Good morning, everyone, and welcome to today's Q3 2026 results conference call. At this time, all participants are in a listen-only mode. My name is Matthew Hooper, and I will be your host today. Joining me here on the call are our CEO, Jørgen Lindemann, and our CFO, Johan Johansson. Our presentation will be followed by a Q&A session on the telephone dial-in line, and you can find our results materials, including the presentation deck and the detailed fact sheet, on the investor relations section of our website. As usual, the deck is for your information, and our remarks and our commentary will not follow it slide by slide. Please be advised that today's conference call is being recorded. I will now hand the call over to Jørgen to walk through the results. So over to you, Jørgen.
Thank you, Matthew, and good morning, everyone. These results demonstrate that we are on track to deliver our full year targets as we continue to execute our strategic transformation plan and move towards our long-term objectives of healthy operating margins, restored cash flow generation, and lower borrowing levels. There is no change to our full year targets or long-term ambitions. The combined sales of SEK 16 billion for our core operations for the first nine months of this year were 30% higher than what we reported on a standalone basis for the same period of last year. Our combined EBITDA before ACI and IAC of SEK 871 million compares with a loss of SEK 65 million for the first nine months of last year. The integration of Allente Group is running according to plan, and we have now taken the majority of the cost relating to the restructuring.
The resulting cash cost synergies are already coming through, and we expect to be at the full annual run rate, SEK 300 million-SEK 400 million from the start of next year as planned. There will also be sales synergies which our teams are also working on already. We have now received Dutch Competition Authority clearance for the sale of our Dutch operations to the parent company of the Videoland Dutch streaming service, and we expect to close the sales in the coming weeks. The sale of our Dutch operations will focus us operationally on our core Nordic markets, where we have the greatest scale advantage and synergy potential. It will provide cash to reduce our debt position and strengthen our financial profile, and provides our Dutch colleagues with a committed, new, fantastic owner who will be able to develop the operations further.
More broadly, we are implementing a wide range of organic measures to strengthen our market positions, product offerings, and partner agreements, reduce non-essential costs, invest in key areas, and conserve cash. Looking at Q3 in more detail, subscription sales accounted for more than 80% of total sales and were up 1% on an organic basis. Our streaming subscription sales were up 4% on an organic basis, with a total Viaplay subscriber base stable year-on-year and growing quarter-on-quarter in line with the usual seasonal patterns. The growth in our B2B streaming sales again reflected our focus on value over volume in our distribution partner agreements, as well as the growth in the number of premium sports subscribers, while the rising D2C ARPU level again reflected positive mix effects and pricing dynamics.
The 4% organic growth level is lower than in first half this year because the new distribution agreements and packaging structures that were implemented from the middle of last year were already having an impact in Q3 last year. Conversely, the decline in the non-streaming revenues line were lower this quarter, with sales down 1% on an organic basis. This line includes almost all of Allente's sales, as well as the sale of our linear TV channels through third-party distributors. Allente's sales were boosted in Q3 by making FIFA World Cup men's football matches available to pub and club subscribers. We have also continued to work with Allente and our partners to introduce new packaging and pricing initiatives to offset the ongoing structural decline in the linear TV channel subscriber bases.
Allente's ARPU was up again, both year-on-year and quarter-on-quarter, with almost all DTH satellite subscriptions now bundled with Viaplay and also offering access to Apple TV, HBO Max, Amazon Prime, and SkyShowtime, so that subscribers have the best of scheduled live and on-demand viewing options. Our total advertising sales were down less than 1% on an organic basis, which again reflected the combination of strong digital sales through our H1 and H1 offerings, almost offsetting the ongoing structural decline in linear TV advertising. Q3 is the seasonally weakest period of the year, and this year's audience and market shares were also impacted by coverage of the FIFA Men's World Cup football matches being shown by rival media outlets. In addition, our Q3 2025 sales were boosted by our coverage of the UEFA Women's European Football Championships.
The high growth in our digital advertising sales continued, with particularly strong growth in digital ad impression in all countries. Finally, the other sales line comprises of our sports licensing business, where we license our sports rights to third-party broadcasters and streamers in our core markets, and our scripted content sales business, where we sell our portfolio of original scripted content to broadcasters and streamers around the world. Sales were down 14% year-on-year on an organic basis and reflected the volatility in this revenue line. Our existing new and pipeline agreements suggest an improved performance in Q4, but sales will continue to decline as the amount of content that we want to sell or license diminishes over time. Overall, our core operations sales were slightly up year-on-year on an organic basis, which is in line with our short and longer-term outlook for stable sales development on an organic basis.
