Earnings Call: Q2 2020

Jul 22, 2020

Morning, ladies and gentlemen, and thank you for holding. At this time, all participants are in a listen only mode. If any I will now hand the call over to your host, Matthew Hooper, NENT Group Chief Corporate Affairs Officer. Thank you very much, operator, and welcome, everybody, to Nant Group's Q2 2020 results conference call. We hope you're all well and managing your way through these extraordinary times in which we are living. I'm joined here on the call today by our President and CEO, Anders Jensen our CFO, Gabriel Catriona as well as Stefan Littker and Joel Gudin, our Investor Relations team. Presentation materials are available on our website as usual and a Q and A session will follow Anders and Gabriel's comments. I will now hand the call over to Anders. Thank you very much, Matthew, and a very good morning, everybody. Q2 was indeed an unprecedented quarter in many ways. Not only have we been dealing with the effects of the COVID-nineteen pandemic, but we have also closed the merger between ViaSat Consumer and Canal Digitall, launched ViaPlay in Iceland, announced the expansion of ViaPlay to the Baltics, teamed up with our partner, Elisa, in Finland, raised our ViaPlay subscriber intake targets again, delivered on our cost cutting program, partially refinanced ourselves and launched an updated reporting structure that better reflects our streaming strategy. So all in all, a fairly busy quarter. I will go through many of these things in more detail in a few minutes. But before I do that, I would like to draw your attention to 3 key takeaways from this quarter. Firstly, we are well set up to succeed. The transformation program and the new operating model that we implemented during the second half of last year have clearly helped us to become faster, more accurate and more efficient, so that we can make sure that we capture the full potential of ViaPlay, while at the same time generating significant savings in other areas. This has been a major factor in enabling us to deal with the challenges of COVID-nineteen. We have made a number of quick and, dare I say, brave decisions that will ensure that we emerge from this crisis even stronger and better position than before. Secondly, the investments we have made in ViaPlay are yielding results. We have just delivered another quarter of exceptional subscriber intake. While some of this growth is undoubtedly related to the staying home effect of COVID-nineteen, we have continued to take market share and the record high usage and low churn levels again demonstrates how much our customers love ViaPlay. And thirdly, we are ready to expand ViaPlay internationally. Our platform can compete with the best in the industry and the successful launch in Iceland shows that we're ready to take this to the next level. We're now preparing to launch in the Baltics at the beginning of next year, and our vision is now to scale ViaPlay even further. We could launch ViaPlay in over 15 markets in the next 5 or more years. Now let me turn to what we are seeing across our business and let me start with ViaPlay, which added over 200,000 subscribers in the last 3 months and over 600,000 in the last 12 months. We've ended the quarter with over $2,700,000 paying via Play customers. The growth came from our standalone rather than bundled base that was driven by healthy intake of both films and series as well as sports subscribers. Via Play revenues were down 4% as temporarily lower sports package prices more than offset the subscriber growth and higher transaction revenues in the ViaPlay store. Sports packages are now back at normal levels again and streaming minutes of sports viewing were up 10% year on year in June and are now up 116% so far in July. We have raised our subscriber intake for the full year twice this year from 250,000 to 400, and then from 400,000 to 600, which would represent more than 25% growth in the ViaPlay subscriber base in 2020. This full year target may seem conservative given the performance so far this year, but it's hard to judge how much of the growth in H1 is a pull forward effect as a result of COVID-nineteen, and we're also mindful of the upcoming Disney plus launch in mid September. We don't expect increased churn levels, but more noise in the market will most likely impact sales at least temporarily. The number of streaming minutes was up 42% in Q2 when excluding sports. Usage is one of the most important metrics we have and it's highly correlated with the churn rates. We premiered 8 new Via Play Originals in the quarter and the total viewing of our Via Play Originals was up 41%. This was driven by the success of Season 2 of The Lawyer and the very popular premieres of The Machinery and Big Lars. This is fantastic to see as our locally relevant originals are a key differentiator for us. 3 of the top five shows in bioplane in Q2 were original productions when measured by number of unique users and 4 out of the top 7. This shows that the interest in broad based is broad based and that originals are a great way to attract new customers to the platform. We also saw a huge increase in the viewing of Season 1 of The Lawyer when we premiered Season 2, which shows that the value of our Originals library will only go up as we launch new seasons of successful series. Then moving on to other subscription revenues, which were down 34%. This is reflect this reflected the deconsolidation of ISAT Consumer from the beginning of May as well as the temporary reductions in sports package prices by 3rd party networks that distribute our sports channels. The postponement or cancellation of sports events also reduced our sports rights sublicensing revenues. Sports package prices are now back