Viaplay Group AB (publ)

STO:VPLAY B

Earnings Call Analysis

Company Exits Markets Aiming for Stability

In Q4, the company saw a rise in organic revenues by 3%, fueled primarily by a 9% growth in content supply and sales, including sales to Netflix, Amazon, and sublicense sports content. Viaplay revenues increased by 3%, though advertising revenues dipped by 3%. The firm is cutting down on unprofitable customer acquisition, resulting in a higher Average Revenue Per User (ARPU) post-price hikes. Internationally, the decision to exit nearly all markets has led to a Q4 sales increase of 12% but a staggering SEK 1.7 billion annual loss. Currency effects, particularly the weak Swedish krona, presented a transactional forex headwind, reducing operating profit by about SEK 110 million in Q4 and signaling a SEK 300 million challenge for 2024. Optimistically, operating income before adjustments surged roughly 20% in Q4, illustrating an upward trend in efficiency and profitability despite the prevailing currency and market exit challenges.

Stabilizing Cash Flows and Pro Forma Net Cash Position

The company has navigated through a period of significant cash flows while minimizing profit contributions. A substantial improvement in their financial position is evident, driven by a successful equity issue and refinancing efforts, which reduced their net debt significantly. These moves led to a pro forma net cash position of about SEK 0.9 billion at the previous year's end.

Forecasting Free Cash Flow and Financial Targets

Projections for the year indicate a negative free cash flow of SEK 1.7 billion to SEK 2.2 billion. This outlook factors in the non-core exit markets, which are expected to contribute additional revenues of approximately SEK 0.8 billion to SEK 1 billion, while also anticipating a negative impact of about SEK 100 million on reported EBIT in 2024 due to content write-downs.

Strategy: Emphasizing Value Over Volume

The company underscores a pivot from purely growth-focused strategies to those more centered on value, indicating a clean-up of their B2B subscriber base and a more selective approach towards deals that match their retail pricing. This shift aims to engage B2B customers more effectively and drive long-term profitability.

Content Strategy and Long-term Ambitions

Their content strategy remains committed to delivering top-tier live sports, series, and movies - all curated for local relevance. A disciplined approach towards exclusive rights and renewals is in place to ensure a strong return on investment (ROI), with rationalized costs and improved partnerships envisioned for the future. The goals are ambitious but aligned with previous achievements; they include profitable growth, increased margins, and a focus on free cash flow generation to enable shareholder returns.

Developing Anti-Account Sharing Measures and HVOD Services

The company is actively working on measures to combat account sharing, a move it plans to roll out within the current year. Additionally, there's a strategic initiative in place to develop and launch HVOD (Hybrid Video On Demand) services by 2024, aiming to capitalize on opportunities in digital advertisement and viewership.

International Market Exit Strategies and Sublicensing Plans

Exiting the Baltic markets is part of the company's broader strategy to reduce cash outflow from international markets. This move helps lower commitments on sports rights as well as production costs. Sublicensing of sports rights is a critical component of the cash flow guidance, indicating that it's a calculated part of ongoing deals vital to the SEK 2.2 billion cash flow figure.

Expectations for Allente Dividends and Advertising Trends

Although Allente's performance was not up to expectations, future dividend assumptions remain in the area of SEK 200 million annually for several years. Advertising sectors are expected to show some improvement; however, 2024 forecasts indicate a 'less down' rather than an increase in advertising performance.

Subscriber Reactions and Pricing Strategies

The company recently implemented price hikes that are expected to be value accretive despite an anticipated loss of some customers. It's too soon to gauge the full impact of the price increases on the subscriber base, but the company plans to continue its price adjustments in alignment with content enhancements. The objective is to remain highly competitive and capture a fair market share by delivering value for money.

Earnings Call Transcript 2023-Q4

[Matthew Hooper, executive]

Good morning, everyone, and welcome to today's Q4 '23 results conference call. My name is Matthew Hooper, and I will be your host today. Joining me here on the call are our CEO, Jorgen Madsen Lindemann; and our CFO, Enrique Patrickson. As usual, our presentation will be followed by a Q&A session. You can find the presentation deck for this meeting on the Investor Relations section of our website. If you are joining via the webcast link, you will be able to follow the slides as we present them. Please be advised that today's conference is being recorded.If you are following the webcast, please post your questions on the message board at any time and I will read them out. If you prefer to ask your questions directly, you are, of course, welcome to do so using your phone keypad, but more about that later.This is our first Q results call after the completion of our comprehensive recapitalization program on the 9th of February. We provided a trading update, including our updated guidance when we publish the prospectus for our SEK 4 billion of equity issues in the middle of last month. So a large part of what we will present today is already known to the market.I will now hand the call over to you, Jorgen, to walk through the Q4 highlights. So please go ahead.

