Q1 2024 interim report January-March

Recapitalisation completed and full focus on operational improvements and product performance

First quarter highlights

• Total reported Group net sales of SEK 4,757m (4,537) and operating income before associated company income (ACI) and items affecting comparability (IAC) of SEK -317m (-291)
• Core operations (Nordics, Netherlands and Viaplay Select) 6% organic net sales growth to SEK 4,459m (4,279), with operating income before ACI and IAC of SEK -270m (103)
• IAC of SEK -188m (-44) primarily comprised unrealised non-cash currency effects related to previous content provisions
• Total reported operating income of SEK -473m (-325) including ACI of SEK 32m (10)
• Net income of SEK 605m (-288) and EPS of SEK 0.23 (-3.68) included SEK 1,190m one-off impact related to debt write-down part of recapitalisation
• Comprehensive recapitalisation programme completed on 9 February 2024 with net cash proceeds of SEK 3.6bn and financial net debt reduced by SEK 5.6bn

Financial summary

1) Please see page 21 regarding items affecting comparability.
Alternative performance measures used in this report are explained and reconciled on pages 19-23.

A word from our President & CEO

The completion of the recapitalisation programme was an important step in setting the foundation for our retransformation into a profitably growing and cash generative business. We are now fully focused on the many operational improvements that need to be made across the Group. Our Q1 results are in line with expectations, and we have reiterated our outlook for the year.

We have adjusted our product prices in recent months, in order to ensure that we can continue to invest in our content offering. This led to temporarily increased churn levels, and research shows that our linear and streaming products continue to be highly relevant, resonate well and provide very good value for money for our partners and customers, when benchmarked with competitor offerings.

Our core commercial content has continued to perform well, with viewing of the new Formula One season combining with exciting Premier League action and our very popular winter sports coverage, complemented by a wide range of sports-related programming. Local core commercial content like reality format ‘Paradise Hotel’ returned and followed up its success in Denmark by being the most watched non-sports title in Norway in Q1. New seasons of established favourites ‘MasterChef’, ‘Luxury Trap’ and ‘Efterlyst’ delivered again on both our TV channels and Viaplay, while the latest series of our hit crime drama ‘Wisting’ and new crime documentary ‘Under the Radar’ made a big impact in Norway and Sweden, respectively.

Following the recapitalisation, we can now begin to commission for Spring 2025. Our slate for Q2 looks good with new seasons of successful local and international series, great new movie releases and new shows including comedy drama ‘All and Eva’ and documentary ‘Ace of Base – All That She Wants’. These will line up alongside the Ice Hockey World Championships, the Stanley Cup, top motor-racing, two golf majors and the culmination of the Premier League, Champions League, Europa League, Danish League and numerous other football leagues and cup competitions.

The reality is that our content costs have risen faster than our revenues over the past few years, due to competition, underlying inflation and ongoing adverse FX movements. We cannot expect our direct customers and distribution partners to carry these cost increases 100% alone, which is why we have sublicensed selected sports and non-sports content to other broadcasters and streamers.

We are also innovating with new products such as our interesting linear TV channel partnership with Talpa TV in the Netherlands, and we are also planning to launch a new sports news channel in most of our markets, in order to capitalise even further on our wide-ranging sports offering. And we will be introducing a new HVOD streaming package this summer that will include advertising, in order to provide flexible solutions for our customers, and additional monetisation windows for our content. 

We are in talks with our distribution partners regarding all of the above and will learn from what has been done well and not so well in the past few years, both in terms of products that have worked and where we can enhance the consumer offering and better monetise our content. These discussions will also address how we tackle account sharing together. This is a major issue for the industry.

We estimate that approximately a third of premium subscribers have been sharing the account details for their Viaplay subscriptions. This is not fair. We have implemented changes in some markets to limit the number of concurrent streams for live events, which have proved successful and have encouraged new customers to join and pay for the entertainment they watch. We will implement more far-reaching initiatives this summer, in order to get more to pay for what they watch. We are also working with our industry peers to combat piracy, but we do need much more help from politicians and regulators to prevent and police all forms of illegal content distribution.

