TF1 SA (TFI) Earnings Call Transcript & Summary

Thank you. Good evening, everyone, and thank you for joining us for our Q1 2026 result presentation. I will walk you through the quarter's performance before we open the floor for questions. Let's start with our key highlights. First, in terms of audience performance, the group maintained its leadership in all key targets and further improved its share among 4+ and women below 50 despite a highly competitive environment, notably with the Winter Olympics. The TF1 channel claimed 25 of the 30 best viewing figures in its 25 to 49 commercial target. The group's news offering, which plays a key role in the democratic debate, further strengthened its position amid heightened international news flows, leading to a record for LCI in March. TF1+ recorded 41 million monthly streamers on average in Q1, a significant increase compared with the 35 million monthly streamers in Q1 2025. Second, financial performance. Revenue amounted to EUR 472 million, down 5% like-for-like and at constant exchange rates, reflecting the decline of the linear advertising market that we partially mitigated with market share gains. On the digital side, we maintained a strong growth momentum. TF1+ advertising revenue grew by 22% to EUR 49 million and total digital revenue rose by 18% to EUR 60 million. COPA stood at EUR 13 million. As anticipated, profitability was impacted this quarter by the decline in linear advertising revenue as we have maintained our programming costs flat. Finally, our financial position remains very solid with a net cash of EUR 565 million at end-March, slightly up year-on-year and up EUR 51 million since the beginning of the year. In terms of outlook, in an advertising market that still offers limited visibility, we maintain our 2026 targets. Let's go now into more details. We'll first give you a quick update on our business segments. We will then provide additional information on our financial results before moving to outlook. We will close with a Q&A session. Let's start with a quick business review of our Media and Studio segments. I'm on Page 6. In Q1, the group maintained its leadership across commercial targets and the TF1 channel its significant lead over its main competitor. This performance is particularly noteworthy given a very competitive programming environment, including events such as the Winter Olympics. TF1 delivered strong ratings across all genres, notably sports with a broadcast of 9 Six Nations matches, which gathered up to 7 million viewers for the Wales versus France game. News also performed strongly. LCI reached in March a record high audience with 3.2% audience share in the 4+ target. And the extension of our morning show Bonjour allowed us to double our audience share in that time slot at limited cost. Moving to digital. TF1+ keeps showing strong momentum 2 years after its launch with 41 million monthly streamers in Q1, up 17% year-on-year and 285 million streamed hours, up 9% year-on-year based on site-centric figures. These growing consumption figures, along with increasing ad loads enabled TF1+ advertising revenue to grow by 22% to EUR 49 million. As a reminder, we have also been disclosing a new KPI since our full year results, namely the digital revenue, which encompasses the various levers activated by TF1 Group to boost advertising and non-advertising revenue. In addition to TF1+, it includes advertising revenue from TF1info and addressable TV, along with revenue from subscription, TF1+ Premium and micropayments. It amounted to EUR 60 million, up 18% year-on-year. A word on micropayments, which continued to gain traction in Q1. On the TF1+ app, an environment where this offer is fully deployed, converted users have made close to 4 transactions per month in average in Q1, versus 3 in 2025, highlighting the appetite for this feature. The key challenge now is to accelerate the adoption and revenue generation of the offer through a gradual rollout across telecom operator set-top boxes. For instance, when a seamless payment process is implemented on telco eligible boxes, user adoption accelerates significantly. That's what we saw in March with SFR, resulting in a 50% increase in transaction compared to February in this environment. It's a good example. Now turning to Slide 7. Studio TF1's revenue was broadly stable year-on-year at EUR 58 million, down EUR 2 million. In line with its strategic road map, Studio TF1 continued deliveries to its long-standing partners in France, new episodes of A Priori for France Television, while pursuing its international collaboration, Hunting Alice Bell for Channel 4 or the third season of Teachers for Channel 5, both in the U.K. and particularly its partnership with streaming platforms to diversify its client mix, for example, Day One for