Year-End Report January - December 2016 Storytel AB (Publ.)

Highlights from the past quarter including Mofibo (compared to Q4 2015)

• Increased  subscriber base from 341,500 to 360,200 subscribers (245,400 subs)

• Increased Streaming revenues from 135.7 MSEK to 147.4 MSEK (91.7 MSEK)

• Increased international share of Streaming revenues from 36.0% to 37.9% (29.6 %)

• Completed a secondary stock offering of 100 MSEK for institutional investors

• Delivered quarterly earnings, before depreciation, of 19.7 MSEK (0.9 MSEK)

(See film with CEO Jonas Tellander commenting the report)

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

* Forecast is 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 at 100%, according to the principle of proportional consolidation.

**** Publishing, Sweden includes Norstedts Förlagsgrupp for all four quarters. Revenue from Storytel and Mofibo

redacted. Barnens Bokklubb not included in figures.

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

Comments from the CEO

When we uncorked the champagne on New Year’s Eve and looked back on Storytel’s past twelve months, it was clear the year had seen Storytel throw off its cloak of anonymity and step into the spotlight as one of Sweden’s most exciting and rapidly growing tech- and content-based companies. In the process, we clearly come to lead the digital book-market in Sweden, Norway, Denmark and Holland.

At the same time, our acquisitions of traditional book publishers Massolit Förlagsgrupp and Norstedts Förlagsgrupp, as well as our ongoing project Storytel Original, assured that 40% of the seven million audio- and e-books our customers listened to and read last year originated with us. The contribution margin of Storytel in Sweden is steadily 30% of streaming revenues after deducting all content and marketing costs.

The Storytel group, as indicated, also own traditional publishing houses in which 85-90 % of revenues are derived from selling ink-on-paper books. The Publishing division’s focus is on generating healthy profits and increasing digital sales by attracting skilled authors to form long-term partnerships with. Earnings for both Norstedts and Massolit have both been strongly positive. A large proportion of traditional book sales occur during the Christmas season, which explains why earnings for Publishing are the highest in Q4 and lowest in Q1. The year’s bestsellers for each imprint were, respectively, the eighth Harry Potter book, (Rabén & Sjögren), Elena Ferrante’s novels (Norstedts), The Girl on the Train (Massolit), and Nordiska Gudar (Norse Gods) (B. Wahlströms). We’re very proud of them!

In Q4 2016 our Norwegian operations turned profitable (according to plan), and as previously communicated, our Danish operations turned profitable in Q3 2016, which proves we have the ability to launch in new countries and make these operations profitable after a few years’ investment. In Denmark we raised the price during the summer and in end of December we also raised the price in Norway from 169 NOK to 199 NOK. We have seen a slight negative effect in subscriber growth during first part of Q1 2017, as a result of the price increase. However, we now see the markets picking up and growing according to plan.

We view Holland as a market with great potential, and during the second half of last year, we tripled our number of Dutch subscribers. During 2017, we plan to continue putting enormous efforts into audio-book production and marketing in the Dutch market. Our plan is to make Storytel Holland profitable by 2018, and we hope that a few years later it will be as large as Storytel in Sweden.

Our current focus is on growth, and accordingly, profits from Streaming will be reinvested in new markets. We plan to open our service in several new countries in 2017, according to our goal of spreading spoken stories to every corner of the globe. We currently operate in six countries (Sweden, Norway, Finland, Denmark, Holland and Poland). We have earlier stated that we have started acquiring audio-book rights in Arabic, and during the year several other languages will follow suit. Many chapters of the Storytel-story are still unwritten.

In Q4 2017, revenues for Streaming were 147 MSEK (compared to 92 MSEK in Q2, 2015). Operations in Sweden generated 92 MSEK in Q4 2016, while other markets generated 56 MSEK (38% of the total). In Q4 2015,  Swedish streaming revenues totaled 65MSEK, with other markets generating 27 MSEK (30% of total revenues).