[Jorgen Lindemann, executive]

Thank you, Matthew, and good morning, everyone. Let me start by thanking you again for your support in the recently completed recapitalization. It was a lengthy and very complex process involving a large number of stakeholders. So we do appreciate your patience as well as the substantial concessions and commitments that have been made.Before I get to the Q4 results, a quick word regarding the group structure now. Our Viaplay streaming services generate subscription revenues, which account for more than half of group revenue. We are focused on the Nordic and Netherlands markets as well as on our Viaplay Select branded content concept, which is available around the world. We're in the process of exiting our Baltic, U.K., North American operations and will exit the Polish market in summer '25.In addition to Viaplay, we have a family of Nordic Free and pay-TV channels that also generate subscription and carriage fees. This, together with our content production studio, which have now been sold or are being closed, and the sublicensing of our content account for 30% of group revenues. And last but not least, we generate advertising revenue from our TV channels, radio stations and streaming services, which account for just under 20% of group revenues.As Matthew mentioned, a large part of our Q4 results are known already from the trading and guidance update published last month. Our results are in line with that update. And overall, Q4 revenues were up 3% on an organic basis and driven by content supply and sales in particular, with total Viaplay revenues up 3% and advertising revenues down 3%. The Viaplay subscriber base was down from Q3 as expected due to the churn in the Netherlands after the end of the Formula 1 season and in Finland after we discontinued our partnership in that market.Moving to the Nordics now specifically, our sales were up 2% on an organic basis and Viaplay accounted for just under 40% of the Nordic sales, and sales were down slightly year-on-year. This reflected the effect of lower subscriber levels after the B2B cleanup we did in the summer, with a further discontinuation of unprofitable marketing campaigns as we exit any expensive and value-destructive hunt for customers and revenues that we -- that were not creating long-term value, combined with higher ARPU levels after the price increases we have put through. The share of B2B subscribers also grew in the quarter.The main growth driver of this quarter was the linear subscription and other revenue lines, which generated 9% organic sales growth, and linear channels were slightly down and studio sales were down as we wound up those operations. So the increase came from sales of some of our scripted titles to the likes of Netflix, Amazon and Showtime as well as the sublicensing of some sports content that we do not need exclusively. This is in line with the new content strategy that we announced last year.On the advertising side, we gained overall market share across our TV, radio and digital platforms. Sales were down 3%, which was sequentially improved in markets where TV advertising spend was probably down around 10%. We also grew our TV audience shares in each market, and we continue to grow our digital sales at a fast pace and will launch a HVOD offering later in the year. It is too early to make a call on '24 as we are still in the annual upfront agreement discussions, but we do expect the markets to be better than last year.Our Nordic profits were up 21% as operating expenses only grew 2%, inflation in content costs and adverse currency effects offset by reduced content investments and the effect of the write-downs in Q2 and lower personnel costs after the change that we made last summer.Moving now to the international markets. We have announced that we are exiting almost all of these markets. Sales were up 12% following the price increases that we have put through and due to the higher Viaplay Select sales now that we are in 23 markets around the world. The subscriber base decreased after the B2B cleanup we did in the summer and also reflects the usual churn effect at the end of the Formula 1 season.Churn levels were also higher in the exit markets due to the uncertainty around our withdrawal, which had a negative effect on customers and partners' willingness to commit to the longer 12-month subscription periods. Operating expenses were up almost as much as sales due to the sports investments that we have made a while back and the expansion of Viaplay Select. These were offset by personal savings and the effect of the write-downs and provisions that we made last summer.Profitability improved overall for the international markets, but we still reported a near SEK 400 million loss in Q4 and a SEK 1.7 billion loss for the year. The status on the market exits is that we have signed an agreement with TV3 Group in the Baltics to sublicense our full live sports portfolio to their streaming service Go3 from the beginning of this month, and our subscribers will be transferred next month.The sale of the U.K. business is expected to receive the necessary regulatory approval by the end of Q1, and we will have discontinued our U.S. and Canadian B2C services by the end of Q1 too. The last of the markets that we will exit is Poland, which will happen in summer '25.So that concludes my initial remarks. And I will now hand over to Enrique to comment on our financial performance and position before I come back to you to talk about our future plans.

[Enrique Patrickson, executive]