Amazon. Studio TF1 COPA was minus EUR 3 million in Q1 2026, close to last year's level. And as you know, with results skewed towards the end of the year. Let's now turn to financials in more details. On Page 9. Group revenue amounted to EUR 472 million, down 9% on reporting figures and down 5% like-for-like, broadly in line with consensus, contrary to what some automatic press release are writing. In media, advertising revenue declined by 7% year-on-year, right on the consensus. This reflects the structural decline of the linear market, exacerbated by advertisers' cautious stance in a particularly unstable, though slightly improving environment since Q4 2025. That said, we gained market share in linear advertising, demonstrating the strength and relevance of our commercial offering. The launch of TF1 Prime notably helped us extract greater value from our premium prime time inventory, highlighting its unrivaled standing among advertisers. The change in non-advertising media revenue was entirely driven by scope effects resulting from the disposals completed in 2025, mainly My Little Paris and Play Two. As mentioned earlier, revenue at Studio TF1 was broadly stable. Now turning to profitability. COPA amounted to EUR 13 million, in line with the consensus and in line with what we anticipated at this point of the year. This decrease is primarily driven by the decline in high-margin linear advertising revenue. Programming costs were broadly stable at EUR 222 million. They reflect the group's effort to maintain premium programming in order to support the launch of the new segmentation of the advertising offering, notably with the broadcast of the Six Nations matches, sorry. This is something that we announced during our full year call. Studio TF1 generated COPA of minus EUR 3 million, close to last year's level. Regarding the income statement on Page 11, I have already commented on consolidated revenue and COPA. Operating profit stood at EUR 9 million. No particular one-offs to highlight beyond the amortization of the PPA relating to JPG and nonrecurring costs related to digital acceleration. Net profit attributable to the group, excluding exceptional tax surcharge, was EUR 7 million. France 2026 finance bill had an adverse impact of EUR 3 million in Q1. Our balance sheet remains a key strength. Net cash reached EUR 565 million at end March, up EUR 6 million year-on-year, up EUR 51 million year-to-date. Free cash flow after working cap amounted to EUR 54 million compared to EUR 50 million last year. This solid financial position gives us flexibility and resilience to navigate an unstable environment while accelerating our digital transformation. Let me conclude with our outlook. On Page 14. In the Media segment, TF1 will continue to offer the best of free, family-oriented and serialized entertainment. The iconic franchises like Koh-Lanta, The Voice, Mask Singer, which have large digital audiences and a strong appeal towards young targets will be among the highlights of the second quarter of 2026, along with dramas, including the new event mini series, L’Été 36. On digital, 3 key initiatives will foster growth. The upcoming launch of the Netflix distribution agreement by end June, aiming at maximizing our reach and ad revenue. The ramp-up of micropayments, notably through their rollout on telco set-top boxes, including integrated billing solutions. And last, the deployment of the SME-focused mid-tail journey through TF1 Ad Manager, which started mid-April. This will enable small and medium enterprises as well as business commercial retail networks to buy and easily create geo-targeted ad spaces starting with low pricing points from EUR 1,000, therefore, making TV accessible to all and notably smaller customers. This initiative will be driven by a small dedicated team, therefore, limiting the impact on the group's fixed cost base and will rely on an outsourced sales team providing nationwide coverage. For Studio TF1, activity will remain weighted towards the second half. Highlights for the rest of the year include the first releases from the new theatrical distribution division, including the Jean Moulin biopic starring Gilles Lellouche, which has been added to the competition lineup of the Cannes Film Festival. Now turning to Slide 15. In a context of limited visibility, our 2026 targets are confirmed. Strong double-digit revenue growth in digital in 2026, maintain a mid- to high single-digit margin from activities before capital gains in 2026, subject to the evolution of the linear market, aim for a growing dividend policy in the coming years. We remain disciplined on cost, focused on digital acceleration and capitalize on our solid balance sheet to navigate this complex environment. Thank you for your attention. I'm now ready to take your questions.