to normal levels and revenues from sublicensing are resuming. So revenue should, excluding the impact of the deconsolidation, follow more regular trends moving forward. And then moving on to our advertising business. Revenues were down 30%, which was in line with our expectations and reflected a broad based drop in advertising demand due to COVID-nineteen. All markets were down, both for TV and radio, weak betting and gambling revenues, in particular, taking a beating when live sports were off air. We have now seen a substantial improvement in July with revenues expected to be up slightly. August is looking okay so far, but September is the big sales month in Q3, so we will have to wait and see how bookings develop. Based on where we stand today, what we know and what we hear, we expect total advertising sales to be down substantially less in Q3 than in Q2. And then moving on to Studios. We have resumed the process to sell the non core part of our Studios business. It is proceeding according to plan and we have ongoing discussions with a number of interested parties, which is why we have now reported these companies as discontinued operations. The core part of our Studios business is scripted content production and distribution, which has now been integrated with the rest of the business as it primarily provides scripted drama content for ViaPlay and will be key to ensuring the continued quality of our original production pipeline into 2021 and beyond. All scripted productions has been postponed to the second half of this year or first half of year due to COVID-nineteen. However, no scripted shows have been canceled and the underlying demand for high quality scripted programming remains very healthy. We still expect to premiere approximately 30 bioplay originals this year and up to 40 in 2021, provided that the gradual return to full production capacity continues. The final piece to discuss is Alente. The merger between ViaSat Consumer and Canal de Guitar was completed in May and we therefore deconsolidated ViaSat Consumer from the beginning of the same month. This transaction has great strategic value for us for several reasons. Firstly, this will generate substantial cost synergies that will allow for the combined company to generate higher profits, despite the structural headwinds that satellite TV is facing. Secondly, we will now be able to penetrate the Canal de Geital with both via play and RV channels. And thirdly, this deal is an important foundation for us to be able to scale up our Norwegian presence, not least following the investments that we made in the skiing and the Premier League rights for years to come. And this brings me to my final point, which is expansion. The COVID-nineteen crisis has made it clearer than ever just how relevant our strategy to focus on streaming is. We have continued to take market share and our content offering is stronger than ever. While our technology platform has again proven to be highly adaptable and resilient and even enabling us to launch in Iceland when in full lockdown. And please remember that from a tech point of view, launching in a small market is no different from launching in a bigger market. Scale is a great enabler to drive value, and the best way to drive scale is to offer the best user experience. Increased consumer engagement drives down churn and drives up customer lifetime value. We have for a long time stated that our focus is on Buyer Play subscriber growth and not on maximizing short term profits. The material margin expansion opportunity in the Nordic markets is clear. And once we achieved critical mass and start to focus on value rather than volume, innovative deals like the one we have recently struck with Elisa in Finland as well as the potential for Via play in the Alente joint venture will only get us to this point even more quickly. The very healthy trend we have in the Nordics, together with the successful launch in Iceland, make us confident that ViaPlay is ready to travel to new markets, which is why we announced our intention to enter all three Baltic markets in Q1 next year. And my vision is that we will enter more than 15 markets in the next 5 or so years, with new launches being announced on a regular basis. Our content partners are very supportive, and we are in a number of very interesting discussions. And we know that our originals travel well given the international distribution deals that we have done historically. Not all launches will be the same as the profile of the markets that we're looking at are very different. It would be everything from full blown stand alone launches with or without sports to niche Nordic Noir products offered alongside local partner services. We've created many innovative partnerships over the past year, including the most recent one with Elisa in Finland, and we are constantly open to opportunities to work with partners to accelerate growth, contribute investment and provide valuable local insight. This is the time to invest in the significant market opportunity that we see with Viaplay. The launches may well reduce overall group profitability short term, but they will also drive considerable long term profitability as the periods to breakeven will be relatively short and the margins beyond that point will be relatively high. And as I think you know by now, we are very disciplined when it comes to managing our cost and exposure levels. So each market we consider must prove provide a unique value opportunity or we will pass on that market. I will now hand over to Gabriel for his comments on our financial performance and position. Over to you, Gabriel. Thank you, Anders, and good morning, everyone. Let me start by quickly running through our Q2 