Release Date: October 22, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Viaplay Group AB (OSTO:VPLAY A, Financial) achieved 6% organic sales growth in Q3, driven by linear subscription revenues and sublicensing of content.
- The introduction of a competitively priced HVOD tier in Denmark, Sweden, and Norway has attracted new customer segments and reactivated former subscribers.
- Efforts to tackle account sharing have shown encouraging results, with most former account sharers choosing to remain subscribers.
- Sublicensing and other sales grew by 165% year-on-year, driven by ongoing sales of scripted content and strategic sublicensing of sports content.
- Cost control measures and core sales growth have enabled a reduction in EBIT losses year-on-year and sequentially.
Negative Points
- Viaplay's D2C subscriber base was down year-on-year in almost all markets, despite sequential growth from Q2 to Q3.
- Advertising revenue, which accounts for 18% of core revenues, was down 1% on an organic basis due to a decline in linear TV advertising revenues.
- The company faces substantial currency challenges due to the weak SEK, impacting financial performance.
- Core SG&A costs increased due to the allocation of all central overhead costs to the core segment.
- The company is still dealing with the negative cash impact from exiting non-core operations, with a significant negative free cash flow reported.
Q & A Highlights
Q: Has there been any significant progress on the B2B negotiations with regards to price increases?
A: Yes, we have extended partnerships with key B2B partners and introduced new products like sports channels. However, some partners have been more challenging, and we are segmenting partners based on their willingness to discuss content value. We are also introducing new partners to the region.
Q: How crucial is the expansion of digital video ad capacity for maintaining the sustainability of your advertising revenues?
A: Expanding digital video ad capacity is important to mitigate the decline in analog advertising. We are investing in HVOD and exploring other opportunities to increase digital advertising offerings.
Q: Your year-to-date free cash flow is minus SEK2.5 billion. What are the building blocks that make you confident in meeting your full-year guidance of negative SEK1.7 billion to negative SEK2.2 billion?
A: We expect a positive Q4, as Q3 is typically our heaviest working capital outflow quarter. We are maintaining our guidance despite the challenges in the ad market and currency fluctuations.
Q: Can you explain the revenue dynamics for the streaming subscription segment, including the impact of HVOD and the Champions League?
A: ARPU is up due to price adjustments, although subscriber numbers have decreased year-on-year. The HVOD service is attracting new customers and is priced lower, but advertising compensates for this. We saw growth from Q2 to Q3, indicating successful price adjustments.
Q: What is your view on the financial position of the company, particularly regarding high debt and headroom at the year-end versus bank covenants?
A: We prioritize cash flow management and debt reduction. Initiatives are in place to generate positive cash flow and improve our financial position over time. Our guidance provides a clear indication of where we'll end the year.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
