Management Commentary

Statement of the chairman of the management board

Dear colleagues, partners and shareholders,

The year 2023 was full of challenges, which we were able to overcome thanks to our dedicated work and the right strategic decisions, achieving significant progress and strengthening our position as the leading digital media company in the Baltic States.
One of the key challenges is the continuation of the war in Ukraine. This significantly affects entire Europe, including Estonia. In our media company, we have had to learn new ways of covering the conflict and how to ensure the safety of journalists and the coverage of reliable news. We have also had to deal with propaganda and cyber-attacks. Last year, Ekspress Grupp's media outlets largely focused on ensuring that the coverage of the war would not show any signs of fatigue. We need to find new angles to keep our readers interested – this is how we can make our best contribution to support Ukraine.
In 2023, we also adhered to our mission to serve democracy, and provide a high-quality and unbiased news feed. Our readers appreciate it highly, and the value of quality news content will continue to grow over time. The highlight of the year 2023 was artificial intelligence (AI), and the benefits and problems associated with it. Content production has never been that easy, but in the future content will become less important than those who publish it. Credibility will become an even more valuable currency, and media companies will play an even more important role in filtering misinformation.
One of our greatest achievements has been the growth in the number of digital subscriptions of our media companies and thus growth in the digital revenue base. In the Baltic States, we were able to significantly increase the number of digital subscribers, which shows that readers value the content offered by our media outlets and trust us as their main source of information. Ekspress Grupp’s strongest brand – Delfi – is the number one choice of readers in all the Baltic States. The number of digital subscriptions increased by 41 percent year-over-year. Our digital revenue also grew significantly, accounting for 83 percent of the Group's total revenue.
In addition to the success of digital subscriptions, we also achieved significant growth in other business areas. For example, we were successful with our digital outdoor screens, increasing our network by almost 65 screens. Expanding the network has also led to significant revenue growth in this segment. We also managed to achieve significant revenue and profit growth in the Latvian ticket business.
Last year, the inflation rate and higher input costs also affected our results. We have carefully managed our costs while maintaining the standards of quality content. This yielded a 14 percent increase in revenue and a 15 percent increase in EBITDA.
In the future, I am confident that Ekspress Grupp will continue its successful development and play an important role in promoting democracy in the Baltic States. Our key focus will continue to be on delivering unbiased news and providing quality news content and entertainment to our readers.
I would like to thank our dedicated team and supportive shareholders. The year 2023 demonstrated that together we can achieve excellent results and lead the way to the digital media in future.
I would like to thank our dedicated team and supportive shareholders. The year 2023 demonstrated that together we can achieve excellent results and lead the way to the digital media in future.

Yours sincerely,
Mari-Liis Rüütsalu

The year 2023 was another year of strong sales growth for Ekspress Grupp. Despite the economic downturn, which shaped the entire economic environment in the Baltic States, the Group’s revenue increased by 14% in a year and totalled EUR 73.1 million. Against the backdrop of the general economic slowdown, digital advertising revenue has been in an upward trend both in Estonia and Lithuania, and in general, the growth of total sales revenue is differentiated and distributed across all main business segments. Digital revenue increased by 21% in a year and contributed 83% to the Group’s total revenue by the end of December. The digital revenue growth of the Group’s media companies and the number of customers with digital subscriptions increased strongly in all three countries. The revenue of ticket platforms and the advertising revenue of outdoor screens have demonstrated strong growth.

In Latvia, the total market volume decreased and the advertising revenue of Ekspress Grupp earned in Latvia was also 6% lower than last year. However, this decrease in Latvia was offset by the revenue growth of the ticket platform and digital screens. The Group’s ticket platform increased sales both through the number of events in the portal as well as the growth in the average ticket price.

Over the last year, the Group gained almost 61 000 new readers with digital subscriptions in the Baltic States, i.e. 41% more as compared to the end of December 2022, reaching 207 000 subscriptions. The Group’s digital revenue is increasingly more based on digital subscription revenue, and an even larger monthly recurring revenue base is being created without the need for additional sales activity (costs). The average price, which was higher than previously, also made a positive contribution to the subscription revenue growth. We have also improved the quality and volume of the content provided by the Group’s media companies, in order to be the leader in the field of digital subscriptions in all Baltic States.

On the Estonian market, the number of digital subscriptions of the largest media company, Delfi Meedia, increased by 20% in a year and exceeded the 100 000-subscriber threshold for the first time in December. If to compare it to the population of Estonia, Delfi has most likely become one of the most successful media companies both in Europe and in the world with its share of digital subscriptions. The Group is moving step-by-step closer to its strategic goals and aims at providing paid digital content to at least 340 000 subscribers by the year 2026.

