TF1 SA (0NQT.IL) Earnings Call Transcript & Summary

Good morning. This is the conference operator. Welcome, and thank you for joining the TF1 Half Year 2025 Results Conference Call and Webcast. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Rodolphe Belmer, Chief Executive Officer; and Mr. Pierre-Alain Gerard, Executive VP, Finance, Strategy and Procurement. Please go ahead, sir.

Good morning, everyone, and thank you for joining us. I am Rodolphe Belmer, Group CEO; and along with Pierre-Alain Gerard, CFO, will present TF1 Group's H1 2025. First of all, we would like to share with you the key highlights of the first half. Audience first. In H1, the group maintained its leadership among women under 50 with a share of 33.7% and among the target of individuals aged 25 to 49 with 30.7% share. The TF1 channel, our flagship maintained its high audience share in the 4-plus target group, reaching 18.7% and LCI, our news channel, set a 2-year record by reaching a 2.4% audience share following the renumbering of DTT channels that took effect on the 6th of June. In digital, TF1+ attracted 35 million streamers per month on average in H1 and up to 39 million streamers in June 2025, a new record. Second, financial performance. The group's consolidated revenue amounted to EUR 1.1 billion in H1, stable year-on-year. The group's advertising revenue was down 2.5% at EUR 782 million, impacted by macro uncertainties. Also bear in mind that we had a high base for comparison with the Euro 2024. Advertising revenue generated by TF1+ maintained a strong growth momentum, rising by 41% year-on-year, up to EUR 92 million over the semester. COPA amounted to EUR 131 million, broadly stable year-on-year and margin was slightly up, increasing by 0.2 points, up to 11.9%. The group also maintained a strong financial position with net cash of EUR 473 million at end June, up EUR 26 million versus the end of June of last year. After a first part of the year marked by a more challenging advertising market than expected and with visibility remaining very limited, we confirm our 2025 guidance. Let's go now into more details. On today's agenda, we'll first give you an update on our business activities, then we'll provide details on our financial results. And after that, of course, we will update you on our strategy and outlook. For those of you who are joining by phone, note that we are broadcasting this presentation as a webcast, and you can also find it on our corporate website. Let's start with a quick update on our business lines, linear, streaming and studio. First, turning to Page #6. A quick reminder of why TV and TF1 in particular offers unmatched value in the media landscape. Reach is the key factor underpinning the value we deliver to our customers. In H1, TV overall daily reach stood at 77%, while TF1 group maintained an unrivaled position, covering 53% of French people every day, well above any other media business such as YouTube, SVOD services and TikTok. On the right-hand side of the slide, you can also see that beyond reach, TF1 also delivers a superior return on investment ROI for advertisers. Every euro invested in advertising on the TF1 channel generates EUR 6.3 of additional sales and even up to EUR 6.6 on prime time slots of TF1. The return for our DTT channels is also high at EUR 6.6. That's way above any other TV player and also above digital competitors, underpinning the strong resilience and pricing power of our group in the French market. Now turning to Page 7 and our audience performance. The group maintained its leadership across commercial targets and the TF1 channel retained a significant lead over its main commercial competitor, ahead by 9.2 points in the women under 50 target group with an audience share of 22.9% and ahead by 7.7 points among individuals aged 25 to 49 with an audience share of 20.3%. The TF1 channel had strong ratings in H1 in each genre, ranking #1 in French drama, news, entertainment and movies. Turning to our streaming strategy on Page #8. Our strategy is to leverage the group's solid content lineup to address both linear and nonlinear exploitations. 21% of total viewing comes from nonlinear consumption among individuals aged 25 to 49 for the TF1 channel. This share is even higher on our strongest franchises, reaching, for example, close to 50% nonlinear viewing for HPI. Now looking at the right-hand side of the page, let me give you an update on the platform's performance building blocks. Awareness. TF1+ reached 81% aided awareness at the end of June, a 3-point increase versus October of last year. Today, more than half of TF1+ regular users consider TF1+ as a streaming platform as opposed to a simple catch-up platform. On first visibility, the TF1+ app was visible on the TV screen landing page in 65% of households owning a connected TV, an 8-point increase from December 2024, which is quite significant. On consumption now, TF1+ attracted 35 million streamers per month on average in H1 and up to 39 million streamers in June, setting a new record. Overall, streamers watched 559 million hours of content on TF1+ in H1 according to Mediametrie, which is 1.4x the figure achieved by the second ranked platform in the French market. In terms of site-centric figures, which cover all streaming usage not captured by Mediametrie, such as specific aggregated content, for instance, as well as the consumption we produce outside of France, streamed hours rose by 11% year-on-year. On ad inventories, the ad load reached more than 5 minutes per hour on average in H1, a 6% increase versus last year. On the value front, the CPM reached EUR 13.5 per hour, a 2% increase over H1 2024. As a result, advertising revenue generated by TF1+ rose by more than 41%, reaching EUR 92 million in H1. As a reminder, our ambition is to establish TF1+ as the leading advertising-based free streaming platform for family entertainment in French-speaking markets. We want to build a cultural community around the French language with our premium content. To that end, after the initial launch we made in Belgium, Luxembourg and Switzerland late in 2024, TF1+ was rolled out in 22 African countries on the 30th of June with promising initial results. At this stage, our top 3 countries in Africa in terms of streamed hours are Morocco, Algeria and Tunisia. French-speaking markets now represent altogether 6% of total streamed hours on the platform. Turning to Page 10 for an update on Studio TF1. Its revenue totaled EUR 128 million in H1, growing by 6%, notably with the contribution from JPG of EUR 11 million. Like-for-like revenue was broadly stable. Highlights in the quarter included the launch on TF1, TF1+ and Netflix of our new daily series, Tout pour la lumière or All for Light in English. It included also the production of the of the Flemish version of Dancing with the Stars for Belgian channel VTM, the delivery of the documentary series From Rock Star to Killer to Netflix and the theatrical releases of the films, Jouer avec le feu, The Quiet Son in English and Avignon, with -- which both received awards at major film festival. Now Pierre-Alain Gerard for the financial section.

