Alma Media Oyj (ALMA) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to this interim report session of Alma Media's First Quarter 2025. My name is Elina Kukkonen, and I'm responsible of the Communications and Brand of Alma. We begin with the presentation so that our CEO, Mr. Kai Telanne, will first present the Alma's overall result of the first quarter and highlight the performance of each of our business segments. After our CEO, our CFO, Mrs. Taru Lehtinen, she will present the financial position of Alma Media today. And then our CEO returns about the strategy going forward and the operating environment. After the presentations, we have plenty of time for questions and answers. So we encourage you to present questions either online or here at the premises at Alma House. We first take the questions here at the Alma House and then our Director of Investor Relations, Mr. Teemu Salmi, will speak up the questions from the online. Thank you for joining us today. And once again, welcome. Please, Kai, stage is yours.

Thank you very much, Elina, and welcome. It's time to summarize the achievements of ours for the first quarter. As we all noticed, the turbulence in the market has continued and especially the geopolitics is a little bit different. It is quite difficult for all of us to maneuver in this kind of moving situation. But for us, this is more like a new normal. We've been adjusted and accustomed our services for this kind of moving environment for quite many years. And this is not that big surprise what happens at the moment. But as we remember from the last quarter, we were waiting -- always waiting for the market to change a little bit on a positive side. That remains to be seen still. So there are new issues coming out every day as we noticed the trade tariffs and others. But still, we had quite a solid start for the year. I'm quite happy that we were able to increase the profitability of the company with a slight increase on the revenues as well. And the contribution is coming from 2 out of 3 segments. So all good at this stage. Revenue grew by 4%. Adjusted profit by almost 7%, which is quite okay-ish achievement in these circumstances. The digital revenue growing hand-in-hand with the strategy and the operations to 84%, slightly up from last year. And that comes, as we all know, partly from the decline of the print and then the growth of the digital. Because of the good cash flow and the profitability, the balance sheet is getting stronger and stronger all the time. The equity ratio after the first quarter, 50.5%, which is, of course, very vital part of our strategic development, allowing us to invest into new businesses to support the current ones and to leverage the business into new territories and business areas. As mentioned, the 2 of the -- 2 out of 3 segments improved their profitability. The main contributor this time was Marketplaces and quite solid and stable development on Career and News Media. And due to the good revenue growth of Marketplaces, the profitability of that segment improved remarkably, EUR 1.5 million improvement during the first quarter, which is even more than we expected. But that's good. And the revenue and the transformation going on as expected, rolling development of digital to 85%. So we are heading to the conclusion of the print to digital transformation and stepping into the new era of AI-assisted platform development. Classified revenues grew close to 3% during the period, especially the digital services was the contributor of the good growth, partly from the new acquisitions like Netwheels and Edilex. And the other part or the half came from organic growth of that sector. Still advertising declining inside the company, 5.5% down. That is, of course, burdening the News Media sector mostly, but also the other sectors like the Marketplaces. On the News Media side, advertising minus was 4.3% and close to 2% minus on our classified businesses in Finland. So that's the situation right now. Let's have a short dive into the segments then. We start as usually with the Alma Career, which is led by Vesa-Pekka Kirsi; then we continue with the Marketplaces, Santtu Elsinen's segment. And finally, not least, the News Media, Juha-Petri Loimovuori, leading that segment. So for the Career, this was okay-ish achievement. Revenues more or less on par with the previous year. Profitability slightly down due to a quite heavy salary inflation in Central Eastern Europe, around 10%. We've been actually reducing the number of staff by 10% trying to mitigate the salary inflation. So the cost on that side, more or less on par with last year. But then we have the extra cost on our product development relating to the common platform development and Alma Career United program. So that is more or less planned extra costs. But on the other hand, we are on a very healthy profitability level there, and the plan is to increase the profitability by the end of the year, of course, and in long term, quite well. The market has shown some slight signs of recovery in Central Europe, like in Czech Republic and Slovakia, also in Croatia by the end of the quarter. So the 2 first months of this year were a bit