RTL Group S.A. ($RRTL)

Ladies and gentlemen, thank you for standing by. Welcome, and thank you for joining the conference call for the RTL Group's Full Year Results 2025. I'm Mohit, the Chorus Call operator. [Operator Instructions] The conference is being recorded. At this time, it's my pleasure to hand over to Oliver Fahlbusch. Please go ahead.

Good morning, everyone, and thank you for joining our analyst call for RTL Group's full year results 2025. The speakers for today's presentation are Thomas Rabe, the Group CEO; and Bjorn Bauer, our CFO. The presentation for this call is available on our corporate website, rtl.com, following the link included in our press release under download. Thomas and Bjorn will now guide you through the highlights and the financials of the past financial year and provide an update on our group strategy and the outlook. After the presentation, they will be available to answer your questions. And with this, I will hand over to Thomas Rabe.

Yes. Thank you, Oliver, and good morning to all of you. Thanks for taking the time to join us on this call today. Let me start with the highlights of 2025 on Slide 4. The business environment in 2025 is challenging with significant pressure on the advertising markets in our key countries, Germany and France. We responded by accelerating the transformation of our businesses, shifting resources to streaming and reducing costs across our businesses and have made significant headway. First, our streaming services continue to grow strongly. We exceeded 8 million paying subscribers at the end of 2025, which made RTL Group one of the leading European streaming companies. Streaming revenue continued to grow dynamically while streaming start-up losses came down significantly, and the business was near breakeven in the fourth quarter. Second, we broadened and deepened our streaming partnerships, for example, Deutsche Telekom, Amazon and HBO Max. And third, the planned acquisition of Sky Deutschland will further boost our streaming business. Following the official notification to the European Commission at the end of February, we are confident to obtain clearance and close the transaction in the first half of 2026. Our results and the sale of RTL Nederland EUR 1.1 billion enabled us once again to pay [indiscernible]. The Board of Directors is proposing a dividend of EUR 5.50 per share to our AGM that is equivalent to EUR 832 million, fully in line with our dividend policy. For 2026, we expect adjusted EBITDA to increase by 10% to around EUR 725 million, primarily thanks to our streaming services turning profitable. Streaming will become the key driver for our profit growth in the coming years, and we confirm our medium-term adjusted EBITDA target of EUR 1 billion. And now over to Bjorn, who will take you through the group's performance in more detail.