Financial Information

This group of companies 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 acquisition of Storytel AG by Storytel AB (publicly traded) (formerly Massolit Media (publicly traded)), is accounted for according to applicable accountancy regulations for reverse acquisition. According to the group’s statement of accounts, the reverse acquisition means that Storytel AG is the parent company and Massolit is included in accounts from the time of acquisition. The registered parent company is Storytel AB (publicly traded). Mofibo Books ApS (and its wholly owned subsidiaries) and Norstedts Förlagsgrupp are included in the yearly statement of accounts from their time of acquisition. Storytel A.S. (Norway) is 50% owned by Cappelen Damm and is reported here according to the principle of proportional consolidation.

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

Revenues and profits for period

The group’s total revenues for Q4 2016 were 287,298 (104,112) TSEK. Within the Streaming division, Sweden accounted for ca. 62.1% and other markets for ca. 37.9%. 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 revenues in Norway under Streaming, other markets. Also, in table on page two, any accrual of revenue is not taken into account.

The group’s production costs during Q4 totaled 155,974 (71,029) TSEK. Production costs include costs for the actual production of audio books, the production costs of physical books, wharehousing and distribution costs, and royalties. During the second half of the year, our publishing operations contributed to a higher gross margin.

Other external costs for the group during Q4 totaled 66,435 (17,704) TSEK. The greatest external costs included marketing, rental payments, tech services, and consultants.

Staffing costs for the group in Q4, 2016 totaled 52,889 (15,310) TSEK. Publishing requires a greater concentration of staff, which explains the relative increase in staffing costs compared to Q4 2015, when Norstedts Förlagsgrupp was not a Group company.

Profits before depreciation for the group for Q4 totaled 19,656 (865) TSEK. During Q4, 2016, the acquisition analyses ordered in connection with the purchases of Mofibo and Norstedts have been put into action, which has affected the size of depreciations. All extra value was preliminarily allocated to goodwill, which for both Mofibo and Norstedts will be written off in ten years.

In connection with the acquisitions of Mofibo and Norstedts, the group now has an increased reliance on loans, which has necessitated higher interest payments than in the past.

Earnings per share of stock in Q4 2016, after taxes, equaled 0.19 SEK and in 2016 to 0,51 SEK, calculated as current period´s profit, after taxes, divided by average number of shares during the period.

Group: Financial position and cash flow (as of 31 December 2016)

At the end of the period, the group had 129,561 (41,495) TSEK in liquid assets. Solvency was 23.8% (4.8%).  Equity totaled 172,472 (7,808) TSEK. External debt has been increased due to the acquisitions of Mofibo and Norstedts Förlagsgrupp, which were largely financed through bank loans. During Q1, 2017, we will start paying off these loans, and the short-term debts will be paid off during the next twelve months. During Q4 2016, 40 MSEK was repaid to the bank in connection with our secondary stock offering of October 2016, an activity attributable to the gap loan we took in order to finance our acquisition of Norstedts Förlagsgrupp.

Number of shares and share-capital (as of 31 December 2016)

There were 47,847,183 shares in issuance at the end of the period, divided between 635 A-shares and 47,846,548 B-shares. As of 31 Dec. 2016, share-capital totaled 23,923,591.5 SEK.

Post-period activity

On February 1st, 2017 Storytel acquired Kontentan Förlag AB as part of our ongoing interest in shorter, popular non-fiction.

Date of next report

The interim report for January–September 2017 will be released on May 15th, 2017.

General shareholders meeting

The next general shareholders meeting will be held on 12 May 2017 in Stockholm. Annual accounts and the annual financial report for the group will be made available through the company starting on 14 April 2017.

Dividends

The board of directors moves to forego paying dividends for the fiscal year 2016.

For more information, please contact:

Jonas Tellander, CEO, 0046 70 261 61 36

Sofie Zettergren, CFO, 0046 70 509 98 08

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