Thank you, Jorgen, and good morning, everyone. So let's look at the group level, where you can see that our increased sales were also reflected in higher cost of goods sold, which primarily consists of content costs. Our SG&A costs were reduced significantly after the changes that we made last summer. FX changes again impacted our top line in Q4 due to the weakness of the Swedish krona with a favorable currency translation effect on sales of approximately SEK 47 million or about 1 percentage point.These currency effects also inflate in our reported costs, which -- given the fact that we buy so much of our content in dollars and euros. This resulted in an overall negative impact on EBIT of about SEK 110 million in the quarter and about SEK 470 million for the full year. Based on current rates, we expect a transactional FX headwind impact on EBIT of a further SEK 300 million in 2024 versus '23.Overall, we had an organic growth on sales of 3.4% when our COGS increased on reported currencies by about 10%. While on the other hand, our SG&A declined by about 24% in the quarter, with significant reductions in people costs as well as marketing. Our operating income before ACI and IAC improved by approximately 20% in Q4.We also have some substantial items affecting comparability in this quarter, which we announced previously and total over SEK 2.6 billion. This primarily relate to sports content costs in the markets that we are exiting, but we will not be able to recover the full cost when exiting these markets as well as the impairments of sports rights in the Nordics.The total I see for the full year amount to them about SEK 9.2 billion, of which approximately SEK 4.9 billion is cash effects. And we are providing the estimates of the phasing of those cash costs on this slide, as you can see here. The SEK 2.2 billion related to the exit on -- exit markets is clear. We also provided a phasing for the core Nordics and Netherlands markets on the IAC impacts.Our content costs make up about 80% of our overall operating expenses in 2023, which will not change that much going forward as the cost of sales impact of writing down content value will be offset by the overall content inflation. Sports will continue to comprise the majority of these costs at approximately 60% of the total OpEx.Moving now to Allente. The business has continued to perform below expectations with the fall in sales passing through to the bottom line and resulting in us reporting a low share in associated company earnings. We did not receive any additional dividends in the fourth quarter. So we received about -- so it was SEK 100 million then for the full year in total. We expect that number to increase to SEK 200 million in 2024 as the company continues to generate significant cash flows, but the earnings contribution will be minimal.Now looking at our cash flow. The changes in working capital totaled about SEK 1.2 billion negative in the fourth quarter and reflected the timing of sports payments primarily. Looking forward into 2024, we expect to continue to build up working capital, but a lower level. On the other hand, we will have substantial one-off payments impacting our overall cash flow for the year as per the slide we just saw earlier. We'll come back to the -- to our guidance shortly in terms of the impacts of '24.Our year-end reporting financial position -- reported financial position included an increase in borrowings after we drew down on the remaining SEK 2.5 billion on our revolving credit facility. The financial position has, of course, substantially improved since the end of the year with the new equity issue of refinancing reducing our financial net debt by some SEK 5.6 billion net of transaction costs. This would have left us with a pro forma net cash position of about SEK 0.9 billion at the end of last year.Our debt maturity profile has also changed substantially with a SEK 2 billion reduction in the principal amount to about SEK 5.25 billion, excluding guarantee facilities, and an extension of maturities until 2028. As SEK 500 million on the write-down was converted into equity, this will flow straight into equity, while the remaining SEK 1.5 billion will show up in our P&L as a positive one-off in Q1.From a free cash flow perspective, I talked earlier about the SEK 2.2 billion related to the exit markets over the period of 2024 till '28. We came in at a negative SEK 3.5 billion in cash flow in '23, which was better than the original expectation and in line with our most recent guidance. For 2024, there is no change to our expectations for a negative free cash flow, of about SEK 1.7 billion to SEK 2.2 billion, of which SEK 0.6 billion to SEK 0.8 billion relates to the noncore exit markets.And this brings me to our financial targets for the year, which are the same as in the recently published prospectus when they were adjusted for updated currency effects and the sale of Paprika content, so the studio production business. Please bear in mind that these are -- these targets are for our core business, meaning the Nordics, Netherlands and Viaplay Select.The noncore exit markets' operations will deliver an additional approximately SEK 0.8 billion to SEK 1 billion in revenues, but the effect of the writing down of the content means that our P&L will essentially only show SG&A cost until we exit, which we estimate to have a negative impact of about SEK 100 million in reported EBIT in 2024.Finally, we will change our reporting structure moving forward and are finalizing that so that we can provide you with historic numbers too in the next month or so. We will report sales, EBIT and free cash flow for the core and noncore markets so that you can keep track of the P&L and cash flow impact. We will provide subscribers for the core, and we will break the revenues into 4 categories, and most notably now splitting out the sublicensing, which will be a lumpy revenue line that can be quite substantial.As ever Matthew and I, we welcome any feedback that you have on the structure. We have structured it in this way with an intention to providing useful set of parameters for evaluating our performance and position. 2024 is a transition year. We have changed substantially how we work with capital allocation and content investments, but it will take a while until you start seeing the changes in our ROI of the investment decisions that we've been taking in the last few months. We still sit with a large balance of content that we will monetize, but not necessarily with great returns. The focus on cash flow and the cash ROI is very clear in how we follow up in our businesses and investment decisions.That is all from me now. So over back to you, Jorgen.

[Jorgen Lindemann, executive]