Yes. Thank you, Thomas, and good morning, everyone. We present our full year results for 2025 and the comparative figures without RTL Nederland, which is presented as discontinued operations in the consolidated financial statements 2025. Allow me to highlight the main points upfront. First, we have met all financial and streaming targets set out in our updated guidance. Second, we have recognized several significant special items in our 2025 financial statements, which position us for a stronger profit trajectory in 2026 and beyond. Third, we're offering shareholders an attractive dividend in line with our policy. Let's start with our key financials on Slide 6. In 2025, RTL Group's revenue decreased by 3.8% to just over EUR 6 billion. Adjusted for portfolio effects and at constant exchange rates, group revenue was down by 4.3% Lower TV advertising and lower content revenue from Fremantle were the main drivers for this development. Due to lower linear TV advertising revenue, our operating profit was down significantly. In line with our updated guidance from November 2025, adjusted EBITA decreased by 8.3% to EUR 661 million. However, the impact was partly compensated by a significant reduction in streaming start-up losses, an improvement of EUR 90 million. Total group profit came in at EUR 1.28 billion, in line with our latest guidance. Our total group profit was affected by special items and mainly driven by the sale of RTL Nederland. Earnings per share increased from EUR 2.97 in 2024 to EUR 6.36 per share in 2025. Moving on to the next slide and the financial performance of our main business units. Starting with RTL Deutschland. Total revenue of RTL Deutschland was down by 4% to EUR 2.54 billion, mainly due to lower TV advertising revenue, which was partly offset by higher streaming revenue. RTL Deutschland faced a particularly tough advertising market. We estimate that the German net TV advertising market declined between 9% and 10% compared to 2024 with RTL Deutschland again outperforming the market. Adjusted EBITA decreased by 12% to EUR 287 million. The positive effects from significantly lower streaming start-up losses were offset by the decrease in adjusted EBITDA from RTL Deutschland's linear TV channels. RTL Deutschland achieved a combined average audience share of 25.8% in the target group of viewers aged 14 to 59 and remained significantly ahead of our main commercial competitor, with a 5.1 percentage point. Moving on to Groupe M6. Groupe M6 delivered its best TV performance in 4 years in the key commercial target group, achieving the strongest growth in the market across all audiences. Groupe M6 has further shown a strong performance in streaming with viewing hours up 10% and streaming revenue up 27%. Total revenue of Groupe M6 was down 4% to EUR 1.26 billion, mainly due to lower TV advertising revenue and distribution revenue. Groupe M6 adjusted EBITDA decreased accordingly from EUR 253 million to EUR 218. Let's turn to our content business, Fremantle. Fremantle's revenue decreased by 9% to EUR 2.04 billion in 2025, mainly due to lower revenue from the U.S. and the U.K. Due to cost control portfolio effects, Fremantle increased its adjusted EBITA to EUR 175 million, which corresponds to a margin of 8.6%. Fremantle is thus on track to reach its target margin of 9% in 2026. Let's turn to our streaming revenues on Slide 8. In 2025, streaming revenue represented 8.5% of the group's total revenue, reaching EUR 509 million and growing 26% year-on-year. The group's quarterly revenue cycles are well known. And once again, the fourth quarter was the most important. In our streaming business, revenues are less seasonal and streaming revenue comprises subscription, advertising and distribution revenue. If you look at the adjusted EBITDA trajectory of the streaming business in 2025, you will see a clear and steady improvement in earnings across all 4 quarters. Throughout the year, we reduced start-up loss significantly and reaching near breakeven in the fourth quarter. To summarize, we are firmly on track for our streaming business to turn profitable in 2026 while it continues to grow dynamically. On Slide 9 and a closer look at the main items below adjusted EBITA down to group profit, significant special items, which were substantial in the past financial year, up to EUR 371 million compared to 2024. The higher charge in the