TF1 SA (TFI) Earnings Call Transcript & Summary

Good evening. This is the conference operator. Welcome, and thank you for joining the TF1's First Quarter 2025 Results Conference Call and Webcast. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Pierre-Alain Gerard, Executive VP, Finance, Strategy and Procurement. Please go ahead, sir.

Thank you. Good evening, everyone, and thank you for joining us for our Q1 results presentation. First of all, we would like to share with you the key highlights of the first quarter. Audience first. In Q1, the Group maintained its leadership among women below 50 with a share of 33% and among 25 to 49 years old with 30%. The TF1 channel continued to increase its audience share in the 4+ target, reaching almost 19%. On digital, TF1+ attracted 35 million streamers per month on average in Q1, higher than its 2024 average figure of 33 million. Second, financial performance. The Group's consolidated revenue amounted to EUR 520 million in Q1, up 1.6% year-on-year. The Group's advertising revenue was stable at EUR 363 million. Advertising revenue generated by TF1+ maintained its strong growth momentum, rising by 37% year-on-year to EUR 40 million. COPA amounted to EUR 43 million, up EUR 6 million and margin increased by 1 point to 8.3%. The Group also maintained a strong financial position with net cash of EUR 559 million at end of March, up EUR 53 million versus end December 2024 and almost unchanged year-on-year. The Group confirms its objectives for 2025 in an advertising market with very limited visibility. On today's agenda, we'll first give you an update on our business activities. We'll then provide the details on our financial results and our outlook, and we'll close with a Q&A session. For those of you who are joining us by phone, note that we are broadcasting this presentation as a webcast. You can also find it on our corporate website. So let's start with a quick update for our Linear Streaming and Studio businesses. On Page 6, our Linear activities. In Q1, the Group maintained an unrivaled reach covering 53% of the French people every day, well above any other media business such as YouTube or SVOD services. The Group also maintained its leadership across commercial targets and the TF1 channel retained a significant lead over its main commercial competitor, ahead by 9.6 points in the women under 50 target with an audience share of 22.7%, ahead by 8 points among individuals aged 25-49 with an audience share of 20.3%. The TF1 channel recorded the best Q1 ratings in French drama, news, entertainment and movies. Let's now turn to our streaming activity results on Page 7. Our strategy is to leverage the Group's solid lineup to efficiently address both linear and nonlinear expectations. It translates into a nonlinear consumption among 25 to 49 years old for the TF1 channel, reaching 20% of total viewing. This share is even higher on our strong franchises, reaching, for example, close to 50% for Plus Belle La Vie. Now looking at the right-hand side of the page, let me give you an update on some of the platform building blocks. On Consumption, TF1+ attracted 35 million streamers per month on average, higher than its 2024 average figure of 33 million. Overall, Streamers watched 272 million hours of content on TF1+ in Q1 according to Mediametrie, representing 1.3x the one achieved by the second ranked platform. In terms of site-centric figures, which cover all streaming usage not captured by Mediametrie, such as specific AVOD and aggregated content as well as consumption out of France, streamed hours rose by 12% year-on-year. On ad inventory, ad load reached 5 minutes per hour on average in Q1 2025, a 19% increase versus last year. It is important to note that this is an average, as you know, and that the ad pressure is already higher for some user segments. On the value front, the CPM reached EUR 12 per hour, a 3% increase versus Q1 2024. As a result, advertising revenue generated by TF1+ rose by 37%, reaching EUR 40 million in Q1. Now turning to Page 8; here is an update on Studio TF1. Its revenue totaled EUR 59 million in Q1, which is stable year-on-year. Highlights for the quarter included the production of the Flemish version of Dancing with the Stars for the Belgian channel VTM, the delivery of the documentary series From Rock Star to Killer on Netflix, the theatrical release of the film Jouer avec le feu, The Quiet Son. Another notable event was the start of the shooting of the new daily series Tout pour la lumiere in early March that we spoke about earlier, which will be available on TF1, TF1+ and Netflix. Let's move now to a more detailed breakdown of our financial results for Q1 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 10; TF1 Group's consolidated revenue amounted to EUR 520 million in Q1, a year-on-year increase of 2%. Revenue from the Media segment increased by 2%. Advertising revenue was stable year-on-year, outperforming the market according to our estimates. It reached EUR 363 million, in line with the company