Storytel AB (publ)

STO:STORY B

Earnings Call Transcript 2020-Q2

[Jonas Tellander, Founder, CEO & Director]

Hello. Good morning. I'm here together with...

[Jorgen Gullbrandson, Chief Development Officer]

Jorgen Gullbrandson, Company CFO.

[Ingrid Welinder Bojner, Chief Commercial Officer]

And Ingrid Bojner, Chief Commercial Officer.

[Jonas Tellander, Founder, CEO & Director]

My name is Jonas Tellander, and we have to present the Q2 report for Storytel AB. So basically, Q2 was a very strong quarter. We could say that we have 42% annual subscriber growth and 43% revenue growth, which is, of course, very, very strong. In some part, of course, this revenue growth is boosted by the fact that a lot of the VAT rates in many of our markets have been reduced on -- in the third quarter last year. We will see on the second half of this year that the relative growth number will drop down significantly. But the underlying subscriber growth was very, very strong. So I'll hand over to Jorgen to walk us through the highlights of the report and also the numbers.

[Jorgen Gullbrandson, Chief Development Officer]

Yes. So could you please display the third slide, highlight in the reports. So -- and just as Jonas said, streaming sales were up 43% comparing to the quarter -- same quarter last year, which means SEK 459 million, the highest ever in the company history. Subscriber base up as well to, on average, 1.257 million users, up from a short of 900,000 last year the same quarter. Looking at the revenue line, which includes everything in the group. We came in at SEK 554 million, up from SEK 402 million last year the same quarter. So a significant growth, obviously, on the consolidated level. Worth mentioning, during the quarter as well is that we renegotiated our financing from Swedbank so that we now have only a so-called revolving credit facility of SEK 500 million, which means this is a credit line that we could draw anytime we like, but we don't need to pay full interest for it, simply pay a small fee to have access to this credit line.As of today, we use nothing of it. We have, during the period as well, in conjunction, after the AGM issued a stock option program for all employees. So that means that everyone employed by the company at the beginning of June are part of the 3 staff auction program. The intention is, of course, to create loyalty and sharing the same targets with everyone in the staff. For the first time ever, we also introduced a warrant program for selected key employees and for some of our new directors in the company. This is a program where they need to buy the option with the strike north of SEK 300. Through this transaction, we pooled in SEK 11 million from our staff and Board members, which I think is a great sign of strength and confidence in the company. So about 50 persons were involved in this warrant program as well. And the stock option program is like 500 in the company that were offered now. Next slide, please. Going over to the fun page, with all the numbers on it. So looking to the right, where you see the graphs of this total streaming revenue over the last 5 quarters. You can see that we come in at the highest revenue ever for the group and all to the highest contribution margin. Worth mentioning in this as well, you can see that we had a significant increase in contribution margin in Q1 2020. And that is when we changed our accounting principles. As you might remember, we started at activating cost for our -- development of our platform, but also developing and creating our audio book, so both those 2 elements are now activated in the balance sheet. We're talking about SEK 57 million in Q2. So that's a one-off. But even that aside, we had the highest contribution margin in the group ever in history. Looking at the different regions, Nordics and the non-Nordics, it's extremely fun to see that the non-Nordic region, we improved the contribution margin extremely well. We're up from almost 100% negative a year ago to minus 7% contribution margin in Q2 2020. So significant increase, which comes with increased volume, I would say, of the higher revenue of SEK 93 million in the non-Nordics in Q2, highest ever, and more than 100% more than a year back. I mean, explains the higher contribution margin. Also in the Nordics, it's extremely good. A bit lower than in Q1 this year, which is mainly explained by the fact that we have a heavy marketing campaign in Q2. We usually have that in Q2, and that is to attract as many users as possible in the Nordic countries before they go on vacation in that period. I'll leave the forecast until later in the show. So next slide, please. And as is in some of our recent announcements, we made a couple of acquisitions in July. One was of the Icelandic publishing house, Forlagið, which is now under Competition Authority scrutiny, if that goes through. We have a very strong position in the book market in Iceland with our service that's attracting a lot of Icelandic people to listen to audio books, but it's also a very big and vast book market as a whole. This is a very interesting acquisition. Then we acquired Kitab Sawti, competitor in the MENA region, which helped us to acquire big couple of Arabic speaking audio books. So you now have 4,000 titles, strong catalog of Arabic audio books that we can distribute throughout the world. And also in July, we announced the acquisition of Earselect, a Nordic production company for audio books, with a very advanced and progressive technology that helps to streamline the audio book production process. So I mean we -- over the years, we made probably some 20 acquisitions. I mean, the most notable was Norstedts acquisition in 2016, and also our competitor Mofibo in Denmark in 2016.And I think that we see that this is part of our regular business. When we want to acquire new technology, a catalog or a very strong market position, we always look, of course, to develop it ourselves, but sometimes that's not enough and we want to speed up things by making acquisition. And I think that's what you will see us doing also in future.Next slide, please. I hand over to Ingrid is going to walk us through content.