line amortization and impairment of fair value adjustments on acquisitions and subsidiaries is mainly attributable to impairment charges relating to the Stéphane Plaza and Toggo brands at the level of Groupe M6 and RTL Deutschland. In 2025, the group's tax expense was EUR 123 million. The normalized tax rate remained relatively stable at 33%. The main driver for total group profit, which came in at EUR 1.028 billion was the sale of RTL Nederland. Let's turn to Slide 10, covering our special items. The overall challenging economic environment, coupled with an accelerated shift from linear TV to streaming led to comprehensive restructuring measures at all our business units. This is also reflected in our P&L as significant special items, specifically cost reduction programs that led to restructuring costs of EUR 154 million, mainly at RTL Deutschland and Fremantle. Second, the discontinuation of selected content activities such as the fully financed film business at Fremantle and other content-related measures of minus EUR 95 million. And thirdly, we've also accounted for one-off costs for the migration of RTL Plus Germany to Bedrock technology platforms and other related measures amounting to minus EUR 80 million. On a constant scope basis, we expect significant special items to decline meaningfully during 2026. Moving on to Slide 11 and the cash flow statement. On this slide, we present pro forma figures for our cash flow. Until the closing of the sale of RTL Nederlands on the 1st of July last year, RTL Group continued to benefit from all cash flows and profits generated by RTL Nederland, highlighted here is net cash from discontinued operations. Total net cash from operating activities decreased year-on-year to EUR 561 million, mainly due to lower profits from continuing operations. The net cash inflow for acquisitions and disposals was EUR 1,032 billion, mainly driven by the cash proceeds from the sale of RTL Nederland to DPG Media. Following the sale RTL Nederland, we significantly reduced our loans with our majority share [ investment ] by EUR 300 million. And as a result of our surplus cash, our deposits increased to EUR 468 million. Both effects are reflected in the line transactions with shareholders and their subsidiaries. In 2025, we paid a total of EUR 130 million for share buybacks. As you know, RTL Group has the right to settle the potential variable consideration of the Sky Deutschland acquisition either in RTL Group shares in cash or in a combination of both. This potential variable consideration is kept at EUR 377 million and the share buyback and the shares bought back can be used to fully or partially settle this potential variable consideration. Since September, RTL Group has acquired just over 3.5 million treasury shares. After the payout of the dividend for the year 2025, beginning of May, we will continue our share buyback up to an additional volume of around 0.5 million shares through open market transactions. This would bring the total volume of the share buybacks up to 4 million shares as initially targeted, and we'll communicate more details in a separate announcement after the dividend payout. The operating cash conversion rate for continuing operations was 152% and therefore, significantly higher than last year. This is mainly because our EBITDA was negatively impacted by special items, which I just described. In 2026, we expect a more normalized operating cash conversion rate in the tune of 90% to 100%. At the end of December, RTL Group had net cash of EUR 126 million, and this compares to a net debt position of EUR 492 million at the end of 2024. Let's move to our dividend proposal on Slide 12. Our dividend policy is based on the group's full year profit attributable to RTL Group shareholders and adjusted for any material noncash impacts, and we target a payout ratio unchanged of at least 80%. In line with this policy, our Board has proposed a dividend of EUR 5.50 per share for 2025, corresponding to an 86% payout ratio. The dividend proposal for the financial year 2025 includes the significant value crystallized by the sale of RTL Nederland, representing EUR 4.74 per share. And now based on the average share price for 2025, EUR 3.41, the proposed dividend represents a dividend yield of 16.5%. And with this, I hand back to Thomas, who will give an update on our strategy and the outlook for 2026.

