Banijay Group N.V. (BNJ.AS) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the Banijay Group Half Year 2025 Results. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to Marion Heudes, Investor Relations. Marion, please go ahead.

Good evening, and welcome to Banijay Group 2025 H1 Results Webcast. This is Marion Heudes, Investor Relations. Before we start, let me draw your attention to the disclaimer on Slide 2. I also want to remind you that this presentation is now available on the company's website, and the recording of this call will be accessible in the coming days. Your speakers today are Francois Riahi, our CEO; and Sophie Kurinckx-Leclerc, our CFO. First, Francois will present our key financials and business highlights for H1. Sophie will then cover the results in more detail before Francois provides some concluding remarks and commentary on our 2025 outlook. We will then open the call for questions. Over to you, Francois.

Thank you, Marion. Good evening, everyone, and thank you for joining us on this last day of July. In our first set of results since the Capital Markets Day last May, with adjusted EBITDA growth in the mid-teens, it is very encouraging to see the key drivers of growth we presented coming through in our performance. In content production and distribution performance, there was steady growth driven mainly by further penetration with global streaming platform and live events. As usual, we expect to benefit from standard seasonality as the year progresses with show deliveries weighted towards the second half of the year. Live experiences enjoyed a strong growth in revenue as we scaled up key IP across our global network and continue to consolidate the market, particularly through 3 new bolt-on acquisitions at The Independents. And online sports betting and gaming results delivered continued very strong performance even when considering the very high comparison base from 2024 as there were no major international competition in the first half of 2025. As a result, we are well on track to deliver our 2025 performance. Looking now at our key figures for the first half of the year. Group revenue reached EUR 2.2 billion, up 6.1% year-on-year. Adjusted EBITDA reached EUR 424 million, up 15.8%, while adjusted net income was up 8.1% at EUR 206 million. All our activities are growing and all are improving their profitability. This is indeed a very satisfactory set of numbers. We also maintained a high level of cash conversion at 81%, and our leverage is stable versus the end of 2024 at under 3x given the dividend payment and the seasonality of working cap. Let's move to business highlights now, starting with Banijay Entertainment, our content production and distribution business. During our Capital Markets Day, we highlighted 4 key growth factors in content production for the years to come, increased penetration with streamers, development of live events, digital and AI-led initiatives; and finally, sports initiatives. Hence, in my quarterly presentations from now, I will naturally focus on these growth drivers, even though our business with broadcasters is also performing quite well. So today, I will focus on the first 2 key growth drivers, development with streamers and live events to explain our good performance in H1 2025, and I will have the opportunity to update you on our developments in the 2 other key drivers, digital and sports on which we are currently working in coming quarters. As explained in our Capital Markets Day, our share of production and distribution revenues from streamers is constantly increasing, and this increase fuels our growth. During H1 2025, it stood at 20%, up from 17% last year. And our business with these platforms has been both in scripted and in non-scripted areas. On the scripted side, we have delivered several important shows during this first half of the year. Spanish reader El Jardinero spent 2 consecutive weeks as the top global non-English series on Netflix. It was the #1 show in 50 territories and in the top 10 in 84 territories with over 33 million views since release. Series 7 of Black Mirror also achieved outstanding success, topping the chart as the #1 English language series and #2 overall, spending 5 weeks in the global top 10 and receiving over 30 million views since release. And season 2 of British period dramas The Buccaneers on Apple TV+ was also hugely successful with audiences. But we are also the partner of choice for streamers nonscripted offering. H1 saw the international rollout of local successes such as new adaptation of Laugh Out Loud in the U.K. and The Summit in Germany for Amazon Prime and new formats, including Building the Band for Netflix, the first ever singing show on this platform. Production of live events is another key driver of growth for the group and a creator of powerful cultural moments. On average, we now produce over 5 live events per day, which is the double of last year's figures. Balich Wonder Studio produced some of the period's biggest global sports ceremonies, including the UEFA Champions League 2025 Final Kick Off Show in Munich in May, which is a very good memory for all PSG fans, including me, as well as the opening and closing ceremonies of the FIFA Club World Cup in the U.S., which is less the case. It was also the producer of the Women's EURO 2025 opening ceremony in Basel in July. This is very telling on how Balichs' team know-how in this field are acknowledged by the sports institutions. Lotchi, the French producer of immersive live experiences we acquired in January, continued to roll out its show LUMINISCENCE across our global network with new adaptations in 12 cities across France, Spain and Germany. Finally, The Independents further consolidated their leadership in the events and communication market for the global fashion and luxury industry. Three new bolt-on acquisitions expand its global network to 20 agencies across 16 geographies, and it is now even better positioned to support the global luxury and fashion brands in their events and experiential marketing. As you know, The Independents performance is not yet included in our figures, and we have the option to become the majority shareholder next year. This also means that our figure on content production and live events for H1 2025 is purely organic. Moving now to online sports betting and gaming, which saw a very strong increase in unique active player. I say every quarter that unique active player is the most important KPI for this business and it measures the commercial performance of the platform. This UAP increase is thanks to our proven proactive acquisition and retention strategy powered by our best-in-class tech platform with seamless user experience. This has allowed our sports betting business to increase player numbers even during quieter sports calendar periods like this one. So UAP has grown 25% year-on-year with a significant 400,000 new players in the last 6 months. I would like to emphasize our performance in this first half as last year, our revenues for the first half, if you remember, were up by 42% and our EBITDA was up by 34% on a busy calendar with the Africa Cup of Nations and the Euro 2024 in addition to all the yearly sports events. Some of you even questioned at that time where we would grow in 2025. And on this very base, in H1 2025, our revenues grew by over 12% and our EBITDA by over 25%. So when we put figures in perspective, I think we can say it is a very strong performance. This performance has been reached, thanks to strong user engagement across all products and geographies and good levels of cross-selling during the first half. Despite a tough comparison basis that I already mentioned, online sportsbook grew 2 digits and saw high engagement driven by the new Champions League format. Our new poker platform launched in Q4 2024 saw strong momentum, thanks to its revamped user experience, which engages both casual and experienced players. We told last time that we believe it would be a growth engine for 2025. It is the case. In just the first 3 months since the poker platform launched, both daily unique active players and average revenue per user were up by 18% and 7%, respectively, with player satisfaction also rising between Q1 and Q2. Finally, online casino experienced solid performance and strong player acquisition, bolstered by effective cross-selling between sportsbook and casino and the launch of this activity in Ivory Coast. So we can say that all our products and all our geographies have contributed to this strong performance, which is quite satisfactory. That's all from me for now. I'll be back at the end with some closing remarks before we open the line for questions. Over to you, Sophie.