Thank you, Enrique. I now want to focus on the transformation initiatives that we are undertaking. So we set out our new strategy in July last year, and we have unique products that are greatly appreciated by our customers and offer tremendous value for money. Our first priority is to reset and refocus our top line drivers. I've talked before about prioritizing value over volume, and this is vitally important as chasing growth per se does not deliver value.Too much of the subscriber growth historically has come from B2B deals at too low prices, which is why we cleaned the B2B base last summer and are focusing on new deals that we do around our retail price and engaging B2B customers. It is essential that the value of the content that we have is fully reflected in our pricing to partners and to the consumers. That is why we have been increasing our prices across all -- almost all markets.We have a clear value proposition when you compare the cost of Viaplay against taking your family just once to the movies or a restaurant or a sport event or a concert if you are lucky enough to get tickets that will cost you more than a whole month of all of our content on demand 24/7. We simply have to be better at selling that story to our customers and partners.On the advertising side, we are growing our digital inventory as fast as possible. And this is the part of the market that is growing and this is growing strongly as media buyers increasingly pivot to digital platforms. We're also looking at HVOD solution as a means of driving ad revenue on our streaming platforms, and we'll launch products later this year. And we're exploring new linear streams and mobile products that can increase and diversify the monetization of the great sports and non-sports contents that we have.Secondly, we are working to improve the return on the investment that we make. The vast majority of our investments are in content. And here, we have shifted our focus away from high and very expensive scripted dramas that do not drive ROI back to mass-appeal and very commercial non-scripted performance and Hollywood content. These shows drive viewing and sit well with our premium live sport content.We have already had success with the likes of Robinson, Paradise Hotel, Luxury Trap, MasterChef, not to mention [ Borje ] and the [ Peter Mangs ] documentary, and there's much more to come. We will drive ROI by having a much keener focus on customer segmentation, acquisition and lifetime value. And churn management becomes more and more important. This is also why we are doing more around account sharing and fighting piracy.And where we have content that works in the Nordics and can be exported or we decide to sell sports or other content because we do not need it exclusively, then we are sublicensing it to other companies and increasing our return of investment. This is why we have done deals with several of the global streaming players for shows from our original scripted drama slate.And then there is the organization restructuring, where we are exiting the international markets as quickly as we can. We made the adjustments to the size of our workforce last summer. And now that the recapitalization is done, we are looking to bring in talent and strengthen the teams so that we optimize in all areas. This is why the new country-based structure is so important with mandated and accountable teams and a culture that is bold, is smart, is fun and continues to be curious.You can see here on this slide how unique our proposition is, combining scripted originals, non-scripted performance, the best of the best live sports, acquired series and movies, all commercially acquired and curated specifically for local audiences. All of this content must be relevant commercial and needle moving.Our sports offering remains best-in-class. We have adjusted where we need to and are very focused on making sure that we get value for money here. Where we do not need exclusive rights, we will not buy or we will stop license. The discipline is very clear.So when we look forward beyond '24, we will continue to be competitive on price in terms of value for money. We will rationalize our content costs. We will look to sublicense content where appropriate, and we will consider each renewal on marriage with clear ROI requirements, and our partnership model will be improved for all parties with better unit economics.Our long-term ambitions are the same in terms of profitable growth, rising margins, free cash flow generation and the building of the balance sheet to enable shareholder return. These are all things we have done before and have the clear intention of doing again.So that's all for me, Matthew. So now back to you.

[Matthew Hooper, executive]

Thank you, Jorgen, and thank you, Enrique, as well. We're now ready to take your questions. So if you would like to ask a question and you have joined the conference call via the weblink, you can post questions on the message board by clicking on the Ask a Question tab at the top right-hand corner of the window, and I will read them out for you. Please don't forget to write your name and your company name. [Operator Instructions]So I think we'll take the first question from the message board, and I think this is for you, Jorgen. Two questions from [ Emile ] at Media Watch. First of all, can you elaborate on the plans for HVOD offerings? What markets? And when do you plan to launch? And then part of the same question is, what potential do you see in terms of dealing with account sharing efforts?

[Jorgen Lindemann, executive]

Yes. If we take the last question first. I think, obviously, we're inspired by some of the peers who have launched very successful account sharing measures, and that is something obviously we're looking into and we'll learn as much as we can. We are in contact with them to get best practice on how they are executing on that. So that is something which we are rolling out this year already.And the same goes with HVOD. It is -- obviously, as we said, we want to make sure that the revenue pocket of digital advertisement is something that which we have been into as well. And that is quite important for us to create more digital eyeballs. And we will do that by launching HVOD services as well, which will happen also in '24.

[Matthew Hooper, executive]

Great. Okay. And another one from the message board, this time, I think, probably for you, Enrique, from Aaron, a private investor. What can be done to further reduce the guided cash outflow from the international exit markets? And how does the deal with TV3 in the Baltics support that to any extent?

[Enrique Patrickson, executive]

Yes. I mean, the -- I mean, first part of the question, I think it's really difficult. We have been through the plans and essentially we have cash commitments. So that means also that the variability of that amount is quite low. The areas where we can improve is on our sublicensing. And obviously, we're working super hard in terms of trying to improve that. The exit from the Baltics reduces not only the cash commitments on commanded sports rights, but also the production cost that we have related to broadcasting and producing studios and so on. So that's an important part of that equation.

[Matthew Hooper, executive]

Okay. I think we'll now go to the telephone lines. So first up on the telephone line is Derek Laliberte from ABG. So Derek, over to you.

[Derek Laliberte, analyst]

I was wondering on the content sublicensing here. It seems you've been pretty successful with that given the linear performance here in the quarter. Could you talk a bit about this and what the outlook is for further cooperation here? And preferably sort of split into what you see within sort of the drama side versus the sports side?