Yes. Thank you, Bjorn. Let's turn to Slide 14. Our strategic framework is well established and is based on 3 priorities: core, growth and alliances and partnerships. Core means investing in premium content, strengthening our families of channels as well as cost and portfolio management. Growth areas are streaming services and content production stream. And alliances partnership advertising to technology, content and distribution. [indiscernible] 2025, we accelerated our transformation by shifting resources to streaming and comprehensive cost reduction across our main businesses. In Germany at RTL, we launched a reorganization in January to reduce the headcount by around 600 that is equivalent to an annual savings in the mid-double-digit million euro zone. In 2024, we announced the migration of RTL Plus in Germany to the Bedrock technology platform, which already serves in France, in the RTL Nederland and RTL Plus in Hungary. The migration will be completed by the end of April 2026 and will generate significant cost savings. Last month, Groupe M6 set a cost reduction target of EUR 80 million by 2030. Over the past year, streamline has significantly grown its business portfolio with various acquisitions. In 2024, we shifted focus to post-merger integration and margin improvement. Consequently, Fremantle has reduced headcount by around 550 since 2023, mainly in overhead functions. In total, we realized EUR 75 million of cost savings in 2026, increasing over time. Let's turn to Slide 16 and take a holistic view of the changes in our portfolio over the last few years. Over the past years, we have transformed RTL Group's portfolio in line with our strategy to focus on our biggest business units, RTL Deutschland, Groupe M6 and Fremantle. In the past 7 years, RTL Group sold a series of noncore assets, including the digital video network BroadbandTV, [indiscernible] company SpotX, mobile entertainment company, Ludia and software and data company for media measurement VideoAmp. We also disposed our TV business in Belgium, Croatia and Nederland. In total, we generated disposal proceeds of EUR 2.7 billion since 2019. Our shareholders benefited from these transactions, including the proposed dividend for 2025. RTL Group will have returned around EUR 4 billion or almost EUR 26 per share to shareholders in the past 7 years. Moving on to Slide 17. AI will profoundly transform our business by enhancing creativity and driving productivity from streaming to video production and marketing. Over the past 2 years, we have successfully tested and implemented AI, particularly in media production. Our goal is to transform the entire workflow from development to production. Progress gives us confidence that we will achieve 10% to 15% gross production cost savings through AI by 2030. Here are some examples. The reboot of the iconic Baywatch franchise, Fremantle is integrating AI into the development story boarding process. During production, AI will support the generation of selected video shots and visual effects, increasing efficiency while maintaining high production quality. At serial drama, AI has been embedded across the entire development and production value chain to significantly speed up workflows. We started a pilot in virtual production to reduce channel location costs, shorten production cycles and increase flexibility in tuning. In addition, we have been leveraging camera and cloud technologies and AI-driven automation to streamline processes and post production such as transcription and rough cut creation. RTL Deutschland is using AI-based use protection tools, which enable automated detection and classification of potential contentious content, strengthening compliance and brand safety. In parallel, RTL Deutschland is leveraging AI-driven analytics to proactively manage and reduce churn and [indiscernible]. Across our business units, AI-powered tools have been deployed in marketing to generate and optimize visual, trailers and promotional campaigns, enhancing output by reducing time to market. And our content production, we have rolled out a broad range of AI applications across streaming, advertising, sales and overhead functions to deliver measurable efficiency gains. Moving on to Slide 18. Streaming is at the core of the transformation of RTL Group. Having invested more than EUR 800 million or EUR 560 million post [indiscernible] over the past years, our investments are starting to pay off. Our streaming service continue to grow strongly. Paying subscribers have grown by 48% per year since 2019, and we exceeded the 8 million paying subscriber mark at the end of 2025. We expect to add another 1 million paying subscribers in 2026. Streaming revenue [indiscernible] also continued to grow dynamically. In 2025, we surpassed the EUR 0.5 billion market streaming revenue. For 2026, we expect to generate around EUR 600 million to EUR 650 million. Our streaming start-up losses have come down significantly. The business was near breakeven in the fourth quarter of 2025 and will be profitable and was profitable in January 2026. Streaming growth continues at a strong pace, driven also by new partnerships with Amazon Prime Video and HBO Max. By the end of February 