The breadth and depth in our highly relevant and compelling content offerings, including our high quality and year-round sports coverage, remain consistent differentiators for us across the business. Our Q3 content lineup again featured the very best in premium sports, local storytelling, and international hits. The restart of the domestic and European football leagues and cup competitions have attracted large audiences, and we have further enhanced our coverage of these hugely popular competitions. This includes becoming the first broadcasters in the world to show all 12 matches each week from the English Football League Championship. Our Viaplay Premier Sunday show has not only delivered some of the best on-site coverage, but also attracted a big following of English Premier League fans on social media.
Our Formula 1 coverage has benefited from Max Verstappen returning to the podium and Kimi Antonelli's fight to become the first Italian world champion since Alberto Ascari in the 1950s. Our Q3 non-sports content offering included the successful launch of new titles as well as new seasons of proven favorites. The premieres include Temptation Island in Denmark, as well as a new season of returning formats, including Paradise Hotel in Sweden, Svenska Fall in Sweden, and Charterfeber and Eventyrlig Oppussing in Norway. The international content slate included Outlander: Blood of My Blood Season 2, and South Park, as well as hit movies like Hunting Season, Flight Risk, and supernatural thriller Obsession was also a hit in the Viaplay store. Content accounts for approximately 3/4 of our total cost and operating expenditure for our core operations was slightly up year-on-year, but less so than in previous quarters.
A combination of synergies and savings from the Allente Group integration for all the content and production savings and positive currency effects almost offset Allente's investment in the FIFA World Cup men's football matches and the inflation embedded in our legacy and multi-year content agreements. As we have prolonged these agreements on competitive market terms, let them go or found alternatives, the level of inflation is decreasing in the second half of this year and will also decrease next year. But this is balanced by investment that we are making in other areas. Our Q3 EBITDA before ACI and IAC was up year-on-year and again included a positive currency tailwind.
We remain on track to deliver an EBITDA result in the SEK 1 billion-SEK 1.4 billion target range, and there's no change to our longer-term ambition to deliver double-digit percentage point EBITDA margin for 2028 compared to the pro forma 5.3% that we delivered last year. We're making steady progress towards our goals, but still have much to do to ensure that we are as relevant and resilient as possible and are set up as commercially and competitively as possible. Our priority and focus is on delivering the transformation plan, including the integration of the Allente Group and the divestment of the Dutch operations. This will strengthen our cash flow so that we can reduce debt levels and invest in markets where we have greatest advantage, opportunity and potential. That is for my comment for now.
I will now hand the call over to you, Johan, for your comments on our financial performance and position before we take questions.
Thank you, Jørgen, and good morning, everyone. Year-on-year, FX movements had a significant impact again this quarter with a positive impact on the group. On the core reported operation sales over SEK 50 million as the Norwegian kroner in particular strengthened against our Swedish krona reported currency. Reported core operation cost benefited from the net positive FX tailwind due to the strength of the Swedish krona against euro and dollar, in which we have the vast majority of our cost. The net result of this was approximately SEK 75 million positive year-on-year FX effect on our core operations EBITDA. Depreciation and amortization amounted to SEK 144 million in the quarter and included the regular SEK 100 million of PPA amortization charges arising from the consolidation of Allente Group.
The SEK -48 million of items affecting comparability in the Q3 primarily comprised SEK 19 million of redundancy and restructuring costs related to the integration of Allente Group, as well as SEK 29 million of currency translation effects. We have previously guided for a total integration cost of SEK 270 million -SEK 330 million, which are reported IAC, and we have taken SEK 222 million so far this year. We have no associated company income or dividends now that we have fully consolidated Allente Group, as you know. When looking at our interest cost, please remember that the cost for the EUR 646 million of balance sheet bank liquidity facility that we canceled in November last year were included in other financial items, not in the net interest. Whereas now almost all of our borrowing costs are included in the net interest.
Although our net interest costs were up year-on-year, other financial items were also significantly down. Moving on to the group cash flow. Our cash flow from operations before changes in working capital improved to SEK +195 million from SEK -140 million in Q3 last year. We reported a negative working capital development of SEK 190 million, which included SEK 90 million of payments for legacy content agreements in markets that we have exited. This non-core operation cash drag, which we have talked about previously, is included in working capital. The rest of the working capital development reflected the timing of payments and receivables between quarters. The substantially lower change in working capital compared to last year reflects the smoother and more stable setup that we have now with less volatility between quarters.
Our cash flow from operating activities totaled SEK 5 million in Q3 and included SEK 107 million of cash interest costs and SEK 2 million of cash tax costs. We invested SEK 36 million of CapEx in Q3 and reported negative free cash flow of SEK 32 million, of which a SEK +58 million was coming from the core operations and SEK -90 million from the non-core operations. The SEK 67 million cash flow from financing activities included the quarterly amortization of the Allente Group-related borrowings, which will total SEK 420 million this year and next year. The minor changes in the usage of the SEK 2.8 billion secured revolving credit facility, on which we had drawn SEK 750 million at the end of the quarter compared to SEK 700 million at the end of Q2.
