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Viaplay Group

Quarterly Report Apr 25, 2023

2993_10-q_2023-04-25_b54b84bd-f673-4d97-beda-9ddf2595a4a8.pdf

Quarterly Report

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First quarter highlights

  • Viaplay paying subscribers up 60% YoY to 7,643k (4,783) with 325k subscribers added QoQ

  • Viaplay revenues up 68% on organic basis to represent 52% share of total revenues

  • 30% group organic sales growth with reported sales of SEK 4,537m (3,324)

  • Operating income before associated company income (ACI) and items affecting comparability (IAC) of SEK -291m (-49), of which SEK 163m (256) for the Nordics and SEK -454m (-305) for the International markets

  • Total reported operating income of SEK -325m (602), including ACI of SEK 10m (55) and IAC of SEK -44m (595)

  • Net income of SEK -288m (483) and EPS of SEK -3.68 (6.20)

Financial summary

Full
Q1 Q1 year
(SEKm) 2023 2022 2022
Net sales 4,537 3,324 15,691
Organic growth 30.3% 9.9% 19.7%
Operating income before ACI and IAC -291 -49 -372
Associated company income (ACI) 10 55 275
Items affecting comparability (IAC)1) -44 595 510
Operating income -325 602 413
Net income for the period -288 483 323
Basic earnings per share (SEK) -3.68 6.20 4.13
  1. IAC includes restructuring costs related to the previously announced reorganisation and the integration of Premier Sports in the UK. Q1 2022 IAC includes the proceeds from the settlement of court cases with TV 2 Denmark. Please see page 19 for details.

Alternative performance measures used in this report are explained and reconciled on pages 18-21.

We have continued to deliver on our growth targets despite the broader economic uncertainty and increased market volatility. Our Viaplay subscriber base grew by 60% YoY to 7.64 million, and Group sales were up 30% YoY on an organic basis. The recent direct-to-consumer launches of Viaplay in the US and Canada, and our new Viaplay Select partnerships in Canada, Austria, and Germany, have taken our footprint to 33 markets, further reinforcing our position as a leading international entertainment provider and exporter of premium international storytelling. Our original content has never been more attractive for consumers and partners, with over 130 productions set to premiere this year in what is a highly competitive environment. In combination with our mix of premium live sports rights, constant tech innovation and talented team, we are well positioned to deliver on Viaplay's considerable potential, and to reach our short- and long-term goals. Our guidance for the full year remains unchanged, reflecting our ambition to strike the right balance between maintaining the strong momentum in the business and managing the continued uncertainty in the market.

We have started the year in line with our guidance, with 30% Group and 17% Nordic YoY organic sales growth in the first quarter. Our investments in content and technology are paying off, and Viaplay continues to be the primary growth driver for the Group, accounting for 52% of Group sales and generating organic revenue growth of 68% YoY.

Our Viaplay subscriber base grew by 60% compared with the same period last year. Our combined international markets now have more than 2.9 million Viaplay subscribers, 140% more than a year ago. We are growing in line with our expectations to reach the target of 4 million subscribers by end of the year. We also added 113k Viaplay subscribers in the Nordics in Q1, which is line with our ambition to add 400k new subscribers in 2023 and reach our year-end target of 5 million subscribers.

We have adjusted our Viaplay price points upwards in almost all markets, to reflect our unique and enhanced content offerings, as well as the prevailing inflation levels. Churn levels remain fairly stable and demonstrate the importance of high quality and flexible entertainment packages in these economically challenging times. Locally relevant content and live sports coverage remain our key differentiation points, and we have seen the positive impact of our coverage of the new Formula 1 season in 10 of our European markets, including Poland for the first time.

Viaplay Nordic revenues (37% of Group revenues) were up 36% YoY on an organic basis, while international revenues were up sevenfold and accounted for 15% of Group revenues, compared with 3% in Q1 last year.

Our linear subscription and other revenues (29% of Group sales) grew 11% YoY on an organic basis. The growth in wholesale subscription revenues reflected price increases, while sublicensing and studio sales were also moderately up YoY.

Advertising revenues (19% of Group sales) were down 2% YoY on an organic basis, which was better than expected in weak markets. TV advertising prices were again raised in the annual upfront contract negotiations, and radio advertising sales have continued to be resilient. We expect the overall Scandinavian advertising market to remain soft for the rest of the year, with the outlook for H2 currently particularly uncertain. TV and radio remain high impact media, which offer high returns on investment for advertisers, and our audience shares were up in almost all markets in Q1.

Our Nordic operating profit margin of 4.2% was higher than expected and reflected the healthy subscriber growth, rising prices and lower than anticipated advertising sales decline. The YoY effect of the content investments that we made in H2 last year will result in a low H1 margin, as expected, before rising ARPU levels and lower cost inflation drive up our profitability margin for H2. We remain focused on delivering our target full year operating profit of SEK 1.2-1.35 Bn for our Nordic operations.

The combined operating losses for our international business reflected our investment in the Polish Formula 1 rights, the launch of Viaplay in the US and Canada, the scaling-up of our UK operations and the Polish and Dutch ARPU mix. These losses are expected to progressively fall during the year as the subscriber base continues to grow and ARPU levels rise. This is expected to result in the lower YoY losses for the full year of SEK 1.0-1.1 Bn, before we reach a combined full year profit for our international business in 2024.

Sustainability is as always at the top of our agenda. We have a very clear strategy, and we are making good progress towards our goals. This progress was reflected in Sustainalytics' recognition of our leading sustainability performance for the second year running, and their ranking of us in 8th position out of 294 global media businesses.