performance. Organic growth in the quarter was down 13%, which reflected the impact of COVID-nineteen on our advertising, subscription and studio sales. Live Play accounted for over 30% of group sales in the period, despite the material impact of the temporarily lower sport package prices. The underlying performance continues to be very positive. Operating profits before items before associated combined income and items affecting comparability were down from €432,000,000 to €156,000,000 which reflected the lower advertising and sports subscription revenues, the deconsolidation of the Viasat consumer business in May and the U. S. Dollar FX headwind in the quarter. We had some cost benefits from the postponed or canceled sports events in the quarter, but also an FX headwind due to the depreciation of the Norwegian krona. Viasat Consumer reported an EBIT of $33,000,000 in April compared to $125,000,000 for the whole of Q2 last year. This reflected the consolidation of the business in May. And after May, Alente revenues were adversely affected by the depreciation of the Norwegian krona, the fall in subscriber numbers as well as a temporary reduction in spore package prices. Prices now are back to normal and Alente's EBITDA before items affecting comparability amounted to $166,000,000 for the 2 month period after the consolidation of the business. Our associated company income from Alente amounted to $51,000,000 for the remaining 2 months of the quarter and included the net impact of Allentes' $31,000,000 of restructuring cost in the quarter. The purchase price allocation has yet to be finalized and no amortization was there for May this quarter. But we do expect amortization charges of approximately $350,000,000 to $450,000,000 per year from May 2020 onwards, which will be taken from Q3 and forwards. The majority of these charges will be adjusted for tax in the reporting, so have less impact on Alente's net income. The focus now for Alente is on delivering the $650,000,000 of cost synergies and the upselling of VioPlay to the Canal Digital subscriber base. These synergies will have full effect in 2022 and we do expect approximately $100,000,000 already this year and $400,000,000 of synergies next year. The integration and the restructuring costs are still expected to be approximately 900,000,000 and will be incurred during 20202021. Approximately €250,000,000 will be taken this year and the rest will be taken next year. Following the end of the quarter, Alente has secured the $2,500,000,000 bank funding, which will be drawn down in Q4 this year with the intention of paying down an extraordinary dividend to Alenten's shareholders. Alenten then plans to pay out quarterly dividends moving forward. The remaining costs for the 2019 2020 football seasons that were restarted in Q2 have been taken, including the cost for the Premier League, Bundesliga and Superliga. Sports events that did not restart until the end of the quarter, such as the UEFA Champions League and Formula 1, will be taken from Q3. Overall, we expect Q3 sport costs to be approximately $250,000,000 higher than normal due to the movement of costs between the quarters. We received compensation for some sports events that were canceled such as the Ice Hockey World Championships, some of the European Football Leagues and the British Open Golf. But based on the current situation with the vast majority of events resuming, we do not expect any further material compensation from sports rights owners. The combined savings from the 2019 2020 efficiency programs amounted to $300,000,000 in the quarter. And the benefits from government actions such as flowing of staff and lower social expenses amounted to approximately BRL 15,000,000. In addition and in line with government initiatives, we have been able to defer tax payments into 2021. Items affecting comparability amounted to $2,400,000,000 and comprised the non cash and tax free capital gain on the merger of Aiza Consumer and Canal Digital due to the difference in the book value of Aiza Consumer and the fair value placed on the business in the transaction. If you look at the cash flow, cash flow from operations was down, but our net operating cash flow was up following a positive $673,000,000 change in working capital. This reflected normal seasonal patterns and continued investments in VIA PLAY original, but with no significant sports rights payments, lower studio production volumes and the deferral of approximately $400,000,000 of tax payments into 2021. If we move now to the outlook, it is clear that the impact of the COVID-nineteen on the business will be material this year, which is why we withdrew our 2020 outlook for profitable growth when we announced our Q1 results in April. It is still very difficult to provide any clear outlook as that depends on different factors, including the extent and duration of the crisis as well as the measures implemented by governments around the world in general and in the Nordics in particular as well as actions that we could take to mitigate any further impact. Having said that, our ambition is to be as transparent as possible, so I want to try to help you with some of the line items where we have some visibility. We still expect full year savings from the 2019 transformation program of approximately $200,000,000 this year, of which we deliver approximately $50,000,000 in Q2 $100,000,000 for the year to date. We also continue to expect to generate additional $700,000,000 of savings in 2020 from our COVID-nineteen initiatives, of which we have delivered approximately $250,000,000 in Q2 and $285,000,000 for the year to date. In total, then from both these programs, we have delivered approximately EUR 300,000,000 of sales in Q2 and