Acast AB (publ)

Good morning and welcome to ACoS's earning call for the second quarter of 2024. As usual, we have our CEO, Ross Adams, and CFO, Emilie Wellatt, that will present the results and the developments for the quarter. You're welcome to submit questions throughout the session using the form below, and we'll make sure to answer them in the Q&A session that will be held after the presentation. I would like to kick off the call by handing over to our CEO, Ross Adams.

Hi, and thank you for everyone for dialing in. My name is Ross Adams. I'm the CEO originally based out of London, where I am actually today, but now living in New York, where I've been for the past two years. We'll take you through the Q2 numbers and recent events. And our CFO, Emmy Villette, is also on and will take you through our financials. If you're new to ACAST, we are the market-leading, independent, global infrastructure platform, uniquely positioned at the center of the podcasting value chain. And we connect advertisers with podcast creators who want to monetize their content and their highly engaged audiences. Essentially, we are an internet connected ecosystem bringing together creators who produce compelling content to attract listeners using their creativity to build a loyal audience base. And this high quality content attracts audiences who are eager to consume it. sizeable and engaged audiences are highly attractive of course to advertisers seeking and paying for efficient reach at scale so we are in the middle of this value chain helping advertisers to access highly engaged podcast audiences across the globe and we share the advertising revenue we generate with the podcast creators on our platform In building the world's most valuable podcasting marketplace, we've established a portfolio of over 125,000 podcasts, generating more than 1 billion listens per quarter. And we work with around 2,700 advertisers consisting of both global brands and smaller companies too. We allow them to reach these listeners with effective and creative advertising campaigns via Acast's marketplace. We take great pride in fostering and growing our relationships with podcasters of all audience sizes and types from around the world. Our state of podcasts ranges from some of the biggest podcasters in the world, like Marc Maron, to news publisher shows, as well as emerging creators. The common thread is that they all choose ACAST as their partner to find and grow their audience and earn revenue through partnering with advertisers of all sizes. So let's look at our development during the second quarter of 2024. And another good quarter with sustained healthy levels of growth. Group sales grew by 24% to reach 478 million SEC in the quarter. When adjusting for currency changes, organic growth was at 22%. Importantly, we have maintained a good growth in North America at 26%. When looking at the growth level in North America, I want to remind you that we had easier comps in the previous quarter. And I'm also glad to show that Europe grew by 25%, reflecting a higher pace compared to the first quarter. Our gross margin was steady at 39%, which is in line with the previous quarter, but reflects a three percentage point increase compared to the level a year ago. Another sign of healthy development of our business. And together with continued cost control, progress has allowed us to make additional EBITDA improvements in Q2. Our EBITDA loss in the quarter amounted to negative 11 million sec, corresponding to a negative 2% EBITDA margin. And this reflects a nine percentage point improvement year over year. And this, of course, shows that we've taken another step closer towards profitability. In June, we announced the results of a comprehensive study we ran together with the media agency OMD. Using data from the Swedish market, the study reveals that podcasting advertising not only surpasses other media in brand building, but also in generating sales. The results show that podcast advertising provides the highest long-term return on ad spend, ROAS, with ROAS of 4.9, meaning that every SEC invested in podcasts generates 4.9 SEC in long-term sales. And this surpasses, for example, social media, which has a ROAS of 4.6 and radio with a ROAS of 4.3. It also shows the podcast advertising is 34 percent more cost effective and driving brand awareness compared to other media. Adding podcasts to a mix of TV and online video can increase a campaign's short term ROAS by up to 18 percent. Synergy between different media channels enhances the value of podcasting and underscores why advertisers need to integrate podcast advertising into broader media strategies. And the study clearly illustrates the attractiveness of podcast or the podcast markets and the large opportunity for both advertisers and creators, as well as the ones providing the infrastructure needed to realize this potential us. An important market trend is that video and social media components are becoming increasingly critical in podcasting, enhancing engagement, expanding reach, and improving monetization opportunities for creators. More and more multi-channel creators are choosing Acast as their home. And some recent relevant signings and renewals in this space include Have a Word, Shits and Gigs, The Fellow Studio, and Kayla, it seems, among many others. ACAST has been at the forefront of this evolution. In fact, we launched our first multichannel campaign more than six years ago. And recently, we have refined our multichannel offering due to increased demand from advertisers recognizing the value of such campaigns. and we see more podcasters keen to extend their brand campaigns across all their channels. Furthermore, our innovative work in this space is being recognized across the industry. In June, our multi-channel work was celebrated at the Campaign Audio Advertising Awards by winning in four categories, including Best Branded Podcast Episode, Best Social Strategy, Best Sustainable Green Campaign, and Best Advert. is testament to our commitment to creative excellence, versatility, and pioneering integrated marketing that so many of these types of creators choose ACAST and so many advertisers trust us with these valuable campaigns. On our pass over to Emily, who's going to take you through our Q2 financials in more detail. Emily.