[Ingrid Welinder Bojner, Chief Commercial Officer]

Yes, content is key for us, of course, since that is how we reach our customers and what we engage with. So we are exploring a lot of investments in the content area. We're very happy to see that our total original content catalog is growing. We have also released 10 of our strongest titles from different countries into English and included that in our catalogs across the group. We continue to see True Crime being very important for us.Following the investments in [indiscernible] in the Swedish market, we have done other follow-on titles in Iceland and other countries. Virus, which is a total original success, launched its 7% this spring. And has also been explored in other countries, and we're doing the makeovers for specific other markets for this title.Children's catalog has been very important to us during Q2, and we have seen an increase in the leadership across the board in children at the catalog. So we've also included more and more titles and invested more in this type of content. And specifically for the Swedish market, we've invested in [indiscernible]. So that's something that many of our customers are enjoying at the moment.Furthermore, all of our exclusive titles have also enjoyed some pull from external production companies who are in negotiations with some of this being explored also potentially to be and other streaming services.Next slide, please. So when we look at other highlights, we wanted to explore both people and, of course, also what's going on in the different markets. So when we talk about people, this is one of our largest drive. And we are very happy to say that we've onboarded our 500 employees. And this has also been done in a moment of fully digital situation, where we can actually both employ and onboard people fully digital across the board in our 20 markets.We can see that our employer branding score is increasing, and that's, of course, important for us to find the best talent out there to continue to invest in our tech platform and, of course, all our commercial and content areas. In addition, we have strengthened the Board during the spring with Stefan Blom and Malin Holmgreen and thanking -- Holmberg, sorry. I'm thanking our committed Board members who have recently left us. And also joining us in the management team here, Helena Gustafsson, a long timer with Storytel, and a great contributor to all things in terms of content and publishing and knowing how to really, really get through in the Storytel spoken word. Is that great to have her on board?When it comes to market development, in the Capital Markets Day during January, we said that we were going to start exploring other different type of models to reach a broader audience. And that's what we've done. We have launched 2 services in India during the summer, AudioBites and Storytel Select, which is a limited offer, with only the Marathi language available. So excluding the English conduct on the regular service that the premium services we have across. So that's going to be interesting to see how that develops, knowing that India is a vast market and very diverse.In addition, we have had some [ Baa2 ] improvements, both in Spain in April and recently in Bulgaria from 1st of July. And last, but not least, we're continuing our expansion effort. The things we have talked about mostly lately is the expansion in the APAC region. We're going to launch Thailand later this year and Indonesia in 2021. Next slide.

[Jonas Tellander, Founder, CEO & Director]

