Viaplay Group AB (publ) (VPLAYB) Earnings Call Transcript & Summary

Good morning, and welcome, everyone, to Viaplay Group's Q2 results call. My name is Matthew Hooper, and I will be your host today. With me here on the call are our President and CEO, Jorgen Martin Lindemann and our CFO, Enrique Patrickson. So a warm welcome to both of you. Today's call is, of course, a very different one as we're also presenting a new strategy, plan and targets after all of the changes that have been announced in the last 6 weeks since the beginning of June. You can find the presentation deck for this meeting in the Investor Relations section at viaplaygroup.com. We will take questions after Jorgen and Enrique's presentation. So please post your questions on the message board if you are in the web platform, and I will read them out. If you prefer to ask your question directly, you are, of course, welcome to use so by using your phone key pad, but more about that shortly. There's plenty to discuss today, so we'll keep our presentation short and leave as much time as possible to answer your questions. So first of all, I will hand over to Jorgen for a summary of our results for the second quarter and to present our new strategy and plan. So over to you, Jorgen.

Thank you, Matthew, and good morning, everyone. As Matthew alluded to, we have a lot to get through today. So I will start with a few words about the Q2 results that will normally be the sole focus of today's call. So we have reported 16% group organic sales growth and group sales at the top end of our guidance range. The primary growth driver was Viaplay Service, which accounted for more than half of our sales and generated 42% organic sales growth. This reflected a 19% year-on-year growth in the base as well as the fact that we have increased our prices in all markets. However, the total base was down 13% or SEK 1 million compared to the end of Q1. It is quite clear that volume growth has been prioritized over ARPU growth, especially with B2B partners, and that is not good for the product as it creates artificial low prices, gross price points for quality content. We have, therefore, taken the opportunity to not prolong or initiate ARPU-dilutive temporary subscriber acquisition campaigns with our partners as these do not drive revenues or profitability. On a like-for-like basis, when excluding the temporary campaign subscribers, the base would have been up 25% year-on-year and 1% quarter-on-quarter. Now that we have cleared the base, we have provided an updated target for the year end of 7 million to 7.2 million subscribers, if you were to compare that like-for-like with the end of 2022, it would amount to 9% to 13% growth. We did also experience a degree of higher turning to 2, which is naturally given the return to the post-pandemic wars of sports fans in particular, churning out during the off-season. Good news is that the new football season kicks off already today with the beginning of the Women's World Cup, and Sweden's first match against Italy is on the 29th of July on Viaplay. The Premier League and other leagues kick off next month, and that we have plenty of other live sports during the summer months as well as our movies and series to watch while on holiday. Locally relevant and high-quality storytelling is, therefore, more important than ever. Breaking down the 8% Nordic organic sales growth, the Viaplay Service delivered 26% organic growth and accounted for 43% of our Nordic revenues. The Viaplay Nordic subscriber base was slightly up year-on-year, but decreased by 668,000 subscribers compared to the end of Q1 due to the removal of short-term and ARPU diluted -- dilutive B2B campaign -- partner campaigns. On a like-for-like basis, when excluding the temporary campaign subscribers, the base would have been up 2% year-on-year and down 1% quarter-on-quarter. Moving to linear subscription and other sales. These represented approximately 29% revenue in Q2 and 34% of Nordic revenues. Organic growth here was 9% and was driven by sublicensing in particular, which was up 200%. Wholesale channel sales were up 6% and studio sales to external customers were up 74%. Advertising revenues, which made up approximately 19% of group revenues and 22% of the Nordic revenue in the second quarter were down 16% on an organic basis. We have previously indicated that ad revenues in Q2 would be down between 12% and 16%, so this clearly shows the deterioration in the market. 