The net change in cash and cash equivalents therefore amounted to SEK -99 million in Q3.
For the year as a whole, when excluding the non-core operations cash drag, our ambition is for working capital to be neutral to positive given the SEK +190 million change for year to date. We are constantly working to improve the working capital profile, as you know, as we also have discussed previously. We continue to expect the full year CapEx to be at or about the same SEK 150 million level, with cash tax payments approximately SEK 200 million, and our annual cash interest costs are now running at approximately SEK 450 million. Our financial net debt, when excluding leases, were largely unchanged at SEK 5.17 billion at the end of the period when compared to SEK 5.12 billion at the end of Q2, and comprised SEK 6.4 billion of borrowings and SEK 1.2 billion of cash.
You can see the usual debt maturity profile in the chart in the slide pack on the website.
Aside from the scheduled repayments this year and next, all the rest of our debt facilities mature in 2028. Our net debt to trailing 12 months pro forma EBITDA, excluding associated company income and IAC, was 4.4 x at the end of Q3 compared to 4.5 x at the end of Q2. This soon-to-close divestment of our Dutch operations for EUR 142 million on a cash and debt-free basis will enable us to reduce our net debt level further. The de-leveraging of our balance sheet depends on strengthening our cash flows through the effective doubling of the EBITDA margin between 2025 and 2028 and the ending our non-core operations cash drag in 2028. We are making steady progress and the cash flow improvement still requires a lot of work.
We are focused on executing on all the various initiatives we have in place to deliver the transformation plan by making the required efficiency gains, carefully allocating capital, driving returns on our investments as we're doing, and ensuring that we have the best possible capital structure. That concludes my remarks and I throw over to you, Matthew.
Thank you very much, Johan. We're now ready to take your questions. If you would like to ask a question, you will need to be on the telephone dial-in line as the webcast is listen only. Please press star one and then one again on your telephone keypad and you will enter the queue. To cancel your question, simply press star one and one again. We're just waiting for any questions to come in on the dial-in line. Okay. The first question we have will come from Alex Solvand, who is from SB1 Markets. Alex, you for your question.
Morning team, hope all is well. Just a quick question from me or maybe two. You might have mentioned it, but just the working capital for Q4. How much of the outflow that we saw in Q3 should reverse in Q4? We can maybe start there.
What we have said is that we are expecting on a full year basis, a neutral to positive working capital development, excluding the cash drag that we have. So that is the guidance that I have given.
Perfect. Thanks for that. And just with, let's jump to the next question here for the Dutch sale, which is approaching completion here. Can you give us any more information yet on the kind of expected net debt reduction after costs and adjustments and the EBITDA contribution leaving the group yet?
No, at this point, we cannot give any further information that we have given. As we said, we are targeting to complete a transaction with the mentioned purchase price of EUR 142 million.
Okay, fair enough. The last one from me would be on the sports rights economics. As the renewed sports agreements start to take effect, what are you seeing in terms of, just in general, cost savings versus subscriber retention and ARPU? When should the better contractual terms start to outweigh the inflation in those legacy contracts, would you say?
Yes, I think when you are looking at the sports contract, clearly that is something that we are evaluating on every right. What do we need? How much do we need of it? As you have seen, we have made some new agreements where we might not have bought 100%, but less than 100% of the rights. That is of course, a careful calculation on what do we believe we need in order to have a very competitive product, and where then else to allocate capital into new rights or new areas. These rights are, of course, as you can imagine, prolonged on what we call market competitive terms. There is interest in the market, and then we put our best foot forward and show what we can do with the right and hopefully, and luckily we have historical partnership with a lot of these rights owners.
There is a dialogue on what they expect and what we expect. Where we prolong things, we do that because we can see it is meaningful and where we do not then, or when things are too expensive, we let them go and we find alternatives.
Okay. That was all for me. Thank you.
Thank you.
Thank you.
Thank you, Alex. Just again, waiting to see if there are any further questions in the Q&A queue. Please remember to press star one and then one again on your telephone keypad if you would like to join the queue. Okay. No, okay, so I think it looks like that is the questions for today. That does conclude the rather brief question -and -answer session. Thank you for your time and your questions today. We do really appreciate your interest and always welcome your feedback. We are available for follow-up questions and meetings, so please don't hesitate to reach out if you would like to schedule a meeting or have any further questions. That is it for today now. Thank you again, and goodbye for now.