So looking at the subscriber revenue growth forecast for Q3 this year. We expect to grow our subscriber base to 1,345,000 subscribers, indicating a 33% year-on-year growth this Q3 2019. And looking at our revenue growth about Q3 2019, we expect to grow that by 21% to SEK 483.5 million in the third quarter. So I mean what we've seen -- I think what we've seen is that some non-Nordic markets have a slowdown in Q3. We could see very clearly in July that growth stopped for a while and it's now picking up again, I think, in August. But we want to be a little bit conservative and look at this as a forecast that we are pretty confident with under this unexpected circumstances of changing economics in the world. And in particular, in these markets that newly opened up.So the full year forecast at least for revenues remains at 32% growth and SEK 1.9 billion just in the lower end of the range that we communicated in January of this year.Next slide launch timeline. So what does it look like for coming for launches and the markets we're on? Well, what we're very much focused on now and working diligently on is to bring new markets into profitability within 5 years. This slide indicates that. We can see that at the beginning of this year, we had 4 markets, net profitability in Sweden, Denmark, Norway, and Iceland. And we quickly, in Q1, added the Netherlands to this group of profitable markets and now believe that we will add also Finland and hopefully, Russia before the end of this year. So this is a very important metric for us. We're not profitable on consolidated level for the full company, but bringing its market to profitability within 5 years is the key metrics for us to show that we, on a local level, have found the right product market fit and are able to grow revenues profitably into a breakeven situation.So I'll hand over to Jorgen to walk us through the financial targets.

[Jorgen Gullbrandson, Chief Development Officer]

Thank you. Next slide, please. Yes. These are the financial targets that you have seen before. We have polished them slightly. Those of you that know these by heart can see that we have said that we're still going to reach the 1.5 million paying subscribers at the end of this year. So no change there. But we also say that we want to grow our streaming revenues to SEK 1.9 billion. Previously, we said anything between SEK 1.9 billion and SEK 2 billion. Now we conclude and see that we think we will hit the lower of this range. And there, we want to be more specific. That also means that our percentage growth is tightened to 32%, which is what it is, and took out the 32% to 35% that we used to have.The negative EBITDA margin, we maintain minus 1% to minus 5% over the year. If we changed last quarter, just following the change in the accounting principal, but underlying, we see the same positive development in EBITDA. We also said, as Jonas just mentioned, that we think we should reach stream profitability on a local level into the 4 markets. We have done 1 at least. So we need to add at least 1 more to reach the target, and we think we can do it. And we're going to launch in 1 to 3 market, and that also corresponds with exactly what Ingrid told you before, but as you said, we're opening up in market.Looking at our long-term financial targets, maybe even more interesting. This is unchanged. We still believe we can grow the paying subs by 40% on a year-by-year basis, while our revenues will come in somewhere slower. And between these 2, of course, the revenues is the important bit. Maybe depending on the price development and mix of countries where we grow, we might need to grow even more paying subscribers to hit the revenue target. And we want to be clear that we will prioritize growth before profitability as long as we improve our customer lifetime value compared to the acquisition cost of the subscribers' time period.And as Jonas mentioned as well, we want to reach streaming profitability on a local level within 5 years from launch, and it seems like we are able to do that. And launching the additional at least 20 markets over the coming 2-year period, that's also in line with what Ingrid mentioned that we are on that and continue to do that. So I think the next time for next page and Q&A.

[Operator]

And our first question is for Joachim Gunell from DNB Markets.

[Joachim Gunell, Junior Analyst]

So when we think about your Q3 guidance, I mean, there seems to be no clear seasonal dose in Q3 for your non-Nordic markets. So you talked a bit about this, but we have historically seen at least Q3 boost even in these markets. Can you talk just a bit more about what drives this conservativeness other than, say, uncertain GDP outlook?

[Jonas Tellander, Founder, CEO & Director]

Yes, sorry. I mean for the Nordic market, we have very strong Q2 and then also strong Q3 guidance now growing by almost 60,000 subscribers. So I think that's all well, that's where we've seen the seasonality historically more in Sweden and Denmark and Norway are very strong in countries where you had historically very, very strong. People going in vacation at the same time in July, and we've seen that effect very, very strongly over the years with start-up. That effect is not as accentuated in the non-Nordic markets, and it varies a lot. But what we could see this year was that, as you know, that the corona quarantine situation brought incredible growth to Storytel in April. In particular, we could see that expand into May. And then in some parts into June, we have knockdowns in many of our markets, most notably, we saw Russia, Turkey, India, and also countries like Italy and Spain, we saw some really good growth.But then, all of a sudden, in July, we could see that this growth totally disappeared. So we -- basically July was we lost month, more or less, where there was no growth in these markets at all. Now we can see that it starts to pick up again, but it basically means that the growth for Q3 will be a lot lower for the non-Nordic markets as a whole. We see some examples on markets that are growing pretty well like the Netherlands, but apart from that, it's much lower than we've got used to historically. And then you can ask yourself, is this a long-term trend, what's going on here? I mean, fundamentally, personally, I believe that the strong need and interest in listening to good stories will continue to grow in these markets as we do a better and better job at marketing Storytel and getting more and more people to know us. So -- but here and now, this is what we can promise. So this is what we can estimate and want to communicate to you today.