EUR 385,000,000 for the year to date. The transactional headwinds from the U. S. Dollar are now expected to be approximately $160,000,000 for the year. We have absorbed approximately $20,000,000 of this impact in Q2 and approximately $80,000,000 for the year to date. We also expect an FX transaction headwind of approximately $75,000,000 for the full year due to the depreciation of the Norwegian krona, of which we absorbed approximately $25,000,000 in Q2. For the full year, we expect working capital development that is broadly in line with 2019. So that means between minus $750,000,000 and minus $800,000,000 This is driven by prepayments for new and prolonged sports rights that we have secured during H1, such as the Premier League that was paid in Q1 and the UEFA rights that will be paid in Q3, as well as further planned investments in BioPre originals and the positive impact of deferred tax and other payments into next year. The total amount of deferred tax payment for the full year is expected to be $470,000,000 Finally, a few words on our funding profile. We have recently successfully raised €800,000,000 in the capital markets by issuing 3 5 year unsecured bonds. The issue, which was oversubscribed, comprised $150,000,000 maturing in June 2023 and $650,000,000 maturing in June 2025. This helps us now to substantially lengthen the average maturity of our borrowings as the proceeds are being used to reduce shorter term debt. We now have SEK 3,100,000,000 of outstanding corporate bonds, of which SEK 500,000,000 expire in October 2020, and with no further bond repayments until May 2022. We also have SEK 1,600,000,000 of short term commercial paper. We ended the quarter with SEK 1,500,000,000 of unrestricted cash, a $4,000,000,000 revolving credit facility maturing in August 2023, of which $500,000,000 is currently drawn and an equivalent of $280,000,000 in undrawn overdrafts. Our net debt ended the quarter at $4,200,000,000 which is 2.6 times our trailing 12 month EBITDA before items affecting comparability. Financial net debt totaled MXN 3,700,000,000. Alente ended the quarter with a net cash position of MXN 751,000,000, and this new EUR 2,500,000,000 loan will enable Elente to pay the extraordinary dividend to Nant and Telenor in Q4. We will use this dividend to reduce our gearing levels and fund the expansion of Bioplay. In summary, we have a well balanced capital structure. We have taken a wide range of quick and effective measures to counteract the effects of COVID-nineteen, and we will continue to monitor the development of the pandemic and adapt the business accordingly. We have made considerable progress in line with our streaming focused strategy and the outlook is now improving. That's it for my comments. And so now back to you, Anders. Thank you very much, Gabriel. Q2 was indeed a very eventful and challenging quarter with many moving parts. But the quick and decisive actions that we took are paying off, and we see clear improvements in the market now. The addition of more than 200,000 new Via subscribers, the closing of the ViaSat consumer merger to create Alente, the partnership with Elisa in Finland and the successful entry into Iceland are just some of the highlights. I stated on the Q1 call that we would come out of this crisis stronger and even better than positioned than ever, and I am more confident of that now. The credit for this goes to the fantastic dedication, focus and the flexibility of our teams during these challenging times. We're now preparing for the expansion of Via Play to the Baltics, Viaplay to the Baltics, while also reviewing further geographic expansion opportunities. My vision for Viaplay is as clear as the considerable opportunity before us. I would like to take this opportunity to thank you all on the call for your interest in NEMT and for the support that you have provided during these challenging times. It means a lot to us. That concludes our commentary on the results and we'll now be more than happy to take your questions. So over to you, operator. Yes, sir. Thank you. Ladies and gentlemen, we are now ready to register And the first question comes from Johanna. Please go ahead announcing your name and company. Johanna Alquist from SEB. I have two questions, if I may. The first one relates to working capital. If I got you right, Gabriel, you guide for negative SEK 700,000,000 to SEK 800,000,000 for the full year on working capital in the cash flow. I'm just wondering, does that include the €400,000,000 450,000,000 in positive sort of tax gain that you get this year, but will which will be postponed until next year. And then I'm wondering why sort of if we exclude this SEK 400,000,000 positive, why working capital underlying will be more negative now than you expected in Q1? And the second question relates to the Allente joint venture. And also the question there relates to the extraordinary dividend that we should expect. I know that you say that you will increase leverage by SEK 2,500,000,000 for Alente. I'm just wondering, do you talk about deleveraging? So how much do you expect of I guess, you will receive half of the 2.5% and how much will you use to deleverage and how much will you sort of pay out as next door with no dividend to shareholders? That's my two questions. Thank you. Thank you, Johanna. Yes, on the working capital, we have yes, the benefit of the tax payment is included in that number. As I mentioned on the outlook, we have the prepayments of the new sports rights that we have secured during H1, and now we have more visibility of those payments that we need to make now in Q3 as well. And then obviously, that is also affected by the continued investments that we have in BioPlay. So that's what is affecting