TF1 SA (TFI) Earnings Call Transcript & Summary

Good morning, and thank you for joining us. I am Rodolphe Belmer, the CEO of TF1 Group. And along with Mr. Pierre-Alain Gerard, the CFO, we will present TF1 Group 2024 full year results. On today's agenda, we'll first give you an update on our business activities. Then we'll move on to our financial results. After that, we'll update you on our strategy and the outlook going forward. And then we close the session, as usual, with the Q&A session. For those of you who are joining us by phone, note that we are broadcasting also this presentation as a webcast, where you can see the slides. You can also find it on our Corporate website. Let's turn to the first page of substance, if I may say so, the Page #4. First of all, we'd like to share with you the key highlights of what has been a quite strong year for the group. In a snapshot, first, audience, the evolution of audience throughout the fiscal year. First half recorded strong year-on-year rating growth across all targets. Then audience shares were resilient during summer, despite the competition from the Paris Olympics, which were broadcast on France Télévisions. And in the fourth quarter, the group immediately regained its leadership in commercial targets. As a result, in 2024, the group maintained its leadership among women under 50 with a share of 33.5% and among the target group of the individuals aged 25 to 49 year old with 30.5%. The TF1 channel even increased its audience share in the wide 4+ target group by 0.1 points for the first time since 2021. On digital, TF1+ attracted 33 million streamers on average per month in 2024 and more than 34 million on average in Q4. Second element, financial performance. The group's consolidated revenue was up 2.6%, driven by both media and studios. The group's advertising revenue increased by 2.3% with a strong revenue growth in streaming and a stable, I insist on that, stable linear revenue. Advertising revenue generated by TF1+ grew by almost 40%, confirming the platform's appeal for advertisers. COPA amounted to EUR 297 million, up EUR 9 million year-on-year, and the margin from activities stood at 12.6%, slightly higher than in 2023 by 0.1 points, which we deem a distinctive performance in a year of accelerated digital transformation. And the group maintained a strong financial position with a net cash of EUR 506 million at -- in December, remaining stable year-on-year. The group, therefore, achieved its 2024 targets in a year of major transformation. Let's turn now to a detailed activity review for 2024 for our Media and Newen Studios line of activities. First, the review of our linear activities, of our linear business. As a reminder, TF1's unrivaled reach is the key factor underpinning the value we deliver to customers. In 2024, the group maintained its unrivaled reach, covering 53% of French people every day, well above any other Media business such as YouTube and SVOD services. The group maintained its leadership, despite unprecedented competition from the Paris Olympic Games. The TF1 channel retained its leadership position in commercial targets with audience share of almost 23% of women below 50, 10 points ahead of its closest competitor, and more than 20% of the 25- to 49-year-old target, 8 points ahead of its closest competitor. Switching to Page 7, commenting more in -- on the linear performance. In 2024, the group offered a solid lineup of program performing well, both in linear and also the same lineup of program performing well in streaming. The TF1 channel maintained its solid position across all dayparts, confirming the relevance of its programming strategy. This is illustrated by its leading audience share among the 25 to 49 years old, particularly in the afternoon slots, where the launch of the daily soap Plus belle la vie, encore plus belle, significantly improving our position with a 15-point increase in audience share. It confirms the appeal of our daily soaps and strong franchises. The morning show Bonjour! continued to gain popularity among French households. It has doubled the audience share for its time slots in the 4-plus target group to 9% on average in 2024 and even reached more than 10% at the end of the year. As a reminder, the distinctiveness of the strategy implemented with TF1+ is to leverage the group's solid lineup of programming to efficiently address both linear and nonlinear exploitations without inferring specific programming costs for TF1+. This strategy has proven successful as the total number of hours viewed for the whole group was stable year-on-year, with nonlinear consumption offsetting the decline in linear viewing time. This trend is reflected by the 7-point increase in nonlinear consumption among the 25- to 49-year-old for TF1 channel year-on-year, now reaching 20% of the consumption. This share is even higher on our strong franchises, reaching up to 45% of the consumption. Nonlinear, now, the group's success in attracting linear audience is a springboard for TF1+ development. As a reminder, our objective with TF1+ is to become the leading free streaming platform in France and also now in French-speaking markets. In 2024, the platform made significant progress on all building blocks, underpinning its development. Brand awareness -- aided brand awareness stood at 78% for TF1+ at end 2024, 5 points gain in a year. On visibility, TF1+ app was visible in 58% of households owning a connected TV, beating the initial targets of 55%. Consumption, TF1+ attracted 33 million streamers on average per month in 2024 and more than 34 million on average in Q4 compared with 28 million only for MYTF1 the year before. 1.2 billion hours of content were watched on the platform in 2024, representing 1.5x the usage of the second ranked competitor. Based on our site-centric figures, consumption increased by 55% year-on-year. TF1+ is the biggest leader among individuals aged 15 to 34 with a monthly reach of 75% of this target group, illustrating its appeal among the younger generation. On our ad inventories now, ad load reached 5 minutes per hour on average in 2024 compared with less than 4 minutes historically on MyTF1. And it's important to note that this is an average and that the ad pressure is already higher for some target groups. These promising results show that we are on track to achieve our target of 6 minutes per hour of ad load in the medium term. And on the value front, on the monetization side, we are also on track to achieve our goal of increasing our CPM up to EUR 15, which is our target, as we reached already EUR 13.5 in 2024, coming from EUR 12, you remember that, on MyTF1 the year before in 2023. Looking now at the production line of business with Newen Studios. Newen had a strong year in 2024 with a 5% increase in its revenue and the return to a double-digit margin. 2024 was marked by the strengthening of synergies with the Media segment of the group, illustrated notably by the launch of Plus belle la vie, encore plus belle on TF1 in January 2024. Also it was marked by the normalization of the relations with France Télévisions with the renewal of the unscripted program, Le Magazine de la santé, it's daily program for another 2 years. The delivery of productions such as the second seasons of Marie Antoinette for CANAL+ and Memento Mori for Amazon Prime Video as well as theatrical releases with Jamais sans mon psy and Nous, les Leroy. And finally, the closing of the acquisition -- finally, and importantly, should I say, the closing of the acquisition of Johnson Production Group at the end of July, further strengthening Newen's position in a dynamic and resilient TV-movie market. It also gives Newen privilege and long-term access to the North American market with its midterm activity secured by output deals. Now let's turn to our financial performance with Mr. Pierre-Alain Gerard, the Group CFO.

