Storytel AB (publ) ($STORYB)

Welcome to Storytel Q1 Report 2026. [Operator Instructions] Now I will hand the conference over to the CEO, Bodil Eriksson Torp. Please go ahead.

Good morning, everyone, and welcome to sunny Stockholm and our earnings call for the first quarter this year. I'm Bodil Eriksson Torp, CEO of Storytel Group. And together with me here today is our CFO, Stefan Ward. We are glad to announce that we are off to a good start for this year 2026 with a strong subscriber growth, increased profitability and a strong cash flow generation driven by strong operational performance. So we are well on track to continue to deliver our guidance. So here comes some of our strong highlights. We have started off the year with a solid start with revenue growth of almost 8% in constant currency. And we continue margin expansion to an EBITDA margin of 17% compared with 14% Q1 last year. So we continue to strengthen our financial position and ended the period with a net cash position of SEK 220 million. And we also added 72,000 paying subscribers during this quarter. It's up 8% year-on-year, and we had 2.74 million paying subs at the end of the period. We actually had the strongest Q1 net intake of subs in the Nordics since the pandemic, and our new European segment crossed the 1 million mark for the first time. So we are happy for that. When it comes to Publishing, our external revenue growth was solid, over 9% in constant currency and while our margin expanded to 28%. We are well on track for our transfer to main market on schedule during Q2. So over to our group financial highlights during the quarter. We have faced material currency headwinds in the quarter that continues. So reported net sales increased by 3% and 8% in constant currency, while stream revenues increased by 7% constant currency and publishing external revenue increased by 9% in constant currency. Our gross margin expanded to over 45%, driven by improved margin in Publishing. Q1 EBITDA grew by 24%, while our EBITDA margin improved by 3 percentage points to 17%. Our net profit amounted to SEK 86 million, driven by strong operational performance and the positive impact of reported tax, as Stefan will come back to. And our cash flow from operation before working capital was strong at SEK 135 million. So looking into rolling 12, our annualized performance showed continued growth and margin expansion. At the end of Q1, our annualized EBITDA was SEK 780 million, up 25% year-on-year with a margin above 19%. So let's look into our Publishing business area. Our external sales in the Publishing grew 9% in constant currency, driven by strong digital sales in Publishing. So we have also had a strong gross margin expansion behind the EBITDA growth of 21% to SEK 81 million with an EBITDA margin of 28%. And this was also with a positive effect from [indiscernible], which was consolidated for the first quarter this year -- full first quarter, I should correct. So now over to our streaming business unit and the new segment, Stefan. Stefan, please tell us more about why we are doing this with the new segment and how.