Thank you, Francois. So let's start with group revenue for the first half, where we delivered 6.1% growth at constant exchange rates to reach EUR 2.2 billion. Q2 revenue was EUR 1.1 billion, up 4.5% at constant exchange rates. Thanks to this growth in revenues and thanks also to our effective cost control, adjusted EBITDA grew 15.8% at constant exchange rates. We also saw a 160 basis point improvement in our adjusted EBITDA margin to 19.2%, mainly driven by the greater contribution from Banijay Gaming, which has a higher margin. At the group level, total external and personnel expense rose by 3.5%, driven by effective cost management across all activities. Banijay Entertainment first benefited from a favorable mix with greater weighting towards higher-margin activities combined with cost optimization. Then at Banijay Gaming, staff cost and external expense grew at a slower pace compared to revenue. This was mainly explained by lower marketing expense as a percentage of revenue compared to the significant marketing efforts that have been made in H1 2024 to support the intense sports calendar at this period. Looking next at our P&L. [ EIP ] expense were down as anticipated, reflecting the expected trajectory of the listing plan. The increase in depreciation and amortization is driven by greater recoupment of third-party distribution advance in our content production and distribution business. The other finance costs mainly include the change in the fair value of financial instruments including hedging or mainly put and earn-out debt and also the currency losses and gains. Income tax expense increased in line with activity growth. But looking at the effective tax rate, it improved slightly from 31.1% in H1 '24 to 29.8% in H1 '25. Then adjusted net income was up 8.1% at EUR 206 million. Let's go now to results by business, starting with content production, distribution and live events. These revenues were up 3% to EUR 1.4 billion at constant exchange rates, which is a solid performance. As usual, there is an expected seasonality effect visible with an amplified volume of show deliveries and production of events weighted towards the second half. Looking at revenue by activity, there was a 2% rise in content production, thanks to a strong slate of scripted show deliveries and further penetration with streamers in the period, as already mentioned by Francois. Distribution was up 1%, driven mainly by superbrands format sales. H1 was also a strong period for live events and other revenue with 15% growth, reflecting the production of major sports ceremonies, the successful rollout of Lotchi shows across our network and robust growth from commercial activity. As you know, there is also a similar seasonality effect at Balich with increased show delivery skewed towards H2. Let's look at content production and distribution earnings and cash flow next. Adjusted EBITDA was up 6.6% at constant exchange rates, a very good result supported by revenue growth and a positive mix with a greater share of higher-margin activity. Higher CapEx mainly reflects higher distribution advances at Banijay [ rights ] and to a lesser extent, additional investment in cloud and digital development. The change in working capital reflects the traditional seasonality with major deliveries expected in the second half of the year and the one-off phasing effect explained by the different time of cash collection between H1 2024 and H1 2025. In fact, we can see here that we are returning to more normal seasonality compared to 2024 as we are in line with what we experienced in 2022 and 2023. Adjusted free cash flow conversion was 68%. Next, let's look at online sports betting and gaming, where we saw double-digit growth in the period, even when taking into consideration the high comparison basis with H1 2024. Revenue was up 12.3% at constant exchange rates with solid growth across all divisions, despite, as mentioned by Francois, a very high comparison basis due to the busy sports calendar in H1 2024, when we experienced a growth by 42% of revenue and by 37% of unique active players. Sportsbook performance was driven by continued unique active player growth as well as high engagement with the new format of the Champions League. Even during quieter periods of major sporting events, we are demonstrating a successful strategy of acquiring and retaining players. In online casino, poker and turf, there was also strong momentum in all geographies, thanks to effective cross-selling between sportsbook and other products as well as the successful rollout of the new poker platform. Banijay Gaming continues to deliver very high profitability and free cash flow. Adjusted EBITDA was up 25.2% at constant exchange rate and adjusted free cash flow conversion remained high at 93%. The adjusted EBITDA margin was up 3%, thanks to cost discipline, including lower marketing costs as a percentage of revenues, as already mentioned. The change in working capital comes from a cutoff effect in betting taxes and other taxes, excluding CIT, resulting from high levels of activity in 2024, thanks to the busy sport calendar. As betting taxes are paid 1 month after results, this timing effect impacted H1 2025. The increase in income tax is mostly explained by activity growth and a one-off cash out of EUR 27 million related to the income tax catch-up on 2024 strong results at Banijay Gaming. Looking at cash flow generation now. Adjusted free cash flow reached -- sorry, EUR 344 million. This resulted in a cash conversion rate after CapEx and lease payments of 81%, in line with our guidance for the year. Adjusted operating free cash flow was EUR 176 million. Given the normal seasonality effect, we expect a strong cash collection in H2. The group's net debt stands at just under EUR 2.8 billion, and the increase in this net debt mainly reflects the seasonality of the activity and cash payments as well as the payment of the dividend during the period. This is why at the end of June, we are at the peak of the net debt, we expect it to decrease during the second half of the period. Overall, we continue to have a strong cash position and a significant undrawn secured credit line. That's all from me. I will now hand back to Francois for some concluding remarks.