70% of our ad revenue comes from our TV channels with 20% from our radio stations and 10% from AVOD or online, of which half is through the cooperation with Pluto TV. All of the TV and radio ad markets were down in Q2 with only online growing and even that at low levels. Our results mirrored these trends. For '23 as a whole, we expect the TV and radio ad market to be down around 10%, with only AVOD showing single-digit percentage growth. Turning to our International segment, which comprises the Viaplay Service in 8 markets and Viaplay Select in 21 markets and represent 17% of the group revenue sales were up 115% on the back of 69% Viaplay subscriber growth and price increases in all markets. Just like in the Nordics, we took the opportunity to do some housekeeping and clean the business to business base that will be based of short-term or temporary ARPU dilutive campaigns. In terms of subscribers in our international markets, then the subscriber base grew by 69% year-on-year but was down 344,000 compared to the end of Q1, and on a like-for-like basis, when excluding the temporary campaign subscribers, the base would have been up 95% year-on-year and 4% quarter-on-quarter. Regarding churn, we did see higher levels in the Netherlands, but that was balanced by D2C growth in Poland. Overall, then some important cleaning and rebasing of subscriber numbers so that you'll be able to clearly track ARPU changes and growth moving forward. We, therefore, closed the quarter with 4 million Viaplay subscribers in our 5 Nordic markets, 2.6 million subscribers in our 8 international markets and 6.6 million subscribers in total, of which more than 1/3 were D2C and less than 2/3 worth B2C. When it comes to profitability, our Q2 numbers were in the middle of our guided range with the Nordic coming in with a sequentially improved margin of 5.4%, while the losses for the international operation increased quarter-on-quarter due to the investment in content, consolidation of the U.K. operation and launches in North America, but we also have a very large set of one-off charges that Enrique will talk about later and which relate to the various and major changes that we are making. We are today announcing a new strategy and plan, which includes what is not limited to focusing on our core Nordic and Netherlands and Viaplay Select operations, implementing a new operational model, downsizing or partnering or exiting our other international markets, rightsizing and pricing our product offers in the Nordics and undertaking a major cost reduction program and conducting an immediate strategic review of the entire business to consider all options, including content sublicensing, asset disposals, equity injections or the sale of the whole group. The content investments that we have made are not all paying off and are committed in the short and medium term. Furthermore, the pursuit of subscriber volume growth has been at the cost of value, especially when it comes to our partner agreements. The reason is in the advertising market and currency exchange rates are additional factors that we must live with international expansion assumptions, including the time lines to profitability have also been pushed materially into the future since the expansion started. We are moving quickly to address all of these changes. So we have a number of challenges to face, which together have created something of a perfect storm. These factors are listed on Slide 12, and you can see there some are external and others are our own making. The cost of living crisis, of course, impacted the ad markets, especially the TV and radio and subscriber bases, especially streaming services that are easy to turn in and out of. That is not a big secret, and you would have heard the same thing from many other companies. What is a little more unusual is the level of currency headwind that we have right now. We expect approximately 460 million of headwinds this year due to the weakness of the Swedish krona against the dollar, the euro and the Norwegian kroner in particular. We expect at least another 300 million next year. In terms of what we can control going forward, we will focus on Viaplay value growth. We'll focus on addressing ARPU-dilutive deals with B2B partners and create an artificial -- create an artificial low price for what is the premium product. We will focus on local relevant storytelling that you would expect the commercial media companies to produce. We will focus on building inventory and all this is in the part of the advertising market that is growing and will continue to grow online and AVOD. And we have a range of very costly but important sports rise, and they are locked in now in some cases, for many years to come with some significant