that number. Then when it comes to the extraordinary dividend on the €2,500,000,000 loan, I think you could expect the majority of that will be paid out to the shareholders in Q4. Thank you very much. Thank you. And we will now take our next question from Mikhail. Please go ahead, announcing your name and company. Yes. Good morning. Mikhail, Got a couple of questions regarding Via Play. Can you say something about the development, the subscriber development in June, July during the restart of the football leagues and the resumption of the season? Yes. Good morning, Mikael. Absolutely. During June July, we had very low churn during sort of the lockdown in sports, thanks to the price reductions. So the returning customers wasn't that many because very few had left. So the new but the new customers that came in during the quarter, the second quarter was 22,000 roughly out of the 206 of new sports customers. And then the usage has been very high. So I think sports is now back to where it was before the crisis hit hard on the sports and sporting event. And now we're seeing sort of a gradual back to normal. So we are at higher levels now than we were going into the crisis, both in terms of usage and in terms of paying subscribers of the sports packages. I hope that answers your question, Orest. Okay, great. Thanks. And can you also say something about the development of the subscribers, how you defined it before Q2, the standalone subscriptions not included not including 3rd party and bridge and the banding? The development, is that your question? How the development was on the standalone? Well, if you look in Q2, the numbers, the 186,000 that comes from TM TV series and movies packages and then the 22 on the sports packages, they are typically from the stand alone proposition. So and that development has continued strongly into the Q3. And then we have the addition, of course, of B2B agreements. And we have yet to sort of fully integrate the upside from the Alisa agreement. So the mix will continue to be between B2B and direct to consumer. The bundles are outside that number. They are in a fairly steady state. Okay. And just a follow-up there, would be great if you can say something about the event absent potential. Yes, it is one of the major upsides in the wholesale venture above and beyond the cost synergies that we have quantified very specifically. The whole upside of upselling via Play is, of course, a revenue synergy that we have yet to see the full effects on. And it's still early days, but very positive. And there are also some hardcoded requirement in our agreement with Elant on volume. So there is an opportunity both on the standalone via play upsell and then there is the bundle upsell opportunity with the V channels. Both of them has been, as you probably know, underpenetrated for historic business reasons for many years. So this will give us a significant upside in general, and I would say in Norway in particular. And we'll see more of that in the second of this year and early 2021 as well. The integration between the 2 ViaSat and Canal Digitel teams are more or less happening according to plan, but there is of course a little bit of a delay effect because of the current situation. But there is a significant upside in that and that will come above and beyond what we see in the current outlook for Viaplay. Okay, great. Thanks. Thank you. And the next question Martin Annel with DNB Markets. So my first question is on the near term outlook here in Q3. There's a lot of moving parts here still. And if you could just clarify the sort of timing of the sports rights cost effect, the FX and the cost synergies so we get a full grip of the cost base in Q3? Thank you. Thanks, Martin. Gabriel, do you want to take that one? Sorry, I had a bad line. Can you please repeat again the question? Yes. If you could clarify the FX effect that you expect for Q3 and the cost synergies and the incremental Sports Rights cost effect? Yes. When it comes to the incremental sports rights effect, that is $250,000,000 additional cost in Q3 that we expect. Then when it comes to the currency, we're still looking at the numbers. So you should try to split the guidance that I gave on equally across the quarters. And then what was the other? The cost synergies. The cost synergies. Yes, those are also evenly distributed over the quarters that were both in terms of the transformation program that we did last year and then what we expected the remaining savings from the COVID-nineteen initiatives. Okay. Great. And then on the ViaPlay outlook and your full year guidance, how is can you share some light on the breakdown of ViaPlay subs on the Q2 figure and also in your guidance on it was, as we mentioned, the volume came predominantly from the standalone base, I. E. Not the bundled base. We took in 186 TV series and movies packages and then another 22,000 on sports despite some of the lockdown on sports for a large part of that quarter. And we expect that kind of split going forward as well with sports gradually increasing during Q3 and Q4. This year has the smallest common denominator probably the past quarter as well as many moving parts, and we still live with many moving parts given that we don't have a period without the major sports leagues. Everything will happen back to back more or less. So we have to sort of navigate through that period and how much we can actually get out of it. The underlying most important thing is that there is a very positive beat right now for both outlook for the full year is on the conservative side given the momentum that we see. But I think think it's also given the many moving parts and this COVID-nineteen situation that none of us has a manual for, it's