Thank you, Rodolphe. Good morning, everyone. Let's move now to a more detailed breakdown of our financial results for H1 2025. You will find additional information in our consolidated financial statements and their notes as well as our management report, all of which are available on our website. First, a word on revenue on Page 12. TF1 group consolidated revenue amounted to EUR 1.1 billion in H1, stable year-on-year and in line with the company complied consensus. Revenue from the Media segment declined by 0.9% to EUR 975 million. Advertising revenue amounted to EUR 782 million, down 2.5% after a stable Q1. Ad revenue was down 4.4% in Q2, impacted by macro uncertainties. Also bear in mind that we had a high base of comparison with the Euro 2024. And despite these headwinds, TF1 gained market shares, both in linear and digital according to our estimates. TF1+ maintained its strong growth momentum with advertising revenue increasing by 45% in Q2 and 41% in H1, reaching EUR 92 million over the period. Again, let me remind you that we only disclose advertising revenue here and not a broader streaming revenue. Non-advertising revenue in the Media segment amounted to EUR 193 million in H1, up 6% year-on-year, driven by the good performance of interactivity and music and live shows. Studio TF1's revenue totaled EUR 128 million in H1, an increase of 6% year-on-year. That figure includes an EUR 11 million contribution from JPG. As mentioned during our Q1 results, the year will be back-end loaded like in 2024. It will notably be driven by the activity of Studio TF1 America, JPG and Reel One and by the distribution business. On Page 13, moving on to COPA. It amounted to EUR 131 million in H1 2025, broadly stable year-on-year, up EUR 2 million and above the company compiled consensus. Margin from activities slightly increased by 0.2 points to 11.9%. The Media segment reported COPA of EUR 125 million in H1, stable year-on-year, which is a solid performance in a challenging advertising market. Our premium lineup led to programming cost of EUR 451 million in H1. The slight decrease compared to last year is mostly related to the Euro 2024 base effect. Studio TF1 generated COPA of EUR 6 million, a slight increase of EUR 2 million, including the cost of setting up the new ERP, which, as a reminder, was fully recognized in the first quarter. Studios TF1's margin was up 5 points to 10.2% in Q2. Regarding the income statement on Page 14, I have already commented on the consolidated revenue and COPA. Looking further down, operating profit totaled EUR 119 million, up EUR 4 million year-on-year. That figure includes EUR 7 million in amortization charges related to the intangible assets arising from JPG acquisition and EUR 5 million in nonrecurring expenses relating to the group's digital acceleration plan. Net profit attributable to the group, excluding the exceptional tax, was EUR 93 million, close to its level of last year. The EUR 3 million change was mainly related to the year-on-year decrease in financial income due to lower market interest rates. Income tax expense for the first half included an exceptional contribution on French companies under the 2025 finance bill. This exceptional EUR 14 million sur tax for the period comprises EUR 10 million based on 2024 taxable profits, fully recognized in Q1. As mentioned during our annual results conference call, the exceptional tax impact for the full year is expected to be around EUR 20 million to EUR 25 million. Moving on to the net cash position. At the end of June 2025, the TF1 group had a solid financial position with net cash of EUR 473 million, up EUR 26 million year-on-year. The EUR 33 million decrease compared to end December 2024 mostly reflects a free cash flow after working capital of EUR 97 million and the dividend payment by TF1 of EUR 125 million in April. Now back to Rodolphe, who will give you an update on our strategy and outlook.