[Joachim Gunell, Junior Analyst]

That's clear, Jonas. And having increased the credit facility, can you elaborate a bit on, if you believe the organization is ready to pursue even more acquisitions in by the end of 2020? Or will the focus be entirely on consolidating the [ trade ] you've recently announced?

[Jorgen Gullbrandson, Chief Development Officer]

Well, as you know, we cannot comment on any future acquisitions if we're doing or not doing. But as Jonas mentioned before, when we talked about the ones that were done, this is part of our ordinary business. Of the company, and we, of course, need to look at these opportunities in all the markets we're in. We just recently hired an M&A manager that will join the company in a couple of months' time, maybe that gives you an indication.

[Joachim Gunell, Junior Analyst]

And just a final question. I mean, not that you have a relatively, say, new setup with your first pure technology acquisition in year select. Are there any say growth plans or strategies that's maybe out of the ordinary that you're thinking about? I mean, in what way, we do believe Storytel will be different over the next, say, 5 years than it has been in the past 10?

[Jonas Tellander, Founder, CEO & Director]

In terms of what -- in terms of technology build up or...

[Joachim Gunell, Junior Analyst]

Exactly, more from a strategy point of view as you've complemented, say, the traditional publishing these acquisitions now with more technology-oriented ones.

[Ingrid Welinder Bojner, Chief Commercial Officer]

I think it's difficult to tell, but I would say that, of course, data mining and data processing is more and more important for us in order to service our customers best and also our publisher partners. So this is very important on that, of course, comes our decision in artificial intelligence. So there are, of course, a lot of different areas in terms of technology that we're exploring.

[Operator]

Next question is from Derek Laliberte, ABG.

[Derek Laliberte, Research Analyst]

So outstanding growth in Q2 and also strong guidance here for Q3, although it is clearly lower, and you are slightly low in your full year guidance. Clearly, you are talking about this higher churn in some markets. But how much of this is currency or FX related? And how much is subscriber growth because you are keeping your end of year subscriber target of 1.5 million while only lowering the revenue target?

[Jonas Tellander, Founder, CEO & Director]

Yes. I mean, as you see in the current market for once, the Swedish krona has strengthened against more or less all other currencies. So there is definitely a negative effect that hits us in -- both in Q2 and in Q3. However, I cannot honestly say that this is the explanation. The main explanation to be somewhat soft to Q3 is that we actually attract less people to the service. So the currency definitely has a negative effect, but it's also driven by less people. So both parts of the equation play in. Yes. I mean, if I need to wait them, I don't have a specific number, but I would say the fewer people on the service following the very weak July is the main driver, I would say, that's more than 50% of this.

[Derek Laliberte, Research Analyst]

Okay. That's very clear. And I know you mentioned a couple there, but are there any specific markets to highlight in terms of this higher churn?

[Jorgen Gullbrandson, Chief Development Officer]

Yes. So I think, we said before, we see this in Russia, Turkey. Those -- that's grew really, really strongly there. Russia, Turkey, India, in red and you have all the markets.

[Ingrid Welinder Bojner, Chief Commercial Officer]

No, but I think you have to go back to the behavioral aspect of our app. It takes some time to understand how and when and where we contribute the app. And I think some of these markets are in quite of a turmoil in terms of how people live their lives. So first, you have been in a very tough [indiscernible] situation and [indiscernible] comes and that's a different type, and you want to meet with your parental family again. So I think, it will stabilize over time. But I would look at countries who have been in the furthest can into that where we're a little bit more outside [ just maturing ] situation.

[Derek Laliberte, Research Analyst]

Got you. And then on the back of the Kitab Sawti acquisition, I was wondering if you could elaborate a bit on your expectations for the Middle East market now that you have this great content catalog and a strong team to drive it locally. What's kind of the status in this market in terms of adoption to audio books, some streaming services? And what's your focus now? Will it really start to ramp up marketing spend, et cetera?