[Jorgen Lindemann, executive]

Yes. No, I think, as we have mentioned, we have made a quite steep ROI analysis to make sure that whatever we will show on our channels is something that we can afford. And the products, as I said last time, are very good, meaning that, that is something Netflix or others of our partners can use internationally. And that also means, obviously, that it -- when we are selling content, that also helps us, of course, being able to invest in the local relevant content. So it is very much about capital allocation as well, that, if we are offloading drama content or sports content, whatever, then it gives us opportunity as well to do something else and be more competitive and commercially relevant.We have identified a range of things which we would like to sublicense or sell. And particularly, we have talked about, what you say, so-called free TV assets, so things which are very reliable on -- free TV advertising revenue is obviously not something you want to have given the fact that the advertising -- free advertising market is not doing what we want it to do is. It's definitely not growing, to be fair.So stuff like that is, of course, a key priority for us. So it is very focused on ROI, and then subsequently then capital allocation, where do we then want to spend money on making sure we become more competitive.

[Derek Laliberte, analyst]

Okay. Great. I appreciate the clarity. And finally from my side, what's the latest on the Champions League from your perspective? What's going on with that right?

[Jorgen Lindemann, executive]

Yes. As you know -- and that is a boring political answer, but -- we never comment on rights, and I will not do that this case either, to be fair. So we are happy with whole of the Champions League in Denmark and Iceland, and we are happy with that.

[Derek Laliberte, analyst]

I understand. Perfect. No, that was all from me right now.

[Matthew Hooper, executive]

I think, Derek, just the other thing to say is, obviously, for the sublicensing revenues in the fourth quarter, they were -- the vast majority of that was non-sports, right, to be very clear. And it will be lumpy moving forward this. So you'll see in the disclosure structure, we're now going to split this out, so it gives you a bit more kind of clarity and transparency quarter-to-quarter. So that should help in terms of how you model it, okay?

[Derek Laliberte, analyst]

Yes. It's very helpful.

[Matthew Hooper, executive]

No problem. I think we'll go back to the message board now, and it's a question from Christopher at Kepler Cheveraux. Probably one for you, Enrique. You've previously indicated sports rights costs of SEK 8.6 billion across the Nordics in 2024. Have you been able to reduce that through any of the renegotiations with sublicensing write-downs or any of the measures you've taken? And what price inflation do you expect for the years coming after that on your sports rights?

[Enrique Patrickson, executive]

Yes. So I think I'll probably answer a bit similar as to Jorgen's answer there in terms of the inflation and the commercial deals that we have. But I mean the majority of the -- of any negotiations we're having are related to the exit markets. So look at it as being as per how we guided previously. We indicated in the -- on my initial statements the share of sports cost out of the total operating expenses being about 50%. So yes. So probably I'll leave it at that.

[Matthew Hooper, executive]

Yes. And I think also, Christopher, you would have seen that we've broken out the IAC cash flow impacts moving forward, which includes a sports definition. So you get some clarity around that. So that helps. And Christopher, forgive me if I don't ask Enrique questions about Formula 1 rights auctions in the Netherlands or UEFA competition because it would be a waste of his and your and probably mine time as well. So anyway, the same answer applies.I think next we'll go back to the telephone lines. So the next person on the telephone line is Rasmus Engberg from Handelsbanken.

[Rasmus Engberg, analyst]

Thanks for the much more detailed composition of your expectations for the cash flow going forward. I was just wondering, are there any assumptions regarding sublicensing in this guidance? Or how should we think about that going forward?

[Enrique Patrickson, executive]

So we do have some licensing. I mean, it's kind of as part of our business. I mean it has been included, I mean, in historical financials as well. And I mean, when we model the scene for the future, we do make a number of assumptions around sublicensing certainly. So that is part of the guidance that we provide.But as Matthew said, I mean, it will be a little bit lumpy. It's not supposed to forecast everything except which quarter when it comes to content sales. Sports is a bit more predictable because it's more of deals that are either done or to be made. But I mean, it's more closer to when the events actually take place.

[Rasmus Engberg, analyst]

So to be clear, do you assume any sublicensing on sports in this cash flow guidance?

[Enrique Patrickson, executive]

Yes, correct.

[Rasmus Engberg, analyst]

That you have not -- sorry, that we have -- future sublicensing that we have not sort of seen, new contracts or similar? Or is it going -- concerned with what you have right now?

[Enrique Patrickson, executive]

I mean take, for instance, the international cash drag. That one includes sports sublicensing. That is part of that. So essentially, it's a net into that SEK 2.2 billion number.

[Rasmus Engberg, analyst]

Okay. All right. So you have already made certain assumptions that you will sublicense. So we don't have to get all that excited when it turns up in media or -- is that correct?

[Enrique Patrickson, executive]

Yes, especially when it comes to the international market...

[Rasmus Engberg, analyst]

Yes.

[Enrique Patrickson, executive]

Yes. It's always exciting when we strike up in the media.

[Rasmus Engberg, analyst]

Yes. But it's already in your guidance, I mean? All right. Sorry. And very, very clear. The other question is, Allente was very disappointing, of course. Do you think that we could assume kind of SEK 200 million dividend for several years? Or is that mainly a recoup of a very low dividend this year? I mean, how should we think about it beyond '24?