As flagged previously, we have adjusted our financial reporting structure this quarter, in order to reflect our strategic focus on our core Nordic, Netherlands and Viaplay Select operations, and to provide a breakdown of our linear channel and sublicensing sales. The core operations are therefore now reported separately from the non-core international markets that we are exiting. We have completed the sale of our UK operations and the Paprika content business and exited the Baltics by transferring the subscriber base and sublicensing the sports portfolio. Poland will be our only non-core business until we exit that market in mid-2025. We will continue to have cash costs for these businesses and have therefore provided free cash flow numbers for both the core and non-core operations.

The 6% organic growth for our core operations primarily reflected the sublicensing deals that I have mentioned and were announced during Q4. We do expect Viaplay subscription sales to return to growth once we feel the full effect of the price increases and launch the new product offerings, and as we work to reduce account sharing and improve the terms of our partnership agreements. These actions will also boost our linear channel sales. We have continued to build our digital advertising inventory, which helped offset some of the effects of the continued decline in the linear TV advertising markets, and the launch of the new HVOD tier should further support this transition.

The growth in our operating expenses was mainly due to rising content costs, which were partly offset by lower SG&A costs after the changes that we have made in the last year. As expected, profitability for the core operations declined, with significant improvements required in the coming quarters.    

Our commitment to restore profitability, enhance our product offering and rebuild sustainable stakeholder value is unwavering. It will take time and will be done with a laser focus on consistent operational improvements, mutually beneficial partnerships turning account sharers into customers, innovative revenue streams, the right content mix at the right price, and strict cost control.

Jørgen Madsen Lindemann
Viaplay Group President and CEO

Shareholder information

2024 Annual General Meeting
Viaplay’s 2024 Annual General Meeting of shareholders will be held on Tuesday 14 May 2024 at 10:00 CEST at Viaplay Group’s Head Office, Ringvägen 52, 118 67 Stockholm, Sweden. Shareholders may also exercise their voting rights at the Annual General Meeting by postal voting in accordance with the provisions of Viaplay Group’s Articles of Association. As previously communicated, the Board of Directors will propose to the Annual General Meeting that no annual cash dividend be paid for 2023. The AGM resolutions will be published as soon as the outcome of the voting has been established. The AGM notice and related documentation are available at www.viaplaygroup.com.
 

Conference call
A conference call will take place today, Tuesday 23 April at 09.00 Stockholm local time, 08.00 London local time and 03.00 New York local time.

The conference call can be accessed online at https://edge.media-server.com/mmc/p/qqgao8xx

Or, register for the conference call at https://register.vevent.com/register/BIe68fefec771b4478bbf5f188c0644d81

Click here for full report.

Contact
press@viaplaygroup.com or +46 73 699 17 00
investors@viaplaygroup.com or +44 7768 440 414

Notes to editors
This information is information that Viaplay Group AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation and the Swedish Securities Markets Act. The information was submitted for publication, through the agency of the contact person set out above, at 07:30 CET on 23 April 2024.

Viaplay Group AB (publ) is the Nordic region’s leading entertainment provider. Our Viaplay streaming service is available in every Nordic country, as well as in the Netherlands and Poland, and our Viaplay Select branded content concept has been added to partner platforms around the world. We also operate TV channels across most of our markets, as well as radio stations in Norway and Sweden. Our talented people come to work every day with a shared passion and clear mission to entertain millions of people with our unique offering of locally relevant storytelling, which spans premium live sports, films, series and music. Our purpose is to grow our business profitably and responsibly, and deliver sustainable value for all our stakeholders. Viaplay Group is listed on Nasdaq Stockholm (‘VPLAY B’).

This interim report contains statements concerning, among other things, Viaplay Group's financial condition and results of operations that are forward-looking in nature. Such statements are not historical facts but, rather, represent Viaplay Group's future expectations. Viaplay Group believes that the expectations reflected in these forward-looking statements are based on reasonable assumptions; however, forward-looking statements involve inherent risks and uncertainties, and a number of important factors could cause actual results or outcomes to differ materially from those expressed in any forward-looking statements. Such important factors include but may not be limited to Viaplay Group's market position; growth in the streaming industry; and the effects of competition and other economic, business, competitive and/or regulatory factors affecting the business of Viaplay Group, its group companies and the streaming industry in general. Forward-looking statements apply only as of the date they were made and, other than as required by applicable law, Viaplay Group undertakes no obligation to update any of them in the light of new information or future events.

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