Interim Report January - March 2017 Storytel AB (publ)

See video with CEO Jonas Tellander commenting the first quarter of 2017

Highlights from the past quarter (compared to Q1, 2016)

  • Increased subscription base from 360,200 to 381,200 subscribers (268,300)

  • Increased Streaming-revenue from 147.4 MSEK till 155.7 MSEK (99.7 MSEK)

  • Increased share of international Streaming-revenue from 37.9% till 38.2% (29.9 %)

  • Signaled preparations for launching service in Russia, Spain, India and the UAE

  • Acquired Kontentan Förlag AB publishers and the Danish publishers People’s Press

Key figures for the Streaming division (figures for each quarter include Mofibo) and Print Publishing

Currency: thousand SEK Q1, 2016 Q2, 2016 Q3, 2016 Q4, 2016 Q1, 2017 Q2, 2017
Total: Streaming Forecast
Revenue 99 668 111 339 135 703 147 399 155 660 164 000
Contribution Profit** 22 425 20 961 29 269 32 684 32 133
Contribution Margin 22,5% 18,8% 21,6% 22,2% 20,6%
Paying subscribers 268,3 291,6 341,5 360,2 381,2 414,0
Subscriber-base change 22,8 23,3 49,9 18,7 21,0 32,8
Streaming, Sweden
Revenue 69 823 75 284 86 889 91 557 96 177 100 500
Contribution Profit 20 869 22 424 29 464 27 073 32 678
Contribution Margin 29,9% 29,8% 33,9% 29,6% 34,0%
Paying subscribers 180,3 193,7 219,9 230,8 241,4 252,0
Subscriber-base change 13,0 13,4 26,2 10,9 10,6 10,6
Streaming, other markets ***
Revenue 29 844 36 055 48 814 55 842 59 483 63 500
Contribution Profit 1 556 -1 463 -195 5 611 -545
Contribution Margin 5,2% -4,1% -0,4% 10,0% -0,9%
Paying subscribers 88,0 97,9 121,6 129,4 139,8 162,0
Subscriber-base change 9,9 9,9 23,7 7,8 10,4 22,2
Publishing, Sweden****
Revenue 90 106 105 137 112 689 154 099 89 201
Contribution Profit***** 33 106 42 722 41 576 64 038 33 246
Contribution Margin 36,7% 40,6% 36,9% 41,6% 37,3%

* Forecast based on information available at time of reporting

** Contribution Profit is defined as streaming revenue minus costs for content and marketing

*** Storytel Norway included in figures @ 100%, In the consolidated group accounts Norway is reported according to the principle of proportional consolidation.

****  In Publishing Sweden, Norstedts publishers is included for all quarters. In Group Accounts they are included from the acquisition date. Internal transactions have been redacted. Barnens bokklubb not included in table.

***** Contribution Profit is defined as revenue minus cost per sold unit, distribution costs, and sales and marketing costs

Comments from the CEO

During the first quarter of the year, Storytel’s subscriber base and streaming revenues in Sweden grew about as much as all other markets combined. Holland was the most impressive non-Swedish market, with a subscriber-base increase of over 300% during the previous four quarters. In Denmark, we’ve concluded Mofibo’s initial promotional mobile-phone-carrier plan, and we’re now seeing strong growth in our subscriber base. Storytel’s service in Denmark is itself also growing as planned.

In Sweden, Contribution Margin is at a steady 30%, which we believe is a sustainable level in a mature market such as Sweden. In Norway and Denmark, marketing costs are currently at 20-25% of turnover; in a few years, these costs will sink to the Swedish level of 10%. Investments in marketing and content for our current and new, non-Swedish markets are pushing down Contribution Profit, in line with our planned focus on foreign expansion. Staffing costs for Streaming, in proportion to turnover, were at about the same level in the first quarter of 2017 as during the first quarter of 2016, at just over 10%.

On March 2nd, we announced our purchase of the Danish publishers People’s Press, which further increases our presence on the Danish market. The acquisition went into effect on April 4th. Our integration with Norstedts publishers is also progressing according to plan, and the whole staff is doing a fantastic job.

On March 21st all of our 200 employees gathered for a full day’s event in Stockholm. Our impression is that together, the event served to solidify and strengthen our corporate culture of constant improvement –– which Storytel is well-known for. Our employees currently speak a total of twelve different mother-tongues.

On March 24th, we announced our entrance into four new markets Russia, India, Spain and the United Arab Emirates, where we already have local teams up and running. In May Storytel went online on the Russian market, and our ambition is to go online in one or several other markets during the coming half-year.

We believe we’re currently witnessing the start of an audio-book revolution, which we expect will increase globally during the coming decade. Our goal is to be in position to meet listeners’ interests in listening to stories regardless of where they are and what language they speak. That’s why we’re working hard behind the scenes preparing our platform, our content and our organization in order to launch Storytel in a number of larger markets during the coming years.

Average number of paying subscribers

We expect greater growth in Q2, 2017, which can be seen from our forecast. From Q2, 2017 and onwards, we expect our non-Swedish markets to account for the majority of our growth, and thus we expect that towards the end of this year, they will nearly account for half our paying subscribers and streaming revenue.