Thank you, Rodolphe. Good morning, everyone. Let's move to a more detailed breakdown of our financial results for 2024. 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 our good Q4 results. TF1 Group's consolidated revenue amounted to EUR 765 million in Q4, a year-on-year increase of 2%. Revenue from the Media segment was broadly stable at EUR 612 million. Advertising revenue was down 2%, slightly better than the company combined consensus and outperforming the market, despite the high base of comparison with the Rugby World Cup in 2023 and the more challenging market conditions in the last 2 months of 2024. Newen Studio revenue rose by 16% to EUR 153 million in Q4, driven as expected by numerous deliveries and the contribution of Johnson Production Group. Now for the full year. TF1 Group's consolidated revenue totaled EUR 2.4 billion, a year-on-year increase of 3%, driven by its 2 business segments. Advertising revenue in the Media segment was up 2%. Linear advertising revenue was stable, despite unprecedented competition from the Olympic Games and a weaker-than-expected market in the last 2 months of the year. Advertising revenue totaled EUR 146 million in 2024, representing a strong growth of almost 40%, confirming the platform appeal for advertisers. Again, we only disclose advertising revenue here and not broader streaming revenue, which would be much higher. Non-advertising revenue in the Media segment amounted to EUR 368 million, up 2% year-on-year. Newen's revenue grew by 5%, notably benefiting from the contribution of JPG acquired at the end of July. Without JPG, Newen's total revenue remained stable year-on-year, given its higher activity with TF1. On the next page, COPA amounted to EUR 99 million in Q4, up EUR 15 million year-on-year and in line with our company combined consensus. Margin from activities rose by almost 2 points, driven by the Media segment and Newen Studio. For the full year, COPA was EUR 297 million, up EUR 9 million. Margin from activities was 12.6%, slightly higher than 2023 and, therefore, achieving the target of a broadly stable margin in a year of major transformation for the group. The Media segment reported a margin of 12.9%, similar to last year, despite an increase in programming costs and investments in TF1+. Although momentum in the linear advertising market was weaker than expected at the end of the year, the disposal of Ushuaia enabled the group to maintain a high level of programming costs and accelerate investment in TF1+. Newen's margins from activity returned to double-digit territory at 11%. On the P&L, regarding the rest of the income statement, I have already commented on the consolidated revenue and COPA. So looking further down, operating profit stood at EUR 271 million, up EUR 18 million year-on-year. This figure included other operating income and expenses of minus EUR 18 million, arising notably from the extension of the agreement on jobs and career management called GEPP in French, which was signed in July 2023. Net profit attributable to the group was EUR 206 million, up EUR 14 million. It included a high level of noncontrolling -- higher level of noncontrolling interest than last year as we now take into account minority shareholders for both JPG and Reel One. On cash flow on the following page. At the end of 2024, the group had a solid financial position with a net cash of EUR 506 million, stable year-on-year, with the free cash flow before working capital at EUR 229 million in 2024 versus EUR 177 million last year. Free cash flow after working capital stood at EUR 191 million, enabling TF1 to acquire JPG and pay EUR 116 million in dividends. In line with our distribution policy announced in February 2024, the Board of Directors will propose to the General Meeting of Shareholders on the 17th of April the payment of a dividend of EUR 0.60 per share, up 9% from 2024 and representing an attractive dividend yield of 8%. I now leave the floor to Rodolphe to provide an update on our strategy and outlook.

