RTL Group S.A. (RRTL) Earnings Call Transcript

Ladies and gentlemen, thank you for standing by. Welcome, and thank you for joining the conference call for analysts and investors for RTL Group's Half Year Results 2026. I'm Moritz, your Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] At this time, it's my pleasure to hand over to Oliver Fahlbusch. Please go ahead, sir.

Yes. Good morning, everyone, and thank you for joining our analyst call for RTL Group's half year results 2026. The speakers for today's presentation are Clement Schwebig, our CEO, and Bjorn Bauer, our CFO. The presentation for this call is available on our corporate website, rtl.com, following the link included in our press release under download. The agenda on Slide 2 shows the areas our management team will cover today. After the presentation, Clement and Bjorn are available to answer your questions. And with this, I'll hand over to Clement to run you through the highlights of the first half of 2026.

Thank you, Oliver, and good morning to you all. Thank you for joining us this morning. As you may know, I joined or I should probably say I rejoined RTL Group in April and took over as CEO in May. And over the past few weeks, I've been meeting executive teams and experts across the group, but also our partners across the industry. And I have to say that I'm truly excited about the level of creativity, enthusiasm and drive that I see throughout the organization. And as this is my first call -- analyst call as CEO of RTL Group. I look forward to engaging with many of you in the future, of course. Now let me highlight the most important developments of the past 6 months before Bjorn will run you through the numbers in greater detail. So on Slide 4, the highlights. In the first 6 months of 2026, we delivered on our transformation strategy with very tangible results. And we're executing with, a, speed; and b, importantly, discipline. Only 10 weeks ago, we successfully closed the Sky Deutschland transaction. And I have to say this is probably the most transformational deal in the history of RTL Group in the last 25 years of existence. I mean, we were successful in getting the approval of the European Commission, but we've done it without any remedies. And now our RTL Deutschland management team is moving quickly to integrate the businesses, and we are fully focused on delivering the EUR 250 million in synergies over the next 3 years. Also, our streaming services continue to grow dynamically and deliver strong profitability. And this is a real turning point in our operation. After years of carefully investing in content and tech infrastructure, our streaming is now high-margin contributor and high-growth segment at the same time. And as a result, we now expect streaming to contribute around EUR 100 million to our full year adjusted EBITA. In our linear TV business, we obviously face soft TV advertising market, which is in line with our expectation. But more importantly, we gained market share in both TV audience and TV advertising in our main territories, which are Germany and France. In France, we was clearly driven by the coverage of the Football World Cup on M6 and M6+, a very powerful demonstration of the power of our content and brand. And I have to say also the exceptional reach that TV offers in the current fragmented audience environment. For the financial year 2026, we confirm our adjusted EBITA target of around EUR 725 million, which is in line with our previous guidance. We'll look at the outlook in greater detail at the end of the presentation. At the same time, we confirm our medium-term adjusted EBITA target of EUR 1 billion with streaming being a key driver for future profit growth at RTL. And now over to you, Bjorn, who will take you through the group's financial results in more detail.