As a company and most importantly, as a team, we are more focused and united than ever. Our new organisational set-up is fully implemented and enabling us to achieve our goals together more efficiently, despite the ongoing impact of the global geo-political and macro-economic pressures.

Anders Jensen President & CEO

Sales

The Group's net sales were up 30% on an organic basis, when excluding changes in FX rates and the contribution from acquired operations. This growth was driven primarily by the 68% combined organic sales growth of Viaplay in the Nordic and International markets. Reported sales amounted to SEK 4,537m (3,324). Please see page 18 for a reconciliation of organic and reported sales growth.

Organic sales growth

Viaplay subscriber base

Operating income

Operating income before ACI and IAC amounted to SEK -291m (-49), with Nordic operating income of SEK 163m (256) offset by International operating losses of SEK -454m (-305). Total operating income amounted to SEK -325m (602) and included SEK 10m (55) of associated company income, which primarily comprised the Group's 50% share in the earnings of Allente and SEK -44m (595) of items affecting comparability. These items mainly related to the previously announced reorganisation and the integration of the Premier Sports acquisition in the UK. (Please see note 3 regarding Allente's financial performance and position, and page 19 for details about the items affecting comparability).

Net financial items and net income

Net interest and other financial items totalled SEK -37m (-19). Net interest amounted to SEK -42m (-25), of which SEK -3m (-3) related to net lease liabilities. Other financial items amounted to SEK 5m (6) and mainly comprised the impact of currency exchange rates on the revaluation of financial items.

Tax amounted to SEK 74m (-100), and total net income amounted to SEK -288m (483), with total basic earnings per share of SEK -3.68 (6.20).

Cash flow

Cash flow from operations excluding changes in working capital totalled SEK -329m (492). Changes in working capital amounted to SEK -649m (-1,418) and primarily reflected payments for sports rights and original productions. Total cash flow from operating activities amounted to SEK -978m (-926).

Cash flow related to investing activities amounted to SEK -54m (-41), which comprised capital expenditure on tangible and intangible assets of SEK -58m (-45) and other investing activities of SEK 4m (4).

Cash flow from financing activities amounted to SEK 271m (887), with borrowings increasing by SEK 300m (900) in the quarter. The total net change in cash and cash equivalents therefore amounted to SEK -761m (-79).

Financial position

The Group's net debt position at the end of the quarter was SEK 2,516m (-1,107). The financial net debt position, when excluding net lease liabilities of SEK 343m (355), was SEK 2,173m (-1,462). Cash and cash equivalents totalled SEK 2,007 (5,642), while the Group's total borrowings amounted to SEK 4,200m (4,200).

The introduction of segment reporting reflects the Group's new operational structure from 1 January 2023. Please see note 1 and 2 for more information.

Nordics

Q1 Q1 Reported Organic Full year
(SEKm) 2023 2022 change % change % 2022
Viaplay 1,682 1,211 38.9% 35.6% 5,535
Linear subscription & other 1,313 1,146 14.6% 11.4% 4,914
Advertising 871 876 -0.6% -1.6% 3,808
Total sales 3,866 3,233 19.6% 17.0% 14,257
Operating expenses -3,703 -2,977 24.4% - -13,246
Operating profit 163 256 -36.3% - 1,011
Operating margin (%) 4.2% 7.9% - - 7.1%
Viaplay subscribers ('000) 4,738 3,576 32.5% - 4,625

Viaplay sales were up 36% on an organic basis and represented 44% of total Nordic sales. The Nordic Viaplay paying subscriber base grew by 33% to 4,738k subscribers, and was driven by B2B partner sales in particular. Viaplay subscription prices have been adjusted upwards in almost every market. Linear subscription and other sales, which include wholesale channel subscription sales, sublicensing revenues and external sales by the Group's content production studios, were up 11% on an organic basis and represented 34% of total Nordic sales. The wholesale subscription sales growth reflected price increases introduced for the linear channels. Advertising sales were down 2% on an organic basis, which reflected the continued weak TV advertising markets and stable to growing radio advertising markets. The Group's TV target audience share increased in all three Scandinavian markets, and each of the TV advertising markets is estimated to have declined. Viaplay Group's radio target audience share was up in Sweden and down in Norway, with both radio advertising markets estimated to have grown.

The 36% decline in operating profits reflected the 24% increase in operating expenses following the investments made over the past year in live sports rights and original content productions.

International

(SEKm) Q1
2023
Q1
2022
Reported
change %
Organic
change %
Full
year
2022
Viaplay 671 91 637.4% n.a 1,434
Total sales 671 91 637.4% n.a 1,434
Operating expenses -1,125 -396 184.1% - -2,817
Operating profit -454 -305 48.9% - -1,383
Operating margin (%) n.a n.a - - n.a
Viaplay subscribers ('000) 2,905 1,208 140.5% - 2,694

Viaplay sales increased more than sevenfold as the paying subscriber base grew by 140% to 2,905k subscribers, after adding 211k subscribers in Q1 alone. The subscriber growth in the international markets was mainly driven by the Polish and Dutch markets. Viaplay subscription prices have been adjusted upwards in both markets to reflect the further enhancement of the content offering, including the recent addition of the exclusive Formula 1 rights in Poland and the previous new Premier League rights from August 2022. Viaplay was launched direct-to-consumer in the US and Canada in Q1, and new Viaplay Select agreements have been signed with pay-TV operators in Austria, Canada and Germany.

