Good morning, everybody. We're going to go through the Q3 2020 Report. With me, I'm Jonas Tellander, CEO and Founder of Storytel, and on my side, I have our Interim CFO, Jörgen Gullbrandson, and our Chief Commercial Officer, Ingrid Bojner.
Good morning, everyone.
Good morning.
Let's flip to the next slide. We have the subscriber growth of 35% up from the year ago quarter, revenue growth 23%, streaming revenue 23% up from the year ago. Next slide. This amounts to SEK 609 million in total turnover for the Q3 quarter. We also made during the quarter a number of acquisitions, no less than four. We'll go through them in a bit later. First, I'll hand over to Jörgen to walk us through the next slide with all the numbers.
Thank you, Jonas. Looking at all the numbers on slide four, you can see that we booked a revenue for the group for the streaming businesses of SEK 490 million, as we have reported before. Happy also to announce that we do the highest contribution profit ever of SEK 113 million, almost SEK 114 million in the period. A contribution margin of 23% and some. The great contribution profit and also the high revenue generates even a positive EBITDA margin in the quarter. Internally, we call this a small accident, but it's fun to see that after we started activating our audiobook production and also our tech development in the group, the EBITDA margins came up substantially. In Q3, where we had slightly lower marketing than usual, the contribution margin come up and we even could book a EBITDA profit for Q3.
This is fun, as we point out in the report, this is not the thing that you should expect to happen regularly going forward. Somehow it's an evidence of our business model anyhow. We saw the paying subs coming in at 1.36 million in the period and an ARPU of SEK 120. This is good. This is driven by growth. When it comes to revenue, it comes mainly from the Nordic countries, where we are almost up at SEK 400 million in Q3 with a really good contribution profit there, SEK 125 million and a margin of 32%. Above 900,000 paying subs in the Nordic countries. With a healthy ARPU of SEK 146 as well. Almost even more fun is to look at the non-Nordic countries, where we approached the SEK 100 million mark, SEK 96 million in Q3.
Of course, having a slight negative contribution profit, we should remember that these are the markets that we really do invest in marketing and growth and staff and whatever we do in all these countries. It's still happy to see these numbers, and we can see that the average paying subscribers for the period, they are then over 450,000, 458,000 in the period. A lower ARPU in the non-Nordic countries, of course, because these are economies with lower purchasing power, this you know from before. Happy to look at the graphs. You can see, they all point in the right direction, which they should, increasing and going upwards to the right. Giving a forecast, you saw for Q4, the last quarter of the year, coming in at almost SEK half a billion in revenue in Q4.
A bit sad that we couldn't record a five number before. This is actually what our models project. Let's keep it at 499.5. Growing the subscriber base. This is what we foresee for Q4 with another 75,000 paying subs in this period. Taking a small hit on ARPU, which also, of course, affects the revenue. This is driven by the fact that, you could say the good news, we have a very strong Swedish krona compared to our significant currencies. Looking at the Nordic currencies like the Norwegian krona, Icelandic krona, but also compared to many of the weaker currencies like the Turkish lira, et cetera. It's good for Sweden, but bad for the reporting numbers of Storytel. We also have another positive news in this one, and that is that we are successful in converting our existing users into a family subscription.
As you know, we've said it before, this drives down the ARPU because we divide the money that we get in with more people, but it still means that we get more money in. We get them more to stay on our service, which drives down the churn. Our LTV for these customers are positive. Happy to see that even. Looking at the Nordic and non-Nordics, we see almost similar growth rates. Of course, we grow most in the non-Nordic countries where we see that we will add more than 60,000 people to the company reaching 530,000 paying subs at the end of the year. This is as far as we see it today based on the exchange rate that we have today. Let's hope for a weakening Swedish krona. It's okay. Next page, please.