[Jonas Tellander, Founder, CEO & Director]

Yes. I mean, at Storytel, we always appreciate the value of a strong local team and also in particular, I think, there's a strong local leader that can really drive the local market up [indiscernible] and understand what to focus on and when. And I think that that's one part that we think that we acquired with this acquisition of Kitab Sawti to have a very strong local team that also have a much better adapted up to the Arabic market actually historical have present. And with this consolidated catalog of 4,500 titles in total, I think that we are in a very strong position to be able to seriously start to invest in the Arabic market, which we haven't really done historically, to be frank. So it's a good setup. But it will take time. And every single country there in the region -- in a region, has its own challenges. So we hope to be able to see strong growth for these markets in coming years, but it's coming from very low levels. So before that makes a meaningful contribution to the overall growth of Storytel, I think it will take 2 to 3 years to be frank. But big hopes for that and also big hopes that the strong Arabic catalog will be of great value for us in the Nordic area where we already have a lot of customers that will be willing to pay for this content. It's still pretty exciting. We're looking forward to this, and it's going to be fun to follow and to also get to 20-plus Kitab Sawti employees to integrate into the Storytel company.

[Derek Laliberte, Research Analyst]

Exciting. That's very clear. And just finally, I was wondering if you could give some sort of update on the Finnish market here. Sounds very positive with being close to profitability. Has anything changed on the market, thinking about an improved position versus your main competitor? And how are things going there?

[Jonas Tellander, Founder, CEO & Director]

Yes. I think that what we can comment on is that subscriber base is growing. We have a good pricing level. Gross margins are coming up. And all this is leading to a situation where we breakeven soon and will be profitable. I think that's what we can say here now. It's -- the multiple -- do you have anything to add there, Ingrid?

[Ingrid Welinder Bojner, Chief Commercial Officer]

No. I think you asked before about when that the market become profitable. And of course, it's an equation of both the gross margin, but also, of course, the volume of customers in the market. So I think we're coming to a pretty good situation in Finland with a stable growth and the sales customer base.

[Jonas Tellander, Founder, CEO & Director]

Penetration of audio books is very similar now in Sweden, Norway, Denmark, Finland, Iceland even higher. It's very high penetration in all the Nordic markets. And what we're placing our bet on is really to see this penetration grow as much in non-Nordic markets. That takes some time for us to really figure this out. But hopefully, market by market, we'll nail it and be able to deliver very strong growth as we expect in the coming 10 years.

[Operator]

Next question is from Oscar Erixon, Carnegie.

[Oscar Erixon, Financial Analyst]

Few questions for me. First of all, regarding the Q3 guidance on subscribers and revenue. Is that on the conservative side, i.e., is the improved trend in August as well as to keep up some of the acquisition fully factored in?

[Jonas Tellander, Founder, CEO & Director]

I think historically, our forecast, we did an analysis of our forecasting currency and looked since we started with the forecast 4 years ago, and then compare this to Netflix, actually, we could see that our forecasting accuracy was actually twice as good or half as bad as theirs. So on average, I think we missed the net add growth by 8%. And we intend, of course, to keep that for costing accuracy. We want to provide a reasonable picture. But what's different now is that the -- we're not really sure what's going on in some of these markets. I think that's all really, we can tell, and this is our best guess right now, to be frank. But a year ago, you have some other thoughts there.

[Jorgen Gullbrandson, Chief Development Officer]

No, I agree. I mean, it's not like we're trying to downplay it anyway. I mean, we really try to hit this. As I think you know, and Jonas mentioned historically, we've been very successful with that. But we're going to keep that. But the -- as we said last quarter as well, when we gave the indication the uncertainty in the marketplace following what's happening with corona and the rest of the world. It's still there. We don't know what the comeback will be, what will happen with the GDP development in these countries, et cetera, et cetera. So the uncertainty, I would say, is greater than ever in this forecast. You asked specifically about Kitab Sawti and Jonas mentioning that, that we're not locked about. It's not the big numbers coming from that region in Q3. So that you should not expect.