Exactly. As recently showcased during our July upfront, we'll continue to offer in the second half of 2025, the best proposition of free, family-oriented and serialized entertainment. Highlights will include the return of some major franchises, including Star Academy and the final exit of the French drama, HPI. New premium and ambitious French series like Montmartre and Été 36 will be launched on TF1 and TF1+. Following the Women's Euro 2025, the group will continue to broadcast the main sports event of the year, notably with the 2025 Women's Rugby World Cup in England. The new daily series, All For Light, Tout pour la lumière, which has been available on TF1, TF1+ and also on Netflix since June and now ranks among the top 5 shows on the platform and will be broadcasted until September. As you know, our objective is to sustainably finance the best lineup of family-friendly and premium programs going forward. After launching TF1+ in January 2024 and establishing it as a premium alternative to YouTube, the group is now entering the second phase of its strategic plan, which comprises 3 pillars. The first pillar of this new phase is the launch of a new form of monetization on TF1+ in the form of micro payments starting in September 2025, September 1. Our goal is to diversify revenue sources we can generate from our programs beyond linear and digital advertising. We call it micro payments or in-app purchase, which aims to create a distinctive forms of monetization for our content. We are inspired by a business model that has proven successful in mobile gaming. Users will be able to enjoy new features, for instance, allowing on-demand access to each content without ad break, but for a modest fee. If you do the math, the revenue potential is significant if a portion of our monthly streamers transact several times a month. The second pillar is the extension of the group's distribution strategy illustrated by the landmark deal signed with Netflix. Starting in summer '26, we will show all our linear channels, defined them, on Netflix as well as more than 30,000 hours of content available on TF1+. This unprecedented alliance will unlock additional reach for TF1 as a significant portion of Netflix subscribers around 12 million in France, according to various sources, consider Netflix as their primary source of TV entertainment. In addition, TF1+ will benefit from Netflix unrivaled expertise in content recommendation. Finally, and the third pillar of this new strategic phase is the extension of the distribution of TF1+ within French speakers worldwide, notably with the launch of 22 African countries at the end of June with the aim of being the leading entertainment platform in those markets. To conclude, going to Page 18, a reminder of our guidance. After a first part of the year marked by a more challenging advertising market than expected and with visibility remaining very limited, the group confirms its 2025 guidance, strong double-digit revenue growth in digital, broadly stable margin from activities compared with 2024, aiming for a growing dividend policy in the coming years. Thank you for your attention. And now we are ready to take your questions.

