Storytel AB (publ) (STORYB) Earnings Call Transcript & Summary

Welcome to Storytel Q2 report 2026. [Operator Instructions] Now I will hand the conference over to the CFO, Stefan Ward. Please go ahead.

Thank you, and good morning, and welcome to you all to our earnings call for the second quarter of 2026. Regarding today's call, I will be hosting it on my own as Bodil had an accident at her home this morning and dislocated her shoulder. She is unable to attend and needs to have the shoulder looked at. Aside from that, she is doing fine, and she'll be back as soon as she has sorted out the problem with the shoulder. We're pleased to report a solid performance for the second quarter with strong revenue growth and continued margin expansion. On the back of this solid organic performance and the acquisition of Overamstel, we are raising our 2026 full year guidance for adjusted EBITDA to be at least SEK 900 million from earlier SEK 870 million. During the quarter, we also completed our transfer to the Nasdaq Stockholm Main Market. Now let me take you through the highlights. On top line in the quarter, we grew our net sales in constant currencies by 12.7%, of which 10.7% are organic growth. The adjusted EBITDA margin came in at 19.2%, up from 16.8% a year ago and equal to a total growth year-on-year in EBITDA of 27%. Our net profit more than doubled to SEK 100 million from SEK 47 million, and our earnings per share came in at SEK 1.18, up from SEK 0.54 a year ago. We ended the quarter with a slight net debt of SEK 14 million, and a very modest gearing. In terms of subscribers, we grew our base by 7.2% year-on-year to a total of 2.75 million customers end of period. A highlight here is that this is the first quarter when our subscriber base outside the Nordics is actually bigger than the subscriber base in the Nordics. During the quarter, we added 11,000, up from Q1. And year-to-date, we added 83,000. Growth year-to-date is led by our European segment. Looking at our Streaming or Publishing business, we grew sales by 32% in constant currencies, and we expanded our EBITDA margin for Publishing to 31.3%, up from 27.4% a year ago. We acquired Overamstel during the second quarter, and it is consolidated as of June. As mentioned, we raised our full year guidance, and we completed our move to the Nasdaq Main Market. In terms of product innovation, we had significant progress in the quarter with the launch of Storytel Genie and our author platform, Storytel Pulse. Moving on to the next slide. We can see the bar charts for net sales showing solid progress with the growth rate already mentioned, 12.7%. We have a strong development on the gross margin. It's up 1 percentage point year-on-year to 46.3%, while our adjusted EBITDA came in at SEK 205 million for a margin of 19.2%. Cash flow from operations. Cash conversion is solid, and the cash flow from operations are SEK 170 million before changes in working capital. You can move to the next slide. Looking at our annualized development, it highlights our significant margin expansion over the past 10 quarters, moving from 9% EBITDA margin in the first quarter of 2024 to 19.8% at the end of Q2 2026. During this period, we have also exceeded market expectations on the EBITDA level, 8 of the past 9 quarters. On a rolling 12-month basis, our EBITDA are currently at SEK 823 million for a growth year-on-year of 22% and the margin is at 19.8%. This means that we are very well on track to realize our 2028 target, which stipulates an annual sales growth of at least 10% with an EBITDA margin at the end of 2028 of at least -- or plus 20%, and we are already at 19.8%. Moving over to our Publishing segment. It's a very strong quarter with strong growth in both net sales and gross profit and EBITDA. External sales increased by 32% in constant currencies, driven by higher digital external sales and improved commercial terms and newly acquired publishers such as Overamstel. Our gross margin is at 35.8%, up from 31.2% a year ago. Our EBITDA came in -- for Publishing came in at SEK 108 million, up from SEK 82 million, equal to a growth of 32% year-on-year and a margin of 31.3%. Strong growth also in operating profit. Overamstel was acquired in May and consolidated as of the beginning of June. Next slide. In Streaming, our subscriber base grew 7.2% year-on-year to 2.75 million. It's up 185,000 on an annual basis. As we mentioned, 11,000 subs were added in the quarter and a total of 83,000 for the first half. Our performance in our European segment is strong with 13% growth in subscribers, 18% growth in sales in constant currencies, a stable ARPU and a total of 1.07 million subs. We also delivered a solid performance in our Nordic segment with a 4% growth in subscribers and a 6% growth in reported sales in constant currencies, driven by a slightly higher ARPU level. The run rate for the first half is slightly below where we were a year ago. This is primarily due to campaign planning. As you know, we had a really strong first quarter, and that has some dampening effect on how subscriber growth were in the second quarter. However, for the full year, we target to add at least the same amount of net adds for the year as we did in 2025, suggesting an acceleration in net intake during the second half and the outlook for the third quarter