good to be a bit prudent. But I think there is good opportunity for us to beat that and hopefully pass the $3,000,000 outlook for the year, but it's too soon to say. We want to continuously invest in Via Play, speed up the production for the originals if we can. Our capital situation, including getting the dividend from Alente, which will allow us to both deleverage and then continue to invest in ViaPlay, gives me good confidence that sort of the underlying positive beat will continue also going into 2021 with the launch in the Baltic. So the kind of split that you have seen in Q2 will probably continue. And then we have a new addition with the Elisa agreement, which is a hybrid between a B2B and a partnership, if you will. So many moving parts, but very positive underlying. Hopefully, that answers your question. Otherwise, happy to elaborate further. That's great, Anders. Thanks for good color on that. And just out of curiosity, on the sports events, mainly the big football games, how I mean, we don't know when the audiences will be allowed back into the stadiums. And how do you think this impacts the interest in the sport product? Are you surprised by the figures so far? No, it's a very good question. And again, there is no real manual for this extraordinary situation. I think when we the first league that we had back on air was with the German Bundesliga, and there was a lot of comments how football without an audience is not exactly what you want in terms of viewing experience. But then there is no technology. You can put some sound on it if you want to. And we've seen very, very healthy uptake in the viewing numbers. And now people are getting used to the comments of any negativism has more or less disappeared completely. So I think we adopt quite dramatically. And the more than 100% increase in viewing in July has been quite extraordinary. There will be returns. We see now in Denmark that they will be doing trials on a gradual return to audiences with a limited number being admitted into some of the arenas. We hear the same discussions going on in the U. K. Regarding the Premier League. I think Champions League when the new season kicks in after the sort of the play out in Portugal in August, we'll probably try to find some sort of solution as well. But I think the smallest sort of the common denominator here is that we are very adaptable and the log of football has not decreased. If anything, it has increased. So and hopefully, I think at some point, we will be back with full stadiums of screaming fans. So we'll get through this and the value will just increase. That's my the smartest I can say right now. It's very difficult to say, but we are very adaptable. Okay. And just two final questions. Firstly, on advertising. You mentioned it was up in July. How should we think about the full Q3 outlook? Could you be up for the full quarter year over year? Or is July a temporary? And also on the full second half of the year, do you expect? What we know right now is that July is slightly up. August is looking promising. So I wouldn't rule out that being up as well. But the big month is September. And for that, we have yet to see the bookings. What we hear though, after obviously engaging with as many of our larger clients and media agencies as possible is that there is a built up demand. There is earmarked money ready to be spent, assuming that the pandemic situations continues to gradually improve. We are far from out of the woods, but what I take with me from everything that I hear is the willingness to invest out of the crisis, and that will impact. Whether that is significant enough to take us into growth in Q3 and for the second half, it's too soon to say. But indications are positive in general in the 3 advertising markets that we have and I would say in Sweden in particular. Perfect. And finally, on the ViaPlay vision, I'm just trying to understand how much of this is sort of vision versus actual planning? How far have you come in these expansion plans? Well, it is a vision and it's very much something that I drive as I see the significant opportunity with the platform that we've created because it is very much a tech game to be able to scale cost efficiently. And we have taken the build up cost for expansion on the tech side by being who we are in the Nordics. We can scale to any market at a fairly fixed price. And then it's more an effect of how much content and marketing we want to invest in. And we've done quite significant work simulating various scenarios and opportunities. And we are in some, as I mentioned earlier, in some very interesting discussions with content partners. But it's still a vision, and we are yet to announce anything above and beyond the Baltics. But of course, I wouldn't mention the vision in the way that I am right now if we didn't have fairly solid sort of pre work and pre studies completed. But there is yet to be any firm announcements. And of course, this is something we want to make sure we can discuss with our shareholders and as I said with our partners. We are built to scale and the margin opportunity from that scale is quite significant. And the natural question is, if it's possible to compete with those global giants that we're up against. And I think we've proven in the Nordics that it's possible. That is our home turf. Now if we go to play away, if you will, then we have to make sure that we find unique U. S. Piece in each and every market. But I think history has proven that we have seen a couple of U. S.