difficult, I would say. And the market and the economies seem to be more or less on the edge where to go. Is there a recovery or not, but now it seems that the things are moving into a right direction, meaning that our invoicing has started to pick up, which is a sign of a recovery in an economy. And that is happening almost in every country where we are present at the moment. And of course, the biggest input comes from Czech Republic, Slovakia, meaning the big markets. Good thing here is that the KPIs that we are showing here, like the visitor base, job alerts or paid advertisers, we are at all-time high levels. So we haven't lost customers or market share or anything, but it's more about the market to develop. So we have a good standpoint and the position here to go forward. So no big worries here. Then Marketplaces, as noticed, a very solid performance in every business, meaning real estate, houses and premises, commercial premises, especially Sweden, a good speed. Mobility, Nettiauto and other services, a nice growth, good organic growth, comparison services as well as inside services. So the fundamentals around our businesses are getting better all the time. So we have seen the volume on houses and premises and housing market in Finland to pick up. I'll show you a few figures and the same slightly with the mobility services. So nice 17.5% revenue growth with a heavy growth of 26% of digital services, and nice 26% increase on adjusted operating profit, meaning that we are able to leverage the business as expected on the digital side and that good growth on revenues is moving nicely to the bottom line as well. Yes, that's it more or less. So in that segment, the only, I would say, negative and a little bit disappointing is still the advertising development in Finland, and that comes mainly from a very low level of car advertising, and that comes from the very low level of new car sales in Finland, which has not picked up yet. And that, of course, has its effects on also to the News Media segment. But very solid satisfactory development here, and we expect that to continue. A few lines about the market development, which is, of course, one of the basis behind this good development. As we can see to summarize it roughly, last year, month-on-month, 18% decline and now 31% up. So I would say that it's a bit too straight forward to say that now we have gone -- going nicely and rapidly up, but there are positive development and the volumes have gone up. And we can see the volume increase nicely from the DIAS transactions of ours, which have improved nicely. And -- but then on the other hand, from the lower part of this slide, you can see that there's a lot of supply in the marketplace like ours. So we have a lot of listings, 18% -- so 11% up from last year month-on-month comparison, but a little bit less activities, users on the side, meaning that there's still the buyers' market at the moment. So more supply than demand at the moment. So we wait for that to change and speed up later. And the same figures from the mobility market, slightly upcoming mainly from the used car segment and active listings slightly down. And then we have the problem with the new cars. If we don't get the new car sales up and new cars in the market, it's quite difficult to grow in the used car market as well. So the fleet of the finished cars is aging heavily with this kind of development, meaning that the worth of the market is going down, while the cars are aging as they do at the moment. But very good position there, as we know, we have increased our service portfolio with the Netwheels and other data-based solutions. And then finally, the News Media, very good profitability development despite the slight decrease in revenues that's coming from advertising. As said, 4.3% decline still in advertising has been mitigated by a good cost control and nice growth of digital subscriptions. Good work there. So the 17% growth in profitability is a remarkable achievement in these circumstances, I would say. There's still a high demand for journalism and due to this and due to our own initiatives, we were able to increase the digital subscription base to over 200,000 subscriptions on digital. The cost savings, of course, coming mainly from the decline -- with the decline of the print business, like we have seen -- can see here that the print business declined 13%. So when the volume is going down, if we do it properly, we can decrease the print-related cost of distribution and printing and also some initiatives from the production costs, while we closed some businesses last year, as you might remember. So we closed some of the print titles last year. So that's it. The negative thing here is that the Finnish ad market has not recovered, not yet. The overall market was still 3.6% on a negative side, the overall market. The digital market was slightly on green figures as well as our digital advertising. But the overall situation is still a little bit depressing as we can see, especially on the print as we noticed. So that's it. Taru will continue with the financials now and with the balance sheet. I will come back with the market environment, please.