Thank you, Sophie. I will now briefly summarize our excellent performance this half year before talking about our guidance and outlook for 2025. So as a reminder of our key achievements. Overall, it was a very strong first half year performance for the group with mid-teens earnings growth and a strong contribution from all activities. All activities have seen growth in revenues and earnings growth higher than revenues, so very good performance overall. Our content business grew solidly, and we expect normal seasonality of a higher weighting of major show deliveries towards the second half of the year, meaning a higher level of growth in the second part of the year. This positive momentum in live events production is also expected to increase in the second half of the year, thanks to major shows in the pipeline at Balich Wonder Studio. Overall, live events showed its standing as a growth factor as the group. On the online sports betting and gaming side, our H1 performance is a strong achievement with double-digit growth and high level of EBITDA growth compared to a very high comparison base. Thanks to this performance and the positive outlook across all activities, we are well on track to deliver on our full year guidance. As a reminder, we expect mid-single-digit organic revenue growth in content production and distribution and live experiences. And we expect also a mid-teens growth on online sports betting and gaming with the resumption of National Football League and the UEFA Champions League and sustained performance in casino, poker and turf. At the group level, we also confirm mid- to high single-digit adjusted EBITDA growth, which includes the 6 months impact of the new betting tax increase in France, which started at the beginning of July, and we expect adjusted free cash flow conversion to remain around 80%. As highlighted at our Capital Markets Day, Banijay Group has entered a new phase of accelerated growth and our trajectory in 2025 demonstrates that. That's all from me. Thank you for your attention, and back to you, Marion.