During the Q3 , we completed a number of acquisitions, one being the acquisition of the Arabic streaming service Kitab Sawti. That's now been completed, those numbers are in. We have now a huge catalog of Arabic-speaking audiobooks of close to 5,000 titles, are preparing to ramp up our marketing activities there in the coming quarters. We also completed the acquisition of iCast, the Israeli streaming service, on October 1st. We expect to launch this towards the end of the first quarter. Also here we have a very strong Hebrew catalog that we hope will stand very strong next to also Russian catalog to be able to launch that market in 2021. Norstedts Förlagsgrupp made a small acquisition of a literary publishing house, Brunberg, run by Dorthea Brunberg. This is, I think, very exciting for the publishing house. Looking at expansion, Ingrid, what do we have there?
Yes. We're happy to have announced that we will be expanding in Thailand in the next quarter or this Q4. In a couple of weeks, we will open up our service for the Thai public, and that's very exciting. That's also strengthening our presence in the APAC region where we're continuously expanding. On October 20th, we launched our service in Belgium, and that is extremely fun launch because we are actually doing it also from our Amsterdam office. Even though this is of course a localized service for the Belgium public, it's still an effort in combination with our people on the ground in Sweden and also on the ground in the Netherlands.
Cool.
Yes
Jonas was a bit quick there in the beginning. During the quarter, we also entered into an agreement to acquire a 70% majority interest in Iceland's leading book publishing house, Forlagið, as well. It's not in the books yet because we are going through competition authority approval processes in Iceland. We hope to see that completed in Q4 or in the worst case in Q1 2021. We also acquired an 80% majority interest in Earselect. It's a audiobook production company, Sweden-based, but with business all over Nordic, which we think will be important to the company going forward.
Yes. Thank you. All in all, in our Capital Markets Day, we announced that we were going to launch at least one to three countries. Belgium and Thailand will be those countries to be on the target there. Next slide, please. What about content? Well, even though the world has been in distress over this 2020 with Corona and COVID virus affecting us all, I think creativity has not lost its purpose. We are very happy that we've collaborated with one of the most renowned crime authors in Russia and released a Storytel Originals for audio at first by Boris Akunin. That's a great success also coming after having done other Storytel Originals in Russia. That's something we'll continue to explore. Secondly, we have launched "Harry Potter," both in Bulgaria and in the Netherlands.
In the Netherlands, it's fun because it's a new recording, and it's really bringing people to our service and also bringing something really great to the people in the Netherlands. Thirdly, we wanted to highlight a very special recording that we have done together in collaboration with the Prince Carl Philip and Princess Sofia's Foundation on dyslexia. It's called "Älskade dyslexi," "Beloved Dyslexia," which was also launched in combination with Gothenburg Book Fair. Next slide, please. Other highlights during the quarter. We can also say that we have something we talked about in the Capital Markets Day about starting to make pilots or tests with different types of subscription models.
We have done two of those pilots. We have launched one select version in India. It's a selected version of our unlimited offer, which is targeting only the Marathi language group, which is the region around Mumbai. This is a less expensive service, which then can actually reach out to people who doesn't need also the English more expensive content catalog in the service. That's actually gaining really great momentum. This is part of localizing our service so it becomes even better and more suitable for each of the markets that we enter.
Secondly, we have also launched another model, which is the Storytel Lite in Finland just a couple of weeks ago, which is a limited version of our subscription model. You can get all the content, but you can only listen for 20 hours. It's at a little less price. This is for us to expand who can actually listen, and hopefully we can reach even more consumers that want to take the step into audiobooks and streaming, which we are very happy to have launched. Then we held a global conference this year, a virtual conference. Jonas, what can you say about that?
I think we agreed it was a huge success. We've made it a tradition to have conferences every year in early September, where we gather all the Storytellers around the world. Obviously, this was not possible this year. Instead, we went into a TV studio, Filmhuset here in Stockholm, and ran six 45-minutes TV shows internally, so to speak, over these three days in early September. We had chat moderators and a lot of engagement from all the employees around the world, and then other workshops. It was, I think, three really packed days. Of course, you cannot mimic the physical socialness of actually meeting together, but we did a really good job. The outcome from it was a very positive rating from our 600 employees from this conference. It was a good success, and the best way we could handle the COVID situation.