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

Three questions. First question, if we can have just a little bit more color on the -- what you're seeing for the start of the third quarter and particularly ahead of September and how that relates, I think, to the comments you made in the press release about April -- weakening spend from April. Are you seeing any stabilization of that or any improvement? Or does that continue into Q3? Second question based on the Netflix deal. Can you let us know whether there's any carriage fee component to that? I mean I understand the idea behind increasing the reach for advertising purposes. But is there also a sort of second stream of revenue coming from carriage fees payable by Netflix for carrying your channels? And then third question, any update on the thinking behind what to do with the net cash balance? Any further thoughts on that would be interesting.

Well, thank you, Conor. On the advertising outlook for the rest of the year, as we said in our presentation and we insisted on that, while this year is particularly marked with a lack of visibility given the macroeconomic situation. Still, what we see in the third quarter, which has already started, were announced in the third quarter of the year, is the following. First, we break down our revenues in 2 pockets, I would say. There is digital and there is linear. In digital, the first year -- the first part of the year has been very solid for us with a 41% growth. And we continue to see a very solid demand in digital for the rest of the year, which leads us to reiterate our guidance of a strong double-digit growth in digital and the underpinning market. The underpinning demand for that portion for that line of business is very solid. We estimate that the demand for digital advertising in the BVOD segment has been up 30% over the first semester. Now there is the linear business, which has historically been the bread and butter of our company and which still represents a significant portion of our revenues. This part of the business has been marked by a lower demand over the first half. And we estimate that the French market has been down by a bit more than -- a bit less, sorry, than 8% over the first part of the year. And our revenues in the linear segment have been a bit better, meaning that we have beaten the market, and we have grown our market share. Now looking in the second part of the year, the second half, we estimate that linear should -- demand should be still in negative territory, but with a very low single-digit decline, meaning that the trend should improve even though the demand will be slightly negative in the second half. And that's the 2 underpinning elements of our outlook for the rest of the year, very solid demand in digital that we will beat and well, a better trend, even though negative in linear that we will also beat. On the Netflix deal, well, of course, I cannot reveal confidential elements of our contract, which are marked by the customary confidentiality constraints. But what I can say is that well the contractual form of the arrangement we have made with Netflix is a distribution deal, meaning that while this deal is built with the customary conditions of a distribution deal.

And maybe, Conor, I'll take the question on the net cash position. So as you know, for us, the financial policy of the group is to be in a net cash position. We have -- it's very important, especially in turbulent times, to be able to count on a solid balance sheet. So being in a net cash position is important. It gives us, as you have seen last year, a strong agility when we identify a target suiting our strategic and financial guidelines. And last point, as you know, part of our guidance is to aim for an increasing dividend in the coming years, which is what we've done, increasing our dividend by almost 10% last year.

The next question is from Julien Roch, Barclays.

The first one is on TF1 Studio -- Studio TF1, if we could get the organic growth rate in the first half. Then you gave us the number of streaming hours at 559 million. Can we get the total hours of viewing across all devices and all channels? And then lastly, Rodolphe, if you could come back to what you explained about the next phase of your strategy and micro payment on your streaming platform, TF1+. Can you give us some example of what people would pay for and maybe some price points, some more color on that potential source of revenue? That's it.