-based giants underestimating the firepower of Nordic innovation before. So I do think we have a good opportunity. Thank you. And we'll now take our next question from Tom. Please go ahead announcing your name and your company. Sorry, dog in the background. Tom Singlehurst here from Citi. Thank you for taking the questions. I've got a handful, maybe going through them 1 by 1. On Viaplay, I mean, one of the encouraging things is that you anticipate continued momentum across the second half, which is maybe a contrast to how some of the other big streaming platforms have talked about that. I was just wondering why is it you're so confident that what we saw in the 2Q isn't just sort of a pull forward of what might otherwise have come in the second half of this year. What's is there specific market research underlying this? Or is it driven by your view on the usage levels? And I'd love a little bit more detail on that, maybe as a starting to answer the question. Yes. Absolutely. Good morning, Tom. I think the reason for why we view the opportunities for the second half slightly different than at least one of the globals is, of course, that they had a little bit of a head start when it comes to penetration into the households in the Nordics. And we are sort of increasing our penetration gradually. And I think one thing that we learned during this pandemic is the willingness to sort of add more services to your household portfolio, if you will. I think this is something that will not go away. I think this behavior will continue. We have managed to reach the furthest end of the long tail sooner than we anticipated as a consequence of this situation. And if anything, rather than sort of stop adding streaming services, I think people will look at maybe shaving off a couple of other traditional TV channels and pay less for a traditional TV bundle rather than slow down the growth in streaming. So I think we are organically able to justify a continued growth whereas at least one other player will see a slowdown as a consequence of their higher penetration. The other factor is our belief in the content that we have for the second half of this year. We have some very attractive strong original productions coming up. And thirdly, we do sports. And sports will only continue to attract, especially if we see a gradual return to stadiums filled with audiences and the whole experience of sports will get back more and more to normal, hopefully, at least when we come into next year. So I think there are good fundaments for why we can be a bit more bullish on our view on the second half. And leading on from that, I suppose one of the things that you could have considered maybe is sort of trying to drive pricing. I mean, am I looking at that too bluntly that there's a choice between using this strong platform to drive growth in sub volumes and all pricing and you've just elected the sub volumes? No, there is you're right. There is a trade off, of course. If the trade off was between sort of keeping prices lower to drive increase, if we take Sportsnet as an example, I don't think that would be a smart way to create a solid business going forward. We have seen and I have experienced from previous life in adjacent industries that if you keep prices low for too long, it's going to be very difficult to get them back to the level where you need to be. So that trade off, I would not be willing to make. The other flip side is, of course, that now that demand is where it is, is the room for price increases, which we originally planned for this year. And I think that would not be so clever at this point because we see this great momentum. So we're trying to strike the balance between sort of not giving away too much too cheaply and not trying to cash in on the momentum too soon. It's a balance that needs to be struck right now. And another addition that I would also like to mention that adds to our ability to be a bit more bullish for the second half is the increase in B2B agreements. The Alisa partnership is one great example that we do that the global don't do. So there could be more of that in the pipeline as well. That makes sense. And then very final question. Obviously, I mean, quite an impressive performance 2Q on advertising. I know minus 30 probably doesn't feel like that, but relative to other broadcasters in Europe, it's a good number. July positive. Just on the July number, is there a distortion from sports? I mean is there some sports content that's appearing on the free to wear channels that is potentially inflating that number in a regular way that's not sustainable? No. The very short answer is no. We haven't aired anything just to sort of boost that number. We've been very mindful about making sure that sports, 1st and foremost role is to engage people with bioplane. We haven't done anything to boost that number. So no. But the return to sports is positive in the sense that betting companies is now, of course, investing to get back what was lost during the time of no sports. But we haven't moved anything over to free to air to just sort of inflate the number, if you will. That's wonderful. Thank you very much and congratulations on a good quarter. Thanks. Thank you. And we'll now take our next It's Peter Testa from 1 Investments. I have a couple of questions, please. One is just on the originals view. When you look at the working capital and the investment in originals in 'twenty and 'twenty one, can you give some sort of sense as to whether there's been any timing shift there as to how we should feel about the cost of that? And then in 'twenty one on originals and taking their launches up again to 'forty and thinking about spending going forward in originals, there had been an earlier view that you would be able to monetize partnerships, etcetera, and get to a point where the total broadcast or production, sorry, envelope was relatively stable. Do you think that's still the case? Or given