This is our first quarter with our new segment structure. We have 2 business areas that's unchanged. We have the streaming and the publishing. But within the streaming, we have changed the segmentation. And instead of our earlier composition of 3 segments, we now have 4 segments. Nordics remain unchanged, but we have added Europe as a separate segment, and we have included Americas for the first time as a separate segment. And then we have a fourth segment called APAC. Europe includes our European footprint, including Israel. These European markets include the core markets of Poland, Netherlands and Turkey and Bulgaria, but they also include Germany, Belgium, Italy, Spain. Americas consists of our subsidiary in North America, Audiobooks.com and our LatAm footprint with Mexico, Colombia, Brazil, Argentina and Chile. And of course, the segment includes our Asian footprint and Middle East markets. We believe that this new segmentation better describes how we run the business, but it also helps improve transparency of our different assets in the group. And it should also help understanding our FX exposure and improve visibility of the profitability in various areas within the group. Perhaps most importantly, it will also help show where in the group we are delivering and focusing on generating growth going forward. Now let's take a look at the actual performance for the streaming segment on the next slide. We had a strong quarter in terms of net adds. Normally, Q1 is seasonally weak. In this quarter, we added 72,000 new subs for a total of 2.74 end of period. Nordics, as Bodil mentioned, had its strongest Q1 performance since the pandemic, adding 11,000 in the quarter. In our European segment, we added 44,000 new subscribers and crossed the 1 million mark for the first time, while we added 17,000 in our Americas division. Our Nordic business now have 1.35 million subs end of Q1. 47% of this base have been with us for a period of longer than 5 years. This is a very strong characteristic of our subscriber base and also help explain how we can continue to see a decline in churn rates, both for the group as a total, but also for the Nordics. ARPU declined 5.5% in the quarter, primarily or almost entirely due to FX headwind. We had a real headwind in our North American business due to the 16% decline in the dollar versus the SEK. And this is also explaining why our reported growth for the old sort of non-Nordic core segment was on the weaker side. [ Mix ] also plays some part, and this is an important dynamic. As you can see, we are driving growth in our European segment. And hopefully, we will see increased growth in Americas as well. Both of these segments are below the Nordics in ARPU, we will continue to see pressure on group ARPU. That does not necessarily mean that we see a decline in ARPU levels in the local markets. Rather the contrary, we actually see stable ARPU development in most of our local markets. Okay. Let's move to the next slide. So our subscriber growth enabled a solid 7.4% organic growth for the streaming segment in constant currencies. FX headwind played a part, so the reported growth was 2%. The Nordics delivered 4.5% organic growth in constant currencies, while Europe grew by 19% in unchanged currencies. Operating leverage enabled a solid 31% increase in our adjusted EBITDA, while our operating profit for the segment improved by 50%. Moving over to our group financial again on the next slide. We can see our cash flow generation. We delivered a strong cash flow of SEK 135 million from operations, both before and after working capital as the impact of working capital was neutral in the quarter compared with a headwind of SEK 59 million in Q1 last year. The increase in cash flow from operation was close to 53% year-on-year, while our cash flow increase after change in working capital increased by SEK 106 million or 4x the level from last year, so a dramatic improvement there. CapEx went at a similar level as last year. Q1 '25, we made the acquisition of Bokfabriken, which had an impact on investment cash flows in that quarter. We repaid SEK 50 million of our outstanding debt during Q1 this year and delivered a net cash flow for the period of SEK 29 million versus an outflow of SEK 73 million in the same period last year. Looking at our net cash position, it has actually turned into a net cash position of SEK 220 million in Q1 compared with a net debt of SEK 160 million a year ago. Moving on to the balance sheet, next slide. We can see that we have increased our assets by roughly SEK 350 million. Of those SEK 195 million comes from the activation of tax losses carryforward that we did in Q4 and the remaining part comes from positive results generation. The strengthening of the balance sheet over the past 12 months is material and exemplified by our improved equity to assets ratio, which is now at 57%, up 10 percentage points from a year ago. So we can conclude that we are in a good position financially to combine our growth initiatives with continued shareholder returns and we will aim to maximize shareholder returns over time. With that, I'll hand the presentation back to Bodil for our final remarks.

Thank you, Stefan. Yes, as you said, Stefan, we are in a good position now. As a summary, we have a solid start for this year, 2026, and we can see a robust subscriber growth, enabling continued growth for the rest of this year and further on, of course. So we also see a significant improvement in profitability, and that will further support our ability to deliver on our targets. And we are, as I said before, we have constantly increasing our AI capabilities within our team in the company. And I'm really proud of our team that they are driving high-paced innovation for all our current and also future book lovers customers. So there's a lot of AI improvement going on when it comes to developing our business. Our strong financial allows us also to pursue an active M&A agenda, and this is really a top priority for us now moving into the rest of the year. And hopefully, we will have some news about that going on. So we are well on track to meet our 2026 EBITDA target of at least SEK 817 million and deliver also on our midterm targets. So with that said, we are working further to improve our profitable growth engine, and it's constantly ongoing work as we have the good position for Storytel for the next level into our Storytel journey. So we are also, as we said, in the middle of the process for uplifting to the NASDAQ main market. And we are on track, expected to close this in this quarter or the next quarter. So with that said, I will hand over to all you out there listening and please ask your questions.

[Operator Instructions] The next question comes from Derek Laliberte from ABG Sundal Collier.

I appreciate the new segmentation in streaming, very helpful. I was wondering on these changes, why you sort of changed the subscriber count here from being average subs to end of quarter subs and also wondering there if your ARPU calculation has changed anything as a result of that.

Yes, we want -- we think that end of period is actually a better description of where the business is at the end of each quarter. So that should be helpful for external readers of the report. ARPU calculations have not changed due to that. They are calculated the same way as before.