2026, we reached more than 8.3 million paying subscribers. That means that in the first 2 months of the year alone, we added more than 250 new subscribers -- 250,000 new subscribers. Our streaming business will be profitable in 2026. We expect it to contribute between EUR 25 million and EUR 50 million to adjusted EBITDA this year. At the upper end of the range, this represents an improvement of around EUR 500 million. We expect streaming to become the key driver for sustainable profitable growth in the coming years, combined with continued cost reductions and AI efficiencies across all of our businesses. And we'll further expand our streaming business with the acquisition of Sky Deutschland. For that, let's turn to Slide 19. In line with our strategic focus on streaming as a key growth driver in June 2025, we signed a definitive agreement to acquire Sky Deutschland. The agreement with Comcast Sky is a transformational move for RTL Group. It is our largest acquisition since our formation in 2000 and will bring our full year revenue to EUR 8 billion and paying subscribers to 12 million. The combination will create a unique video proposition for entertainment, sports and news across free TV, pay TV and streaming. 2 businesses complement each other in terms of business models and revenue streams, target groups and content offers. And bottom line will create significant shareholder value with annual synergies of EUR 250 million within 3 years after closing. Following several months of preparatory work and discussions with the European Commission as is customary in such transactions on the EU merger regulation, RTL formally notified the European Commission 2 weeks ago. We are confident to obtain approval from the European Commission and close the transaction in the first half of 2026. Over to Slide 20. Let's turn to Fremantle. Following a phase of several acquisitions, our focus in the past years has been on integration and margin improvement. In 2025, Fremantle increased its adjusted EBITDA margin to the highest level since 2013 and is on track to reach the target margin of 9% in 2026. As a result of the acquisitions over the past years, Fremantle's revenue streams have become more diversified in terms of genres, regions, customers and IP. Going forward, we expect Fremantle to grow organically by around 3% on average per annum, broadly in line with the market. We have defined 5 strategic priorities for Fremantle, which we presented in March, and they are as follows: ramp-up of our own IP development, rapid development of deployment of AI across the company's value chain, focus on IP-driven acquisitions of small and medium-sized production companies, expansion in attractive geographies and genres and focus on gross margin and net margin. Fremantle celebrated major creative successes in 2025 and won 145 awards. The film [indiscernible] Fremantle's [indiscernible] was nominated for 4 academy awards alongside 3 Golden Globe and 5 [indiscernible]. Fremantle continued to demonstrate its creative strengths with several high-profile productions for international streaming platforms, including Maxton Hall, Hotel Costiera in Amazon Prime Video [indiscernible]. Now let's take a look at our alliances and partnerships. As you know, we continue to actively build alliances and partnerships and in 2025, renewed and expanded our partnership with Deutsche Telekom and entered into new partnerships with Amazon in Germany and France and Warner Discovery in Germany. Prime Video users in Germany and France can now also access via HBO Max subscribers in Germany can offer a bundled offer that combines HBO Max and RTL+ in subscription at a significant price discount, and there is more to come. Now let's turn to the outlook for 2026 on Slide 22. On the basis of the group's linear TV advertising revenue decreasing by around 3%, the group's streaming revenue growing by around 25% and Fremantle revenue growing by around 3% organically, we expect full year revenue for 2026 to increase to around EUR 6.1 billion to EUR 6.2 billion and our full year adjusted EBITDA to increase to around EUR 725 million with a variance of plus/minus 3%, and this is [indiscernible] streaming service turning profitable as just presented. Our dividend policy remains unchanged, which means that the group plans to pay out at least 80% of its adjusted full year net results. Finally, on Slide 23, accelerated transformation and medium-term outlook. We confirm our medium-term target, adjusted EBITDA target of EUR 1 billion, which represents a 50% increase from the EUR 661 million in 2025. What are the key drivers? After years of investment, the streaming business will become profitable this year and then continuously increase their profitability. The acquisition of Sky Deutschland which generate annual synergies of EUR 250 million in year 3 post closing. Fremantle will return to organic growth around 2% per annum and further expand its margin also with selected M&A. And finally, as I mentioned, AI will provide significant benefits. So we're very confident that AI will be a net contributor to our business. This brings us to the end of our presentation. Thanks for listening, and we will now take your questions.