inflation till then. Our Nordic operations have, for a number of reasons, been negatively affected, and our international operations are not moving quickly enough towards profitability. That is why our revised guidance for '23 is where it is, because our costs are growing faster than our revenue, and we cannot change quickly enough this year. We now have a plan to meet each of these challenges head on, but we cannot solve everything in the short or medium term. And some of the macro elements, of course, largely out of our control and something we need to deal with. First and foremost, we want to be in markets with products where we can compete and build long-term and sustainable business with premium products that people love to come back to time and again, so we will focus on the Nordics, the Netherlands and Viaplay Select. All of our other international business will be sold or partnered or the content sublicensed. That process has started, and we are already in discussion with various parties. This is part of a broader strategic review of the whole business that is necessary because of the negative cash flows over the next couple of years, in particular, require that we consider all options. We have ongoing discussions with our lending banks in order to navigate the period until we can return to a healthy profitability levels. As a result of our revised geographical focus, we have provided 2024 guidance on the basis of the new setup. This new setup will deal with the sports rights cost, FX, the currency headwinds and the negative SG&A synergies of spreading ourselves over fewer markets. We have a number of levers available to us, and we have slides on each of them in the presentation. We have already set a new operating model that is country based and a lot slimmer centrally. This will mean more than 25% of our people leaving, which, of course, is a horrible situation, but unfortunately, very necessary for the future of the company. Editorial sales and marketing decision making will now sit locally where they belong, while we continue to benefit from our common tech and delivery platforms. On the content side, it is all about return on investment, and that means securing scale audiences and customer bases with broadly popular content that works with the core demographics that we are targeting. As you can see from the slide, this will mean that we will focus more on acquired content and unscripted content. We have scripted shows that have worked well, especially in the dramatic genre, but we have too much. So we will use what we have already produced wisely and focus our forward investment on a better mix, not least given that some of the Hollywood studios are open for business again. Internationally, we will continue to sell our content through Viaplay Select, but now also close down our TM offerings in the international markets and focus on premium sports. When it comes to the sports content, we have an extremely attractive portfolio of content. So there are many opportunities to partner up or sublicense content, and we are already working on deals in this area both in terms of international market solution and improving Nordic profitability levels. The reality is though that we have some longer terms right with fixed embedded inflation, and we cannot adjust those until we establish new economics through renewing on different terms, walking away or changing -- or charging customers significantly more. This will enable us to unlock our higher margin ambition that we have. In terms of the top line refocus, we'll continue to raise our prices especially in the premium sports here and especially in the B2B partner deals that we do. And we will also look to increase our digital ad inventory over time, both with our sports and nonsports content. That is where the market growth will continue to come from, and we simply need to be better positioned for that. Finally, portfolio optimization, I have talked about the strategic review, about exiting most of our international markets, about already discounting -- discontinuing our TM offerings internationally. In addition to this, our holding a lender is noncore, but does pay us annual dividends. So we'll continue to review options to monetize the assets for the right price and at the right time. So overall then, it is very clear that to bring about better outcomes, we must do things differently. And that is what we are 100% focused on doing, as I hope you can see and feel. That is for my initial comments. So over to you Enrique for your comments on our financial performance, position and plans.