Good morning, everyone, and thank you for joining us today. Let me briefly go through our financial position. Again, Alma Media was able to demonstrate quite good financial performance during Q1, and we were able to continue our journey in that sense. During Q1, our interest-bearing net debt decreased to the level of EUR 133 million. This was mainly driven by a good operating cash flow. And additionally, our interest-bearing debt decreased to the level of EUR 171 million. We repaid our finance loans and also amortized our term loan by EUR 10 million. Our average interest rate declined a bit to the level of 3.4% with the help of a decrease in short-term market interest rates compared to the level of 3.6% in the previous year. Actually, half of our debt is covered with this kind of interest derivative hedge agreements that are valid until the end of 2027, which gives us a quite good visibility over our finance costs also for future coming months. Our KPIs are proceeding quite nicely also. So our gearing dropped to the level of 54% and our equity ratio reached the level above 50%. So considering the long-term development, we are in a quite good position at the moment to support our investments and strategy execution in the future. Let me move to the cash flow then. So our operating cash flow was a little bit below previous year, amounting EUR 22.3 million, which was more or less EUR 2 million less than in the previous year. Like you can see from the graph -- from the bridge graph, our operative EBITDA was contributing quite nicely, the cash flow generation, but we had this kind of normal fluctuation or variation between quarters for the taxes paid and the net working capital. But considering the past 2 years, we were more or less like in the similar level in that sense. After investments, our cash flow was EUR 8.1 million compared to previous year, EUR 8.6 million, including our M&A acquisitions of Edilex and Suomen Tunnistetieto Oy. Like mentioned, we continued to invest to our strategy -- according to our strategy, and we had an M&A acquisition of fully acquired Edilex Oy, so the digital legal content services reported under Alma Marketplace segment's Insights business unit. In addition to that, we acquired the full ownership or the remaining shares of the Suomen Tunnistetieto Oy, the company operating DOKS services. DOKS service, which is also reported under our Business Insight business unit. All in all, our M&A activities totaled EUR 13 million, while our CapEx was quite moderate during the Q1, only EUR 1 million. So quite stable and solid development also here. And then our earnings per share and not dividends like stated in the slide, but return our earnings. So our earnings per share was EUR 0.14, EUR 0.01 more than in the previous year. So this was supported by our good operative EBIT development. during Q1, but also supported smaller one-off items. So previous year, we had, all in all, EUR 1.3 million cost for M&A transactions and restructuring. And now during this year, it was EUR 0.6 million. So contributing now positively to the reported earnings. On the other hand, we had a little bit less interest costs during Q1. But opposite to the previous year, we had actually in the prior year, we had a positive gain of EUR 0.8 million from our interest derivatives, which was caused by that time for the variation of fluctuations of long-term interest rates. And we only recognized EUR 0.1 million during Q1 2025. We also had a mild negative effect of exchange rates coming from our intercompany loans for our interest costs. But on the other hand, offsetting the positive effect, what we are directly booking to equity as a translation difference. So nothing big in that side either. And our return on equity and return on invest are more or less in the similar result than in the previous year. And then finally, shortly review our business result against our long-term targets. Our long-term targets are, like you know, to aim to reach the revenue growth of 5% and reach the adjusted operating margin above 30% and keep the net debt-to-EBITDA ratio below 2.5. We were quite nicely to able to reach our revenue growth target, so supported by our acquisitions, but also the organic growth. Acquisitions contributed by 2.6% and the organic growth by 1.7% for the revenue growth. From the segment level, we had in the News Media closed businesses, closed media brands that affected, of course, a little bit negatively to the revenue development to take into account also. Our EBIT margin in Q1 was 21.7%. So the EBIT margin level is normally a little bit lower in the first quarter of the month, but the rolling 12 months was like able to reach the previous year level, 24.7% margin. And our leverage amounting 1.4 is in a really good position now compared to our long-term target. So as a summary, I would say that we are like having a really solid, stable development in our balance sheet. The leverage is developing really nicely. We are able to create good profitable growth and generate a good cash flow. So the situation from that point of view is proceeding according to our plan. Thank you.