compiled consensus. Advertising revenue generated by TF1+ reached EUR 40 million. It maintained its strong growth momentum as it rose by 37% year-on-year, close to the 39% increase in full year 2024. Again, we only disclose advertising revenue here and not a broader streaming revenue, which would be much higher. Non-advertising revenue in the Media segment was close to EUR 100 million, up 10% year-on-year, driven by the good performance of Interactivity and the Music and live shows business unit. Studio TF1's revenue totaled EUR 59 million in Q1, stable year-on-year. That figure includes a EUR 9 million contribution from JPG, the acquisition that we closed in August last year and less significant deliveries than in 2024. The year is likely to be back-end loaded as it was in 2024. It is notably driven by the activity of Studio TF1 America, JPG plus Reel One and by the distribution businesses. On Page 11, COPA; COPA amounted to EUR 43 million in Q1 2024 -- 2025, sorry, up EUR 6 million year-on-year and above the company compiled consensus. Margin from activities rose by 1 point to 8.3%. The Media segment reported COPA of EUR 45 million, up EUR 8 million with broadly stable programming costs. As a reminder, Q1 2024 COPA including specific costs related to the launch of TF1+ such as marketing and tax expenses. In Q1 2025, Studio TF1 made a COPA of minus EUR 1 million. This represents a year-on-year decrease of EUR 2 million, notably reflecting the cost of setting up the new ERP system fully recognized in the first quarter of this year. Regarding the income statement on Page 12, I have already commented on the consolidated revenue and COPA. Looking further down, operating profit totaled EUR 36 million, which is stable year-on-year. That figure includes around EUR 6 million in amortization charges relating to intangible assets arising from JPG acquisition. This is the PPA and around EUR 2 million in nonrecurring expense related to the Group's plan to accelerate its digital development. Net profit attributable to the Group, excluding exceptional tax surcharge, was EUR 26 million, close to the level of last year. The EUR 4 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 quarter included an exceptional contribution levied on French companies under the 2025 Finance Bill. This exceptional EUR 11 million tax for the period comprises EUR 10 million based on 2024 taxable profits and EUR 1 million as a portion of the 2025 estimated exceptional tax. As mentioned during our Annual Results conference call, the exceptional tax impact for the full year is expected to be between EUR 20 million and EUR 25 million. Moving on to net cash on Page 13; at end of March 2025, the TF1 Group had a solid financial position with a net cash of EUR 555 million, almost unchanged year-on-year. The Group's net cash position increased by EUR 53 million compared to end December 2024, reflecting the free cash flow before working cap of EUR 27 million and the free cash flow after working capital requirements of EUR 50 million in the first quarter. Let's now have a look at our perspective and targets for the rest of the year. On the lineup side, we will continue to offer in the second quarter of 2025, the best array of free, family-oriented and serialized entertainment. Highlights will include the return of some major franchises, including the final season of the French drama HPI and the entertainment show, Mask Singer. The Group will also broadcast the main sport events of the year, the final 4 games of the Nations League, the UEFA Women's Euro 2025 and the Women's Rugby World Cup 2025. The new daily series Tout pour la lumiere, which began shooting in early March, will be broadcasting from the summer onwards. Another highlight of the year will be the implementation of the new DTT channel numbering with LCI available on Channel 15 starting from the 6th of June. On Digital, the Group intends to further accelerate its development and establish TF1+ as the premium alternative to YouTube for both viewers and advertisers. The Group will continue to extend its distribution among French speaker worldwide. The next phase is the expansion in French-speaking Africa in 2025 to reach more than 150 million people. The Group's ad sales house will continue to launch innovative advertising formats to support brands across their entire digital strategy after the launch of COVER+ in March and exclusive embedding on our TF1+ homepage. The ad sales house will also work on the simplification of the ad campaign purchasing experience, notably by automating key features for advertisers in order to boost the attractiveness of the platform. To conclude on Page 16, a reminder of our guidance. In an advertising market with very limited visibility, the Group confirms its objective for 2025, which is a strong double-digit revenue growth in digital, broadly stable margin from activities compared with 2024 and aiming for a growing dividend policy in the coming years. Many thanks for your attention, and now we're ready for your questions.