Yes. Thank you, Clement, and good morning, everyone. First, one comment regarding the presentation of our numbers. The Sky Deutschland acquisition closed on 1st of June 2026. So RTL Group's first half results include Sky Deutschland for 1 month, i.e., June following its full consolidation. Let's start with a look at our key financials on Slide 6. In the first half of 2026, RTL Group's revenue grew 3.9% to EUR 2.9 billion, mainly driven by the acquisition of Sky Deutschland and continued streaming growth. Organically, group revenue was stable. Our adjusted EBITA increased from EUR 160 million to EUR 239 million. This corresponds to a significant margin uplift from 5.8% to 8.3%. The strong increase was mainly driven by the streaming business and the acquisition of Sky Deutschland as well as a higher contribution from Fremantle. Adjusted EBITA, excluding the impact from Sky Deutschland, was also up by EUR 18 million. Group profit from continuing operations increased significantly from EUR 6 million to EUR 61 million in the first half of 2026, mainly due again to the contribution of Sky Deutschland. Over to Slide 7. And let's take a look at the development of our adjusted EBITA. The bridge shows the various effects in the first half of 2026. First, as expected, we see lower contributions from the group's linear TV channels, mainly due to higher programming costs related to the Football World Cup coverage at Groupe M6. However, secondly, the decrease was offset by significantly higher adjusted EBITA from streaming, up by EUR 65 million compared to the first half of 2025, confirming our transformation strategy. Fremantle adjusted EBITA increased by EUR 21 million to EUR 60 million and is well on track to reach the target margin of 9% in the full year 2026 as previously guided. Sky Deutschland contributed -- that's the third -- fourth point. Sky Deutschland contributed EUR 61 million to the group's adjusted EBITA in the first half of 2026. This is, however, not indicative of the full year adjusted EBITA contribution by Sky Deutschland as the month of June is seasonally highly favorable with no Bundesliga or German Cup football matches broadcast and no related sports rights production and production costs incurred in June. We'll come back to this later in the outlook presentation. Now let's take a closer look at the financial development across our main business units, and we're moving on to Slide 8. And I'd like to start with our largest unit, RTL Deutschland. Total revenue of RTL Deutschland was up 11.1% (sic) [ 11% ] to EUR 1.3 billion. This strong increase was mainly driven by the scope effect from the Sky Deutschland acquisition and higher streaming revenue. Both effects more than compensated for lower linear TV revenue. The German net TV advertising market remained challenging, estimated to be down between minus 6% to minus 7% compared to the first half of 2025. And importantly, RTL Deutschland continued to outperform the market and gained both audience and advertising market shares. Adjusted EBITA increased from EUR 17 million in the first half of 2025 to EUR 129 million in the first half of this financial year, mainly due to the acquisition of Sky and the streaming service RTL+, which became profitable in the first half of 2026 as guided. As mentioned before, for Sky Deutschland, the month of June is seasonally favorable and not indicative for the full year. RTL Deutschland, excluding Sky Deutschland, achieved a combined average audience share of 26.3% in the target group of viewers aged 14 to 59. We therefore, widened the lead over our main commercial competitor, ProSiebenSat1, to 6.6 percentage points. Let's turn to France and take a brief look at Groupe M6. Total revenue of Groupe M6 increased by 1.7% to EUR 644 million. The main drivers were higher digital advertising revenue and significantly higher TV advertising revenue in June due to the broadcast of the Football World Cup, offsetting the decrease of the linear TV advertising market in the first half of 2026. The French linear TV advertising market was estimated to be down between minus 9% to minus 10% in the reporting period with Groupe M6 significantly outperforming the market, thanks to its highly successful World Cup coverage. As expected, the adjusted EBITA of Groupe M6 decreased to EUR 54 million, mainly due to higher programming costs for the Football World Cup and lower linear TV advertising revenue in the period January to May 2026. Our French family of free-to-air channels increased its average audience share in the commercial target group to 22%, which represents a record high for Groupe M6. Now let's turn to Fremantle. The global video production market continues to be challenging. Fremantle's revenue came in at EUR 835 million in the first half of 2026, down 7.7% year-on-year, which was mainly expected and due to timing effects at Fremantle's drama and film businesses, while the entertainment and documentaries businesses were broadly stable in the first half of this year. We expect this development to reverse in the second half of the year, resulting in slightly higher revenue for the full year 2026 for Fremantle, driven by the delivery of major productions such as Baywatch and Kill Jackie. Just last week, Fremantle announced a major international distribution deal for Baywatch with Amazon Prime Video acquiring the reboot across key international markets as well as the full Baywatch catalog. Adjusted EBITDA increased to EUR 83 million, which corresponds to a margin of 9.9%, driven by continued cost control measures such as the further reduction of overhead costs as well as portfolio effects. Adjusted EBITA was EUR 60 million, which corresponds to a 7.2% margin, up significantly from 4.3% in the first half of 2025. And with that, Fremantle is well on track to reach its 9% margin target for the full year 2026 as previously guided. Moving on to the next slide and take a closer look at the main items below adjusted EBITA down to group profit on Slide 9. Group profit from continuing operations rose from EUR 6 million to EUR 61 million in the first half of 2026, mainly due to the contribution from the acquisition of Sky Deutschland. Let's look at some of the other effects between adjusted EBITA and group profit. In the first half of 2026, significant special items increased to minus EUR 107 million, mainly due to cost reductions programs, which we already talked about in March. In the first half of 2026, the group's tax expense was significantly lower at EUR 13 million, mainly due to the absence of onetime tax effects in the prior year. The normalized tax rate remained stable at 33%. Moving on to Slide 9 with a closer look at our cash flow. Total net cash from operating activities was minus EUR 25 million, resulting in operating free cash flow of minus EUR 71 million. The lower cash conversion in the first half of 2026 was primarily driven by temporary buildup in net working capital and other onetime effects, partly related to timing of production businesses and major sports rights like the World Cup. For the full year, however, we expect a significantly improved cash conversion within our normal target range of around 90%. And with this, I'll hand back to Clement for an update on our strategy progress and the outlook for 2026.