Yeah. Being a very diverse and disperse company, this is obviously super important for us to make sure that we all know our targets and what we're aiming for and how we can continuously growing Storytel worldwide.
Good. If we jump to the next slide, looking at the Q4, we are anticipating a subscriber growth over Q4 2019 of 32%, and a revenue growth of 19% over Q4 in 2019. Worth to point out to you guys that read our reports, that the first one that we sent out this morning, we had slightly incorrect percentage number in that one. The subscriber growth up there in 42% versus revenue growth of 25%. That was not correct, and is now corrected on the site and here. The numbers are correct, but the percentages slipped a bit. Thank you to all analysts out there that found it and notified us quickly. Moving over to our financial targets, which we have had the same slide here for quite some time now.
Now we're coming to the end of 2020, and we have always said we're going to reach 1.5 million paying subscribers, and that will then be December 31. Comparing that to our forecast number of 1,000,435 as an average for the Q4 that we have in this report, we're still positive. I think as Jonas pointed out earlier today, we might miss it with a week or two, which is usually done. Some years we've been a week or two ahead, which we were last year on Christmas Day. Some other years we've been a bit late. It's around the change of the year where we'll reach our 1.5 million. We also said we're going to grow our streaming revenue to SEK 1.9 billion. Originally, when we started the year, we actually said SEK 1.92 billion.
In this report, it says now we're going to reach SEK 1.878 or something, I think it is. It's some SEK 20 million short of that. Worth knowing when we look at the numbers, if we would have used the same exchange rates that we had when we did this forecast in Q4 2019, we would have seen revenues coming in at above SEK 1.94 billion. SEK 1,941 million, which would have meant a growth of 35%. If we allow ourselves to excuse the strong SEK, we actually reach exactly the target we set up before the year started. We're also saying we're going to have a full year negative EBITDA margin of -1% to -5%. We had a positive 1% this quarter in Q3, which is good because we were slightly sliding to the upper end of this range.
I'm happy that we are now within the range. It looks positive for the year to reach this one as well. We also said we're going to reach streaming profitability on a local level in two to four markets. We have announced one this year with Netherlands. Let's hope we can add at least one more when this year ends. We're going to launch in one to three markets, and that's already reported that we do for sure. Looking at our long-term forecast, we said we're going to grow some 40% on paying subs. As we stated before, this is the less important target. Of course, the revenue is below the 35% CAGR is the more important. Worth pointing out that this is an average for the period. We could be above some years and we could be below some years.
We're not promising exactly 35% every year, but we think we're going to reach this on average for the planning period. As you all know. We're going to continue to prioritize growth before profitability. Worth mentioning, when delivering a positive EBITDA this quarter, we're still going to focus on growing this company as much as we can. We're going to monitor it to make sure that we have this continued good development in Customer Lifetime Value versus SAC over the period. As long as we do that, we're going to prioritize growth. As we always say, we're going to reach streaming profitability on a local level within five years from launch, and that we still can deliver on, launching another 20-plus markets over the planning period 2021 to 2023. This all we'll do for sure, I think, in this period. Next page. We open up for questions from the group.
Thank you. If you wish to ask an audio question, you may do so by pressing zero one on your telephone keypad. If you wish to withdraw your question, you may do so by pressing zero two to cancel. Once again, it's zero one on your telephone keypad if you wish to ask an audio question. There will be a brief pause while we wait for questions to be registered. Our first question comes from Joakim Gunell from DNB. Please go ahead.
Thank you, operator, and good day, the Storytel team. A couple of questions from me. Let's start with, in conjunction with your Q3 streaming update, I personally got the impression that your non-Nordic segment was growing at almost, say, 100% in August and September, since you commented earlier that July was basically flat. Now that we look into Q4, you forecast below 60% non-Nordic subscriber growth. Is there something here that has perhaps changed in your mindset that you are becoming more cautious on growth, given the, say, almost 100% growth in August to September?