Thank you very much. Taru is keeping our financials in good hands also in the future. So a few words about the operating environment. As mentioned, as maybe noticed, we've learned to maneuver in rapidly moving environment. And of course, in our case, as we know, we don't have in relation to the current topic of trade tariffs, we have the privilege of not having any direct business in the U.S. meaning that the disturbances and the effects of that case are indirect in our case. So that comes more from the overall economical development than direct businesses into the U.S., which is there's good and bad in that. But the overall forecast for the businesses in the Europe, according to the latest estimates have been quite positive. That might change, of course. We don't know yet how this is going to develop. But according to the latest estimates, the picture is this, meaning that they are good basis for growth for us, and there are signs for us of the growth in the markets. Not big ones, but small ones, which is, of course, a sign of the development to the right direction. Hopefully, this will happen. The good thing here is that the inflation seem to be stable at the moment, more or less, closing to the 2% target, which is healthy. The unemployment rates are not increasing heavily. Unfortunately, in Finland, the unemployment has increased by over 30,000 unemployed, which is not a good thing, meaning that the economy might -- in Finland might go down still like the half year, but there are also signs of the change by the end of the year, meaning that the employment rate has gone slightly up, meaning [indiscernible]. So that's okay. So the ground for our strategy is okay. But then on the other hand, we can't escape the challenges in the environment, which is the still quite slow growth in the economy, the geopolitics that is there. Regulation is increasing and the consumer behavior might change quite rapidly also with the help of the AIs. But we are adjusting our businesses all the time into that. Strategy and outlook. Of course, we are building on our strong position in every market. That is not new for you. We are concentrating on the current core businesses, but we are moving on our transformational journey. So we are leaving more behind the transformation from print to digital that is almost done right now and moving to the next era, which is integrating different kind of platforms of ours into customers' platforms with the help of AI. Meaning that we are deploying rapidly the state-of-the-art technology, meaning AI, mostly into our daily operations, into our services, into our platforms in order to be in front of the new parade that is going there and started already. And we use the balance sheet, of course, to speed up the growth in addition to the organic plan that we have, where we will use the resources to do the acquisitions for the growth as well. But the big picture is that we're going to continue in this -- inside these 3 main core areas, which are Advanced Marketplaces, Intelligent Insight Services and Inspiring Media Services. And as noticed and experienced, we are quite good in developing and driving synergies from the audience, data technology and common ad sales and platforms. And that's where we have the advantage in the market. But we're going to continue now the transformation that we have done for 20 years right now on a digital arena to the new AI phase. We're going to grow in digital and scale the businesses as expected to new revenue sources and geographies. And just to repeat, we try and we will move our revenue sources or leverage revenue sources from traditional advertising-based sources to transactional businesses with the new digital services, especially, and have very good experiences and examples of doing that. But a few words about the AI of our AI development. So right now, we are concentrating heavily on the internal productivity and the learning of using the tools that are available and developing very fast at the moment. So the idea is to have the AI at the use of every Alma Median, every team, every business and then at the end of the day, for the whole group and vice versa. And then during the journey of learning to use technology, we will add this kind of AI-assisted components to the services. Already, we have them there like for the searches in our houses and premises businesses, Career businesses, we have this kind of vector-based new AI search components. And we have other AI components, a lot of there in the services as well. At the moment, more than 100 AI initiatives inside the company, meaning then at the end of the day -- by the end of this year, we are -- we have proceeded quite well in deploying the AI in daily work. And finally, of course, which is the most difficult part is to find this kind of disruptive models, business models around our current businesses with the help of AI that might arise, but we are not yet there. But of course, all this will concentrate on improving the productivity, the effectiveness, the quality of the services, the volume of the services and at the end of the day, the revenues and the profitability. So we are building on our good performance and experiences on the digital transformation, a very broad database that we can improve and increase every day and to build on that. As we know, one of the key elements in order to use the AI properly is the qualitative data, the data of high quality, I would say. And that is one thing that we have -- where we have advanced quite well. If you have any questions on the AI developer processes inside the company, we have our CDO here to add on to my speech. So that's it. So 3-phase approach to AI deployment and investments enough to be there as expected. And finally, the outlook for this year. Even we have had a very good start for the year, we are quite careful and cautious, of course, because of the turbulence in the market, the trade tariffs and everything that has happened there. So we repeat our guidance, saying that our revenues and adjusted operating profit will stay on last year's level. All right. So that's my part and our part of this presentation. If you now have any kind of questions, we are more than happy to answer. So please.

