• Revenue: Down 2% year-on-year, impacted by satellite migration and economic climate.
• EBITDA: $60.7 million, down 25% year-on-year, with expectations of improvement in H2 due to lower programming costs.
• Programming Costs: Up $12 million year-on-year, heavily weighted towards H1, expected to decrease significantly in H2.
• Free Cash Flow: $63 million, similar to last year, with strong cash flow generation supporting dividend confidence.
• Interim Dividend: $0.185 per share, with a full-year expectation of at least $0.21 per share.
• Customer Churn: 83% of customers have been with Sky for at least five years, with an average churn of 8%.
• Sky Sport Now Revenue: Record revenue result with a 6% increase in unique customers year-on-year.
• Neon Customer Growth: Over 2% growth in the past six months, slower than expected.
• Sky Broadband Customers: Over 44,000 customers, contributing positively to Skybox retention.
• Advertising Revenue: Increased to 14% share of the linear advertising revenue pool, with a 39% increase since focus acceleration.
• CapEx: $21 million in H1, with satellite migration spend expected to be within the $10 million to $20 million range by year-end.
• Liquidity: Closing cash balance of $28 million, with a $100 million bank facility undrawn.

• Warning! GuruFocus has detected 4 Warning Signs with ASX:SKT.

Release Date: February 20, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Sky Network Television Ltd (ASX:SKT) successfully accelerated its satellite migration project, Project Migrate, which is on track to be completed by early April.
• The company maintained its interim dividend in line with expectations, reflecting confidence in its financial stability.
• Sky Network Television Ltd (ASX:SKT) reported strong growth in its streaming and broadband segments, with Sky Sport Now achieving a record revenue result.
• The company has implemented technical fixes to improve signal strength, significantly reducing customer service call volumes.
• Sky Network Television Ltd (ASX:SKT) secured exclusive content deals, including the return of the Black Caps and White Ferns cricket teams, enhancing its sports content lineup.

Negative Points

• The accelerated timeline for Project Migrate disrupted original FY25 plans, impacting revenue-generating initiatives.
• Sky Network Television Ltd (ASX:SKT) experienced a significant increase in customer service calls and technician callouts due to satellite signal issues, leading to additional costs.
• The company's revenue was down 2% year-on-year, partly due to the economic climate and delays in revenue initiatives.
• Programming costs were heavily weighted towards the first half, impacting underlying EBITDA, which was down 25% year-on-year.
• Sky Network Television Ltd (ASX:SKT) faced challenges in customer retention, with a noted slowdown in customer loss but still dealing with churn.

Q & A Highlights

Q: Could you provide some clarity on the expected revenue growth for FY26, given the guidance for FY25 and FY26? A: Andrew Hirst, Interim CFO, clarified that while they haven't provided specific guidance for FY26, the focus is on managing programming as a percentage of revenue. Sophie Moloney, CEO, emphasized the growth engines across streaming, advertising, and broadband, and the impact of new content like cricket in FY27. They plan to update on FY26 targets at the full year.

Q: Are you expecting a significant drop in FY26 programming costs, and how much of this is already locked in? A: Sophie Moloney, CEO, mentioned that they have a clear line of sight on programming cost reductions, with difficult choices being made based on data insights. The focus is on driving programming as a percentage of revenue, with some reductions already locked in for H2.

Q: What is the shortest time needed to prepare for the 2026 Rugby season after the contract is locked in? A: Sophie Moloney, CEO, stated that Sky has the infrastructure and capability to cover rugby, having done so for over two decades. They are ready to proceed once a deal is struck with New Zealand Rugby, acknowledging the need for timely preparation.

Q: Could you provide an indication of the penetration level needed for the new Skybox to meet CapEx targets for FY26? A: Andrew Hirst, Interim CFO, noted that they were at 30% penetration by December and are comfortable with the CapEx profile. Sophie Moloney, CEO, highlighted the new Skybox's IP switchover capability as a game changer, expecting penetration to increase significantly.

Q: Can you provide details on the expected price increase for the sports tier on the main platform post-migration? A: Sophie Moloney, CEO, confirmed a $5 price increase on the sport pack, reflecting the value delivered by Sky Sport.

Q: Are you actively negotiating for domestic cricket rights? A: Sophie Moloney, CEO, confirmed they are not pursuing domestic cricket rights, focusing instead on Black Caps and White Ferns, starting from the 2026 season.

Q: How are you managing the costs associated with satellite migration, and what is the expected impact on FY25 and FY26? A: Andrew Hirst, Interim CFO, explained that migration costs will be higher in H2 but are expected to be largely cash neutral by FY26, with support from Optus. The P&L impacts are expected to be immediate, with leasing credits coming through differently.

Q: Could you provide insights into sports viewing trends and any notable shifts in audience preferences? A: Sophie Moloney, CEO, noted differences in viewership across platforms, with traditional sports like NFL maintaining strong audiences. The NRL, particularly the Warriors, has seen impressive growth in viewership and advertiser interest.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.