The 49% increase in operating losses reflected the 184% growth in operating expenses following the abovementioned investments in content, the launch of Viaplay in the US and Canada, and the scaling-up of the UK operations, which contributed their first full quarter consolidated result.

International – sales International – Viaplay subscriber base

6 | Q 1 202 3 V I A P L A Y G R O U P A B

Viaplay Group AB is the Group's Parent company and is responsible for Group-wide management, administration and financing. Net sales for the Parent company amounted to SEK 11m (10). Income before tax and appropriations amounted to SEK 52m (-56), and net income for the period amounted to SEK 41m (-45). The income statement and balance sheet for the Parent company are presented on page 13.

The Board of Directors used the authorisation of the 2022 AGM to issue and buy back class C shares in Q1 2023 to secure delivery of shares under Viaplay Group's incentive programmes. Please see Note 5 regarding the number of shares.

The 2022 Annual & Sustainability report details the Group's performance against its five-year Sustainability strategy and 15 goals.

Viaplay Group launched a programme to support sustainable production practices in Q1, including a guide, training and third-party audits, to ensure climate conscious and responsible production across the industry. One key production was audited in Q1, with two more to follow in 2023.

The Group's 2030 emission reduction targets for greenhouse gases (GHG) were validated by the Science Based Targets Initiative (SBTi) as in line with the Paris Agreement's trajectory for limiting global warming to 1.5°C. By end of 2022, the Group had reduced Co2 emissions in its own operations (scope 1 and 2) by 64.9% when compared with the 2019 levels and against its target of 46.2%. Viaplay has continued its efforts to reduce emissions across its value chain and by engaging with its suppliers.

The Group has also continued to drive diversity and inclusion in its operations and productions by supporting the Women in Tech Conference for the 10th consecutive year, attracting and empowering female tech talents, and investing in storytelling that raises awareness of key societal issues such as the recently announced 'Stroke' series in Poland and the first Dutch feature length production highlighting LGBTQ+ themes.

In response to Russia's invasion of Ukraine, the Group has continued to apply the international sanctions, exclude Russian content from its platforms, and screen contracts and counterparties to ensure that no payments are made to entities in Russia.

In addition, Viaplay Group was recognised for its leading sustainability performance by Sustainalytics for the second consecutive year, following an analysis of over 15,000 companies around the world, and received both a 2023 Industry Top-Rated Badge and a Regional Top-Rated Badge. Viaplay was ranked 8th of 294 global media businesses.

Long-term targets

Viaplay Group provided a series of updated long-term operational and financial targets in its Q3 results announcement on 25 October 2022. These targets are listed below.

Group sales growth 1) ~16-19% CAGR 2020-2025
Nordics sales growth1) ~10-12% CAGR 2020-2025
Viaplay subscribers ~12m by end of 2025
~13% margin for 2025 with positive result for International operations already
Group EBIT (excluding ACI & IAC) in 2024, ~20% long-term margin for Nordic operations, and ~25% long term
margin for International operations
Leverage policy2) <2.5x Net Debt/LTM EBITDA including leases

1) based on 2020 Group revenues excluding the contribution from the deconsolidated Viasat Consumer business and the subsequently divested Studio operations, and including the contribution from the consolidation of Premier Sports business from Q4 2022

2) based on trailing twelve month adjusted EBITDA and including leases. Viaplay Group's leverage may exceed these levels temporarily from time to time

Short-term outlook

Viaplay Group also provided a series of short-term operational and financial targets for 2023 at its Capital Markets Day on 9 November 2022. These targets are listed below.

2023 Group organic sales growth ~ 24-26% (excl. FX and Premier Sports)
2023 Nordics organic sales growth ~12-15%
Viaplay subscribers at end of 2023 ~9 million subscribers by end of 2023, of which ~5m Nordics and ~4m
International
2023 EBIT (excluding ACI & IAC) Nordics: ~SEK 1.2-1.35 bn
International: Loss of SEK ~1.0-1.1 bn
2023 Change in working capital Negative ~ SEK 2.0 bn

Significant risks and uncertainties exist for the Group and the Parent company. These factors include the prevailing economic and business environments in each of the Group's markets; commercial risks related to expansion into new territories; political and legislative risks related to changes in rules and regulations in the various territories in which the Group operates; exposure to foreign exchange rate movements; changes in the ability to access capital markets; and the competition for subscribers, content, and talent. The increasing shift towards online entertainment consumption and the Group's expansion also make the Group a potential target for cyber-attacks, intrusions, disruptions or denials of service. Global macro-economic developments, with increased inflation and interest rates, put pressure on both companies and consumers. In addition, currency exchange rate volatility adds further uncertainty. Viaplay Group monitors each of these situations closely and acts accordingly.

Significant events during and after the quarter

A full list of announcements and reports can be found at www.viaplaygroup.com

Stockholm, 25 April 2023

Anders Jensen President & CEO

This report has not been reviewed by the Group's auditors.