Thank you, Jorgen, and good morning, everyone. I will start with some comments on the second quarter numbers and move on to the new strategy and that plan. So to begin, let me give you the general point on currencies. We once again experienced a favorable translation effect on sales during the quarter. Currency has inflated our sales by about SEK 170 million, but also the currency has inflated our cost base. So the total net effect of that was an EBIT -- negative EBIT impact of about SEK 150 million in the quarter. As Jorgen mentioned, we now expect the total transactional headwind to be up about SEK 460 million for the full year. And we do continue hedging our U.S. dollar contracts, we're about a 14-month horizon on that. So it gives us some time to plan. We expect that as well 2024 to have a SEK 300 million negative impact on the EBIT line, and that's already reflected in our guidance. Our operating expenses were up by about 35% in the quarter, which reflected the investments in live sports and original content. The international expansion accounted for approximately 60% of that increase, accounts for approximately 75% of our total costs with live sports being the largest category. And our total content spend was up by about 50% in the second quarter and that should be compared with our organic growth of 16%. The main impact is visible on the cost of sales line and the impact it has on our gross profit. The vast majority of the cost of sales increase of SEK 1.4 billion comes from the sports cost increases. The SEK 6.3 billion of items affecting comparability that you see in the P&L relate to write-downs and provisions for both sports and nonsports content of about SEK 5.2 billion, a goodwill impairment related to Premier Sports of close to SEK 500 million and then costs for exiting the Baltics slightly above SEK 500 million and then SEK 45 million for the initial costs related to the restructuring of the group's operations and the redundancy program. Most of the redundancy cost will be taken as an ISC in the third quarter. The ISC is obviously a big number, but reflects the strategic changes we are making on the content side in particular, and it's made up of both sports and nonsports content adjustments. Let me highlight that, about 40% of that amount is cash of the total SEK 6.3 billion number. We're also changing our original content expensing schedule as of July 1, so that we now recognize 60% of the cost in year 1 and the remaining 40% in the subsequent 5 years. This -- I mean, more access to matches the viewing patterns around the content that we have. On Allente, it is performing below expectations at this time, and that's due to slower subscriber growth and negative currency effects. Allente reduced the size of this organization in May, and this resulted in a restructuring charge in the second quarter. The changes will result in lower running costs moving forward. Allente contributed with associated company income of SEK 5 million in the second quarter. And we still expect the full year share of Allente's net income to be in the range of SEK 150 million to SEK 200 million. But more importantly, we did receive SEK 100 million cash dividend in Q2, and we continue to expect cash dividend payments totaling SEK 200 million in the second half of the year. Cash flow from operations, excluding the changes in working capital totaled a negative minus SEK 198 million and included the receipt of the Allente dividend. The positive change in working capital of about SEK 500 million was in line with our guidance for the full year, but below last year, mainly driven by seasonality of sports rights payments. We have a more favorable view now on working capital buildup for this year, and we're looking at it to be about SEK 1 billion. On the other hand, the cash impacts from the ISCs have an adverse cash flow impact of about SEK 900 million. This effectively means that we will have a negative free cash flow of about SEK 2 billion in the second half of this year. Regarding our financial position, we ended the quarter with SEK 2.2 billion on net debt or SEK 1.0 billion if we exclude the leases. We had SEK 1.6 billion of cash and cash equivalents and 3.5 billion of total borrowings. And we drew SEK 500 million on the SEK 4 billion RCF facility at the beginning of the third quarter. Now moving on to the strategy plan. You will see on Page 20 in the report that -- or in the slide pack that we laid out 2022 to 2023 bridge that shows how we get from the SEK 372 million loss in last year to the EBIT guidance that we have of SEK 850 to -- SEK 850 million loss to SEK 1.05 billion loss. And that includes the savings as well that we have made and we make across many areas of the business as well as the approximately SEK 600 million of lower cost of goods sold following the provisions and write-downs that we have made. The SEK 450 million to SEK 600 million profit for the Nordics for this year reflects the lower COGS as well from the write-downs and provisions. The majority of the redundancy costs that we have announced will come in the third quarter as those happen in July. On the international side, we're guiding for the full year losses of SEK 1.4 billion to SEK 1.5 billion, in line with previous guidance, in fact, but that as well reflects the lower cost of goods sold coming from the write-offs and provisions. The large bar that you see in the middle of that chart is, I would say, key headache that we carry inflating sports tasks that Jorgen referred to. Before I move on to 2024, let me just mention a bit about the trajectory now for the second half. Q3 is a tough quarter with loss of sports, prepayments, meaning a high working capital outflow and many football leagues haven't really actually started throughout the quarter. So we don't get the full benefit on the revenues for premium stores. In addition, as we have new football season starting, we as well had a new high cost level for that. As a result, we expect Q3 to be loss-making both for international as well as for Nordics. And from a cash flow standpoint, Q3 will take the vast majority of that negative hit of SEK 2 billion cash outflow I mentioned earlier. As Jorgen explained, our 2024 guidance is based on having sold or exited all our international operations, except for Netherlands and Select. And of course, if this does not happen, it would create a further earnings and cash drag on group, but we already have good discussions ongoing. The working assumption is that we will have an EBIT result of minus SEK 150 million to plus SEK 150 million in 2024, which includes about SEK 700 million of lower COGS after the write-downs and provisions. The profitable Dutch and Select operations will compensate for a slight loss in the Nordic operations in 2024. From there, we expect the group's profit and margins to steadily increase with a long-term plan to reach double-digit margins. We have included free cash flow assumptions for both years '23 and '24. As you can see, this is -- we have approximately SEK 4 billion to SEK 5 billion of negative free cash flow over these 2 years. With a low profitability, this puts us in a very challenging position. We will fund this gap through our cash balances, available facilities, asset disposal further sublicensing and as well as funds that we're looking from lenders and equity injections. And we're also in discussions with all stakeholders regarding these options. In addition, we have as well announced a full strategic review that is ongoing. We have, at this time, 3 independent banks advising us on continuous basis on all of these options. We will proceed to have meetings with our largest shareholders and lenders over the next few weeks about how to best address this. It would not be prudent to provide guidance or speak on their behalf at this time, so I will limit at that. On this slide deck, you will find on Page 24, an update in terms of our available facilities, maturities and so on. With that, that concludes my comments. So over to you, Matthew.