Thank you, Bjorn. So the strategic framework of RTL Group is based on 3 priorities: core, growth and alliances and partnerships. The core means investing in premium content, strengthening our family of channels as well as cost and portfolio management. Growth areas are our streaming services, advertising technology and the suitable TV as well as content production with Fremantle, alliances and partnerships in advertising, content and distribution. Moving on to Slide 13. And I know Bjorn already touched upon the record average audience share of our French family of free-to-air channels, but I want to insist there because the FIFA World Cup was much more than just a major audience success. It was a strategic milestone for Groupe M6. The tournament demonstrated the power of combining premium live content with our broadcasting streaming and digital platforms. We strengthened the M6 brand, accelerated the growth of M6+ and expanded our reach across all audiences and platforms. In short, the World Cup created value well beyond the event itself and supports our long-term growth ambitions. Now let's look at some of the key achievements. 60 million viewers followed the World Cup in France on M6 and M6+. Alone, the French versus Spain semifinal was followed by 20.3 million viewers, and that makes it the second highest audience ever recorded by M6 in its history. The streaming services -- service M6+, gained 4.2 million new registered users and recorded more than 100 million video views on M6+ during the tournament. The reach was extended significantly by 1.4 billion video views on the company's social media channel. The streaming platform -- [indiscernible] technology platform provided by Bedrock delivered reliable and stable performance, supporting this exceptional increase in audience during the traffic during the World Cup. Now let's turn to Slide 14 and look at the impact of our cost reduction programs. As a reminder, resulting from the challenging environment in 2025, RTL Group accelerated its transformation by reallocating resources to streaming and comprehensive cost reduction across our core businesses. For the full year 2026, we expect cost savings of around EUR 75 million. RTL Deutschland launched an organizational realignment in January and reduced around 600 positions in the first month of 2026. This represents annualized savings of a mid-double-digit million-euro amount. Already in 2024, we announced that RTL+ in Germany will migrate to the Bedrock technology platform. The migration was successfully completed at the end of April and will generate significant cost savings going forward. Bedrock became also profitable in the first half of 2026. Groupe M6 announced a cost reduction program to be implemented by 2030, which focuses on production costs and AI-driven efficiency. Since 2023, Fremantle has reduced FTEs by more than 600 while integrating its acquisitions and reducing overheads. The company's profit growth in the first half of 2026 reflects the progress achieved. Now let's turn to Slide 15 and look at our growth business. So in line with our strategic focus on streaming as a key growth driver, we closed the acquisition of Sky Deutschland DACH on June 1. The transaction is a transformational move for RTL Group, as I mentioned earlier, bringing our full year revenue to EUR 8 billion and paid subscriptions to around 12.4 million in DACH region, making us the clear #3 in the German-speaking streaming market. Alongside the strategic rationale of the acquisition, we will create significant shareholder value and will deliver annual synergies of EUR 250 million within the next 3 years. Let's take a closer look at the combined power of RTL Group and Sky Deutschland on the next slide, please. So the combination creates a unique video proposition for entertainment, sports and news across free TV, pay TV and streaming. RTL and Sky complement each other in terms of business model, revenue streams, target groups and content offers. With more than EUR 2.5 billion of annual content spend, we unite market-leading reality TV, news, entertainment shows and local drama with Sky's premium sports rights and global hit series and films. The combined portfolio connects with 100 million people in DACH region through everyday touch point from TV screen to mobile devices, radio and print. Our reach extends far beyond video entertainment into trusted news as well as radio and podcasts, creating unique cross-promotional power and monetization opportunities. Turning over to Slide 17 and the development of our streaming business. As you know, streaming is at the core of the transformation of RTL Group. Having invested significantly over the past years, our investments are now paying off. Our streaming services continue to grow strongly, making RTL Group one of the leading European media companies in streaming. Please note that the numbers shown on this slide are on a strict like-for-like basis and do not include Sky or WOW. This gives you a clear picture of the organic growth over the past years. Paid streaming subscription for RTL+ and M6+ have increased 21% year-on-year, and we continue to target 9 million subscriptions by the end of 2026. Streaming revenue and viewing time also continue to grow dynamically. Streaming revenue grew 27% in the first half of 2026, and we continue to expect between EUR 600 million to EUR 650 million in revenue from our streaming services for the full year. Profitability of our streaming businesses improved by EUR 65 million year-on-year. Therefore, we now expect adjusted EBITA from streaming to increase to around EUR 100 million for 2026. And now moving on to Slide 18 and a closer look at our global content business, Fremantle. Two points are of particular importance looking at Fremantle. First, we are seeing