To begin with, looking at the percentages, it becomes harder and harder as we grow to grow with the high percentage numbers. This you understand, of course. We believe we still had good growth in Q4. We grew some 65,000 subs in the period, which is comparable to the I think we grew 47,000 between Q3 and Q4 2019. Actually up there. Of course, we see a Corona effect in many of these countries. It is difficult in many of our developing countries around the world.
We saw an initial very positive effect. As we also said when we did the top-line guidance for Q3, we saw a big churn coming in these countries in July specifically, as you mentioned. I think they're struggling in many of these territories. That's definitely affecting us in a negative way. That said, we're growing with more people in an absolute number this year than we did last year in the same quarter.
Thank you, Jörgen. To follow up on the non-Nordic businesses, it's very interesting to follow your progress. You commented Russia in the report, but also India, to name just a few markets here. Can you just provide perhaps some sort of update on growth momentum, ambitions, et cetera, in India now that you have exclusive titles to dig into the Marathi-speaking population?
Yes. Thank you. Our strive to make our service as local and with a local product market fit as possible is what we are doing. Sometimes we are launching a country with a more broader decision, then we start pruning, of course. This is part of a natural cycle for us to prune our offer to the public. I think one has to consider India being a country where we have a large disparity difference between different income groups. Of course, having then a service that costs, if you compare it to other streaming services, two times or even three times, it might be a difficult thing for somebody to test such a service. Hence, we want to ensure that we can work more with a local approach, and this is what we've done with the Marathi language.
We have targeted really Marathi-speaking customers, I think we are gaining some positive momentum. When it comes to Russia, we can definitely say that one of the things we did in Russia also is something that when we did a new payment instruction for Russia with partnership with Yandex, we could also see that that made a great momentum. Payments and of course, languages are great ways to get to our local customer groups. One has to understand that India is made up of 20 different languages apart from English, and Hindi is the administrative language. Many different language groups across India are speaking different languages. This is also something we have in our service. We have now tested it with Marathi.
That's a very positive sign so far in terms of how people start engaging and using the service and conversion from trial to pay on Storytel Select Marathi is incredibly good. I think we have really good hopes that that will be a very big volume game for us. Of course, obviously the pricing there about SEK 15-20 per consumer month, it will require a lot of volumes to make a big impact on our growth rate. Also fun to point out that Marathi is actually the 10th biggest language in the world.
Yeah.
So thereby we talk so much about it.
Very interesting to monitor that going forward. Thank you. Just finally from me, coming back to you, Jörgen. It is very impressive underlying profitability improvements that we are seeing here, and obviously the business model is working with scale and loyal customers. That being said, personally, the marketing spend is something that caught my attention here in the quarter. Can you talk a bit just about why your country managers believe that it makes more sense to, say, prioritize, not perhaps road to profitability, but lessen the marketing spend as where we are right now? What factors goes into that trade-off between chasing further growth and profitability where we stand now?
Yeah. Thank you, Joakim Gunell. We have all along trained our country managers. Ringer have trained our country managers very well in making sure that when we spend marketing money, we make sure that we get them at an attractive subscription acquisition cost that we track intensely. Also comparing that to the customer lifetime value that we project for those customers as well. We have good ratios between those. When the country managers see that we are not performing according to those metrics, they then cut the marketing back home and restart the marketing effort with a new trial.
This we saw partly in Q3, and hence good pick from your side. As you saw, our marketing spend was somewhat lower than usual in the quarter, and this is also, of course, positive for our contribution margin and our EBITDA. That's where it all comes down to. Sometimes you could think, of course, would be fun if they even spend some more to increase the top line, but it's good that they have the financial discipline to make sure that we grow in a profitable way. That's what's behind that.
It makes sense. Just to follow up on that. If it comes down to the customer acquisition cost, which didn't look as favorable as you would have wanted to chase more top line. What drove that trend?