[Oscar Erixon, Financial Analyst]

Got it. Very clear. And perhaps a question for Ingrid actually. What effects have you seen from Penguin Random House withdrawing it to Spanish and English language content earlier this year? Any markets that stand out? I suspect a positive gross margin effect, but perhaps slightly how you showed?

[Ingrid Welinder Bojner, Chief Commercial Officer]

I think we -- the thing we're doing in the particularly Spanish markets, which are the ones that you're referring to, investing heavily in content and also talking to other partners to be able to offer a great catalog with different types of categories, of course, to our customers.In terms of other figures, I haven't really seen any strong signals in any other ways. I think we -- yes. So I think that's pretty much.

[Jonas Tellander, Founder, CEO & Director]

Yes. I mean if you say the English content, I think we said it multiple times, but on each single market, English content consumption by our subscribers makes up less than 10% typically of total consumption. So having one, we still have an English audio book catalog, that's a couple of hundred thousand titles and very strong. So that doesn't make such a huge difference to us.

[Oscar Erixon, Financial Analyst]

Understood. And on the topic of English content here. Obviously, Amazon announced they're entering into Sweden earlier this week -- or actually last week. Do you expect any change in strategy for Audible and risk, of course, for them, gaining market share? And also, if you could discuss sort of the main challenges for Audible in completing the [ raw mix ]?

[Jonas Tellander, Founder, CEO & Director]

I think, Audible, typically, when they have a chance to build up a local catalog that can be exclusive, they typically want to take that chance. I think that's not possible for the Nordic markets where the investments in content have been very, very strong for many years now. I think launching in Sweden in 2020 is very different from launching in the U.S. in 1995. The streaming audio book market is not overrated, but very, very competitive here already. So that's a one. And then looking at the book e-commerce market, we have a couple of pretty strong local players in Adelaide, even bookers that's going to do a good job in providing books at a low price with slim margins and doing it quickly and conveniently to people. So I think that's not a huge revolution to make there. But what Amazon does well, and they do well all in some markets is to build up a strong Prime catalog and -- sorry strong -- big number of Prime subscribers that can benefit from a couple of different things within the Amazon ecosystem. And I think that -- if they managed to build that up in the Nordic markets on Sweden for start, I don't know. But if they do, of course, there will be a very, very strong competitor in the online space for anyone. But short-term, I think we're not going to see a big effect on it. Audible has been on the Swedish market for a year and made some marketing already. But again, it's a very competitive market as it is.

[Oscar Erixon, Financial Analyst]

Great. And 1 final question for me. Regarding your long-term financial targets, where you target 20 new markets until 2023. Could you just say something about what local hubs you expect to be the main drivers behind this expansion? I suspect you have a much stronger position now in the MENA region, content wise, following the Kitab Sawti acquisition?

[Ingrid Welinder Bojner, Chief Commercial Officer]

Yes. So I'll just start with the MENA region. Of course, investing in Kitab Sawti as an acquisition is also something that provides a very strong catalog. And one has to understand that the region is built up of several different countries with different dialects and different tradition in terms of content. So we're going to explore, of course, this opportunity, including North Africa. And then as we've already stated, we're going to launch more markets in the APAC region. So that's going to be very exciting to follow up on. And we're continuously investing in local languages in India, for example. That also is a vast country, which is made up of several sublanguage groups. So those markets are, of course, very interesting for us. And we have already launched several markets in South America. And I believe that that's also a region where we will explore much more opportunities going forward.

[Operator]

Next question is from Hjalmar Ahlberg, Kepler Cheuvreux.

[Hjalmar Ahlberg, Equity Research Analyst]

Maybe 1 more question on the outlook for Q2 and maybe Q4 as well. I mean as you see this kind of uncertainty into Q3, but you're still keeping your full year subscriber estimate. Can you say something about what kind of -- do you expect it based on a pickup in this market for its uncertainty? Or do you see some new markets having growth? Or what's the growth for the full year? And so, if you can add anything there?