[Operator Instructions] The first question comes from Conor O'Shea from Kepler Cheuvreux.

I've got three questions on my side. First question, just in terms of your assumptions on the German TV ad market in 2026. What are you seeing so far? And what's baked into your group revenue assumption for the full year '26? Secondly, in terms of your adjusted EBITA guidance for the group for 2026. What assumption are you making in terms of M6, which obviously facing a big investment in costs in terms of World Cup rights and also relatively weak French TV market at the moment, at least. What's the assumption you're making there? And then thirdly, just in terms of Fremantle, do I understand that you're dropping your midterm target of EUR 3 billion in turnover. Is that the case? And what do you think generally about some of the consolidation moves that we've seen with [indiscernible] media and potentially ITV on the broadcasting side. Could you be interested in larger deals of that type of size going forward?

Okay. Let's start with your question on advertising. Bjorn do you want to take that?

Yes, sure. So the assumption for the full year across the portfolio is a decline of around minus 3% and will be a little bit better as supported by the World Cup. We expect the German TV advertising revenues to decline by around minus 5%. The start of the year is overall in line with these expectations, although we expect Q1 current expectations to be down around mid, maybe high single digits.

Yes. So that's the start of the year, which we've done in parallel given the continued softness of the of our 2 biggest markets, Germany, France put in place contingency plans in the order of EUR 10 million to compensate for this. So we're confident that if the decline is broadly in the range which we have provided, we'll be able to deliver the guidance we provided. So market continues to be soft. We continue to gain market share in Germany. But as I said, we've implemented contingency plans as from January, I didn't wait for the market or additional market data. On the adjusted EBITDA target of 2025, of course, included EBITDA last year was EUR 218 million. This will come down a bit this year, largely due to the investments in World Cup is not unexpected but will be compensated by significant increase in profitability at RTL Germany, notably the streaming service and continued increase in profitability at Fremantle. So we are confident based on everything we see today, advertising market, advertising market shares and our contingency plans to be able to achieve the EUR 725, which would be a plus 10% compared to this year. On Fremantle and our target, the EUR 3 billion revenue target will not be achieved anytime soon. We shifted gears 2 years ago, as I mentioned, and I think as I mentioned on the call several times the market, the video production market has shifted, continue to shift with significant margin pressure coming from, frankly, all customers, the broadcasters, the networks and the streamers. We therefore said we will now focus more on margin and margin improvement, which I think we have achieved and we provided these numbers. But after this phase of consolidation during which we also shared nonprofitable revenue, which is a significant part of the reason why the Fremantle went down, we now expect revenue to increase by 3% per annum. Margins, gross margins at approximately 23% and with proper control of overheads to get to an EBITDA margin of 9%, which is 12% EBITDA margin, which compares well with other market players. We have looked at M&A opportunities in video production. We have not pursued any of these options because we are deeply convinced that the synergy potential is too limited to justify transactions of this size and complexity. It's on my side to talk about other companies, as you know. But I find 50 million of synergies between [indiscernible] and also [indiscernible] for transaction of this size. The other thing is, of course, that you've got to make sure that production companies in particular, which combined are culturally compatible. And the other thing which we are very aware of is that production -- video production companies need to focus on AI and embedding AI in all workflows and that requires significant management attention and focus, which we believe would be hampered by significant M&A. So we very clearly decided here at RTL with our Board and our shareholders that we will not pursue large-scale video production acquisitions. We'll continue to make small and medium-sized acquisitions of companies with a strong IP base. And in regions which are attractive and regions which are attractive are potentially Spanish-speaking Latin America, we're looking at 1 or 2 opportunities, but none of them are beyond EUR 50 million or EUR 100 million [indiscernible].

And the next question comes from Nizla Naizer from Deutsche Bank.

I have three questions from my end. The first is you mentioned about consolidation among the content creators. But when you look at further down the value chain and sort of the Warner Paramount transaction, for example, could you tell us maybe how exposed Fremantle is to them as clients and how you see sort of demand for content creation evolving in the wake of such a large consolidation? That would be question one. And two, on the profitability targets for the streaming business, could you remind us, does that require the Sky acquisition being in the mix? Or is this the organic profitability target for streaming as it is today? And my last question is, you mentioned that selected M&A would be considered going forward. What would be a leverage target that you'd be comfortable with once the dividends, et cetera, have been paid out in 2026?

Okay. Bjorn, do you want to start with the leverage target and M&A?

Yes. So on leverage, as you know, we look relatively conservative at our balance sheet, and I wouldn't expect our target leverage to exceed 0.5 to 1x leverage over the next years EBITDA. And on the question regarding M&A the outlook that we have presented and that includes also the development of our streaming business at constant scope. So the [ EUR 250 million ] adjusted EBITDA target for 2026 for our streaming business excludes any effects for Sky. Once the Sky transaction closes, we'll provide an update of our full year 2026 targets.

Yes, absolutely. So clearly, the profitability of streaming will be achieved without Sky. Sky will add significantly, but let's be clear, I mean EUR 250 million synergies that there will be significant investments to achieve the EUR 250 million, which could have an impact on our P&L this year. But as I said, the value creation is very, very significant. But that's in addition to our streaming services turning profitable and then continuously increasing the profitability. On Warner Paramount, I mean, frankly, it's a bit early, too early to tell. As I just said, we expect the video production market to increase by approximately 3% per annum. That 3% could be impacted by AI interestingly because AI will have the effect of reducing production costs and therefore, reducing the revenue production companies, but potentially increasing margins depending on which share of the AI benefits the video production companies will be able to retain, which they will have to pass on to their customers. I mean very clearly, I mean, a combination of Warner Paramount will have a profound impact on the TV streaming and production market. But whether a positive or negative effect on countries [indiscernible] difficult to tell at this point. My understand is that the regulatory review is only just starting in particular in Europe. And secondly, we don't know in which way Paramount and Warner will run the business, how independent the various parts of the business will be, how much content they will be able to produce internally and whether this could have an impact on content they acquire from third parties. So it is really too early to tell. We will find out later this year.

[Operator Instructions] So it looks like there are no further questions at this time. So I would like to turn the conference back over to Thomas Rabe for any closing remarks.

Yes. Well, many thanks for listening to us. Many thanks for your continued interest in RTL. Stay tuned. There's a lot happening at RTL, and we'll keep you up to date as always. Thank you. Have a good day. Goodbye.

Ladies and gentlemen, the conference is now over, and you may disconnect. Thank you for joining, and have a good day. Bye-bye.