That the acquisition cost as such for a new trial user is-- we always want to improve that, but that's okay. I think the challenge we're seeing, which we have good hopes will improve a lot, is to get the activation and usage of the trial user to go up so that the conversion improves and hence the Customer Lifetime Value improves, which makes the ratio to SAC more favorable. This is why we see these new subscriptions, the Storytel Select Marathi in India, and I'm sure it will be followed by a lot of other select subscriptions to all the other seven languages we have in India.
Also the Storytel Lite subscription in Finland, incredibly interesting because we can really track that the churn numbers do improve and the metrics looks more favorable. We have more of those, and they will then scale and be rolled out in more and more markets, and hopefully we'll see that improving our CLV to SAC ratio more going forward.
I also think there's sort of partly a Corona effect, what we can see in the marketing efforts as well. We very early decided to continue to invest in marketing when Corona hit the world in Q2, and we decided to be positive and stay optimistic because we feel that we have such a great service that would really benefit people. I think what happened in Q3 was that a lot of companies woke up and realized that they also wanted to invest in marketing. Hence marketing eyeballs became more expensive and also became a bit crowded. That's also how, of course, the CMs on a local level work. It's not so easy to aggregate all our 20 plus markets into one explanation, but I think this has been truly an effect as well.
Very clear. Thank you for that.
Thank you. Our next question comes from Oskar Eriksson from Carnegie. Please go ahead.
Thank you. Good morning, guys. Couple of questions from me. First of all, outside of the Nordics, are you seeing any increased competition in this last quarter and into Q4? I've noticed Audible is experimenting with an unlimited offering in several markets, for example. Have you seen any initial impact from that? Thank you.
I think that there are more and more companies interesting to be part of the audiobook play around the world. That from our point of view, that's only a positive as it looks right now because what we're in the phase of doing is really for all these markets, Russia, Turkey, Poland, Netherlands, India, Italy. For all those, we have to build the market and build the awareness about audiobooks. That's a big challenge. Having someone on our side that helps us build that is really helpful, and much more important than the negative impact of having a competitor.
I think that on the whole, that really helps us. That's what we see in Sweden, where we kept growing by 50,000 subs every year for the past seven years, even after we've seen competition come in intensely. Yeah, it's a good thing that we do see more actors coming in. Of having a strong position on most of these markets is a good thing. What will really matter is what it will look like in three, four or five years.
Got it. Thank you. A quick comment on Audible experimenting with an unlimited offering in, for example, Spain, Italy since earlier. Could you just elaborate on if you've seen any impact or sort of first signs from that?
Yes. Thank you. Well, it's not the first market that Audible is really elaborating with this. We have lived side by side with Audible in the Italian markets where they also have a subscription model that is unlimited offer. It's more clear to well, maybe I'm biased, but it's more clear for the general consumer that understands an offer that is an unlimited. I think Audible has, of course, wanted to understand how that would work in markets. If they have launched it in also Spain, we are now then two strong players in that market. Back to what Jonas said, we can build the market together, and since we have the same kind of offering with an unlimited model, not a credit model that they typically have had historically, we can really educate the market on how such a service works.
Got it. Very clear. Thank you. A question on the Nordics as well. You discussed the marketing dynamics a bit here, but could you also perhaps talk a bit about the Nordics? Are you seeing local competitors being very aggressive or perhaps too aggressive on customer acquisition? If that's sort of the main explanation to your very solid contribution profit in Q3, which is typically quite marketing heavy. Thank you.
I mean, we can say our marketing cost as percentage of revenues going down slowly on the Nordic market. The competition is incredibly fierce, I would say. It's very competitive markets, and we see that the penetration levels of audiobook streaming subscription services are approaching 8%, 9% as a percentage of the population above 18 years. It's a competitive market. We have competitors with access to capital that do invest a lot. We have very strong market positions in Sweden, Denmark, Norway, Iceland, Finland, we're second. I think it's a fun game that plays out where the audiobook subscription services stand very strong and are able to grow also the overall book markets.
