Release Date: July 18, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Viaplay Group AB (STU:NEB, Financial) achieved 3% organic sales growth in Q2 2024.
- Price increases of 11% to 27% across almost all markets resulted in 1% quarter-on-quarter organic revenue growth for Viaplay.
- B2B partner linear channel subscription sales were up 7% on an organic basis.
- Advertising revenues saw a 5% organic growth, driven by strong performance in Swedish linear ad sales and radio advertising revenues in Norway and Sweden.
- The company is implementing initiatives to tackle account sharing, with early signs of success in the Netherlands and Denmark.
Negative Points
- Viaplay sales were down 1% year-on-year on an organic basis due to a decline in the core subscriber base.
- Higher content costs due to annual inflation in sports rights contracts and currency headwinds negatively impacted financial performance.
- Core EBIT was negatively affected by EUR 89 million due to FX impacts.
- Content costs, particularly for sports, have been growing almost twice as fast as subscription sales, which is unsustainable.
- The company continues to face significant challenges with piracy and requires more support from politicians and regulators to combat illegal content distribution.
Q & A Highlights
Q: Can you provide insights into the advertising trends in the U.S. and any specific actions to address piracy and account sharing?
A: The advertising market saw a combination of declines in Sweden and Denmark, offset by strong digital initiatives and radio markets. Account sharing initiatives have been rolled out in the Netherlands and Denmark, with plans to expand to Sweden, Norway, and Finland. Early results show over 90% of users who shared accounts remain customers. Efforts to combat piracy include working with industry peers and seeking more support from politicians and regulators.
Q: Should we expect profitability to improve through the earnings season, and how should we view the full-year outlook?
A: No changes to the guidance ranges for the full year. The Q2 year-on-year decline was significantly impacted by currency effects. Actions taken over the past year have shown traction, with a 75% reduction in operating loss excluding certain costs. The guidance remains unchanged, and the company expects to see improvements in profitability.
Q: Can you provide more information about the telco joint venture in the Netherlands?
A: The joint venture with Talpa in the Netherlands aims to capitalize on Viaplay's content by offering it on an advertising-based channel while maintaining Viaplay as a premium product. This partnership allows for broader content distribution and enhances the relationship with Talpa.
Q: How has the digital ad inventory increased by 31%, and what does this mean for the company?
A: The increase in digital ad inventory is due to more engagement with Viaplay's products, leading to higher digital advertising opportunities. While the free-TV channels are fully sold out, there are still opportunities in the digital space. The focus is on transforming from analog to digital advertising, which is growing at double-digit rates.
Q: How much of the advertising revenue comes from digital ads?
A: Digital ads account for 10% to 20% of the advertising revenue, growing at double-digit rates. The majority of the revenue still comes from linear TV and radio, with digital advertising expected to grow further.
Q: What is the impact of the RPU increase on the streaming side, and how much of the price increases have materialized?
A: The RPU increase of 3% quarter-on-quarter reflects the price increases implemented. The biggest impact is seen in the D2C segment, with B2B partners following over time. The price increases have been well-received, indicating the value of Viaplay's content.
Q: How did the Dutch market perform in the quarter?
A: Specific market performance details were not disclosed, but there were ups and downs across different products and packages. Overall, the revenue increased quarter-on-quarter, with sports subscribers showing the most resilience.
Q: Can you provide more details on the cash flow situation and the use of the revolver?
A: The company drew down €1.5 billion on the €3.4 billion RCF after the end of the quarter to fund sports rights payments. Q3 is expected to see a significant buildup in working capital, with a more positive development in Q4. The guidance for full-year free cash flow remains unchanged.
Q: How should we think about sublicensing for the second half of the year?
A: Sublicensing is expected to increase substantially in Q3 and Q4, driven by the Amazon deal and the new Premier League season. Q1 was high due to non-sports content sublicensing, while Q2 was lower. The second half should see stronger sublicensing revenues.
Q: What are the plans for the new sports news channel, and how is Viaplay addressing content sharing and piracy?
A: The sports news channel will launch in Denmark in August, with plans to expand to the Nordic region. Efforts to address content sharing include working with partners to prevent account sharing and implementing anti-piracy measures. The company is also advocating for stronger legislation to combat piracy.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