Thank you, Pierre-Alain. We were proud to celebrate the 50th anniversary of TF1 last month. Over the past 50 years, TF1's mission has been to entertain, inform and bring French people together through a diverse range of high-quality programs as well as reliable and promising news coverage. The group's ambition is to establish itself as the primary premium destination on TV screens for family entertainment and quality news in French language. In the context where usage is shifting from linear to on-demand viewing, the group's strategic priority is to build a virtuous model, enabling to finance programs with superior production values to sustain its long-term leadership and growth. Our 3-pronged strategy is as follows: strengthen the group's leadership in the linear advertising market; become the leading free streaming platform in France and in French-speaking markets; reinforce our studio's position on the international stage by leveraging TF1 brand appeal. The first pillar of our strategy is to consolidate our linear revenue by gaining market share in a flattish linear advertising market. First, through volume, the reach of TV and of TF1, in particular, is a differentiating factor for brands. A premium content offering is instrumental in an increasingly fragmented media environment as it generates the best advertising inventories for our customers. To maintain this advantage, we have secured all our main entertainment franchises like Star Academy, Koh-Lanta and The Voice, to name a few. We have renewed also our lineup of French fiction with a wide universe of new heroes like Carpe Diem, Flashback and Joseph, among others. We have signed co-productions with streaming platforms and, for example, [indiscernible]. And we have invested in flagship sport events. And in that flagship, should I say, sports events of 2025 with the Women's EURO of football and the Women's Rugby World Cup. We also intend to implement a distinctive pricing strategy. Our ad sales house will carry out an ambitious transformation plan over the next few years. Starting in 2025, we are switching the ad pricing unit from the historical 30 seconds to the 20-second format to align with the current duration of ad formats. In 2026, we will further segment our offerings of commercial by distinguishing the highly powerful and premium screens of TF1, which have unique value in the market through, what we call, the peak offering and, at the same time, the rich offering, the rest of our advertising inventories will encompass all of our multichannel inventory, representing 1/3 of the total market inventory, enabling to compete effectively for market share with our peers. Finally, in 2027, we will launch a multiscreen self-serve trading platform for part of the rich inventory, enabling dynamic purchasing for greater agility and productivity of our customers and notably the advertising and the media agencies. The second pillar of our strategy is to increase our nonlinear revenue by gaining market share in a fast-growing digital video advertising market. Our intention is to establish TF1+ as the premium alternative to YouTube. First, an alternative for viewers, TF1+ was designed to offer a premium experience to viewers, similar to best-in-class video streaming platform, but free to view. The group intends to continue the platform's rollout by extending its distribution among French speakers worldwide. The next step is the expansion of the platform in French-speaking Africa in 2025 to reach more than 150 million people. TF1+ will also continue to offer attractive content. Through our aggregation strategy, we intend to enhance TF1+ catalog with complementary audiovisual content to be above the current lineup of 30,000 hours of content at any time, therefore, getting closer to Netflix offering in an aggregate -- in an aggregation model with a revenue sharing approach. From the start, we also designed TF1+ as a platform for advertisers with innovative and distinctive advertising formats and offers. First data -- the first driver is data. TF1+ offers data-enriched inventories to advertisers, which rely on users' knowledge. To this end, the group launched a major innovation in January 2025 called Graph:ID, which is the new single access point for information about users of TF1+, TF1 Info and also the ad sales house of the group. Overall, it gathers around 25 million TF1+ user profiles and allows for unrivaled targeting