Condensed consolidated income statement

Full
Q1 Q1 year
(SEKm) 2023 2022 2022
Net sales 4,537 3,324 15,691
Cost of sales -4,135 -2,622 -13,086
Gross income 402 702 2,605
Selling and marketing expenses -329 -290 -1,264
General and administrative expenses -454 -470 -1,933
Other operating income and expenses 46 605 730
Share of earnings in associated companies and joint ventures 10 55 275
Operating income -325 602 413
Net financial items -37 -19 -88
Income before tax -362 583 325
Tax expenses 74 -100 -2
Net income for the period -288 483 323
Other comprehensive income
Items that are or may be reclassified to profit or loss net of tax
Currency translation differences -112 96 123
Cash flow hedges -33 53 108
Other comprehensive income for the period -145 149 231
Total comprehensive income for the period -433 632 554
Net income for the period attributable to:
Equity holders of the Parent company -288 483 323
Total comprehensive income for the period attributable to:
Equity holders of the Parent company -433 632 554
Earnings per share
Basic earnings per share (SEK) -3.68 6.20 4.13
Diluted earnings per share (SEK) -3.68 6.18 4.13
Number of shares
Shares outstanding at the end of the period 78,225,962 77,981,090 78,225,962
Basic average number of shares outstanding 78,225,962 77,970,193 78,137,402
Diluted average number of shares outstanding 78,225,962 78,225,862 78,225,008

Condensed consolidated balance sheet

(SEKm) 31 Mar
2023
31 Mar
2022
31 Dec
2022
Non-current assets
Intangible assets 2,400 2,001 2,437
Machinery, equipment and installations 180 168 174
Right-of-use assets 308 313 335
Shares and participations 1,292 1,445 1,363
Long-term sublease receivables 107 122 104
Other long-term receivables 239 147 94
Total non-current assets 4,526 4,196 4,507
Current assets
Inventories 5,585 3,869 5,206
Accounts receivable 1,049 924 1,218
Short-term sublease receivables 33 31 32
Prepaid expenses and accrued income 8,366 4,888 7,588
Other current receivables 412 373 537
Cash and cash equivalents 2,007 5,642 2,775
Total current assets 17,452 15,727 17,356
Total assets 21,978 19,923 21,863
Equity
Equity 8,486 8,965 8,911
Total equity 8,486 8,965 8,911
Non-current liabilities
Long-term borrowings 3,250 3,400 3,250
Long-term lease liabilities 367 396 394
Long-term provisions 156 147 143
Other non-current liabilities 154 262 112
Total non-current liabilities 3,927 4,205 3,899
Current liabilities
Short-term borrowings 950 800 650
Short-term lease liabilities 116 112 119
Short-term provisions 54 108 55
Other current liabilities 8,445 5,733 8,229
Total current liabilities 9,565 6,753 9,053
Total liabilities 13,492 10,958 12,952
Total shareholders' equity and liabilities 21,978 19,923 21,863

Condensed consolidated statement of cash flow

Full
Q1 Q1 year
(SEKm) 2023 2022 2022
Operating activities
Net income for the period -288 483 323
Dividends from associated companies and joint ventures - - 300
Depreciation, amortisation and write-down 74 63 270
Other adjustments for non-cash items -115 -55 -589
Cash flow from operations, excluding changes in working capital -329 492 304
Changes in working capital -649 -1,418 -3,305
Cash flow from operating activities -978 -926 -3,001
Investing activities
Acquisitions of operations - - -387
Capital expenditures in tangible and intangible assets -58 -45 -186
Other cash flow from investing activities 4 4 71
Cash flow from investing activities -54 -41 -502
Financing activities
New borrowings 300 900 1,400
Amortisation of borrowings - - -800
Net change in leases -28 -17 -72
Other cash flow from financing activities -1 4 7
Cash flow from financing activities 271 887 535
Change in cash and cash equivalents for the period -761 -79 -2,968
Cash and cash equivalents at the beginning of the period 2,775 5,702 5,702
Translation differences in cash and cash equivalents -7 19 41
Cash and cash equivalents at end of the period 2,007 5,642 2,775

Condensed consolidated statement of changes in equity

Full
Q1 Q1 year
(SEKm) 2023 2022 2022
Opening balance 8,911 8,323 8,323
Net income for the period -288 483 323
Other comprehensive income for the period -145 149 231
Total comprehensive income for the period -433 632 554
Effect of share based programmes 8 10 34
Closing balance 8,486 8,965 8,911

Parent company condensed income statement

Q1
Q1
year
(SEKm)
2023
2022
2022
Net sales
11
10
123
General and administrative expenses
-54
-79
-298
Other operating income and expenses
1
-
1
Operating income
-42
-69
-174
Net financial items
94
13
138
Income before tax and appropriations
52
-56
-36
Group contribution
-
-
-
Income before tax
52
-56
-36
Tax expenses
-11
11
36
Net income for the period
41
-45
-
Other comprehensive income
Items that are or may be reclassified to profit or loss net of tax
Cash flow hedge
-1
-
-2
Other comprehensive income
-1
-
-2
Total comprehensive income for the period
40
-45
-2
Full

Parent company condensed balance sheet

31 Mar 31 Mar 31 Dec
(SEKm) 2023 2022 2022
Non-current assets
Shares and participations in Group companies 228 207 223
Long-term receivables from Group companies 9,101 5,940 9,053
Other long-term receivables 41 2 40
Total non-current assets 9,370 6,149 9,316
Current assets
Receivables from Group companies 3,768 2,244 2,919
Other current receivables 206 240 278
Short-term investments - - -
Cash and bank 1,838 5,538 2,610
Total current assets 5,812 8,022 5,807
Total assets 15,182 14,171 15,123
Equity
Restricted equity 158 157 157
Non-restricted equity 6,526 6,412 6,479
Total equity 6,684 6,569 6,636
Non-current liabilities
Long-term borrowings 3,250 3,400 3,250
Other non-current liabilities 12 - 9
Total non-current liabilities 3,262 3,400 3,259
Current liabilities
Short-term borrowings 950 800 650
Liabilities to Group companies 4,020 3,119 4,163
Other current liabilities 266 283 415
Total current liabilities 5,236 4,202 5,228
Total equity and liabilities 15,182 14,171 15,123

Note 1 - Accounting policies

This Interim report has been prepared according to 'IAS 34 Interim Financial Reporting' and 'The Annual Accounts Act'. The interim report for the parent company has been prepared according to the Annual Accounts Act - Chapter 9 'Interim Report'.