[Operator Instructions] First question is from Christophe Cherblanc, Bernstein.

I had 3 questions, please. The first one is on ad revenues growth. So the 37% from TF1+ is impressive. It seems to suggest the linear revenues went down by 3%. So is that minus 3% a fair proxy for what we should expect for the rest of the year? That's the first question. The second question is on TF1+. You show on Slide 7, the breakdown between consumption, ad load and prices. So it seems to be driven by ad load in quite a fair proportion in Q1. Is it fair to expect less impact from ad load for the rest of the year? And the third one is its housekeeping. So apologies, but can you give us the contribution of Johnson Production Group to the COPA and by default, the ERP costs that was charged to Studio COPA in Q1?

Christophe, on the ad revenue growth of 37% this is indeed very dynamic, and this is a dynamic that we intend to keep for the rest of the year. As mentioned during the full year -- at the full year results, it's too soon to give any proxy on the mix between linear and digital. The only thing I can tell you and this is part of our guidance that we maintain is that we intend to keep a very strong momentum on the digital side. Regarding the ad load, bear in mind that all these numbers are broad averages that the consumption is coming from many levers. You have -- as you know, the equation by heart, you have the reach, but also part of the equation is driven by the frequency of people watching each month, TF1+ and the duration of the sessions. So all of these parameters are moving, but this is something that we track. And what I can tell you is that what we witnessed in Q1 is very much in line or above our plan. Regarding the contribution of JPG, it's around EUR 5 million for the COPA. And the ERP, it's slightly -- it's above EUR 1 million, between EUR 1 million and EUR 2 million.

So EUR 5 million COPA on EUR 9 million revenues?

Yes. Bear in mind that there is a specific deal, I'm not sure we mentioned it on music, a one-off for the year, which occurred in the beginning of the year.

Okay. And that gain was included in the 30% margin level that was mentioned at the time of the acquisition, right?

I would like the profitability to be normative. It's not the case.

Next question is from Conor O'Shea, Kepler Cheuvreux.

Yes. A few questions from my side as well. Just the first question, just in terms of your operating profits, which grew, I think, EUR 6 million year-on-year. Just trying to understand, I guess, maybe this is a JPG effect, but just to be sure there are nothing else moving around, given your programming costs are up EUR 4 million, that increase in media operating profit is quite high. So is there anything else driving that cost savings or any other -- anything to call out there? Second question, just in terms of advertising, have you seen any change in pattern towards the end of the first quarter from any sectors or others or into the start of the second quarter? Anything -- any change in behavior there to call out at this stage? And then the third question, just in terms of your -- what you're seeing in terms of audience and advertising market share impact from the closure of [indiscernible]. Have you -- a couple of months, 1 month or more further down the line or is there any pattern emerging there as to how much of that money is coming back into the market and to you specifically?

Hi Conor, thank you for your questions. On the COPA side, it increased year-on-year. You have the JPG effect. But also bear in mind that last year, we had one-off expenses in tech and marketing that we mentioned, I think, in Q1 2024 that you have to take into account when [Technical Difficulty]. Then is there a change of pattern? So you're referring to the Liberation Day consequences? But look, you see that it's -- at this stage, it's very hard to put in equation all the parameters that are moving every day. If you read the [ DFT ] today, you might have noticed that there is some easing in perspective compared to the first numbers that we could read in terms of tariffs. The main consequence is some kind of standby mode and everybody is trying to figure out how to work in the conditions. So the start of the Q2 is rather softer than what we expected. But apart from that, there is nothing really concrete. And this is why we reiterate our guidance for the year. We had the same situation at the end of 2022, if you remember, for November and December and the situation eased along the way. We'll see how things play out. But at this stage, the only concrete thing that we have is, yes, a softer beginning of Q2. Sorry, and the last question on [indiscernible]. In terms of audience, it's fairly spread out across the various players. So nothing really significant to report here. In terms of advertising revenue, I think we've done the math in the past. We're talking about around EUR 100 million of advertising revenue combined. We have new entrants in the DTT environment. They're going to take a share of that. And then the remaining will be probably spread out according to the market share. So we are talking about a couple of million euros to go -- to grab. So this is pretty much it for [indiscernible]. No real pattern there.

Next question is from Eric Ravary, CIC.

Two questions from my side. First one on Studio TF1. So excluding JPG, the revenues were down 15% on Q1. Could you give us an indication of what are your expectations for full year, excluding JPG on revenues? And second question is on the non-advertising revenues in media. The growth was strong in Q1. It was plus 10%. What are your expectations for Q2 and beyond for this specific business?

Hi Eric, thank you for the questions. So regarding Newen, you know that we don't guide for a full year activity. What you can expect is a significant contribution for JPG. And as we mentioned during the call, a back-end loaded activity for the rest of Studio TF1. The second question? Sorry?

Non-advertising revenues in.

The non-advertising revenue grew by 10% year-on-year. It was driven by interactivity, which is quite dynamic and driven by several shows like [indiscernible] and this is something that we are working on and stimulating because it's an important stream of business, also Star Academy being one of the main provider of interactivity. And then there was also the Music segment with PlayTwo and also driven by [indiscernible], which reported an important growth this quarter. But we don't guide on the full year non-advertising revenue.

[Operator Instructions] We have no more questions registered at this time.

Okay. Thank you very much. Thank you for listening. Just as a way to conclude this call, we had a solid quarter, and we reiterate our guidance for full year 2025 in an advertising market with, as we mentioned during the call, a very limited visibility, but a solid quarter in Q1 2025. Thank you very much. Bye.

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