[Enrique Patrickson, executive]

I mean we haven't guided for beyond '24. So I mean it's hard to say. But I mean, they are continuing to generate quite good cash flows. And we make certain assumptions around how that will continue. But I think it's reasonable to assume that we will be able to extract some decent levels of dividends from Allente.

[Rasmus Engberg, analyst]

Very clear. And then just a final clarification. Jorgen, you said you thought advertising would be better in 2024. I assume you mean it will be less down? Or do you mean that it's actually going to be up?

[Jorgen Lindemann, executive]

No. Sorry. Thank you for the clarification. It will be less down.

[Rasmus Engberg, analyst]

Yes. Yes. I think so.

[Matthew Hooper, executive]

Okay. Very well, Rasmus. Yes, I think just to come back on those things. I mean to Enrique's point, I mean we're looking at a net realizable value when we're looking at these kind of cash flow items. So it does have both those positive and negatives included in there.I had another question here from [ Margareta ] at Swedish Radio about subscriber numbers. Margareta, forgive me if I refer you to Page 19 of the Q report, where you can see all the subscriber data. And that should help you with that to follow through.There's quite a lot of questions coming through on the HVOD and the account sharing, but I think we said what we can say at the moment on those. And those are products that will come during the year. And the account sharing, just to be clear, is not something which we're suddenly waking up to. It is something we've been taking active measures alongside for quite a while now.A question from [ Kamil ] at Telecom Paper. With regards to the Netherlands, did the subscriber base drop below the 1 million due to the F1 season ending? So is it due to churn after the Formula 1 season for the Netherlands?Which I think we can just answer as yes. In terms of giving you detailed subscriber numbers, we don't break those out by market I'm afraid.Then I think we have a question from Martin Arnell at DNB Markets. Martin is asking, should we view Viaplay sublicensing as a temporary in the recovery phase or a new more recurring long-term structural change given that you will report this as a separate line going forward?

[Jorgen Lindemann, executive]

Yes. We have actually always top license content in different shape and form. When we understood that we bought something for the Nordics eventually, and then we got an opportunity to buy something more relevant in a specific market than what we have bought already, then we decided to sublicense. So that is part of the business actually that you are making sure that the products you have on -- towards the customers constantly is as best as they can get. So that is going to be -- is ongoing. Obviously, right now, is a lot, because we have a lot, and we have too much. And we have content which is not generating the returns we want with us, but can eventually help others who have a bigger footprint or whatever.So that is why you will see more now than you have seen in the past, obviously. But as Matthew also said, it would be lumpy. It is something where we also feel that we get the right deal and so forth, then it's something that that we'll execute on. But sublicense is something which is part of business.

[Matthew Hooper, executive]

Okay. We have no other questions in the conference call queue, but a lot on the message board. I take it that means you prefer the sound of my own voice. But if you don't, please do post your questions, and I am very happy to take those directly. So just going through the message board further, a follow-up from Martin at DNB is, how has your Nordic Viaplay subscriber network reacted to the most recently imposed price hikes? And what do you expect in terms of pricing in the market in the coming 2 to 3 years?

[Jorgen Lindemann, executive]

It's still a little bit too early to conclude in all fairness. We have put the pricing increases through now. And the whole idea is, of course, that it is value accretive. You will always more or less always lose some customers, but hopefully, the overall base will then be impacted by the price increases. And since the content is relevant and it is priced when you do a lot of research and so forth before you just hand out the price increase. And it is extremely good value for money in all fairness, the offering and that we have had.But to be specific on reaction, that is too early. And yes, you should expect constant price increases coming as long as we keep on enhancing and increasing our offering. That is the whole idea, of course, is that we get much more relevant content, which is attractive to the customers. So we make sure that we are super competitive and that we take the shares or take our fair share of the market out there. So that you should expect us to continue to invest in the product and therefore, also price adjust and be competitive on value for money on an ongoing basis.

[Matthew Hooper, executive]

Great. Then we have a question from [ Matt ] at Danske Bank. It's in 2 parts. I think the first of which is for you, Jorgen, the second for you, Enrique. First is why are you not trying to capture light users of sports events through pay-per-view? Is it the fear of you losing subscribers or the lack of the technological solution?

[Jorgen Lindemann, executive]

Yes. Do we have -- we are actually using pay-per-view when the events when they allow it, and that is particularly for boxing, and we also have it in some other fighting areas. We have, over the years, have tested a lot pay-per-view also on football and other events. But the model that we're having set up right now for the customers that you subscribe and you easily can access the matches when you want actually. That is something which has turned out to be rewarding for them and rewarding for us we can see. But some events, you will see us do only pay per view, as I said, historically, that has been mainly boxing.

[Matthew Hooper, executive]

And on the rent and buy platform there for drama and, yes.

[Jorgen Lindemann, executive]

Yes, for sure. So we have a full store actually where you can buy movies quite close to the go out of the cinema or even often also when they are in cinema as well. So there is a good business there as well, where we have our renter by lack of a better word.