granularity with 1,200 data segments. The key benefit for advertisers is the ability to use Graph:ID at every stage of their campaigns and also obtain sophisticated insights to significantly optimize the impact of their advertising. In addition, TF1 Group has signed an exclusive agreement in France with Habu, a collaboration platform that is interoperable with all the clean rooms available in the French advertising market. Second driver is the ad tech stack. Advertisers are adopting more sophisticated marketing strategies aimed at creating brand interactions throughout the consumer lifetime value beyond awareness. TF1+ will be the first -- the very first platform to address advertisers' needs across the entire marketing funnel from brand awareness, as I said, to conversion, thanks to an improved ad tech stack. While most platforms on the market only offer pre-rolls and mid-rolls, we will offer innovative ad formats starting in 2025 -- in Q1 of 2025. We have immersive formats on the homepage and ad displays when a viewer poses a program to build brand awareness. We have banners and collections of content around the theme to develop brand image and strengthen the intimacy with customers as we did with Star Academy, a range of playable ad formats that gamify the ad experience to favor user engagement and collect more data and the possibility to encourage consumer purchases through sent to phone redirection to advertisers' website. That's the -- what we call the shoppable ad format. Now turning to the production activities. We announced in January that Newen Studios will rebrand as Studio TF1 next month. The aim is to align Studio TF1 with major global players, like BBC Studios and ITV Studios, simplifying its identity and, more importantly, reinforcing its global reputation as a stable, ambitious and reliable partner for our international customers. The move will increase the international profile of our studio by leveraging the global recognition of the TF1 brand. The focus of Studio TF1 will be also to develop intellectual property with global appeal. The company's existing distribution activities, which encompass international rights for successful production like HPI will be crucial for this strategy. The rebranding will also strengthen the synergies with the Media segment of the group, illustrated in particular by the launch of the new daily series Tout pour la lumière in 2025, which will air on TF1, which will be streamed on TF1+ and also in partnership with Netflix. Studio TF1 will also expand its focus on film with an extensive catalog as it plans to double its film production by 2027 with 10 to 15 films annually. While Studio TF1 will operate independently and collaborated with third-party producers, it will also collaborate with TF1 film production for the financing and TF1's channel for the broadcasting. Major projects in 2025 include Jouer avec le feu, starring Vincent Lindon, or the adaptation of the Natacha comics series starring Camille Lou. Finally, Studio TF1 will launch a new theatrical distribution division next year. Among other benefits, it will give more control over the crucial first window of release of the theatrical movie. Guidance now. For 2025, in an advertising market with limited visibility, the group's outlook is as follows: strong double-digit revenue growth in digital; broadly stable margin from activities; and aiming for a growing dividend policy in the coming years. To sum up, we delivered a robust performance in 2024, maintaining our audience leadership on commercial targets, despite France Télévisions coverage of the Olympics. We grew revenue in both of our business segments, Media and Production. TF1+ was launched successfully and sustained its growth momentum throughout the year, confirming its attractiveness for both advertisers and streamers. Newen Studio's margin returned to double-digit territory. The group's margin for activities increased slightly, thereby achieving the target of a broadly stable margin, and the group benefits from a solid financial position at the end of 2024. 2024 was a defining year for our group. We have made major significant progress in the execution of our digital strategic plan and achieved our financial objectives during a year of major transformation for our group. That's all for these words of introduction. Thank you for your attention, and we are now ready to take your questions with Pierre-Alain.