[Jonas Tellander, Founder, CEO & Director]

Yes. Not sure who should answer it. No. But looking at the Q3, I think it's -- like we said, July was the last month, then we see positive signs coming in August, and we know we have good things coming later on this fall. That's why we dare to believe that we will be able to deliver the numbers we said in the beginning of the year. And we had a good first half of the year as well as we have a good starting point. I think that's why you can combine a somewhat softer Q3 forecast with keeping the full year target. That's what we do. And we also said that the full year target would be in the lower of the range previously communicated as well. So a very small change to that as well.

[Hjalmar Ahlberg, Equity Research Analyst]

Okay. Got it. And looking at -- on the contribution margin in the non-Nordic, it was quite strong now in Q2. If you get related to some decrease in marketing spend, as you saw, maybe a lower uptake in the end of the quarter? Or is that just that you -- I mean, you're growing and improving profit in that way?

[Jonas Tellander, Founder, CEO & Director]

Yes. I mean, partly it is, like Ingrid is speaking about Finland with I think when you come to a certain point, when you grow with the scary Basin and grew the revenues, we very quickly could come to a positive contribution margin in the country. So it's a volumes game that we see in many of these territories, and that's positive. Then secondly, as you mentioned as well, our contribution margin is directly hit by marketing spend in the present quarter. We typically, in the Nordic, Scandinavian countries where we have this vacation pattern where people go on leave, and we usually grow much during the summer months, we usually do a lot of marketing as well as do the competition. You need to be out there and invest heavily in these markets. I think we have not invested that much in the non-Nordic markets, partly that we saw that some of the out-of-home campaigns simply were canceled because we didn't think anyone would see them in the beginning of this period. So the lower spend in marketing in the non-Nordic countries brought up the contribution margin. And that can be one of the extenuator factors to the softer growth in these countries and vice versa within Nordic countries. So it's possible that they are connected.

[Hjalmar Ahlberg, Equity Research Analyst]

Okay. Got it. And maybe a last question on these new markets where you see some lower growth. Are you changing your marketing here? Or are you doing the same as before? Or is there any reason to look that over or do you think it's more a temporary slowdown, let's say?

[Ingrid Welinder Bojner, Chief Commercial Officer]

I think we have strong country managers heading up our local operations in each of our markets. And they are continuously looking at the best go-to-market strategy. For some markets, we're working more with partnerships and growing also the brand awareness in the country. And in some countries, we have seen that once we are the first in place in terms of building really the audio book industry, it takes different types of measures. But I think, we have at least a very strong best practice catalog of efforts that we continuously work on, and we are pruning our digital marketing efforts all the time. Having strong partnerships, of course, also on the digital side of it with the [indiscernible]. So I think this is a mix that always is going to change slightly. And, yes.

[Hjalmar Ahlberg, Equity Research Analyst]

Okay. And just as a last question on print publishing, which is compared to my estimate, was quite strong this quarter and then also in Q1, both in terms of growth and profitability. What kind of trends do you see here? Do you think this is a sustainable change in this business? Or is some temporary that is improving the profit and growth in the print publishing?

[Jonas Tellander, Founder, CEO & Director]

I mean, just, as you mentioned, I mean, we -- maybe I shouldn't say this low, but we are also positively surprised by how well our print publishing companies hold up in Q2. Q1, I mean, we're really not affected by the corona because everything has already been done. But in Q2, we could see that. Looking at comparable units from print publishing business, we just declined 2% on the revenue line in our printing business, actually growing, adding our acquisition approval of 16% in the period. So extremely strong. The gross margins are hit partly because you couldn't save all the costs we had during the period, but we also save on marketing and other initiatives. So the profits are not hit that bad either.Forecasting. What will happen to this business in Q3 and Q4 is even more difficult than before, and we were wrong about Q2 where we thought it would be worse. So the Q2 definitely gave the color that we think that we will be able to stand up better than we expected in March, April, but where this will end, honestly, don't know.

[Operator]

[Operator Instructions] And we do not have any more questions at the moment. I hand the floor back to you.

[Jonas Tellander, Founder, CEO & Director]

Good. So thank you very much for listening in and looking forward to talk to you all in 3 months from now and keep listening, tuning on the audio book and just enjoy it. Thank you very much.

[Jorgen Gullbrandson, Chief Development Officer]

Thank you.

[Ingrid Welinder Bojner, Chief Commercial Officer]

Thank you.