The earnings before interest, tax, depreciation and amortisation (EBITDA) of Ekspress Grupp totalled EUR 10.2 million, increasing by 15% in a year. Profitability has primarily been driven by successful sales of online advertising and digital subscriptions in Estonia and Lithuania as well as the volume growth of ticket sales platforms and digital outdoor screens.

For us as the Group, the ongoing improvement of efficiency continues to be of importance, in order to maintain the EBITDA margin and achieve the minimum 15% level as laid down in our strategy. Implementation of our growth ambitions and the transition to digital media requires investments in technology. Of the investments made in 2023, EUR 3.4 million was related to the development and acquisition of property, plant and equipment and intangible assets, a sign of higher investments in products and technologies. The Group also invested EUR 1.2 million in new LED-screens.

At the end of 2023, the Group had available cash in the amount of EUR 9.6 million and equity in the amount of EUR 56.5 million (53% of total assets). The Group’s future investment capacity continues to be in focus when shaping the liquidity position, and we consider it important to maintain our liquidity reserves for possible new acquisitions as well as possible cooling of the economy. We have an additional overdraft facility of EUR 3 million, which ensures the necessary liquidity buffer for future operations.

When designing our further activities, we will take into consideration that the difficult economic situation will also continue in 2024. It can be assumed that the general GDP growth will remain close to zero and, depending on a particular country, will move slightly to up or down. Despite the economic situation, we are still positive at Ekspress Grupp about the growth of our future business volumes, both from the point of view of digital subscription revenue and all other revenue in the digital areas. In 2024, we will focus on developing the long-term business strengths in media, ticket sales platforms and outdoor media. We remain committed to our growth strategy and achieving our long-term financial goals.

Yours sincerely,
Argo Rannamets

The year 2023 was another year of strong growth for Ekspress Grupp – Delfi Meedia AS surpassed the magical 100 000 subscriber threshold.

The year is characterised by the following digital trends:

- digital revenue growth was strong in all Baltic key markets, customer awareness to pay for digital content keeps increasing;
- artificial intelligence and the tools that are based thereon are increasingly influencing the text, sound and video images;
- focus on ease of use and cyber safety becomes increasingly more important.

Last year, the market for digital subscriptions in Estonia, Latvia and Lithuania developed in the expected direction. Ekspress Grupp, as the largest provider of news media digital subscriptions in the target markets, increased the number of digital subscriptions in the Baltic States by a total of 41% during the year, reaching 207 000 subscriptions by the end of the year. In Estonia, the number of digital subscriptions of Delfi Meedia grew the most, increasing by 20% year-over-year (+17 242) and exceeded the 100 000-subscriber threshold for the first time in December. The number of digital subscriptions of Genius Meedia increased by 25%. Õhtuleht Kirjastus, Delfi in Latvia and Lithuania also continued to ride the growth wave of digital subscriptions, increasing digital subscriptions by 10%, 87% and 112%, respectively, as compared to the previous year. The news portal Lrytas entered the Lithuanian digital subscription market as a newcomer, with over 6 000 subscribers by the end of the year. Rapid growth has been ensured by customers' willingness and awareness to pay for digital content, as one of the biggest leaders in the news field is Ekspress Grupp with its international streaming and music services.

If you compare it to the population of Estonia, Delfi has probably become one of the most successful media companies with a share of digital subscriptions both in Europe and around the world. In 2023, the Lithuanian and Latvian market also witnessed a certain breakthrough in the transition to the digital subscription model, which we had been expecting for some time. The number of Delfi ‘s digital subscribers more than doubled in Lithuania in a year and reached nearly 40 000 subscribers by the end of the year. The number of subscriptions of Delfi in Latvia increased by 87% and reached over 26 000 by the end of the year. The Group's newest media company, Lrytas, switched to a digital subscription model in the last quarter and attained already more than 6000 subscriptions by the end of the year. These numbers show that, similarly to Estonia, the readers in other Baltic States are also embracing the digital subscription model of journalism and value domestic, independent content produced in their own language. A digital subscription of news media is an increasingly accepted product among the readers, as evidenced by the increasing number of subscriptions and the decreasing turnover of subscribers. We see that more and more readers subscribe to digital news media to keep up with important topics in society.

Yours sincerely,
Karl Anton