The Group's financial accounts and the parent company accounts have been prepared according to the same accounting policies and calculation methods as were applied in the preparation of the 2022 Annual & Sustainability Report. Disclosures in accordance with IAS 34.16A are presented in the financial statements and their accompanying notes, as well as in other parts of the interim report.

In December 2022 the Group changed its operational model, introducing commercial regions to the Group's existing functional set-up, with the ambition to strengthen regional focus and bring the business closer to the customer. The new structure is fully operational as from January 1, 2023, hence the Group introduce reporting on two operating segments, Nordics and International, as disclosed in Note 2.

Note 2 – Operating Segments

The Group's reporting of two operating segments, Nordics and International, is primarily based on the customer's geographical domicile. The reporting reflects the Group's operational structure and how the performance in the Group is internally monitored, reported and followed up upon by the Chief operating Decision Maker (CODM). The CEO is identified as the CODM of the Group.

Nordics

The Nordics segment includes the Groups operations related to the Viaplay streaming service available in all Nordic countries, pay-TV channels in all Nordic countries except Iceland; commercial free-TV channels in Sweden, Denmark, and Norway; and commercial radio networks and audio streaming services in Sweden and Norway. The segment also includes Viaplay Studios which primarily focus on delivering original content for the Group's streaming service Viaplay.

International

The International segment includes the Group's streaming service Viaplay and sales in the regions Continental Europe, Baltics, UK and North America. The segment also includes the Group's Viaplay Select concept offering curated content through partner platforms on selected markets.

Nordics International Total Group
Q1 Q1 Q1 Q1 Q1 Q1
(SEKm) 2023 2022 2023 2022 2023 2022
Net sales 3,866 3,233 671 91 4,537 3,324
Operating expenses -3,703 -2,977 -1,125 -396 -4,828 -3,373
Operating income before IAC and ACI 163 256 -454 -305 -291 -49
Associated Company Income (ACI) - - - - 10 55
Items affecting comparability (IAC) - - - - -44 595
Operating income - - - - -325 602
Net financial items - - - - -37 -19
Tax expenses - - - - 74 -100
Net income - - - - -288 483

Reconciliation segment reporting

Disaggregation of revenue

Full
Revenue by category Q1 Q1 year
(SEKm) 2023 2022 2022
Viaplay 2,353 1,302 6,969
Linear subscription & other 1,313 1,146 4,914
Advertising 871 876 3,808
Total 4,537 3,324 15,691
Full
Revenue by revenue stream Q1 Q1 year
(SEKm) 2023 2022 2022
Subscription 3,318 2,272 10,841
Advertising 900 876 3,837
Licenses, royalities and other 271 149 657
Production 47 28 356
Total 4,537 3,324 15,691
Revenue recognition
At a point in time 271 149 657
Over time 4,266 3,175 15,034
Total 4,537 3,324 15,691

Note 3 – Income from associated company Allente

Allente's revenue and subscribers declined in the quarter. Allente's operating income included SEK -1m (-9) of integration costs that were reported as items affecting comparability. Amortisation and depreciation charges for the period included SEK 109m (86) of PPA-related charges. Viaplay Group's 50% share of Allente's net income of SEK 22m amounted to SEK 11m.

Full
Q1 Q1 year
(SEKm) 2023 2022 2022
Net sales 1,646 1,680 6,808
EBITDA before IAC 182 267 1,264
Depreciation and amortisation -131 -109 -463
Operating income before IAC 51 157 801
Items affecting comparability (IAC) -1 -9 -22
Operating income 50 148 779
Financial items -23 -2 -65
Tax -5 -30 -150
Net income 22 116 564
Viaplay Group 50% share of net income 11 58 282
Net debt 1,790 2,071 1,938
Total subscribers (thousand) 1,023 1,047 1,040

Note 4 – Acquired operations

Viaplay Group announced an agreement to acquire Premier Sports on the 21 July, 2022. Premier Sports operates sports streaming service and TV channels available across the UK. The acquisition was finalised on 21 October, 2022. The purchase price amounted to SEK 387m on a cash and debt-free basis. The purchase price allocation resulted in a surplus value of SEK 443m, which has been allocated to goodwill.

Note 5 – Number of shares

Viaplay Group AB has a total of 79,122,244 shares of which 531,536 are class A shares with 10 votes each, 77,701,208 are class B shares with one vote each and 889,500 are class C shares with one vote each. Following the issue and subsequent buy-back in Q1 of 680,000 class C shares, Viaplay Group holds 6,782 class B shares and all 889,500 class C shares. The total number of votes in Viaplay Group amounts to 83,906,068. The total number of votes in Viaplay Group excluding 6,782 class B shares and 889,500 class C shares held in treasury amounts to 83,009,786.