[Matthew Hooper, executive]

Okay. And the second part of the question for you, Enrique, is how accessible is the RCF revolving credit facility as a source of liquidity post the recapitalization? I assume the covenants have become stricter and the price has gone up.

[Enrique Patrickson, executive]

Yes. That's correct for the last part of the question. But yes, I mean, it's very accessible for us. So I mean, we don't really have any limitations in terms of how we access it. But yes, I mean, obviously, we -- after such a recapitalization and all the support from the banks, it comes as well with some more strengths attached in terms of how we reach out to that. But in terms of our business plan and how we start operating with the bank group, things are moving forward very well.

[Matthew Hooper, executive]

Okay. Then we have a question from Eric at SEB. Given that you will have pro forma net cash of SEK 0.9 billion by the end of '23 and negative free cash of SEK 1.7 million to SEK 2.2 million to '24 with expected negative free cash flow until '27. Are you fully financed in this plan until '27 when you reach positive free cash flow on a group basis?

[Enrique Patrickson, executive]

Yes. We are because the -- as we indicated in -- also in Jorgen's statement in the report as well as what we repeated, I mean, we are -- for the core business, we are looking to be cash flow positive for 2025. And then in the -- in one of the slides, we provided a cash flow profit for the international exit markets. So when you add those 2 up, then is 2027, the cash contribution that we received from shareholders, debt holders now is fully sufficient for that. And as you will see that the majority of that cash outflow, the negative outflow is coming in 2024.And maybe I add a little bit color on that because Q1 and Q3 has -- as per normal seasons as well has as well more negative cash outflow. So -- but still talking about our total cash outflow for the full year, about, let's call it SEK 2 billion. It has quite some significant impact in Q1 and Q3 with reversals in Q2 and Q4.

[Matthew Hooper, executive]

Right. And then we have another call back on the line. It's another question from Rasmus Engberg at Handelsbanken. And Rasmus, just before we get to your question, you were asking about balance and we talked about the SEK 200 million on dividends. If you want some sort of fee around the P&L or the associated company income, we estimate that will probably be in the region of around about SEK 100 million or so for the full year '24. But obviously, this is not a subsidiary of ours. This is just a view from our own based on where we are today.And but Rasmus, go ahead with your question.

[Rasmus Engberg, analyst]

Yes. Enrique, just to answer the main part of it, the phasing of the cash flow in this year. But can you -- well, on the line anyway, can you talk about the phasing of earnings? Is that going to be similar? Or how do you see that for the sort of core business, I guess?

[Enrique Patrickson, executive]

Yes. So the core business that we have guided as a midpoint of minus SEK 100 million expects, I mean, first quarter to be, I mean, more negative than that. And that as well for our normal seasonality as well. While then the fourth quarter is the strongest. And then Q2 and Q3 are somewhere in between. So yes, loss-making Q1 and profitable Q4 is, I would say, our view on this.

[Matthew Hooper, executive]

Okay. Thank you. Going back to the message board again. So a follow-up from Martin Arnell at DNB. How confident can you be in the target of double-digit EBIT margins in 5 years? This is obviously far away in the future and should depend highly on the development of the competitive landscape. So how confident can you be in those expectations?

[Jorgen Lindemann, executive]

Yes. No, the -- obviously, there's a lot of components just to be clear, but there is something that we can control as well. And that is, of course, what is -- what kind of content will we continue to buy and at what prices. And obviously, there is a lot of content which is locked in for multiple years, which we don't see the return on, to be fair. And that is, of course, something that you will not prolong going forward. And that will have no effect actually on the revenue line since the content we don't see being value creating, you can argue in any way in some areas. So that is one thing where we have obviously a lot to say, and that is on the cost base for sure.Then the whole ambition is, of course, that to be much more competitive on pricing on the content that we are doing much more commercial, and we have been there before. So obviously, that is a big focus area for us to make sure that the ROI on the things that we are delivering is strong and much stronger than it has been the last years, obviously. So there's a range of measures, but some of it we have control over, and that is simply just not to prolong content, which starts to generate any value at all. Then you have savings and that also helps, of course.

[Matthew Hooper, executive]

Great. And then we had a follow-up question from Aaron, private investor. Can you comment on the value of the sale of the U.K. operation?I think, Aaron, we said that we expect that transaction to be completed by the end of the first quarter. In terms of value, we've said previously that, obviously, it was sold at a value below that, which we acquired the business out, but we haven't been any more specific on that point.A question from [ Emile ] at Media Watch, can -- do you expect rising digital ad revenues to be able to offset lower linear advertising sales in '24? And if not, when will it?

[Jorgen Lindemann, executive]

I don't think we have said anything specific about that, to be fair. But that is for sure, the ambition. That is, for sure, to make sure that not only offset, but we are growing and we are becoming a more relevant player in this area of growth. So that is our focus area. So the ambition would be definitely to offset over time and hopefully also exceed.