Thank you, Enrique, and thank you, Jorgen, too. We're now ready to take your questions. [Operator Instructions] So we're going to take the first question from the telephone line. So first up on the telephone line will be Derek Laliberte from ABG.

Thank you very much, and good morning. Apologies if you mentioned this somewhere in the presentation or report, but I was wondering if you could elaborate a bit more on Poland and the U.K., why they're sort of excluded from the markets that you're intending to focus on going forward?

Yes. I think we had made an overall due diligence on where we believe that we, for the foreseeable future, this can be a long-term or a relevant player. And where we can be competitive with our content and also the horizon to profitability as well. And in all times when looking at the Polish business and the way that, that has developed for us in some areas, then we would see that a little bit difficult to do that alone. So that is the idea is to team up with some strategic players. The idea could be to sell off content or exit. The same goes for the U.K. market. The whole exercise is, of course, to make sure that we spend the money in areas or in countries where we know that we can be competitive, and we are a relevant long-term storyteller, and that is why we focus then on the Nordic part and a very good traction on our Dutch business as well and then obviously with Viaplay Select.

Okay. That's very clear. And then focusing on the lower DTC sales there of late. Can this sort of lower-than-expected subscriber additions be related more or less to the specific sports rights? Like could you give some flavor on whether you invested to have an F1 and the hype has come down or whether it's more related to Premier League? I can understand it's kind of broad-based, but could you give some flavor on the different sports rights there and how you invested in them.

And I think, Derek, just to be very clear on this, the fall in the subscriber numbers quarter-on-quarter is a function of cleaning the house, cleaning the base. It's not a function of the underlying situation. As we said that, that is growing still like-for-like. This is to do with a specific cleaning the house on short-term campaign subs through the B2B partners.

All right. All right. That's I got that. I think it's still if there is something to say because obviously, there's been some disappointment we think, in the subscriber additions as well. But that's...

We have said that there is some higher churn here during the summer months. So we're seeing that there's a return to more like the kind of pre-COVID realities where you do have this churn coming in the sports off seasons. And that is a reality. And yes, we have seen that. But fundamentally, the big quarter-on-quarter sequential adjustment is to do with the cleaning of the house. That's what that is.

Okay. Okay. And finally, on Allente, I think you mentioned it's been up for sale before what could accelerate this at this point? Are you willing to go a lot lower on price now compared to before or what could happen there?

Yes. I think -- yes, I mean, we have commented on it before that. I mean it's not a strategic asset that we are necessarily holding on to for the long term. But I think it's part of the mix of what we're looking at when it comes to our funding. But I think it's too early to comment on it at this time.