Class A Class B Class C
Parent company Shares Shares Shares Total
Number of shares as at 31 December 2022 531,536 77,701,208 209,500 78,442,244
Share issue - - 680,000 680,000
Number of shares at 31 March 2023 531,536 77,701,208 889,500 79,122,244
Of which treasury shares - -6,782 -889,500 -896,282
Number of shares excl treasury shares as at 31 Mars 2023 531,536 77,694,426 - 78,225,962

Note 6 – Related party transactions

The Group has related party relationships between its subsidiaries, associated companies and joint ventures. All related party transactions are based on market terms and negotiated on an arm's length basis.

Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Q1
(SEKm) 2021 2021 2021 2021 2022 2022 2022 2022 2022 2023
Viaplay 1,074 1,095 1,150 4,331 1,211 1,288 1,437 1,599 5,535 1,682
Linear subscription & other 1,056 1,118 1,214 4,498 1,146 1,149 1,257 1,362 4,914 1,313
Advertising 941 837 1,140 3,777 876 1,006 845 1,081 3,808 871
Nordics sales 3,070 3,049 3,505 12,606 3,233 3,442 3,539 4,042 14,257 3,866
International (Viaplay) sales 2 5 48 55 91 282 433 628 1,434 671
Total net sales 3,072 3,054 3,553 12,661 3,324 3,725 3,972 4,670 15,691 4,537
Nordics operating income 294 280 340 1,112 256 371 248 136 1,011 163
International operating income -50 -200 -219 -505 -305 -239 -419 -420 -1,383 -454
Operating income before ACI and IAC 244 80 121 607 -49 132 -171 -284 -372 -291
Associated company income (ACI)
Items affecting comparability (IAC)
9
-74
34
-
-51
-
40
-74
55
595
73 71 76 275 10
-44
Operating income 179 114 69 573 602 - - -86 510 -325
Net income 92 55 32 325 483 205
175
-100
-86
-294
-250
413
323
-288
Basic earnings per share (SEK) 1.18 0.71 0.41 4.23 6.20 2.25 -1.10 -3.19 4.13 -3.68
Sales growth 17.1% 8.0% 11.7% 5.5% 11.5% 21.3% 30.0% 31.4% 23.9% 36.5%
Nordics organic growth 31.2% 9.7% 10.9% 16.2% 6.9% 9.6% 12.0% 10.3% 9.7% 17.0%
International organic growth n.a n.a n.a n.a n.a n.a n.a n.a n.a n.a
Organic growth 31.3% 9.9% 12.4% 16.7% 9.9% 18.4% 25.4% 23.9% 19.7% 30.3%
Nordics Operating margin 9.6% 9.2% 9.7% 8.8% 7.9% 10.8% 7.0% 3.4% 7.1% 4.2%
International Operating margin n.a n.a n.a n.a n.a n.a n.a n.a n.a n.a
Operating margin before ACI and IAC 7.9% 2.6% 3.4% 4.8% -1.5% 3.5% -4.3% -6.1% -2.4% -6.4%
Operating margin 5.8% 3.7% 2.0% 4.5% 18.1% 5.5% -2.5% -6.3% 2.6% -7.2%
Net debt -1,697 -1,392 -2,059 -2,059 -1,107 -1,636 546 1,482 1,482 2,516
Net debt/EBITDA 12 months trailing -1.2 -1.1 -2.1 -2.1 -1.4 -2.3 1.2 8.6 8.6 -24.4
ROCE 15.3% 14.0% 9.9% 9.9% 6.6% 5.7% 2.4% -1.2% -1.2% -4.1%
Nordics subscribers ('000s) 3,260 3,296 3,458 - 3,576 4,034 4,229 4,625 - 4,738
International subscribers ('000s) 27 313 547 - 1,208 1,515 2,200 2,694 - 2,905
Total Viaplay subscriber base ('000s) 3,287 3,608 4,005 - 4,783 5,549 6,428 7,318 - 7,643
CSOV Sweden (25-59) % 21.3 20.4 22.0 21.7 21.3 22.2 20.1 17.8 20.3 24.1
CSOV Norway (25-59) % 15.3 17.0 20.2 17.2 16.6 19.9 17.6 20.7 18.9 19.4
CSOV Denmark (25-59) % 22.7 19.1 18.4 19.3 19.0 19.8 18.5 21.1 19.6 20.3
CSOL Sweden (12-79) % 39.2 40.1 40.1 39.6 43.5 44.7 43.7 43.9 44.1 44.7
CSOL Norway (10+) % 67.4 65.6 67.3 66.7 69.7 68.1 67.5 64.7 67.5 66.0

The purpose of Alternative Performance Measures (APMs) is to facilitate the analysis of business performance and industry trends that cannot be directly derived from financial statements. Viaplay Group is using the following Alternative Performance Measures:

  • Change in net sales from Organic growth, Acquisitions/divestments and Changes in FX rates

  • Operating income before associated company income (ACI) and items affecting comparability (IAC)

  • Operating income before IAC

  • Net debt and Net debt/EBITDA

  • Capital Employed and Return on Capital Employed (ROCE)

Reconciliation of sales growth

Since the Group generates the majority of its sales in currencies other than in the reporting currency (i.e. SEK, Swedish Krona) and currency rates have proven to be rather volatile, and due to the fact that the Group has historically made several acquisitions and divestments, the Company's sales trends and performance are analysed as changes in organic sales growth. This presents the increase or decrease in the overall SEK net sales on a comparable basis, allowing separate discussion of the impact of acquisitions/divestments and exchange rates.

Organic growth, i.e. sales growth adjusted for acquisitions/divestments and changes in FX rates, amounted to 30.3% in Q1 2023.

