new AI-based technologies to stay competitive with our offering.
Definitely.
Okay, we have a final question. If we have any plans to reintroduce our Storytel Reader to enhance the customer experience for e-books. Bodil, what do you say?
Yes, we are looking into that, I can tell. Hopefully, we will have some happy customers in the future. We are looking into it. We know there are a lot of customers that really want us to restart that product. Thank you. Okay, there's no more further questions. No. Thank you, everyone, for joining us today in the call. We are looking forward to our next quarter, and we are looking forward to meeting you soon again. As you know, we are confident in achieving our updated 2025 guidance. Thank you, and have a good day.