significant margin progress. And second, we remain optimistic that Fremantle will return to slight top line growth for the full year 2026. In the second half of the year, major productions such as Baywatch and Kill Jackie will be important performance driver for Fremantle. Fremantle will deliver 12 episodes of the new series of Baywatch in the second half, the new series will debut on Fox in the U.S. in January 2027 on Sky in the U.K. and Ireland next year and on Amazon Prime Video across key markets such as Italy, Germany, France, Spain, Latin America and India. Fremantle will also deliver 7 episodes of Kill Jackie in the third quarter of 2026. The series starring Oscar winning actress Catherine Zeta-Jones will be available on AMC in the U.S. in autumn this year on Amazon Prime Video in the U.K., Ireland, Netherlands, Turkey, Germany and Canada and on HBO Max in Spain, Portugal, France and the Nordics. Beyond the timing of individual productions, the strength of Fremantle lies in its diversified model across genres, market and customer. Successful new shows strengthen our IP portfolio and create long-term monetization opportunities through distribution, also local adaptation and also digital platforms. Fremantle strategy priority reflect this vision. It's a, ramping up Fremantle own IP development; b, rapid development of AI across the company value chain, but also focus on IP-driven acquisition of small- and medium-sized production company, expansion, as I mentioned, in attractive geographies and genres. And with Fremantle on track to reach its adjusted EBITA target margin of 9% this year, we'll maintain focus on continued cost discipline and operating leverage. Together, these priorities will strengthen Fremantle's resilience and drive sustainable profit growth. YouTube. Let me now share an update on another aspect of our strategy, which is monetizing our content libraries and intellectual property across third-party platforms. YouTube allows us to extend the reach of our content well beyond linear TV and streaming while generating additional revenue from existing content assets. At the same time, it helps us engage complementary audiences, strengthen our brands and create additional entry points into our streaming services. So we are seeing strong momentum across our YouTube activities. At Fremantle, the number of YouTube channels increased to 495, while total view grew from 6 billion last year to now 10 billion year-on-year, which is 55% of the watch time from connected TV. To give you an example, Fremantle has generated 230 million views from sports content in the first half of 2026, coming from actually 0 compared to for the same period last year. We are also significantly expanding the YouTube footprint of our broadcasting businesses, including RTL Deutschland, Groupe M6, RTL Hungary and RTL Luxembourg. Overall, YouTube is becoming an increasingly relevant platform for audience engagement, content discovery also and also monetization across the group. So now moving on to our outlook for 2026 on Slide 20. Look, the geopolitical and macroeconomic environment remains volatile, and the impact on RTL Group's business continue to be hard to predict. And following the acquisition of Sky Deutschland, RTL Group updates its full year revenue and adjusted EBITA outlook on the basis of a, the full consolidation of Sky Deutschland for the period June to December 2026, the group linear TV advertising revenue decreasing by around 4% in the full year 2026, the group streaming revenue growing by around 25% and Fremantle revenue growing slightly. RTL Group now expects full year revenue for 2026 to increase to around EUR 7.1 billion to EUR 7.2 billion. Adjusted EBITA for 2026 to increase to around EUR 725 million with a variance of plus/minus 3% with significantly higher contribution from streaming compensating for lower contribution from the group linear TV channel. This is absolutely in line with our previous guidance from March this year. Adjusted EBITA from streaming for 2026 to increase to around EUR 100 million compared to the previous guidance range of around EUR 25 million to EUR 50 million. The overview represented here gives you a transparent bridge from the previous outlook, excluding Sky to the new outlook, including Sky for the period June to December 2026. As explained by Bjorn, the significant adjusted EBITA contribution from Sky for the month of June is not indicative for the full year. With the new Bundesliga and German Cup season starting soon, Sky Deutschland's adjusted EBITA contribution for the period June to December will be plus/minus 0. This shows, however, that Sky Deutschland has significantly improved its financial performance over the past year, and this provides a solid starting point for the EUR 250 million synergy target, which we fully confirm. Finally, RTL Group's dividend policy remains unchanged. RTL Group plans to pay out at least 80% of its adjusted full year net results. On Slide 21. So let me close our presentation with a few remarks on our medium-term ambition. We confirm our medium-term adjusted EBITA target of EUR 1 billion, which represents a 50% increase from EUR 661 million in 2025. So what are the key drivers? First, after years of investment, as I say, the streaming businesses will generate around EUR 100 million in operating profit this year and then continuously increase their profitability. The acquisition of Sky Deutschland will generate annual synergies of EUR 250 million. In the medium term, Fremantle will return to organic growth of around 3% per annum and further expand its margin also with selected M&A. And finally, AI will provide significant benefits across our entire value chain. And this brings us to the end of our presentation. And I guess we'll now take your questions.