[Matthew Hooper, executive]

And again, as you've seen in what we've said, I mean, we do expect that we gained market shares in the fourth quarter here based on the TV businesses alone, so even without the digital ad revenues.Just looking again, it's quite a specific question related to Norway from [ Kanutya Kampaniya ]. A follow-up question on the HVOD. Would you also consider offering a more affordable Premier League product with advertisements?

[Jorgen Lindemann, executive]

We are obviously looking at all options. So that is the political answer here is that we will -- once the product is fully outlined and we understand how we want to market it, then we will have, of course, then you will understand how we're going to do it. So it's difficult for me to discuss specific now. The thing is, of course, they want to make it as attractive as possible to gain as many customers and advertising revenue, therefore, as well. Those 2 things go also hand-in-hand. So you cannot have a product which is too secret because then there's no reach and, therefore, no advertising revenue. So you do need to make sure that you're finding that balance, and that is what we work on to make sure that we get that right.

[Matthew Hooper, executive]

And then we have a question from [ Anna ]. Do I understand it correctly, if I understand that all international markets, except Netherlands, will be exited to which the answer on is yes. And as you've seen, some of that has already been done and some will follow with the last expected to be Poland in the summer of 2025. And then you've also asked to understand if any of the exited markets will give any positive sale or exit value?Well, again, we've said previously that there are cash values associated with the business where we have income, but we also have cost structuring out over a number of years, and we've quantified those in the presentation. You can see it very clearly today at a GBP 2.2 billion noncore exit market cash drag, which is quite specified. So I hope that covers that for you.And I think those are the main questions. There's one here from John, which is quite a lengthy question, I'll just read it out to you. We all know piracy will happen, and we will never be able to stop it. I would say one reason is for costs, but another is related to the content and the speed at which it becomes available at such a high quality, i.e., new movies 30 days after initial theatrical release. Some of these part websites even charge fees to get ad free or high-quality streaming. So cost is not the main reason we will use them. I'm curious if instead of spending millions trying to fight piracy, Viaplay could be thinking about putting money into researching to find ways to look at these pirate websites and try to see how you can learn from what they are doing and how legally you are able to mirror some of those reasons that make people want to use them in the first place. Sorry, a lengthy question, but for one for, Jorgen, to think...

[Jorgen Lindemann, executive]

No, it's a good question, of course. So first of all, piracy is illegal, yes. And that is up to the right holders as well to make sure that our exclusivity is protected. So that is, of course, a discussion. So it's not just us. It is all big right holders in the world who see this as a big challenge. And also, there was a good article as well from Telenor, actually who's fighting that heavily as well and making sure that the private sites, they get more and more difficult life. And I think that is the right journey to make sure that we don't accept this type of criminal activity. I think that is quite important.Of course, we should learn. Whatever we can learn at least learn how to block them. That is, of course, what we would like to do. I think it is completely unacceptable that people taking the content without subscribing to it is feeling like everything else, and that is probably not what to build society is on. So I find it very problematic, I must admit. And that is something we will fight with all force possible. And of course, that also means learning how we can fight them by looking at them. That is also what we want to do. But as I said, we're not alone. It goes for the whole industry and it goes for the right holders and movie, theaters, whatever. Everybody wants to fight them.

[Matthew Hooper, executive]

Great. And then the 2 last questions, one for you, Enrique. Is the U.K. transaction value included in the 2024 cash flow guidance?

[Enrique Patrickson, executive]

Yes. So that is -- yes, let's not become too technical. But I mean it's part of the international cash drag of SEK 2.2 billion overall number. So essentially we sit with some rights and the cash, in fact, net of sublicensing that we are making ahead is reflected into those numbers.

[Matthew Hooper, executive]

Okay. And then the final question for you, Jorgen from [ Kamil ] again at Telecom Paper. With regard to the Netherlands, if fireplace Dutch revenues were higher than EUR 10 million in 2023, which seems likely new legislation means that you have to invest 5% of your revenues in original Dutch content excluding Sport. Do you have plans for this? And I guess this question kind of implies us as easy to Denmark and other countries where similar things are being looked at.

[Jorgen Lindemann, executive]

Yes. That is something we are looking at and how we go into and also the definition of the local content and so forth, what is it? Is it the productions we are doing, which we're doing a lot about our products, our sports products in Netherlands. So stuff like that is something that we are looking at. But you're right, Matthew, that it is not just Netherlands. That goes in other markets as well.

[Matthew Hooper, executive]

And we're obviously a very big investor in a lot of these markets. So we would like to feel that that would be something that we'll be encouraged. So I think that's it in terms of the questions. We have no more on either the conference call or the message board. If you have any follow-ups, please just let us know. You know how to find us through the e-mail or call.I want to say, again, thank you for your time and your questions today. We've introduced quite a lot of new disclosure and thoughts around how we do things moving forward. If you have any comments, questions, suggestions around those, please do let me or I know we'd appreciate that. We're available follow-up meetings, as I said, don't hesitate to reach out if you would like to have those meetings. But that's it for today now. Thank you again. Goodbye for now, and see you soon.