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

Three questions from my side. First question on advertising. I wonder if you could give us a little bit of color at the start of the year. And I think your main competitor was quite bullish about the possibility of picking up some of the -- I think they calculated EUR 100 million plus revenues from [ savings and energy ] when they start broadcasting. Do you see a similar opportunity? Second question, can we have a little bit more color on the outlook for Studios in 2025? Would you see the activity growing year-on-year given what you see in the pipeline for deliveries? And then the third question maybe for Pierre-Alain on the recently announced tax increases in France for, I think, this year and next year. Have you been able to assess the potential impact of that on EPS in those years -- effective tax rate?

Well, thank you, Conor. On your question on the advertising trajectory and the revenue projection for 2025, of course, we try to keep prudent on this subject since, as you know, our market lacks visibility, typically. And this lack of visibility is even more pronounced those days with the surrounding macroeconomic considerations. Still, that being said, we must say that, well, first, we are very confident that our digital initiative, TF1+, will continue to have a very strong momentum in 2025 and will have a solid, as we said, double-digit growth. And when we look at the perspective and the elements we have to have some estimates of the evolution of the advertising market in 2025, what we can say that the first 2 years of the month -- the first 2 months of the year, sorry, the first 2 months of the year, January and February, have been in line with our expectations and objective in terms of advertising revenues for the group. And another advanced indicator that we have is the annual engagements that we have with our customers. As you probably remember, the advertising revenues of TF1 is structured very significantly with annual engagements of investments, of spendings that our customers take with us. And those engagements are typically negotiated during the first 3 months of the year, meaning now, and that's the negotiation period. And those engagements, they represent roughly 70% of the total annual revenues of the group in terms of advertising. I think that it's quite a significant sample, if I may say so, of our revenues. And what I can say now is that while those engagements and those negotiations are going well, and the level of engagements that we have currently will comfort us in the idea that, well, 2025 should be in line with our objective in terms of advertising. On the Studio side, 2025 should be also, as it was in 2024, a year of growth, notably because the core business of the Studio will remain solid, but also will benefit from the consolidation of JPG on the entire fiscal year 2025, where it was -- it brought revenue only for 5 years in 2024 -- 5 months, sorry, 5 months. Yes, sorry, 5 months. On the tax consideration?

Yes, Conor, the -- what -- from what we understand at this stage, the tax impact should be of the same magnitude that the one we had previously, meaning around EUR 20 million to EUR 25 million.

For 2025?

Yes. This is what we understand today.

Okay. Very clear. And just one quick follow-up. I guess, nobody asked the question on programming costs for 2025, at this stage, would you see that at a similar level to '24, slightly below, slightly above?

Well, the order of magnitude is -- what we can say is similar. We try to slightly grow our programming cost every year to continue to provide a superior lineup of content to our viewers and advertisers as the key underpinning bedrock of our superiority on the French market. But of course, this is with a view of continuing to produce a broadly stable margin for the group.

The next question is from Jérôme Bodin of ODDO BHF.

So first of all, on TF1+, so in terms of pricing per CPM, so the increase was significant in 2024, almost 13%, if I'm right. Are you expecting a slowdown of this growth in 2025? And the question behind it, what do you expect in terms of component of growth for TF1+ in 2025 versus 2024, so in terms of price volumes and international expansion? Should it be a bit different from last year? That's my first question. My second one is on other costs and specifically on the marketing plan for TF1+ in 2025. Do you plan this cost to be flat, up or down after the effort that has been made in 2024? And lastly, to follow up on Conor's question on Newen. Can you help us to forecast the margin for this year? Because I guess that Johnson Production Group is a bit accretive. So should we expect a margin improvement next year?