is promising. On the churn level, we remain at very modest levels. We've seen a continued decline in churn rates for a long time. Regarding the Nordic segment, you can see a tiny pickup in churn in the second quarter compared to the previous quarter. It's relatively undramatic and explained by the development in Finland, where we changed our campaign mix, which had a negative impact on churn in Finland. In the Swedish business, we had a stronger net intake in Q2 this year than we had in Q2 last year. Retention in our core base remains strong. In terms of ARPU, it's essentially flat on the group level. It's offset -- we've done price increases in a few markets. Those are a little bit offset by regional mix changes. So the important takeaway here is that in local markets and in local currencies, prices across the board are either stable or improving, while the mix with our non-Nordic part of the business growing at a more rapid pace than our Nordic part, that has a dampening effect on the overall group ARPU as it should because of the differences between ARPU levels in the Nordics and outside the Nordics. Nordics ARPU increased by 2% to SEK 154 on higher price points. As you know, we did a price increase in Unlimited in Sweden at end of 2025, and that has -- it didn't have that much impact on Q1, but it was a little bit more impact in Q2. Worth highlighting also is our weaker ARPU development in Americas, which is down to SEK 129 in the quarter, down from SEK 138 a year ago. That is primarily due to FX, but also slightly due to mix changes as we grow partnership customers, and we have also quite good growth in our LATAM business, which are at lower price points than in the U.S. Moving on to next slide, please. On reported numbers, Streaming are growing at a little bit more than 8%. You can see Europe is growing very nicely with 18.2% in sales. Americas is flattish. Gross margin is expanding to 41.2%, up from 40.9%. Good growth in EBITDA year-on-year and a solid margin improvement in the EBITDA level. So overall, we're satisfied with the performance of our Streaming business. Moving on to the cash flow statement. We can see that cash flow from operations came in at SEK 170 million. So we continue to have a really good cash conversion of our operating earnings. We had a slight headwind in working capital. It's nothing dramatic. It's a little bit seasonal impact and a headwind of SEK 21 million for a total cash flow from operation of SEK 150 million. We used the cash flow in our investing activities. It was negative by SEK 237 million, of which the bulk of that is the Overamstel acquisition and the rest is ordinary investments in content. Cash flow from financing activities was a total of minus SEK 100 million, including our dividend of SEK 140 million. So cash flow for the period was negative SEK 187 million, which brings us to slide... Move to the next slide, please. Balance sheet. You can see there that the net interest-bearing debt at the end of the quarter was SEK 14 million. Other than that, we grew our asset base to SEK 3.7 billion, of which SEK 2 billion is equity. So the equity-to-assets ratio improved to 54% from earlier 46%. So our financials remain solid and strong. Next slide, please. With that, I can summarize that we had a really solid performance in terms of sales growth, plus 12.7%. EBITDA margin expansion continues to improve, up 2.3 percentage points year-on-year to 19.2%. We raised our full year guidance. We had really strong releases on our user experience in terms of Storytel Genie, but we also released our author platform, Storytel Pulse. These are important product developments where we put a lot of emphasis internally in our business to continue to stand out when it comes to the user experience of our service. And we also tailor to the authors that they can really see the benefits of being part of our group. And we have got really positive responses, both from our end customers, but also from our authors regarding these releases. We have strong financials. They support an active M&A agenda. We're very pleased with the Overamstel acquisition that we finalized in May. Overamstel is a really impressive company. It helps us create a platform for us in the Netherlands from which we can actually drive growth in the Benelux region. So we're quite optimistic on that. It's a great team that have joined our group led by Martijn and a really strong portfolio of publishers that has been with the company for -- most of them has been with Martijn for in the range of 10 to 20 years. So that's a really high-quality team that is joining us. And this is an important proof for us to broaden our -- taking our successful Nordic strategy outside of the Nordics and try to drive a similar success in Continental Europe. So we're excited about that, and we are continuing to look for additional assets to bring to the group. So expect more from us on the M&A front. We're well on track to deliver on our mid-term targets, our 2028 targets, as you can see from the current performance, and we completed the transfer to the Main Market. And that was a speedy and efficient process carried out during the spring, which is a good proof that we have all our internal policies and procedures well in place. With that, I think we can head over to the Q&A section.