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

First question, on the second quarter, the early look in April and so on in terms of advertising market. Is that -- has that got worse than you were thinking around at the full year results? If you can give us a little bit of color on that. Secondly, in the first quarter, in contrast to your direct listed broadcasting peer, you didn't make any tactical programming cost savings and we're willing to sacrifice margins. If the underlying ad market is worse, could you change that strategy over the next couple of quarters? And then the third question, just in terms of the digital revenues and micropayments, the non-advertising digital revenues, I think I'm right in saying that they were flat year-on-year at EUR 11 million. Obviously, the micropayments should be growing. So can you just maybe explain why the overall digital non-advertising is not -- revenues are not growing -- did not grow in Q1?

Thank you, Conor. So first question, in Q2, I'm sure you have at least followed the AGM of our listed peer, as you call them. And they gave indications regarding April and May, saying that they were broadly in the continuation of the Q1, which is also what we see. No tactical programming costs, you're completely right. This is something I think during the call session for the fiscal year results the full year results, we said that we wanted to support our new segmentation, and this is how we wanted to support it with a broadly flat programming cost year-on-year. So this was part of the strategy. Should things evolve, we would stay pragmatic regarding programming costs. On the non-advertising revenue, you're completely right. The evolution is completely due to perimeter effects. On micropayments, what you have to bear in mind is that we are dependent on the telecom operator to roll out the bidding processes so that they are completely seamless. And when it's the case, -- we have validated that there is a strong demand. Now when the billing process is not painful, there is a surge in transaction. This is what we highlighted with SFR with a 50% increase from 1 month to another. So there are different generation of boxes among the installed base of telecom operators. But this is something that we are working on with them for the coming months.

Okay. Does that mean that excluding the perimeter effects that the underlying revenue is growing, let's say, by a couple of million year-on-year every quarter? -- off a base of eleven.

Yes, a couple of million, yes.

Okay. And so when -- and just a reminder, when does that perimeter effect overlap?

We should... until the end of the summer.

The next question comes from Christophe Cherblanc with Bernstein.

I had 3 questions. Just to follow up on what Conor was asking about programming costs. Do you mean that even during the World Cup, you're not going to hold back on spending? So should we expect kind of flattish programming spend for Q2, Q3, Q4? And what do you expect will be the market impact of the World Cup, i.e., do you expect your share to go down significantly in June and beginning of July? Or any color on that would be super helpful. The second question is on capital gains. In the last 2 years, you were pretty agile in generating capital gain. Do you see a window to repeat those gains in '26? And the last one is on the SME project, the long-tail of small SMEs. Could you give us a sense of what you believe is a realistic long-term potential? Are we talking a few millions, a few tens of millions that would be helpful. I'm not looking for guidance, but just the sizing of the opportunity.

Okay. Thank you, Christophe. So regarding programming costs during the World Cup, you might have noticed that the hours of the World Cup are not necessarily in prime time. So we have strong programs to broadcast during the World Cup as well to benefit from the slots of the [virus] match either before prime time or after prime time. And then in Q3, we have the Rugby Nations Championships as well in terms of sports events. But regarding the programming that we have during the World Cup, we are benefiting from the slots based on the jet lag between the U.S. and us. Under the share during the World Cup, of course, in terms of audience, there will be an impact. This is -- we have been -- we know the dates of the World Cup for quite a while now. So even during the first -- the full year call, we had modeled the potential impact in terms of audience share and also in terms of advertising share. But everything we said during the full year call is still valid today. Nothing has changed in terms of how we modeled the year. On your question regarding capital gains, yes, we try to remain agile, but there were opportunities. The way we did it and the way we approach it, we are very pragmatic. Before, there remained in the portfolio activities that were no longer in synergy with the rest of the group and where we thought that we could create value with transaction multiples higher than what we were witnessing on the market. So this is how we decided to do it in 2024 and 2025. Your question is, are there new other opportunities to do it? Maybe fewer, I would say, but we try to remain as agile as possible and pragmatic. The idea is to create value. On the SME project, no guidance, of course. But I would say that the market is pretty sizable. It's between EUR 1.5 billion and EUR 2 billion. So a very sizable market. Only a couple of million would be very disappointing. We are looking for much higher numbers, a couple of dozens maybe.