the bioplay ambitions, is that something which we should expect to increase? Yes. Good morning, Peter. Thanks for the questions. On your first question, the impact of the volume, it's more or less in line with what we anticipated before we entered this year of what turned out to be slightly different here. We've had some delay effect, but not significant enough to make any significant changes to the working capital profile as a consequence of the original productions. On your second question, I'm of the opinion of the firm opinion that we are still keeping the opportunity to keep your constant investment on a steady state as a consequence of the in the originals, I should say, as a consequence of more partnerships. And that goes especially to when we look at international originals, mostly in English language, where we will get access to fantastic productions at a lower share of the total investment as a consequence of what we call slate partnerships with very strong international partners. And of course, the more markets we add to our portfolio, the more attractive that kind of model becomes. Then we can monetize more of that investment in more markets, especially if those markets are complementary to the markets that our partners are addressing. And those partners that we are talking about when it comes to English language content typically address the U. S. And those bigger markets where we can sort of complementary secure a value content value at low cost for markets like the Baltics. So the model is hopefully ready to prove itself during 2021 and onwards. Great. And then the other question I had is when you think about the new market plan that you have on Via Play, can you give some sort of sense as to how rights intensive this should be? Are there any that would be sports driven or how we should think about rights spending overall as a consequence of your medium term goals? Well, as I mentioned, we want to view each market on its own merits. And we're looking at sports as a very attractive differentiator for many of the markets that we're doing our homework on. And we're using this whole situation also to engage even further with our partners on the sports rights side to secure sports rights at sort of favorable and attractive cost levels, where we can spread our cost over more markets. One example is the announcement of the Baltics when we announced that we had Formula 1 as part of our portfolio for the 3 countries, and that was secured as part of our Nordic agreement. So that's a bolt on that makes us actually the largest partner when it comes to number of territories for the F1 group where we have 8 countries covered with Formula 1. And we're looking at more deals similar to that one. And then we have to be clever about how we can actually compete. We don't necessarily want to go head to head with large broadcasters in too big a market when it comes to sports. Then we'll probably look at a different kind of proposition. So we will be opportunistic in that sense, but use our relationships and up the sort of built up position as much as possible. That's great. Thank you very much for the answers. Thanks, Liam. And we'll now take our next question from Richard. Hello. It's Richard Jones with Tower House. Good morning Richard. Hi. I just wanted to ask a question. We obviously not had that much discussion around free TV. I just wanted to know your thoughts on the scope of potential consolidation in free TV across the Nordic markets in a similar way to the ViaSat agreement? Yes. Richard, that's a good question. It is a dog with some fleet, to use an expression. It is definitely attractive and there could be some synergies in it, but it's regulatory challenging. That's probably the biggest flee of them all. That is not straightforward to get something done. And secondly, did synergies need to be significant enough to justify exposure to a declining advertising market or advertising markets, I should say. So I think it's more a matter of how we think about use of our capital and whether those synergies and that exposure impact our equity story and focus negatively or positively. So it's not straightforward. I'm more mindful now about using sort of the proceeds of what we have to invest in via play. I think if you take the Atlantian example, where we're now able to leverage up the company, get some extraordinary dividends, use that money to invest in Via Play rather than do extraordinary dividends for our shareholders. I don't think that opportunity would be as significant in a, let's say, a JV on an advertising base because the synergies are not significant enough and the leverage potential for that kind of company is not significant enough. So it is an opportunity, but it is a little bit of a dog with fleece, I would say. Great. Thank you. Thank you. That concludes the question and answer session. I will now hand the call back to your host, Matthew Hooper. Please go ahead, sir. Thank you very much, operator, and thank you, everyone, for your time and questions today. We will be hosting virtual digital roadshows like last quarter over the coming days, and we look forward to speaking with as many of you as possible during that time. Furthermore, we will host a Capital Markets Day in November to provide more details about our plans moving forward that we discuss some of today. As ever, please do not hesitate to reach out to me, Stefan or Joel in the IR team with any questions or requests that you may have. We do have a unique story to tell, so thank you for your time and for your interest. That's it for this call today. So goodbye for now, speak soon, and please stay safe. Thank you. That concludes our conference for today. Thank you all for participating. You may