Petri Gostowski from Inderes. You said that you saw positive signs in your business in March. Would you be comfortable in saying that has continued despite the escalated trade war and the uncertainty that has increased?

Yes. We don't have yet the April numbers, but it seems that this has continued. So there are no signs of backing or going down after a good March, but you never know.

Then on Career, you said you're preparing the discontinuation of the business in Slovenia. Can you give some color on that decision?

Vesa-Pekka Kirsi, who is the Head of the Career segment can answer that.

Thank you. Yes, we have discontinued the business in Slovenia. So our Slovenian service, [ Deloglasnik.si ] was closed in the end of March this year. And hence, we do not have any customer operations there anymore. We invested in this small, small business some 6 years ago and tried to do a greenfield fight against the market leader in Slovenia. However, this effort and the work we did proved unsuccessful. And as there were still some years to it for us to see the profitability of that operation, we just simply made a decision to withdraw and just cap that situation there.

Yes. So we had this kind of country-specific approach at that time, and it seems that our position is too weak there to continue to invest and wait for. So I would say that too long play in our case. So we just left that out and continue to focus on the core markets.

Continuing on that, can you explain what did you learn from this exercise? And does this impact your decision in potentially going into new greenfield markets in Career?

Well, every success and every failure is a learning process. So yes, we did learn a lot, and we've analyzed it. To go against presiding market leader in the current marketplace situation is pretty demanding. So if you go head-to-head with the same approach, that's hardly successful. So when we go and achieve or go into a new market, the way we enter the market, what is our kind of angle to it will be then now different than it was before in the past because of Slovenia and also other learnings.

One more question regarding that is different in the future M&A?

Definitely, it's also impacting the way that we approach M&A. Our recent M&As and most likely at least some part of the future ones will be more technological ones. They are complementing technology or pushing technologies or other types of -- like Nelisa was, it's much more earlier phase, but it gives us technology and access to the market to certain segments. I'm not saying that there would not be bigger or other market factors, but this seems to be at the moment, giving us the kind of push that we need.

Yes. If I can summarize or add on that, it would be so that you can build on the business in our strong core business -- around this core business in the core market like we do in Finland that we've done in the Career countries before, like in Czech Republic or Slovakia or wherever. So add-on capabilities by own product development or M&A. This kind of bolt-on acquisitions you can do. But then to compete in a new geography with the market leader, with your own greenfield operation, it's is not the best way to proceed. So for us, of course, if we want to go into new geography, we definitely want to aim at being #1 and meaning possibly to acquire the major player more than something else. Okay, please.

All right. Nikko Ruokangas from SEB. I have a couple of questions, maybe going one by one and starting with the guidance. So you are guiding for sales and adjusted EBIT to remain on last year's level this year. Your adjusted EBIT grew 7% in Q1. So was this in your wording on last year's level or growth?

On last year's level.

Okay. So that if similar kind of growth will be seen, so that wouldn't trigger a guidance change.

Exactly.

Okay. Then as you said that you have seen some slight signs of market recovery, but it still remains to be seen. So are you still sticking into your plan A in your cost plan this year? Or have you kind of transformed to plan B?

We have actually a plan B in place, but we have this kind of segment-wise approach on that. So the segment leaders can decide how they maneuver in these kind of markets. And for example, in Career, we have plan B. So we have to reduce the costs, while the market is not developing as expected. In Marketplaces, we are not in a hurry in cost reduction, but we have to be careful with the cost while the market is picking up. And in the News Media, while the ad market is not developing favorably, we have to be really careful with the cost, [ Juha-Petri Loimovuori ] and the team has done. So we have the plan B step-by-step, segment-by-step or segment-wise approach in place.

All right. I understand. Then a couple of business segment-related questions. And maybe continuing on Career, where you said that the cost inflation has been rather high. But on the other hand, you have reduced your employee count to kind of offset that. So have you been considering to transform this cost increase to your price?

Yes, we are doing price increases and the effect will be seen during the year. So of course, according to the inflation, we always do the price increases evenly. But it comes step by step. And then we have this kind of price product initiatives where we have this kind of new product development and product pricing system in place, which we don't have time to explain here, but it would and should end up the average prices to increase.