Thank you, Francois. It is now time for questions. So please state your name and company. Thank you.

[Operator Instructions] First question comes from Annick Maas at Bernstein.

So my first question is on content production. I know that you are second half weighted, but I kind of would have expected in the second quarter, slightly better performance, particularly given your comparative was relatively easy. So if you could just come back to the second quarter in content production and distribution and give us a bit more detail around it. My second question is other media companies that are dealing with luxury clients have suggested some weakness from that end. So with regards to The Independents, can you comment on how their trading has been going? And then the obvious one still, if we have any news on the liquidity or potential to raise the liquidity?

Thank you, Annick. On your first question, I think on the content production business, there are some volatility across quarters. You have shows that can slip from one quarter to another. And so the most important element is really the guidance we give on the revenues growth for the year, and we are confident on the guidance we gave, which is mid-single digit for the full year. It's very difficult to qualify just a quarter because it's a business where if a big show slips from one to another quarter, it can make a difference. We have a very good visibility on the full year. We have less visibility quarter-by-quarter. But we are happy with the demand we get, and we are fully in line with what we expected to do this year. On your question on The Independents, I'm not going to give figures because we are not consolidating and we are a minority shareholder, but they have a very good performance this year, which is a very good demonstration of our model. They have a unique setup for luxury brands and the type of marketing and communication and events they are working on are very key for the luxury brands. So very, very resilient business and a very good performance for them too. On the liquidity, I hear your impatience, and we share it. Of course, it's a top priority for us to increase the liquidity of the stock and we are working on it, and we hope to be able to do it as soon as possible.

The next question comes from Nizla Naizer at Deutsche Bank.

I have two questions, if I may. The first is you've previously discussed the importance of M&A in your growth strategy. So could you kindly provide us an update on your current pipeline of potential acquisition targets? Or what's the key criteria you think about when evaluating opportunities? Is it more focused on geographic expansion, strengthening your existing genres or entering new areas of content production? Some color there would be great. And my second question is, you mentioned that you do have visibility for the year when it comes to content production. But are there shifts that you're seeing with your customers preferring more scripted production over unscripted this year, in particular, in the second half, in particular, that gives you more visibility? Some color maybe on how your customers are thinking about content would be great.

Thank you. I'll take the first question. Maybe Sophie can take the second one. On M&A, by definition, we are not going to say anything about our pipeline. You will understand why. But I say again, what we are looking for in our different activities. On content production and distribution, we are not anymore in the strategy to expand our capabilities in new geographies or in new areas because we have a very extensive set of capabilities in all the countries where we wanted to be or even all. And so we could do -- if it's -- we are talking about bolt-on acquisition, what we can consider and we have done last year is buying some IP. That's what we did when we bought the part of Peaky Blinders IP we didn't have. Or we bought also an IP in the kids business once upon a time. And when we think we can exploit it, the catalog and also in live events. That's what we are doing with this IP. So it's very focused. And in this business, what is, I would say, more the name of the game is consolidation. So consolidation of costs and also being as large as possible because, in fact, the bigger you are today in the market and the better. And I think that's what we see as we are overperforming the market. That's what we want to consider. On sports betting, it's more about geographical expansion. We are already strong on our core markets, but we could add some new core markets. So that's really what drives us in terms of M&A. Sophie, you want to take the second question?