[Operator Instructions] And the first question comes from Annick Maas from Bernstein.

I wanted to come back on the EUR 250 million synergies. Can you remind us on the phasing of this? And can we already expect respectively, how many synergies can we expect this year to come through? Second one is on streaming profits, much better this year than expected. Do we have already an idea of where you want streaming profits to land next year? And then finally, if you could give us just some comments on the TV advertising markets across your main markets over the summer, that would be great.

Let me pick up on the first -- thank you for your questions, by the way. I'll pick up on the first one. On the EUR 250 million synergy target, just as a reminder, we just closed the acquisition of Sky Deutschland around 10 weeks ago. we fully confirm this target of the EUR 250 million synergy target over the next 3 years. Obviously, as you will understand, synergy will ramp up over time. Most of them will be realized in 2027 and '28. Synergies are mainly coming from cost-driven categories and approximately 75% of them, while 25% are revenue synergies. The cost synergies are driven by optimization of content portfolio. That's the first one. Second is overhead reduction. And third, which we have started doing is reduction of Sky's external media spend by leveraging the RTLs universe. So that accounts for the cost-driven synergies. For the revenue one, we are looking at upselling some of the existing RTL+ subscriber to Sky product, and this will take a bit of time. So I think that's for the first one. Do you want to pick up on the second one, Bjorn?