Okay. And you highlighted the active M&A agenda here, which obviously sounds quite exciting. Can you say anything about what types of targets you are most interested in going forward?

Yes. Hi Derek, we have -- as we have announced before, we are looking into primarily publishing side, and we are looking into Europe. And that is what we can communicate at this level. But we're also looking into the streaming and the tech business. But we have -- I mean, we have this really good proven business model in the Nordics. So that is also a way of scaling our business by combining both the streaming side with our publishing side. So we want to launch that in more countries. So the M&A agenda is highly active, and we've done a lot of work there. So that is what I can say -- tell you just today. I will come back with news on that side.

Great. Sounds exciting. And finally, I have a question on the sort of growth versus margin balance here, given that you're already somewhere around 20% EBITDA margins on a full year basis. How are you thinking about the trade-off between maintaining strong margins and accelerating growth here in 2026?

Yes. I think that we are focusing on improving our growth rates. It will not come at the expense of margin in terms of margin deterioration, but we are not driving to optimize -- to make the margin as high as possible. We are focused on driving growth with good profitability, so that there you have the prioritization. One is to improve growth further, but at least at the same profitability.

The next question comes from Joachim Gunell from DNB Carnegie.

On the gross margin strength in Publishing, you highlighted that this is mainly driven by strong external sales. So can you just comment a bit? I mean it's a steep improvement year-over-year. How do you think about the durability of these types of gross margin with Q1 typically being kind of seasonally depressed?

Yes. Well noted. We have a significant improvement in gross margin in publishing. It is sustainable. So we expect this level to continue. I wouldn't read too much into seasonality when it comes to gross margin. It depends on how we perform and how our external parties perform during the quarter. But this is -- it's not a one-off. It's a sustainable improvement.

So on that sustainable step-up, is it then driven by, say, one licensing partner? Or is it driven more broad-based by renegotiated terms?

It's broad-based and it's normal course of business. So that's what I can say.

Understood. Perfect. And I mean on the publishing side, if we just look on the internal sales, some players in the industry are -- I mean, have expressed that vertical integration is starting to go too far, own publisher in-house releases are being prioritized over third parties, et cetera. How do you think about the optical mix here and where the net new publisher may actually like cannibalize on the attention of existing publisher in particularly your more mature markets?

I think it's one important factor here that is super important for us. That is what our customer wants to have the needs in the customer behavior. It's about the customer, how we can serve them in the best way when it comes to streaming and the content from the publishing side. So the Northstar for us is to serve our customers with the right content at the right time and also try to increase that capability. And that goes with that we sometimes serve the publishing news from our internal publishers, but also definitely a broad wide range of external publishers. So the focus for us is the customer point of view. And I think we have succeeded since we have a really low churn, and we can see that the engagement rate and the loyalties from our customers is increasing. So that's the most important thing here.

Okay. And you mentioned the ongoing AI initiatives. Just on that topic, whether -- I mean, with AI as a retention tool versus more of a cost lever, the AI personalization features that you have released, are these primarily retention based? Or do you see a path here where AI will meaningfully also reduce content creation, but also OpEx?

I would say we have focused to increase the leverage to our customers, and we use AI in every team. And that goes into retention to product features development. And there's a high pace within the product and tech team, but there is also a high pace when it comes to the market team. So for us, AI is a significant, really important tool to also increase our customer experience and what we can serve out to the customer. But on the other hand, it's also a tool for us to become more efficient when it comes to the cost side and the OpEx, of course. So I would say AI is for everyone, and it's important that we use the advantage of AI in a good way. We need to definitely take responsibility for using AI. But I mean, the pace is super high out there. And we know all of us that we are in different industries and AI is having a huge impact. And I think as a CEO for a company today, you need to really be on top of this to also accelerate the use of AI and the capabilities and opportunities that also comes with using AI. So we have a really intense focus on that, and we will actually increase that focus during this year. So I don't know for the moment what was your core question into this. But it is the answer that this goes in a broad way in the whole company.

Very clear. But I think the question was more that you've highlighted more on the, as you say, customer-oriented side, features being more AI related. But do you think that there is considerably more to do on the cost side, but also on the content creation and how I call it per title production cost when it comes to stepping up your AI efforts?

The short answer is yes.

