Q3 2022 interim report January-September

78% growth to 6.4m Viaplay subscribers

Third quarter highlights

>   Viaplay paying subscribers up 78% YoY to 6,428k (3,608) with 879k subscribers added QoQ

>    25% organic sales growth with reported sales of SEK 3,972m (3,054) 

>   Operating income before associated company income (ACI) and items affecting comparability (IAC) of SEK -171m (80) including SEK -419m (-200) impact of Viaplay International expansion

>   Total reported operating income of SEK -100m (114) including ACI of SEK 71m (34)

>   Net income from total operations of SEK -86m (55) and EPS of SEK -1.10 (0.71)

>   Completion of Premier Sports acquisition in October and Viaplay to be launched in the UK on 1 November

>   Reduction in full year 2022 guidance to organic group revenue growth of approximately 20%; organic Nordic revenue growth of approximately 10%; and Nordic EBIT margin of approximately 7%. Long-term guidance also adjusted – please see page 7

 
 
President & CEO’s comments

We have delivered another quarter of high subscriber and revenue growth, which demonstrate the attraction and resilience of our well-differentiated offerings. Our content line-up has never been stronger, and we added key new original and sports content during the quarter. The international operations are performing ahead of plan, and we reached the important milestone of more than 1 million subscribers in both the Dutch and Polish markets. However, this international performance was offset by the rate of direct-to-consumer subscription and ARPU growth in the Nordics, which was lower than anticipated.  

Our 25% YoY group organic revenue growth was driven by Viaplay revenues (47% of sales), which were up 64% on an organic basis. The total Viaplay subscriber base grew by 78%, and we ended the quarter with 6,428k subscribers.

The 28% YoY growth in the Viaplay subscriber base in the Nordics was driven by our third party B2B distribution partnerships in particular, as well as lower churn levels. The number of premium subscribers in Norway is building following the inclusion of English Premier League coverage in August, but at a slower pace than anticipated. Sales for Viaplay in the Nordics were up 27% on an organic basis.

The international Viaplay operations added 685k subscribers in the quarter, which was more than double the number of subscribers added in the previous quarter. The addition of the English Premier League rights in  Poland and the Netherlands contributed to the growth, together with the new distribution agreement in Poland. Revenues grew accordingly and also reflected the higher price point in the Netherlands.

Linear subscription and other revenues (32% of sales) were up 9% YoY on an organic basis. The growth in linear channel subscription sales followed the upward price adjustments to reflect the addition of new content, as well as the extension of almost all distribution agreements in Norway to include the English Premier League football coverage.

Advertising revenues (21% of sales) were down 3% YoY on an organic basis, and reflected the weaker development in the linear TV advertising market conditions, which was offset to an extent by the continued growth in the radio advertising markets.

Now that we have completed the acquisition of Premier Sports in the UK, we are raising our year end international subscriber target from approximately 2.5m to approximately 2.7m. Viaplay will be launched in the UK on 1 November. At the same time, we are reducing our year end Nordic target from 4.8m to 4.6m. Our group target is therefore unchanged at 7.3m.

As a result of the immediate effects of the general economic slowdown on advertising and subscription sales, the lower than anticipated premium subscription sales in Norway, and the strategic decision to discontinue an unfavourable distribution agreement, we are reducing our full year Nordic organic revenue growth target to approximately 10%. Conversely, international sales are expected to exceed our previous expectations, and we now expect full year total Group organic revenue growth of approximately 20%. 

The Q3 profitability level in the Nordics reflected our content investments, including the new and extended sports rights that will drive subscriber and revenue growth. The lower than anticipated Q4 sales growth in the Nordics cannot be fully offset by corrective measures and cost savings in the short term, so we now expect a full year margin for the Nordic operations of approximately 7%. The international losses were at their peak level in Q3 as we added new content. We maintain our full year outlook for international losses, which was improved last quarter and will provide a better starting point for 2023.

These adjustments to our short-term targets, and the addition of Premier Sports, also affect our long-term targets, as does the significant forward currency headwind due to the strength of the US dollar. Our international operations are now expected to be profitable on an annual basis in 2024 – one year ahead of schedule. This is due to a combination of higher sales growth than originally projected, and the prioritisation of investments into Poland, the Netherlands and the UK. Our Nordic operations are now expected to grow their revenues at a slower rate moving forward. We will embark on a substantial cost saving programme in 2023, in order to deliver these targets by offsetting some of the operating and currency headwinds that we face. We expect to deliver a full year 2025 Group EBIT margin of approximately 13%, with margins to then increase over time. It is clear that the international expansion is spreading and reducing our risk as a group. Please see the updated guidance on page 7 of this report, and we will provide further updates and details at our Capital Markets Day on 9 November. 

We remain fully funded for our expansion and have full visibility over our forward content costs. The broader macro-economic outlook and geopolitical backdrop are of course less certain. This is why we have adjusted our growth outlook, and already made plans to adjust our cost base and exposure, where relevant and as we have done in the past. We are also taking steps to accelerate our growth where momentum is strong.

Anders Jensen

President & CEO
 

Shareholder information

Conference call and video webcast and CEO video message

A conference call and video webcast will take place today at 09.00 Stockholm local time, 08.00 London local time and 03.00 New York local time.

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Contact

press@viaplaygroup.com (or Roberta Alenius, Head of Corporate Communications: +46 70 270 72 17)
investors@viaplaygroup.com (or Matthew Hooper, Chief Corporate Affairs Officer: +44 7768 440 414)

Notes to editors

Viaplay Group AB (publ) is the international streaming challenger. Our Viaplay streaming service is available direct-to-consumer in every Nordic and Baltic country, Poland and the Netherlands, and we are expanding rapidly by launching in the UK in 2022, followed by the US, Canada, Germany, Austria and Switzerland in 2023. Viaplay will have a market presence in at least 21 countries by the end of 2023, including at least five partner markets for the Viaplay Select branded content concept. Every day, millions of customers enjoy our unique entertainment offering, including acclaimed Viaplay Originals and an unrivalled line-up of premium live sports. From streaming to TV channels, radio stations and production companies, our purpose is to tell stories, touch lives and expand worlds. Viaplay Group is listed on Nasdaq Stockholm (‘VPLAY B’). 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 25 October 2022.

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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