Julien, on Studio TF1 organic growth, if we exclude the perimeter effect of JPG is flat -- flattish, Slightly negative minus 2%, excluding the EUR 11 million contribution from GPG. Streaming hours. Well, the total figures of the number of hours -- viewing hours that we produced across the group, including linear is -- well, in the first semester is of 8.5 billion hours. And within that, 500 million, which were made on the digital platform. But well, that's not really the way we assess -- we view -- we could trend our business. We truly believe that our business is made of 2 different lines of activity. If we think of the commercial strategy and the monetization strategy, there is one part of the business, which is linear and which is underpinned by customer demand for linear advertising. And this is a mature market, slightly shrinking in the first half -- well, shrinking in the first half and slightly shrinking in the second half, should I say. And in that business -- in that line of business, in that segment, it's a market share game, and we are focused on increasing the market share of the group in that segment. And we are doing that quite well. We have gained a bit less, but close to 1 percentage point of market share over the first semester. In the digital space, our objective is to take a foothold in that segment, which is growing very fast and from which we have historically been absent and which is occupied by the like of YouTube and want to take a significant market share in that market by presenting ourselves to the customers as an alternative to the current players occupying that segment. And again -- and this is done by creating digital business, which delivers significant digital inventories. And that's what we do quite well with TF1+. And this is totally distinct commercial strategies in the 2 segments of our business. Micro payments, we see that as a significant source of incremental monetization and business generation for our group. As you know, in the mobile space, the in-app purchase represents a significant source of business, probably 1/3 of all the revenue generation on mobile, 2/3 being made with advertising and subscription, as you know well. And we want to deploy that form of monetization on the TV screens, which are getting connected now like the smartphones are connected. What kind of products are we developing? For the moment, we are announcing 3 products that we are developing and that we will launch in the last quarter of this civil year. Starting in September, we will propose to our users on TF1+ to watch episodes of series in avant-première for a small amount of money. And this amount of money will be in the order of EUR 1 per episode, meaning that you can see the next episode of our blockbuster series HPI in advance if you pay EUR 1 per episode. That's the first product. In October, we will launch the ability to watch all of our -- each of our content without advertising. And you can choose to watch each episode, for instance, of our series, of our daily soaps, of our entertainment shows, you can decide to watch each of them without advertising for a very small amount of money, which will be also in the order of EUR 1, VAT included. And we're also developing companion products -- companion shows on our blockbuster franchises, which will also be proposed for a small amount of money. For instance, we have a very popular franchise, which is -- will be released during the course of the last quarter, which is called Star Academy, a talent show, which is very popular in France, a very powerful pop culture event notably for the younger people in the country. And we are launching a 24-hour channel to accompany that show and that event, and we will propose viewers to access that 24 channel specializing on Star Academy for EUR 1 per day -- order of EUR 1 per day. That's the kind of products we are developing, and we think it could represent a substantial source of monetization. Why? When we monetize our show, if you look at the revenue generation from usage point of view, each hour of show that we produce generate on TF1+, you can do the math very easily, around EUR 0.20 per hour. And of course, if we can generate revenues with micro payments with the features we have described briefly previously, we can multiply that revenue by in order of 5, which is per hour, which is very interesting.

The next question is from Christophe Cherblanc, Bernstein.

First question was on the H2 guidance. You basically are saying that you expect the market to be low single digit down. Should we expect the performance of TF1 versus the market to be at about the same order of magnitude that what we saw in H1? That's the first question. And then I've got 2 small questions. One is on the disposal of My Little Paris and Play Two. Can you give us the size of revenues and EBITDA that we are going to see dropping off the P&L? And when will that happen? And the last one is on JPG. I think you said EUR 11 million of contribution in H1. I had in mind EUR 9 million in Q1, which would suggest only EUR 2 million in Q2, which seems super low. So I know it's a seasonal business, but still that seems super low. So maybe clarification there and whether there was any EBITDA contribution from JPG in Q2?

Well, thank you. On the H2 outlook, well, we don't give specific guidance, as you know well, for each semester. But on the outlook, what we said that, well, we -- and I want to insist on that, when I said that the market will be low single-digit decline in H2, I meant the linear business, meaning that we estimate that the demand for linear advertising will be in negative territory at a very low single digit in H2. And we estimate that we will beat the market, I told you that, because we are gaining market share. We have gained around a bit less than 1 percentage point market share in H1, and we consider we will deliver the same kind of performance -- commercial performance in H2 and which gives you a sense of what we could expect from our linear business in H2. For digital, the demand will continue to be dynamic over H2. In H1, demand in France have grown by 30% year-on-year. And we estimate that, that demand will continue to be at that kind of pace. We will continue to have that kind of dynamics over H2. And we did plus 41%, 41.2% precisely in H1, and we reiterate that we will deliver a very strong performance, double-digit growth over H2. And we estimate that we continue to beat the market. Why? Because we have a product, TF1+, which is very, very successful in the French market. You can measure by the penetration, by the growth in the number of viewing hours and by our monetization ability. And that's why we are very confident that in digital, we continue to beat the market also. Maybe on MLP and Play Two, would you take it?