Yes. So if I understood well your question, we have -- well, what we can see is that we have the same kind of approach from our customers than, for example, last year. What Francois mentioned is that quarter-by-quarter, it's quite difficult to anticipate the slippage you can have. But what you can expect for the end, it's easier to have a good visibility by the end of the year because, as you know, we have a strong seasonality and we used to deliver shows in Q3 and Q4 and being in production in Q1 and Q2. That's why we -- it's more difficult to anticipate this slippage right now. What we can see in terms of proportion of our revenues coming from scripted, nonscripted, first, we should keep the same kind of breakdown, yes, thank you between scripted and non-scripted. I remind you that we -- well, we don't want to be a lot more than 25% coming from scripted in our revenues and then 75% coming from non-scripted. So we will keep the same proportion. And what we can see, however, is a growth of the part of streamers in our revenue compared to the previous year. And this is what -- this was clearly explained during our Capital Market Day, and it is a strong lever of growth for our business.

[Operator Instructions] Your next telephone question is from Anna Patrice of Berenberg.

Congratulations on good results. There are a couple of questions from my side, please. So I know that you do have some big hits like Big Brother, Survivor, MasterChef, et cetera. I just wanted to double check how much do they contribute overall to the group sorry, the entertainment part of the business? And then if you can share any statistics in terms of the revenues of yours, if you see that those businesses are stable or if you think that they are declining given that they are already running for the long term? And on the other hand, you mentioned quite new interesting launches. So how do you think it will affect again your like recurring revenues? Do you think that those that you mentioned that will be recurring and we also will see them in the coming years for some time? Or what are the risks for your pipeline in the entertainment section? That's the first question. Second question is on the operating expenses. I saw that your personnel expenses have declined. So I was just wondering how could you explain this? Is it just half year thing? Were there many -- some maybe one-offs last year? Or how do you manage to grow your business but still have declining personnel expenses? And then last question, apologies, it's not related to the H1 results. I was just looking at your annual report, and I saw that you have the presidential -- sorry, you have the fees. And I just want to understand the structure of the remuneration actually with those fees.

Sorry, Anna. Your line was not so good. So I'm not sure I understood the second question. Maybe, Sophie, you have. I have -- the first one. So. Yes. Of course, our big hits are very important to us. You mentioned some of them, MasterChef, Big Brothers, Survivor. We also have LEGO Masters. We also have Temptation Island, a lot of them. What is very important to have in mind is that no single contract in our revenues account for more than 2% of our revenues. We have very granular revenues. And so it's because we have a lot of geographies. We have a lot of clients. We have a lot of formats. It's -- when I say that the size in this industry is a very big advantage today, this granularity is clearly the case. And it's very important also to have in mind that recently, in the past years, some formats that were not active anymore in one country have come back. It's the case for Star Academy and Secret Story the Big Brother in France. It's the case for Big Brother and Survivor in the U.K. It's a case. So it's -- in fact, you can have in one country, one of these format stopping, but in another country, it's starting again. So it's very strong and resilient formats. And we have no -- we are very -- I would say, we are not worried at all in their capacity to sustain their revenues in the past years. And I think during our Capital Markets Day, we gave some numbers about the fact that, in fact, the revenues have been growing in the past years on this type of format. So yes, it's an old format, but they are working very well, and they are active in a lot of geographies. Maybe, Sophie, on the second question, I must say I didn't -- not sure I understand.

If I understood well, you asked why personnel expense decrease. But what we are looking at is more the total amount of external and personnel expense because you may have from a quarter to another some small reclassification. So that's why we analyzed this in the line total external and personnel expense. The kind of reclassification you could have is between the freelancers because, as you know, on content production and distribution, we used to work a lot with freelancers and sometimes it can appear in personnel expense and sometimes in external. So that's why what I explained during the presentation, in fact, what we can see is that the total external and personnel expense increased by 3.5%, which is less than the increase of the revenue, and it's mainly due to a favorable mix of the activity on Banijay Entertainment plus some cost optimizations that have been done in the structure and less marketing cost on Banijay Gaming because we had a less busy sports calendar in H1 '25 compared to H1 '24.

The third question, I didn't understand it, if you can ask it again. Sorry, the line is not good.

Yes, sorry. So there are some -- sorry, can you hear me?

Yes, yes.

Yes. So my understanding is that there are the fees to the CLOs that the company is paying. So I just want to understand better the structure and how to model those fees going forward.

Okay. So these -- there are fees that are part of the cost and reported in the EBITDA. And you have information on this in the URD. It's based on the profit of the company.