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Regulatory press release

Interim Report January – September 2016

Highlights from the past quarter (compared to Q3, 2015)

?      Increased subscription base from 291,600 to 341,500 subscribers (229,400)

?      Increased streaming revenues from 111.3 MSEK to 135.7 MSEK (84.0 MSEK)

?      Increased percentage of foreign sales from 32.4% to 36.0% (29.5 %)

?      Delivered a positive EBITDA of 19.7 MSEK (1.2 MSEK)

CEO’s Comments (Click here to see an interview with CEO Jonas Tellander)

On the first day of the quarter, we finalized our purchase of the publishing group Norstedts. Since then, we have been working to increase integration between the two companies’ leadership and employees. We have made strong headway, and have also started a number of cooperative projects, for example within sales, audio-book production, administration, and on Management-level.

Our integration of the Danish streaming service Mofibo has also progressed smoothly, and we are currently developing a shared digital platform (which will pave the way for Storytel’s international expansion) to be phased in during 2017. As we announced several weeks ago, we have also started producing audio books in the Arabic language.

During the past quarter, our non-Swedish markets have shown strong growth, particularly in Norway, Denmark and The Netherlands. Our annual international revenue growth is currently 97%, which is in accordance with the goals we developed at the beginning of the year. Through this summer’s Danish price increase, from 99 Danish crowns per month to 129 Danish crowns, we are now operating at a profit in Denmark.

Our operations in Sweden, a market rife with competition, have also grown steadily during Q3, with 47% annual revenue growth. This domestic figure has been enabled by reaching out to the population with information on the benefits of audio books, which has resulted in more trial users subscribing to their new pastime after their short trial period. And our latest iOS app was a hit with customers, who rated it at 4.7 stars (out of a possible five).

Our Q3, 2016 earnings before depreciation were 19.7 MSEK (1.2 MSEK), fairly evenly balanced between Streaming and Publishing. Our Swedish Streaming division has been profitable, and Norway och Denmark have also contributed positive. Elena Ferrante’s books, published by Norstedts, have been a boon to our positive earnings within Publishing.

Thanks to our purchase of Norstedts, our publishing activities have contributed significantly to Storytel’s operations. Our hope is that the solid Norstedts-reputation for quality books, together with Storytel’s role as the leading digital audio-book company, will be an attractive combination for both aspiring and well-known authors.

In October, we made a secondary stock offering directed at five institutional funds with a focus on smaller Northern European companies –– an offering which was met with a great deal of interest. In Q4, this will add 100 MSEK (minus emission costs) to our cash reserves, which will increase our quarterly liquidity. 40 MSEK will be used for a gap-loan to cover Storytel’s purchase of Norstedts.

Storytel Original has had a flying start, with thirteen Swedish productions – we have also released our first titles in Denmark and The Netherlands. During 2017, we plan to release more than 100 Storytel Original productions in our various markets.

During Q3, revenue from Streaming was 136 MSEK (as compared to 84 MSEK in Q3, 2015). Our Swedish operations generated 87 MSEK in Q3, 2016, while other markets generated 49 MSEK (36% of total revenue). During Q3 in 2015, Swedish revenue totalled 59 MSEK, while other markets generated 25 MSEK (29% of total revenue).

We expect Streaming to continue growing during the coming quarter (Q4), although at a slower pace than Q3. As for Publishing, Q4 is when the year’s sales figures peak, thanks to the holiday shopping rush and the fact that books make popular presents. Norstedts is releasing Elena Ferrante’s third novel, while its imprint Rabén & Sjögren is releasing the 8th Harry Potter book; together this will spurn energetic quarterly sales, leading us to expect strong Q4 profitability from our Publishing operations.

Financial information

This group of companies and its parent company comply with the Swedish law regarding yearly statements of accounts, as well as BFNAR 2012:1 (Swedish Accounting Standards Board standard 2012:1) concerning annual statements of accounts and group accounts at the K3 tier.

The acquisition of Storytel AG by Storytel AB (publicly traded) (formerly Massolit Media (publicly traded)), is accounted for according to applicable accountancy regulations for reverse acquisition. According to the group’s statement of accounts, this reverse acquisition means that Storytel AG is the parent company and Massolit is included in accounts from the time of acquisition. The registered parent company is Storytel AB (publicly traded). Mofibo Books ApS and Norstedts Förlagsgrupp AB including its wholly owned subsidiaries are included in the yearly statement of accounts from their time of acquisition

This report has not been audited by the company’s accountants.

Interim period revenue and profit

Total Q3 net turnover for the group was 237,216 (81,045) KSEK. The streaming division accounted for 124,665 KSEK while Publishing accounted for 112,551 KSEK. Within Streaming, the Swedish market accounted for 64% of turnover, and other markets for ca. 36%. In Norway, Cappelen Damm owns a 50% stake in Storytel A.S, so its figures are reported on in accordance with the format of proportional consolidation. The table on page two includes all Norwegian subscribers and revenue under Streaming, Other Markets. Furthermore, for the page-two table, the accrual principle was disregarded.

The group’s Q3, 2016 EBIT totalled 10,203 (731) KSEK. During Q3, goodwill-related amortisation negatively impacted profits by ca. 5 MSEK. Other depreciation is primarily due to depreciation of systems purchased and developed by Mofibo and Norstedts. Together with the purchase of Mofibo and Norstedts, the group has increasingly relied upon loans, which has necessitated higher interest payments than previously.

Q3, 2016 after-tax profits per share of stock were 0.13SEK.

Parent company – Revenue and profits for interim period

Parent-company revenue during Q3, 2016, totalled 353 (369) KSEK. Parent-company EBIT for Q3, 2016 totalled –1,140 (–745) KSEK.

Group: Financial position and cash-flow (as of 30 September, 2016)

At the end of the period, the group had 83,131 (41,495) KSEK in cash reserves. Solvency was 9,8 (4,8) %. Equity totalled 65,888 (7,808) KSEK. In connection with the purchase of Mofibo and Norstedts, which were primarily financed through bank loans, external liabilities have increased. These bank loans will begin to be paid down during 2017 at a rate of ca. 9 MSEK per quarter. The acquisition analysis performed in connection with the acquisition shows a goodwill value of ca. 200 MSEK, which will be written off during a ten-year period, thus adversely affecting profits by ca. 5 MSEK per quarter.

Parent company: Financial position (as of 30 September, 2016)

At the end of the interim period, the parent company had 669 (112) KSEK in cash reserves. The parent company’s solvency was 81.7% (96.6%). Equity totaled 633,560 (595,771) KSEK.

Number of shares and Share-capital (as of 30 September, 2016)
The number of shares in issuance at the end of the interim period was 45,347,183, divided between 635 A-shares and 45,346,548 B-shares. As of 30 September, 2016, share-capital totaled 22,673,592 SEK.

Post End-of-Interim-Period Activity

After the end of the interim period, Storytel followed through on a directed secondary stock offering totalling 2.5 million B-shares, which netted 100 MSEK. The issue price was determined through a so-called “Private placement” process led by ABG Sundal Collier, at an established market price of 40SEK. This offering was patronized by five large institutional investors such as Swedbank Robur Fonder AB and Handelsbanken Fonder, and the offering of 100 MSEK was divided between them.

Date of next report

The financial statement for 2016 will be published on February 28th, 2017.

Get in touch with us at:

Storytel AB (publicly traded)

For more information, please contact:

Jonas Tellander, CEO: +46 70 261 61 36

Sofie Zettergren, CFO: +46 70 509 98 08