Yes, sure. Maybe just adding to the synergies for Sky this year, we are already expecting a first benefit this year. But given that it will take three years to fully realize the EUR 250 million synergies, the impact in the remainder of the year is limited. Think about a small lower double-digit amount, but this will definitely help to achieve the around 0 contribution for Sky. And as you know, Sky has been a kind of loss-making business in the past. So this is a good starting point for the next phase of development within RTL Germany. On streaming profit, I think the first main point here is that streaming with the now expected EUR 100 million contribution represents a meaningful share of our overall profitability, and that number is higher than previously expected. For the drivers for this development are threefold. First, higher subscribers, second, higher revenue per subscriber and lastly, higher revenue from our advertising tiers and higher distribution revenue. We generally expect these drivers to continue in 2027, and the business will continue to scale strongly. You've seen this this year, but you've also seen it in the last 2 years that revenue is increasing faster than the cost base. And you've seen in the H1 figures that our revenue from streaming is going up by 27%. Again, we'll give a full guideline on guidance on 2027 with the full year results 2026. But as a first indication, I expect the revenue to continue to grow in a meaningful way. And I would expect that the contribution from streaming will continue to also grow stronger than the revenue. On the markets, on the development on the TV -- linear TV advertising market. As we have seen, the figures or the market overall has remained challenging in the first half of 2026, and this is fully in line with what we have assumed. To note is the World Cup and the impact on the advertising market in general. So in France, we saw a significant impact given the strong success that Clement explained in detail earlier in this presentation. Looking ahead a little bit, July in Germany is down and the same is true for August. In France, July is up significantly or very significant, and that is because we have the second part of the World Cup in July and August is also expected to be down in France. Overall, as you know, when you look at Q3, July and August are relatively speaking, smaller months in a normal year, and September is by far the most important month. It's still too early to fully call September, but first indications in Germany are better. In France, the market continues to be challenging, and we'll be observing this closely as we move into Q4, but we have reflected this in our outlook.

I would add maybe 2 things less related on the TV advertising market, but adjacent topic. I mean, first, we gain advertising share across all our markets, which is a very strong sign of our performance. And second, our digital advertising market is growing very rapidly. I mean we've seen 11% growth in the first half of the year, and it will continue.

And the next question comes from Julien Roch from Barclays.

On Sky Deutschland, first half revenues of EUR 977 million, how much growth versus the first half of '25? And can we get EBITDA and EBITA rather than EUR 4 million of net income. So that's 3 numbers. The second question is EUR 8 billion of pro forma revenue in 2025, so EUR 2 billion for Sky D in '25. So can we get EBITDA and EBITA for Sky Deutschland in '25? So that's 2 numbers. And then staying on Sky Deutschland, 12.4 million DACH subscription in the first half, not subscribers. RTL at 7.6 million, so Sky D 4.8 million. Is that correct? And what was it at the end of '25? So 2 numbers. So that's 7 numbers in total.

Okay. So -- the numbers that we are disclosing are adjusted EBITA and the contribution in the single month of June is EUR 61 million. As explained, this is seasonally affected by the timing of the sports events.

My question was for the first 6 months. So because you gave us pro forma EUR 977 million of revenue. So how much was it last year? Is it up, down, flat? And then can we get EBITA for the whole 6 months?

Yes. I was just repeating of what we are disclosing. So as I said, we are disclosing adjusted EBITA for the single month of June, and we're also disclosing the adjusted EBITA impact for the period June until December, which will be as described around 0. We will not provide any details on past performance of Sky while it was under previous ownership. Overall, I think the numbers are all very consistent and in line with what we presented at the time when we announced the acquisition. At the time, we said it will be around EUR 2 billion of revenues. And we said that at the time of closing with the EBITDA neutral. I can confirm these, and this is also reflected in the revenue adjustment in the revenue expectation for the remainder of the year, which is around EUR 1 billion, so which speaks to the around EUR 2 billion on a kind of pro forma full year basis. And that's one of the side benefits, not only of Sky, but also of streaming that the ability to model and predict the businesses will improve because less volatile than the advertising business. And I can also confirm the EUR 4.8 million, these would be kind of the incremental subscribers from Sky, both for their pay TV product and for WOW streaming. So apologies, Julien, I know there's -- we obviously would like to have all kinds of numbers. But let's dig into kind of what we are expecting for this year. And we will, of course, further develop our disclosures in a transparent way. So we are in the process of reworking our KPIs so that latest for the full year 2026, we provide additional kind of revenue disclosures around our business.