Okay. And how long do you believe it will take to ramp up the revenues because you need to get potential buyers used with the product, et cetera. So how long before we see it?

The preliminary test that we've run before the launch of the platform are extremely promising. The value of TF1 in the various region of France, the ability for a small business to see an add on TF1+ with a certain radius from the business, there is a strong demand for that. And we are capitalizing on the strong TF1 brand to do it, and we see that there is a very strong demand. Of course, it's about penetrating the business and the region in France. So it will -- there will be a ramp-up, but we think that it will take a couple of months, but probably around 2027, we will reach an interesting rhythm.

And just to finish on this point, I mean, we know that there are potentially more higher content payout on digital. You were mentioning you were outsourcing the sales force. So the drop through the operating leverage on that -- on those revenues would be lower than what you have on the core business, right?

Yes.

The next question comes from Julien Roch with Barclays.

We will talk on micropayments, can you tell us how many there was in Q1? And can you come back on the kind of path to get more? Because you said there was a different generation of box, some were more complicated than others. So what's the kind of footprint at the end of Q1? How many users were able to pay easily? And what's the total you can reach? So some more kind of colors on micropayments, please?

On micropayments, we reached several hundred thousand transactions during Q1, higher than what we had at the beginning of the -- when we launched it in late 2025. In terms of footprint, this is something that we don't disclose yet because you have to -- it's hard to define the denominator given the fact that we don't have necessarily all the -- a clear view on the various generation of boxes where we can implement a seamless billing process. We are working with the main, let's say, fixed players, Orange and Free to have that implemented as fast as possible.

And when you say several hundred thousand, I mean, it's somewhat vague. I mean are we talking 200,000 and 400,000 and 600,000...

More than 400,000.

Okay. And you don't have a visibility on -- and do you have a visibility on how many boxes today allow seamless paying or you don't know that yet?

We have that figure. I don't have that with me, but we can come back to you if you want on that one. What I can tell you is that, once again, a very good sign is that when it works seamlessly, we have like 4 transactions per user, which is above what we had in mind at the beginning. So the demand is there.

The next question is from Eric Ravary with CIC.

Two questions from my side. First one on Studio TF1. I see that the revenues in France were down 40% in Q1. So I imagine that it's a phasing issue. But could you give a comment on the prospect for Studio TF1 in France this year? And are you observing any cuts from France Television? And second question on TF1+. So we saw a slight slowdown in the growth rate in Q1 compared with Q4. Should we expect an acceleration in H2 when you start the Netflix distribution? And do you expect a significant impact from Netflix as soon as you start the distribution with them?

Sorry, you slightly broke up, Eric, for your second question. I have the first one. But for the second one, it's about the impact of Netflix when you...

Do you expect Netflix to contribute significantly in H2 and to show higher growth rate than in Q1 for TF1+ in H2.

Okay. So regarding your first question on Studio TF1 and especially the French perimeter, it's a matter of phasing. We don't see any slowdown from France Television. You know that the relationship between the 2 groups are better than they were a couple of years ago. We have several programs in the pipe, and we are in normal discussion with them to basically have them materialize through the year. We have a strong base effect given the fact that last year, we had also the delivery of contact on the -- for Netflix in France. But it's just phasing. And then on Netflix, it's not necessarily binary when the deal is on, the advertising revenue grows instantly, but pretty much like that. So we expect, yes, a contribution in H2 from the Netflix deal. Of course, there is also a kind of ramp-up from the market. But when the solution is here, we expect a contribution.

[Operator Instructions] Mr. Gerard, there are no more questions registered at this time. Back to you for any closing remarks.

Thank you very much. Thank you for your question. Let me summarize this call this way. In an environment that remains volatile and offers limited visibility, our leadership position, digital momentum and strong balance sheet provides a solid foundation for the rest of the year. Our priorities remain clear and unchanged, and we confirm our 2026 targets. Thank you very much.