[Operator Instructions] The next question comes from Joachim Gunell from DNB Carnegie.

So just on -- I mean it's a very strong year results, but on the net adds, can you just explain what initiatives are in place to reaccelerate net adds for H2 and what is your line of visibility when it comes to that?

Yes. So we have a campaign agenda or calendar planning, so -- which is in this year, it was tilted a little bit towards Q1. And we -- as you remember, we had a really strong start of the year, strongest start since the pandemic. And that had a little bit of a dampening effect on our Q2 numbers. However, we're well prepared for increasing our net intake in Q3 and onwards. So on the run rate level, it is around 20,000 lower in the first half this year, and that will be -- we expect that to be recouped -- at least recouped and possibly even a little bit higher during the second half, starting with the Q3. Visibility into Q3, we have had a good start of the quarter. But as you know, we're only 1 month into the quarter, but it looks good so far.

On your European segment as the key growth driver, the gross margin trajectory on the group is, of course, positive year-over-year, but you see slight headwinds here. What makes you sure this is insulated to Q2, whereas what can be done to reverse the gross margin contraction in the European segment?

Well, the gross margin in the European segment is impacted if we grow -- certain markets where we have strong growth, have a slightly lower gross margin, such -- if you take Poland, for instance, it's slightly lower than in the Netherlands as an example. It's not a big issue. It's just a mix change. We see fundamentals for us to over time have a really supportive gross margin also in the European segment. So it's nothing that we sort of react on or feel like it's dampening or burdening on the group level. We will continue to prioritize growth in the European segment as we are in a very strong position in many markets where we are market leaders and those markets are in early stages. So it's more important to focus on growth there than optimize on margin.

Great. And just finally, on the guidance raise here, you are -- you have reestablished credentials of meeting or beating your guidance. So just on a 12-month trailing basis, you are tracking at or just below your '28 margin target. So just help us with how you think with regards to if you should, at this level, target to reaccelerate growth rather than optimize for profitability or if the current run rate on its EBITDA drop-through is actually achievable over the coming 2 years as well?

I think that you should -- I mean, we have operating leverage, and we are becoming more efficient internally in both our product and tech department, but also in sales and marketing. I think that there is room for further margin expansion, but I think the priority for us is to be more focused on growth, not see that margins are softening, but we don't really need to be as focused on improving margins as we have perhaps been in over the past couple of years when we went from 9% EBITDA margin to close to 20%. Most of that journey is obviously done. And the priority will be to try to improve growth rates further. But with that said, I mean, we have a target of plus 20% by 2028. We're close to that. So you should also expect that there will be margin improvements as well.

I hope you get a speedy recovery, Bodil.

Thank you, Joachim. I will tell Bodil that.

The next question comes from Ina Djupsund from SEB.

So I wanted to ask about the kind of competitive landscape. And have you seen any impact from Spotify ramping a little bit its audiobook presence? And how effective would you say that marketing spend is? Are you happy with the kind of current ROI levels?