Yes. Well, Johnson Production Group is definitely -- I wouldn't say slight, it is definitely accretive, but I leave the question to Pierre-Alain. Well, to start with your first question on TF1+ and the key building blocks, the key underpinning drivers of TF1+ growth in 2025, as we said, we will -- we are committing to an objective of a stronger double-digit growth in terms of revenue in 2025. The underpinning elements, as you said, rightfully, as you induced rightfully is, well, pricing and, more importantly, usage. Actually, there are 3 main factors. The factor number one is actually pricing. We are today at EUR 13.5 per CPM per 1,000 impressions coming from EUR 12 a year ago. And our midterm target stands at EUR 15, and meaning that, well, in 2025, we'll continue to grow, but less -- with a less pronounced growth than in 2024. And the source of growth in terms of pricing comes from the development of the digitalization of our inventories. Today, we sell only, should I say, well, 60% of our inventories with data, and we tend to grow the percentage of our inventories that we're able to sell with data because they come with a higher price, of course. Second element of growth, that's the ad load that we are able to have on our viewing hours. Today, we charge -- we have -- we load each hour of viewing with 5 minutes of advertising coming from 4 minutes a year ago. And our target in 2027 is to have 6 minutes per hour, meaning that we continue to add advertising load in 2025 and in 2026. It's another building block of the growth. The third element, which is the most important, that usage. Last year, we have grown our viewing time on TF1+ by 55% year-on-year. And we continue to develop very strongly in this area, well, consumption-wise. And we continue to -- we will continue to produce very significantly growing audience number of hours streamed in 2025. And that's the key element, the key underpinning factor of growth for 2025. The last point, international, it will provide only modest growth, probably representing a small percentage point of our total TF1+ revenue in 2025, and that's what I can say on this subject. Marketing cost, we continue to invest in 2025 to push, promote, develop TF1+, both in terms of technology and in terms of marketing support and distribution of the platform. But, well, the vast majority of the effort was produced in 2024, meaning that we continue to invest a bit more in 2025, but in a more limited proportion than in 2024, meaning that we can continue to develop very strongly TF1+, while we continue to produce, as we said, a broadly stable margin for the total group in 2025 as we did in 2024. We're able to launch successfully established TF1+ as a leading platform with 1.2 billion of hours viewed in 2024, which is massive for the first year of an initiative. We were able to develop ourselves on almost 60% on -- of the French people TV screen. We were able to establish ourselves commercially, vis-a-vis the advertisers. And that, while we are able to grow slightly, but still we grew our profit margin by 0.1 points. And that's the key frame of our strategy, continue to push strongly for TF1+, which has a very significant growth potential and still very significant headroom for growth, while we are very, very serious and maintaining the financial discipline in the group and the frame of our financial performance.

On Newen, you're right, Jérôme, JPG is accretive on the margin, but we don't guide on the margin of Newen. But as we usually say, the production activity in Europe is between 10% and 50% of operating margin, and we see Newen in double-digit territory in 2025.

[Operator Instructions] Gentlemen, there are no questions registered at this time.

No question?

No questions at this time, sir.

Okay. Well, thank you very much for your attendance. And to sum up, well, this meeting of today, and what I want to insist on is we believe that we delivered a very robust performance in 2024, very distinctive in our sector. We're able to maintain our audience leadership. We're able to maintain our linear revenues. We're able to grow very significantly by almost 40%, establishing TF1+ as the leading free-to-view streaming platform in France, expanding now in Belgium, Luxembourg and Switzerland, while we are also able to maintain and slightly grow, should I say, the profitability of the group, meaning that 2024 was a defining year for our group, paving the way for the future of our company. Thank you very much for your attendance and participation, and we'll see you in 6 months for myself and maybe sooner for Pierre-Alain.

Thank you very much.