Q1 (SEKm) Reported Net sales Acquisitions/
divestments
Net sales
adjusted for
acquisitions/
divestments
Changes in
FX rates
Net sales
adjusted for
acquisitions/
divestments and
changes in FX
rates
Nordics
2023 3,866 - 3,866 -84 3,782
2022 3,233 - 3,233 - 3,233
Growth 633 633 549
Growth % 19.6% 19.6% 17.0%
International
2023 671 -85 586 -35 551
2022 91 - 91 - 91
Growth 580 495 460
Growth % 637.4% 544.0% 505.5%
Total
2023 4,537 -85 4,452 -119 4,333
2022 3,324 - 3,324 - 3,324
Growth 1,213 1,128 1,009
Growth % 36.5% 33.9% 30.3%

Reconciliation of operating income before associated company income (ACI) and items affecting comparability (IAC)

Operating income before associated company income (ACI) and items affecting comparability (IAC) refers to operating income after the reversal of material items and events related to changes in the Group's structure or lines of business, which are relevant for understanding the Group's development on a like-for-like basis. This measure is used by management to follow and analyse the underlying profits and to offer more comparable figures between periods.

Operating income before IAC and associated company income

Full
Q1 Q1 year
(SEKm) 2023 2022 2022
Operating income -325 602 413
Items affecting comparability (IAC) -44 595 510
Operating income before IAC -281 6 -97
Associated company income (ACI) 10 55 275
Operating income before ACI and IAC -291 -49 -372

Items affecting comparability

Full
Q1 Q1 year
(SEKm) 2023 2022 2022
Restructuring and redundancy costs -33 - -37
Write-down of content - - -27
Acquisition and integration cost for Premier Sports -3 - -22
Advisory costs -8 - -
Settlement of court cases - 595 595
Total -44 595 510

Items affecting comparability classified by function

Full
Q1 Q1 year
(SEKm) 2023 2022 2022
Cost of sales -5 - -38
Administrative expenses -36 - -34
Other operating income and expenses -3 595 582
Total -44 595 510

Reconciliation of net debt/EBITDA ratio

Net debt refers to the sum of interest-bearing liabilities less total cash and interest-bearing assets. Net debt also includes lease liabilities net of sublease receivables and dividends payable. Net debt is used by Group management to track the indebtedness of the Group and to analyse the leverage and refinancing needs of the Group. The net debt to EBITDA ratio provides a KPI for net debt in relation to cash profits generated by the business, i.e. an indication of a business' ability to pay its debts. This measure is commonly used by financial institutions to rate creditworthiness. A negative figure indicates that the Group has a net cash position (cash in excess of interest-bearing liabilities).

Net debt

30 Jun 30 Sep 31 Dec 31 Mar 30 Jun 30 Sep 31 Dec 31 Mar
(SEKm) 2021 2021 2021 2022 2022 2022 2022 2023
Short-term borrowings 800 800 800 800 150 150 650 950
Long-term borrowings 2,500 2,500 2,500 3,400 3,250 3,250 3,250 3,250
Total financial borrowings 3,300 3,300 3,300 4,200 3,400 3,400 3,900 4,200
Interest bearing receivables 40 40 20 20 20 20 20 20
Dividend receivable - Allente - - - - 100 - - -
Short-term investments - - - - - 100 - -
Cash and cash equivalents 5,415 5,014 5,702 5,642 5,254 3,065 2,775 2,007
Cash and cash equivalents included in
assets held for sale
5 - - - - - - -
Financial net debt -2,160 -1,754 -2,422 -1,462 -1,974 215 1,105 2,173
Lease liabilities 539 534 522 508 487 479 513 483
Lease liabilities included in liabilities
related to assets held for sale
102 - - - - - - -
Sublease receivables 178 172 158 153 149 148 136 140
Total lease liabilities net 463 362 364 355 338 331 377 343
Net debt -1,697 -1,392 -2,059 -1,107 -1,636 546 1,482 2,516

Net debt/EBITDA before IAC

Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
(SEKm) 2021 2021 2021 2022 2022 2022 2022 2023
Operating income before IAC, continuing
operations
1,111 969 647 443 395 181 -97 -384
Operating income before IAC, discontinued
operations
-10 2 8 16 3 - - -
Depreciation, amortisation and write-downs,
continuing operations1)
264 267 296 294 292 292 270 281
Depreciation, amortisation and write-downs,
discontinued operations1)
44 42 30 19 10 - - -
EBITDA 12 months trailing 1,409 1,280 980 772 700 473 173 -103
Net debt -1,697 -1,392 -2,059 -1,107 -1,636 546 1,482 2,516
Total net debt / EBITDA 12 months trailing -1.2 -1.1 -2.1 -1.4 -2.3 1.2 8.6 -24.4

1) Refers to non-current assets only

Reconciliation of Return on Capital Employed (ROCE)

Return on capital employed is a performance measure for operating income before items affecting comparability in relation to the capital employed within the operations. Operating income before items affecting comparability is the main profit metric that operations are responsible for and is measured before interest and taxes. Capital employed is the sum of current and non-current assets less current and non-current liabilities, provisions and liabilities at fair value. All items are non-interest-bearing. Capital employed equals the sum of equity and net debt.

Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
(SEKm) 2021 2021 2021 2022 2022 2022 2022 2023
Inventories 3,009 3,252 3,543 3,869 4,181 4,629 5,206 5,585
Accounts receivable 899 1,089 847 924 1,117 1,023 1,218 1,049
Prepaid expense and accrued income 4,238 4,196 4,990 4,888 6,682 6,979 7,588 8,366
Other current assets 406 261 350 373 676 843 537 412
Other current liabilities -6,245 -5,498 -6,772 -5,733 -8,485 -7,207 -8,229 -8,445
Total working capital 2,307 3,300 2,958 4,321 4,171 6,267 6,320 6,967
Intangible assets 1,998 1,992 1,981 2,001 1,984 1,972 2,437 2,400
Machinery, equipment and installations 131 148 163 168 162 163 174 180
Right-of-use assets 330 335 321 313 295 290 335 308
Shares and participations 1,577 1,495 1,328 1,445 1,382 1,474 1,363 1,292
Other long-term receivables 127 115 124 127 155 130 74 219
Capital employed held for sale 498 - - - - - - -
Provisions -351 -360 -372 -255 -270 -239 -198 -210
Other non-current liabilities -256 -213 -238 -262 -270 -238 -112 -154
Other items included in the capital 4,054 3,512 3,306 3,538 3,438 3,552 4,073 4,035
employed
Capital employed 6,361 6,812 6,264 7,858 7,609 9,819 10,393 11,002
Operating income before IAC 12 months
trailing, continuing operations
1,111 969 647 443 395 181 -97 -384
Operating income before IAC 12 months
trailing, discontinued operations
-10 2 8 16 3 0 - -
Operating income before IAC 12 months
trailing, total 1,101 971 655 459 398 181 -97 -384
Average Capital Employed (5 quarters) 7,199 6,933 6,597 6,916 6,981 7,673 8,389 9,337
ROCE % 15.3% 14.0% 9.9% 6.6% 5.7% 2.4% -1.2% -4.1%
Assets held for sale 846 - - - - - - -
Cash and cash equivalents included in
assets held for sale
-5 - - - - - - -
Liabilities related to assets held for sale -446 - - - - - - -
Lease liability, included in liabilities
related to assets held for sale
102 - - - - - - -
Capital employed held for sale 498 - - - - - - -

Associated company income (ACI)

Associated companies are companies in which the Group holds voting rights of at least 20% and no more than 50%. Associated company income is the Group's share of the associated company's net income.

Capital employed

Capital employed is the sum of current and non-current assets less current and non-current liabilities, provisions and liabilities at fair value. All items are non-interest-bearing.

Commercial Share of Listening (CSOL)

CSOL comprises Viaplay Group's estimated share of commercial radio listening amongst 10+ year olds in Norway and 12-79 year olds in Sweden.

Commercial Share of Viewing (CSOV)

CSOV comprises Viaplay Group's estimated share of commercial TV viewing amongst 25-59 year olds.

Earnings per share

Earnings per share is expressed as net income attributable to equity holders of the parent divided by the average number of shares outstanding.

EBITDA

EBITDA is Earnings Before Interest, Taxes, Depreciation and Amortisation.

Items Affecting Comparability (IAC)

Items Affecting Comparability refer to material items and events related to changes in the Group's structure or lines of business, which are relevant for understanding the Group's development on a like-for-like basis.

Net debt

Net debt is the sum of short and long-term interest-bearing liabilities less total cash and interest-bearing assets. Net debt also includes lease liabilities net of sublease receivables and dividends payable. A negative figure indicates that the Group has a net cash position (cash in excess of interest-bearing liabilities).

Operating income

Operating income comprises results before interest and taxes, otherwise known as EBIT (Earnings Before Interest and Taxes).

Organic growth

Organic growth is the change in net sales compared to the same period of the previous year excluding acquisitions and divestments and adjusted for currency translation and transaction effects.

Return On Capital Employed (ROCE) %

Return on capital employed is calculated as operating income as a percentage of average capital employed.

Viaplay subscribers

A Viaplay subscriber is defined as a customer who has access to Viaplay and for whom a method of payment has been provided. Viaplay Group only reports paid-for subscriptions where a payment has been received directly from the end-customer or from a partner organisation.

2023 Annual General Meeting

The 2023 Annual General Meeting of Viaplay shareholders will be held on Tuesday 16 May 2023 at Viaplay's Head Office in Stockholm. Shareholders may also exercise their voting rights by postal voting. As previously communicated, the Board of Directors will propose to the Annual General Meeting that no cash dividend be paid for 2022 and that the 2022 profits be carried forward into 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.

Financial calendar

Annual General Meeting 16 May Publication of Q2 interim report 20 July Publication of Q3 interim report 24 October

Contact

[email protected] or +73 699 17 00 [email protected] or +44 7768 440 414

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Conference call and video webcast

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. The video webcast will be streamed at https://edge.media-server.com/mmc/p/2n5athhr Please register for the conference call at

https://register.vevent.com/register/BI83837a52e3284ec2ba578d7369ab38c8

Viaplay Group Ringvägen 52, PO Box 17104 104 62 Stockholm, Sweden viaplaygroup.com @viaplaygroup

Viaplay Group AB (publ) is the international entertainment provider. Our Viaplay streaming service is available direct-toconsumer in every Nordic and Baltic country, Poland, the Netherlands, the UK, the US and Canada. Every day, millions of customers enjoy our unique entertainment offering, including acclaimed Viaplay Series, Films and more, and an unrivalled lineup of premium live sports. In addition, our innovative Viaplay Select branded content concept makes Viaplay's compelling storytelling available to partners around the world. 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').The information was submitted for publication, through the agency of the contact person set out above, at 07:30 CET on 25 April 2023.

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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