Yes, definitely.

All right. Good. That explains. And then the last one from me on Marketplaces, where you said that the performance was even slightly better than you expected. So what was the surprise there? And is this something that can also continue?

For me, it was a bit surprised that the housing volumes started to pick up because I was a little bit conservative on my estimate, because of the turbulence in the market and the economic situation where the unemployment is still rising and so. But it seems that there's this kind of bending demand, quite a lot bending demand in the market and it's just waiting for the positive signs for the consumer confidence to pick up and increase. So that was a bit surprise for me. Otherwise, the development was more or less as expected and according to the plan.

Thank you. And going to online questions. We have 3 from Sanna Perala, Nordea Markets. And Sanna was early to ask this question, so that means that you are partly already covered. But let's go through them one by one. After the solid outcome of Q1, your outlook for '25 looks somewhat modest. Should we expect any certain things to impact sales and profitability negatively in the coming quarters?

No, we don't expect the negative development from the things that are in our own hands, meaning like for costs, but we can't decide how the markets are developing. So that is the big thing there. So if the slightly improving market development continues, then we are quite confident that we can improve and perform, but that remains to be seen. So no big negatives in sight.

Second question was, you mentioned that markets are now picking up on many fronts. How confident are you that this will continue also amid the current uncertainty regarding tariffs?

I would say that no one can be confident at the moment. Hopefully, that will continue, but it's -- I would say that it might be unfair to say that I'm really confident that this will continue because next week, the things might change. But then the other -- on the other hand, we are quite familiar in maneuvering this kind of moving situation. And as mentioned already, we have the plan B there, and we have already predecided or rehearsed even or planned initiatives, would say, to mitigate possible changes in the market.

And then finally from Sanna. What level of cost should we expect from the AI deployment and development and in what segments?

What cost or...

Yes. What level of costs?

What level of costs? It's really difficult to say because we don't have this kind of specific AI budget in every segment. It's embedded in the cost structure and so on. But I roughly would say that we have around -- Tommi can add on if you want, but at least for the tools, around EUR 1 million input is needed for the tools per year in our case. But then, of course, we try to get that extra cost out of something else. So it shouldn't be cost on top of everything else, but we try to do this kind of productivity, find the productivity initiatives in order to mitigate the extra cost. But anyway, the ballpark for the tools in our case is around the EUR 1 million per year. Tommi, you can add on.

Yes. If I just build on that a little bit, what Kai was referring to are the kind of the productivity AI tools that we want to make sure that all the Alma employees and kind of units and businesses have available as they need. And then if you look into the AI activities, they are indeed like embedded into the development of new products, development of our internal systems. And thus, it's something that is kind of part of what we do and part of what we invest in general. So there's no specific budget for that.

Yes, meaning that AI is not any kind of separate initiative or business outside of the current everyday work, but it's embedded in everything. And meaning that the aim and the target for us, as shown you before, is to embed the AI in everything in Alma, as we have embedded the digital in everything, right? So this is the next phase of the transformation of the company to be AI-assisted -- fully AI-assisted company in every sector. Yes. Any other questions?

Yes. We have from Pia Rosqvist-Heinsalmi from Carnegie. In Marketplaces, classified sales grew by 12% year-on-year in Q1. What is driving the growth, price hikes, new offering or mainly demand? And do you consider this growth sustainable?

Yes. Good question. So roughly half of the growth came from acquisitions like Netwheels and Edilex and those. So new inorganic activities. And half of the growth approximately roughly came from organic, like -- if I remember right, 8.9% organic growth during the first quarter. And all that Sanna mentioned or was it Pia's question. So all those, meaning prices, volumes, new initiatives, add-on services or components applied. So that's it. So we have to do everything. So the good thing here is that the volumes are increasing also, meaning that the demand in the market is picking up. All right. So that was it. If you don't have any other questions, I thank you very much for your attention and welcome you warmly to the next interim report session on Thursday, 17th July in Tampere. That's great. It's the fastest-growing city in Finland. Good. Thank you very much.