Looking at the Swedish market, it's been growing now by 10% over a three-year period, or 9% over a three-year period, entirely driven by the streaming business subscription services, digital now being about 50% of the overall market. That's what we've seen in Sweden. We see similar trends in Denmark, Norway and Finland. I think that gives us a good case also when we go out around the world and need to convince U.K., U.S.-based publishing houses that the streaming subscription model is a good one and has a positive net effect on the overall book market. That's something that is a big task for us, a big challenge, and hopefully we'll succeed in being able to demonstrate that and therefore making it easier for us to attract really strong English-speaking content.
Excellent. Thank you. Final question from me. The Storytel Lite offering in Finland, should this be seen as a pilot for other markets, I mean, in the Nordics to start, or is this an isolated model specific to Finland? Why in that case? Thank you.
Thank you. Well, I guess, the answer I will give you is really that we're piloting it. I cannot say without having evaluated it, whether or not it will be a model that we will continue with in other markets. Every market is specific, and I think that's how we view the world, that we do a local approach in each country. When we're testing something, obviously we try to learn from it and see whether it would make sense in other markets. It's really too early to tell whether we would use such a model in other markets for now.
Got it. Thank you very much. That's it from me.
Our next question comes from Armand Jabut from Cathay. Please go ahead with your question.
Thank you. First, just a follow-up maybe on the Storytel Lite. Is there any difference on profitability? I mean, I guess, ARPU is lower for this, but is there any difference on how this impacts profitability? Or is this the same kind of profitability on this compared to the unlimited version?
Yeah. Jonas here. It's a limited consumption in this, only 20 hours max per month. You'd expect the average customer on that s ubscription type to be on a lot lower average consumption. You may know that, for instance, on the Swedish market, we do have about a quarter to a fifth of our customers consuming an average of 100 hours per month. It's quite high consumption. I'd expect, if anything, probably that the profitability would be just as good as at least as the unlimited subscription.
Okay. Thanks. A question on new countries. You launched in Thailand, Indonesia, and Belgium. You have a lot of new countries that we don't know in the pipeline for the next years. How does the competition look in these new markets? I guess it's different than old markets, but do you see in general more competition when you're launching this? Or is it similar as you've seen in the last years when you launched in new markets?
Yes. Thank you. Actually, what we see is, for example, in Thailand and going into Indonesia, as we have announced doing that for Q2 next year. We're actually seeing more of a pioneer situation where we have to actually start already early on and producing a lot of books to audio. In some of these countries, audiobook is not even a specific phenomenon. Digitizing is the first step, and then secondly, of course, communicating our offer to the public. We see a very positive effect from more and more publishers that we speak to in more parts of the world that are really eager to continue on the same road that we have shown and proven that we have done in other countries before. It's a positive momentum, but many of the countries out there are still unexplored for us.
Got it. Coming to acquisitions, you made quite a lot this quarter. Do you think this is a new important part of the model when you expanded new countries, or was this quarter a bit unusual in that sense?
It was an intense acquisition quarter for sure, I can tell you from the finance department at least. I think we have our eyes and ears open. We just hired an M&A manager to the company to look into those opportunities. As you know, we have gunpowder i.e. cash, SEK 580 million in cash and a credit facility of an additional half a billion SEK. Definitely looking at possibilities to acquire in other countries going forward. Any specifics, as you understand, I cannot give you.
Thanks. Maybe a last question on the long-term growth to 2023. You have 35% revenue average annual growth. Do you think this could be tilted towards the end of this period, or do you aim to have a smoother growth over the next two or three years? Is that very difficult to say?
Yeah, I think we can't comment on that right now.
Yeah. Okay. Thank you.
Thank you. There appears to be no further questions. I'll hand back to the speakers for any other remarks.
Well, thank you very much for listening in. I think that's it for now, but I'm sure that you'll hear from us on other instances throughout the coming couple of months. Thank you for now.
Thank you all.