Okay. Thanks very much, Derek. We have a question on the Message Board here from Martin Arnell at DNB. Question is how much more cleaning up of the subscriber base should we expect going forward? Or is that it?

Yes. I think we should assume that, that would be it. In all times, we have, again, with the -- the only caveat that I've been here 6 weeks, so it -- but that has been done together with the different executives in the different markets. So I think we should be there.

And then we have another question from [indiscernible]. You seem more positive about the Netherlands and the other international markets. Can we get some color as to why that's the case?

Yes. But that is obviously because of the development -- the financial development of the Netherlands, which have turned out better in all fairness than the other international markets. And that is why we are more positive there. The ambition is, of course, to stay in markets where we can play and where we are profitable. And the Netherlands definitely will look like being profitable. So that is why Netherlands is a focus for us.

Okay. And now we'll go back to the telephone line again. So next person on the telephone is Klas Danielsson -- Klas from Nordea. So Klas, please go ahead.

Yes. Can you hear me?

We can.

I have a couple -- so first off, I mean, in the procedures of exiting this market, I was just wondering if you could maybe help us understand that slide a bit more and what sort of the associated costs in each scenario is, whether that is shutting down the operations, selling this or partnering. And also, if what -- if you have any possibility in really recuperating these sports rights, I mean, clearly, it's difficult to reach profitability with the sort of prices you have now. So just some color on that side would be great to start with.

Yes, I think I can take the first part where as I said, we are in discussion and we'll talk to different strategic partners, could be local partners, there can be newcomers, whatever, to see if we can do something together and if 1 plus 1 would equal 3 in some of the instances. But that is not the case, obviously, we -- it is in all fairness attractive right. So we will try to sublicense as many of them. And then eventually in the end, exit the market if we don't see a long-term viable solution for us. And then, of course, the financial outcome of that depends on what solution we will meet. So it's a little bit premature to be fair to discuss about any impact. Of course, if we don't find any solution with anybody, of course, we then are liable for the commitments that we have in the market, of course. But the ambition is, of course, to make sure that we find partners. We will try to do that, who can help or partners will be interested in buying the content funds with a minimal loss for us.

I think it's one to point out. And I mean in the provisions that you have taken as well, I think it's balanced approach in terms of that we do have -- I mean, we're taking a one-off charge, especially for TV, movies and series content for those international markets. For the Baltics, we have as well taken an impairment for the -- I mean, including sports and essentially the same thing goes for the U.K. market.

Yes. Fantastic. And just following up on that. In the case where you are to sublicense sort of, let's say, Polish sports, right, in that state. What would the economic sort of impact be? Do you expect to get basically back to get on neutral cost? Or would that still imply sort of a cost drag until -- I mean you have Premier League until 2028-2029, I think. Would you still have that cost drag until then or what are you sort of imagining here, at least [indiscernible].

Yes. I think it's honestly too early to comment because, obviously, these are as well related to ongoing discussions. So I mean, our working assumption is that from 1st of January 2024, we are not carrying those costs in our P&L. That won't be -- what I can tell you at this time.

Okay. And then just lastly on from my side. The distribution deals and restructuring that side of the business, I guess most of the deals you've signed and most of the deals you had, I guess those have been signed over the last kind of 1 to 2 years. So basically, what changes are actually in scope on that side? How much can you control on those arrangements?

Yes. But obviously, you can have good dialogues with the partners on how to position these products in a much more favorable way. That is important of course, also Enrique pointed out, when we renegotiate, it is just to understand how we package this product to light the best way also for the partners to make sure that all can get even more out of it. And I just want to make sure we have the due diligence probably made to make sure that we are maximizing the opportunity that this extremely strong products that we have. It's very relevant products, the NHL, Premier League or skiing or also today, we have, as I mentioned, the World Cup Women coming up so far. So those are discussions we're going to have ongoing basis with our partners.