Yes, I can take them. So on My Little Paris. The rationale behind it, My Little Paris was part of the former Unify segment, which was disposed a couple of years ago. We are finalizing and closing this operation in the coming weeks. It's about EUR 30 million revenue and low single-digit COPA. For Play Two, it's a different kind of operation. This was part of the protocol we signed with Believe in 2021, where Believe has the option to buy the exclusive control of Play Two. And we are negotiating and finalizing the terms of the deal, but you should expect it to be closed during Q3, Q4. And in terms of key figures, it's about EUR 50 million and a low single COPA. And the difference is that My Little Paris will be considered as a financial stake accounted for in the balance sheet. Whereas on Play Two, it will be placed as an associate, and we only gain a part of the -- our remaining share of the net income. So this is for My Little and Play Two. Regarding JPG, if you remember in Q1, I mentioned that there was some kind of peak in activity in Q1 for JPG, given a deal in music that happened, and that triggered an important depreciation in the PPA. This is the main element that we mentioned on JPG. Usually, the activity is rather back-end loaded. So -- and the activity in Q1, just to correct you, was around 8 -- less than 8 for Q1. But the rest of the activity is more concentrated around the second half of the year.

So there was no EBITDA contribution from JPG in Q2?

Yes, there was an EBITDA contribution of JPG in Q2, yes, positive one.

Positive one? Okay.

So the next question is from Jérôme Bodin, ODDO BHF.

Just a very 3 quick one on my side. So first of all, regarding TF1, so I have understood that you have signed some revenue share agreement with distributors. I was wondering if the model is full speed because when I check the other costs, they are not increasing so much at the moment. So I was wondering if the revenue share would increase more in the coming quarters? That's my first one. Second one, just a follow-up on micro payments. Do you hold the rights of most of your catalog for micro payments? Or do you need to sign new contracts? And finally, regarding Africa, so I know it's very small, but is it a specific advertising sale? Or is it the same than for France? So I'm just wondering if it is so far a monetized audience.

Thank you, Jérôme. On TF1 and TF1+ and the rest of our DTT channels, under the distribution agreements, we have with our distributors and notably the telcos. We have considered actually revenue sharing of the advertising, which will -- which is made on TF1+ only and where we return a small portion, a very small portion of the digital revenue we make on TF1+ to our distributors. Those agreements have been running for the past 18 months now, meaning that the full effect is reflected in our figures already. On the -- and again, this is a very small portion of our revenue, which is shared. Micro payments, we -- actually, it's a good question because the rights for this -- usage for this form of monetization didn't exist before. It's a first of its kind development in the TV space, even though this kind of monetization model is quite developed in mobile space on the smartphones. It's new on TV, and it's sort of world premier that we are doing. And we had to clear -- to create -- to clear those rights for this utilization. And that's what we did through a large interprofessional negotiation that we carried over the first semester and which ended up with an agreement that we found with the producers at the end of the first semester. It was at the beginning of June, meaning that now those rights they do exist, they clear -- they are cleared, sorry, and we can proceed with this new monetization approach. On Africa, for the moment, there is no specific monetization of the African inventories that we do produce because it's still very small, still very nascent. And we start monetizing specifically for Africa when the volume of utilization is there. But for the moment, very nascent, and we just take a foothold in Africa with TF1+.

[Operator Instructions] Gentlemen, there are no more questions registered at this time from the conference call.

All right. Well, thank you very much for attending this conference call of presentation of our first half results. And just a very short closing remark before concluding that session, reminding that even though the first part of the year was marked by a more challenging advertising market than expected and despite visibility, which remains very limited, we are able to reiterate our '25 guidance today, notably with a strong digit -- strong double-digit revenue growth in digital, a broadly stable margin from activities compared with 2024 and also reiterating that we aim for a growing dividend policy in the coming years. Thank you again for your attention, and see you in 3 months.

Ladies and gentlemen, thank you for joining. The conference is now over, and you may disconnect your telephones.