The next question comes from Georg Attling from Pareto Securities.

I want to go back a bit to the Nordics. Obviously, very strong subscriber intake here sequentially, even with Spotify now in the market for the entire quarter. Can you help us understand a bit on how the competitive dynamic has changed in the Nordics here in the last 3, 4 months?

The short answer is that we don't see any material change; so it's a competitive environment for a lot of players in the market. But for us, it's business as usual. We did a price hike in Sweden in Q4. And still, we managed to report a solid net intake and a decline in churn. So it is intense competition, but we can see that anything material has happened in the short term.

Okay. And staying on Spotify, did you have any material contributions in terms of royalties from them this quarter?

We don't comment on royalties from any business partner separately. As you can see, we had a decent performance in the Publishing segment and their contract is included in that along with other contracts.

That's clear. A question on Europe. I mean, we've seen now for the last -- for the past 2 quarters that subscriber intake is slowing a bit compared to last year. So I'm just wondering, is this a deliberate choice to invest a bit more modestly in Europe, or why is that tailing off a bit subs intake in Europe?

I would say it's normal variation. It looks a little bit slower because the prior quarters were very strong, but we are happy. We think that 44,000 is a solid intake in the first quarter in any year in any market. So we're satisfied with that, and we haven't reduced or lowered our ambitions in Europe, rather the opposite, we want to push ahead and believe that Europe represents a material growth opportunity. Penetration rates are still modest in most of our footprint in Europe. So we have high ambitions with this business, and we'll combine that with expanding margins in Europe.

Okay. Final question on the Americas. And you talked about your ambitions to maybe accelerate that part of the business. Obviously, a lot of FX drag here in Q1, but how is that strategy going to raise the ambition, so to speak, in Americas?

Yes. So what we can see about the Americas is all of the headwind, you see the subscriber intake and there's no ARPU pressure in constant currencies. So all the headwind on growth is FX related, dollar weakness is 16% year-on-year, and I think we are down revenues 13% or something. So that's FX related. What we are talking about or what we're planning is to be, if we would describe the past couple of years of having an intense focus on Europe and the Nordics, of course, that will remain, but we will add potential to the Americas. That has been a little bit on hold for a couple of years as we have improved profitability across the group. And now we're at such a state that we feel like we can be more ambitious on our total growth, and that includes Americas.

And that race ambition, should we read that as product improvements or more investments in marketing? Or can you specify how you're going to accelerate it?

We have a good footprint there, and it will involve several strategies, but let's come back to that when they are launched.

Yes. We are in the middle of also evaluate a bit. So we will come back.

[Operator Instructions] The next question comes from Martin Wahlstrom from SB1 Markets.

Just to continue there on the Americas. I was wondering if you could elaborate a bit on kind of how that market differs compared to Europe and the Nordics and kind of what's important to get right there? I know the publishing side is very concentrated in the hands of the big 5 publishers.

Yes, exactly. So how it differs structurally is that our offering today in the Americas is credit-based, same as Audible, and that has been the model for that market for a long time. It is starting to change. Spotify has a different type of offering. So you can say that the model for that market is under development or it's changing a bit. It's too early to say the traction of that and how fast it will go. But obviously, that has some opportunities with it. When it comes to relationship with publishers, we would emphasize that Audiobooks.com, our subsidiary, has been in the market for more than 20 years in the North American market and has very strong relationship with all the relevant publishers. Around 500 relationships are included in our offering in the U.S. at the moment. So we have a good sort of structural asset in that sense, which we are trying to see how we can -- what we can do the best of.

And then another question or final question is related to Nextory. I noticed they did some price change in the Swedish and Finnish markets after the end of Q1, in April, and they also introduced kind of what they call the [indiscernible], which is a cheaper entry-level version. Just wondering kind of if you had seen any effects from that?

We don't have any comments about Nextory at all.

There are no more questions at this time. So I hand the conference back to the speakers for any written questions or closing comments.

Okay. So thank you for your interest in our business. We are very happy with our performance in the first quarter and looking forward to speak again at the end of the second quarter.

Yes. Thank you so much for listening in and for very good and relevant questions. And we're looking forward, as you said, Stefan, to the next quarter, and be soon here again because the time is running very fast. So have a great day, and thank you for today.