I think, the next, we're going to take some questions from the message board. So first of all, from Morton. What is your view on the revenue-generating nonscripted part of the business? Will that be a bigger part of the content offering going forward? And just to take his other question at the same time, which types of scripted content will be commissioned going forward that is basically about the content mix.

Yes. No, the content mix will be skewed towards being a commercial media company. So what we want to do is, of course, to produce content, which, first of all, is a very local relevant presence that is quite important that we have strong local storytelling as well. And then that will have, of course, a broad commercial angle as well to make sure that we reach as many as possible, and that is good discipline for media company because the big audience, hopefully the more money that you can make. So that is the focus. And we have been historically very good at nonscripted. And obviously, the ambition is that all these genres that we enter into, we want to respect the genre we want to do it properly. So if you do reality, you do proper reality and if you do documentary, do that properly as well. When it comes to the script that we have produced a lot of scripted products and some of it has worked very well for us, and we have quite a lot. So that is not the focus that we're having right now to produce more. That is correct.

And then another question we have on the message board. The Formula 1 broadcasting rights from 2025 for the Netherlands will be sold soon. Will by plan the Netherlands continue if F1 rights are lost after 2025?

Yes. I think what -- again, we will look at the business case as such or how they can develop. The assumption is, of course, that we have a very strong offering also next to Formula 1 in the Holland -- in the Netherlands. But again, as I said, the business cases needs to be profitable in order to continue to be in those markets.

And then we have a question from Stefan Wicker. Could you please elaborate on your comment that there are significant inflation built in some of your sports rights? Are we talking about Premier League in particular? Should we expect a material step-up after the first year -- first 3-year period? Or is the inflation more linear?

Yes. Good question, Stefan. I mean, it's more on the linear side of it. So that's what's happening, what you're seeing coming through in our P&L.

Okay. Then I think we're going to go back to the telephone lines again. And next on the telephone line, we have Charles Thorn from Jefferies. So Charles, please go ahead.

My first question is on sublicensing. Can you confirm whether that will or won't potentially include sport in the Nordics? And if it does include sports in the Nordics, some color on how you'll protect your consumer value proposition would be useful? Second question is on the covenant waiver, under your current plan, the plan announced today, do you actually breach your private bond covenant, forgive the direct question, but we're all wondering it. Or do you absolutely rely on a covenant waiver or a refinancing under the current plan? And the third question is what elements of your Nordic business couldn't ultimately be replicated by a competitor over, let's say, a 5-year period?

Yes. When it comes to the sublicense of sport in Nordics, I think that is definitely something we will be looking into, you can argue some of the rights eventually fits better in a free TV environment and -- than in a premium pay or an OTT product. And that, of course, means that if advertising markets are difficult as we see right now, there's little reason or no reason to have those rights in all fairness. And that is, of course, a new normal -- sorry, a new situation when it comes to the advertising market. So therefore, stuff like that will be looked at and will be sublicensed to companies who can use that better or partner with media companies who can use those better. And then when it comes to the USP. Well, we have been here many years in the Nordics because we have been very, very strong, relevant storytellers, and that is the USP for media company. We have a very strong footprint, and we have a very strong presence in the market in our different products. So we have OTT products, we have radio products, we have free TV products, and we have productions and so forth. So of course, we will continue to develop like we have done in the last many, many, many years, the Nordic business. So we do feel that with the more focused approach that we have right now that we will definitely continue to be a very relevant and competitive player in the Nordics also for the foreseeable future.

Maybe I comment on the covenant question. So I mean, at this time, we are not in a breach of covenant situation. But as you see from the guidance section where we guide for a negative cash -- free cash flow for this year and next year, there is, I mean, clearly an elevated risk that is the case. But at the same time, I think that we have laid out a number of practice steps that we are taking to mitigate such covenant breach. And that, of course, includes as well discussions with lenders and the bank group.