Streaming revenue from subscribers (MSEK)

Revenue for Streaming in Q1, 2017 totaled 155.7 MSEK, compared to 99.7 MSEK in Q1, 2016. Our Swedish division’s revenue totaled 96.2 MSEK in Q1, 2017, while our non-Swedish divisions’ revenues totaled 59.5 MSEK (38.2% of the total). A year ago, in Q1, 2016, Swedish revenue was 69.8 MSEK, compared to non-Swedish revenues totaling 29.8 MSEK (29,9% of the total).

Financial information

Storytel Group and its parent company comply with the Swedish law regarding yearly statements of accounts, as well as BFNAR 2012:1 (Swedish Accounting Standards Board standard 2012:1) concerning annual statements of accounts and group accounts at the K3 tier.

The registered parent company is Storytel AB (publicly traded). Storytel A.S. (Norway) is 50% owned by Cappelen Damm and is reported here according to the principle of proportional consolidation. Wholly owned subsidiaries are included in the yearly statement of accounts from their time of registration or acquisition.

This report has not been audited by the company’s accountants.

Revenues and profits for period (compared to Q1, 2016)

The group’s total turnover for Q1, 2017 was 231,129 (99,024) TSEK. Within the Streaming division, Sweden accounted for app. 61.8% and other markets for app. 38.2%. Cappelen Damm owns 50% of Storytel A.S. in Norway, which is reported here according to the principle of proportional consolidation. The table on page two includes all subscribers and revenue in Norway, and is included under Streaming, other markets –– which is why reported revenue for the table on page two is higher than in the statement of accounts, in order to give a truer indication of revenue per subscriber.

The group’s production costs during Q1, 2017 totaled 133,979 (59,060) TSEK. Production costs include costs for the actual production of audio books, Cost of Goods Sold of physical books, wharehousing and distribution costs, and royalties.

Other external costs for the group during Q1, 2017 totaled 55,727 (19,735) TSEK. The greatest external costs included marketing, rental payments, tech services, and consultants.

Staffing costs for the group in Q1, 2017 totaled till 43,148 (13,311) TSEK. Publishing requires a greater concentration of staff, which explains the relative increase in staffing costs compared to Q1, 2016, before Norstedts publishers joined the group.

Profits before depreciation for the group for Q1, 2017 totaled –2,046 (7,209) TSEK.

Depreciation primarily involves depreciation attributable to goodwill and other extra value identified in connection with acquisitions. The largest asset items are connected to the acquisition of Norstedts and Mofibo, where depreciation total app. 8 MSEK per quarter. Other depreciation primarily concern the purchasing and development of IT-systems.

EBIT (Earnings Before Interest and Taxes) includes both interest income and interest expenses, as well as realized and unrealized exchange differences. Interest costs from bank loans total app. 2MSEK.

During the period, Norstedts publishers has divested its minority stake in Månadens Bok/MånPocket publishers as well as Elib/Axiell Media AB. These divestments have had a positive, one-time effect of app. 3.8 MSEK.

Earnings per share, after taxes, in Q1, 2017 totaled –0.24SEK, calculated as earnings for the period after taxes, divided by the average number of shares during the period.

Group: Financial position and cash flow as of March 31st, 2017 (compared to Dec. 31st, 2016)

At the end of the period, the group had 124,685 (129,561) TSEK in liquid assets. Solvency was 23.7% (23.8%).  Equity totaled 160,364 (172,472) TSEK. Non-current liabilities to loaning institutions totaled 150,132 (155,161) TSEK. We started to amortize these loans during Q1, 2017; the portion that will be amortized during the next twelve months is considered short-term liabilities and totals app. 41 MSEK.

Number of shares and Share-Capital (as of March 31st, 2017)

There were 47,847,183 registered shares in issuance at the end of the period, divided between 635 A-shares and 47,846,548 B-shares. Share-capital totaled 23,923,591.5 SEK as of March 31st, 2017.

Post-period activity

On April 4 th , 2017 Storytel AB (publicly traded) announced its acquisition of People’s Press A/S, which will enter the group’s statement of accounts from April 1 st , 2017. After the completion of the acquisition, 662, 857 new B-shares were offered, in accordance with an extra annual meeting held on March 20 th , 2017. This new stock offering resulted in a dilution of app. 1.37%, based upon the number of outstanding shares and votes in the company on the day of the extra annual meeting.

On May 12 th , 2017, Storytel AB (publicly traded) held its regular annual meeting. All board members, as well as the company’s auditor, were re-elected. The board was also given the authority to order one or more new stock offerings of share warrants and/or convertible bonds, in accordance with or not deviating from the rights of the shareholders. This authority may be used to dilute the company’s share-capital by at most ten percent.

Date of next report

The interim report for January–June 2017 will be released on August 15th, 2017.

Stockholm, May 15th, 2017

For more information, please contact:

Jonas Tellander, CEO: +46 70 261 61 36

Sofie Zettergren, CFO: +46 70 509 98 08





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