Okay. Thanks very much, Charles. We have another question from Francois Anders. Francois, you asked about what the sports costs were in '22 for the Nordics and the answer to your question is SEK 5.8 billion. Otherwise, we have a question regarding the redundancy program in terms of when that will be effective and whether that is that or whether there will be any further redundancies?

Yes. So the redundancy program obviously varies from the different countries. So there's no general comment to that. We are, of course, following the local rules and regulations around these redundancies. So that is what we are working on right now as we speak. And going forward, of course, we will understand how we are set up and we refine the way that we will be set up going forward as well. So that is, of course, ambition to make sure that we are -- continues to be fit for purpose. So there's no steady -- was, of course, steady state here. It is something which continue -- we will continue to look at to make sure that we are set up the right way and we fit the purpose.

Okay. And then we have the same question from a couple of people, one for you, Enrique, I think. Please elaborate why you expect such large negative free cash flow next year '24, if you have an ambition of breakeven EBIT?

Yes, it's a good question. A good moment I just want to clarify a few things. So we're looking for next year to be, let's call it, breakeven EBIT to make it simple. But at the same time, when we highlight today or when we announced the restructuring provision of SEK 6.3 billion, a large part of that is cash. So that has a negative cash impact for next year as well as that we have as well our working capital buildup in '24. For '25, we're looking for working capital to kind of more normalize and the more breaking it could even potentially be a slight positive. But that is the -- so those 2 factors working capital and restructuring that comes on top of that, minus SEK 150 million to plus SEK 150 million EBIT guidance that we have.

Okay. And then another one. Please, could you remind us what proportion of your debt is subject to covenant and what the covenants are on that proportion of that, just so it's 100% clear?

So it is on the bonds predominantly and I mean, what is -- it's measured on the EBITDA for the Nordics at this time. And also, that is subject to renewals. And that is a conversation that we have ongoing with the core bank group that we are working with. So that will be kind of the short answer on that.

But just to be clear, which bonds?

So it's the MTN bonds and the SEK bonds as well.

Okay. And does that profitability include Allente as well?

Yes. So I mean, there's a lot of adjustment items to that. But obviously, it will -- I mean, it excludes a number of items, it includes Allente or an adjustment for how we treat the goodwill, depreciation and of course, the Nordic EBITDA.

Okay. Thank you. Next up on the telephone line. We're going to have Martin Arnell from DNB. Martin, I have asked some of your questions directly from the message board. I know you've got a number of others so if we can hand over to you, Martin.

So my first question is to you, Jorgen. I mean, you've just made a comeback here in this company in a very turbulent time. And my question is, firstly, what were you most surprised with when coming back here, if you look at the decisions taken in the last few years?

I think -- I would think I will answer a little bit different to be fair. I think, obviously, what we are looking at is to understand or to make a review of the assumption as well, which were in these different plans. And some of them has just turned out different from what they originally were meant to be and in all fairness, that happens. So the focus for me has been what can we learn from the past and how we want to set it up then going forward. So that is the approach that I have had, and therefore, also the conclusion that we would like to make sure that we safeguard our home turf. We cannot lose our strong position in the Nordics on the expense of eventually further out profit in some markets, which has turned out to be more difficult than we expected. So you can argue it's just general where you are looking at all the different drivers in the business and then you conclude on where we think that we should play going forward. So I don't think they are surprised of specific things to be fair as such. It is just that a range of the things were not adding up, and that's why we have changed.

Okay. And then one of the questions I have is this mix between B2C and the B2B in the subscriber base. And you're still not disclosing the breakdown. If you would have done that earlier, it would have been much easier to see clearly how ARPU dilutive the B2B partnerships have been. Have you ever considered now in this first weeks to actually give that breakdown?

I think we actually didn't -- I think we mentioned that it was 1/3 B2C and around 2/3 is [indiscernible].

But could you give like specific numbers going forward in the quarterly reporting so that we can follow.

Yes. I think we are considering a lot right now as well. Also we discussed ARPU and so that is something which we could consider going forward, yes.