Thank you, Ross. So let's step into the details of our numbers. Per usual, we start by having a look at the listens. And just as in Q1, we have a decline in listens due to the iOS 17 update that has changed how podcast listens are measured. And in Q2, our listens decline was minus 15%. But our average revenue per listen, RPOL, which is the best indication of monetization that every listener has, has at the same time developed favorably, growing by 45% to 0.43 SEKs in the quarter. So, the decline in our on-platform listeners has not limited our ability to continue to monetize our portfolio. And actually, I'll add some nuance here, because we're not only limited to sell what we are hosting on our platform, but we also have access to some inventory of platform via technologies such as VAST, which are not included in our reported lessons. So, our work to assist creators in monetizing their content outside RSS Also helping them in other media channel or multi-channel work, as Ross just mentioned, is gaining traction. And this means that in practice, we can sell more than the capacity stipulated by the reported number of listens. All right. Our net sales growth amounted to 24% in the second quarter. Apologies, my... My light has gone out. The solid growth development was the one. So it was 22% organic growth after adjusting for FX. So this development was driven by another good quarter for North America, as well as a good quarter for Europe. But I will get into discussing the segments shortly. Moving on to gross margin, we have maintained the gross margin level at 39% in the second quarter, which is the same as in Q1. But when it comes to absolute gross profits, this increase represents an increase of 35% compared to the last year and a three percentage point high gross margin. So as mentioned on previous calls, this positive gross margin development has been driven by the contribution from our friends at Podchaser, their products, whilst we also have had favourable product mix effects. Moving on the development of our geographical segments. Again, we've had North America taking the lead on sales growth, growing by some 26% year on year this quarter. And those of you who have followed us for some time, as Ros mentioned, you might recall that we had easier comps in the previous quarter, explaining the difference in growth between Q1 and Q2, specifically in North America this year. In addition, we saw good growth in Europe at 25% Growth in our other market segments was more stable and increased by 10%. So growth across the board. Also glad to see that we continue to see improvements, not just to the top line, but to the local profitability expressed as contribution profits in all our segments. So once our gross profits grew by 48 million SEKs or 35%, our other operating expenses increased increased by 21 million SEKs, or 11%. So this OPEX increase is explained by our continued measured investments, primarily in North America, but costs were also affected by FX, as well as small cost increase from incentive program costs linked to the recent share price development. So we close the quarter with total staff and consultants of 378 persons, which is actually slightly lower than the 386 staff we had at the same time last year. I'm including consultants here as well. Now turning to EBITDA again, thanks to the combination of our growth, improved gross margin and continued cost control, Q2 was another quarter with tangible EBITDA improvements compared to last year. So the EBITDA loss of minus 11 million FDKs corresponds to a minus 2% EBITDA margin in Q2 of 2024, which compares favorably to the negative 42 million FDKs that we had last year. And on EBITDA margin, this represents a nine percentage point improvement year on year. On the right hand side, you can see the EBITDA development on the last 12 month basis, showing the gradual progress we continue to make. And by Q2, Our LTM EBITDA margin was also negative 2%. So Q2 2024 marks another important step towards profitability, reflecting that we remain firmly on track to deliver on our profitability target of a positive EBITDA in the fall year of 2024. Moving on to cash flows. The operating cash flows improved and amounted to minus 1 million SEKs. in the second quarter. As highlighted in the previous quarter, we usually have some working capital fluctuations, but we've clearly over time become better at driving down our DSO, so day sales outstanding, whilst maintaining our DPO, day payables outstanding, at a steady level. From a last 12 months perspective, it's clear that we've made large cash flow improvements, thanks to the profitability and working capital improvements. So by Q2 2024, so in this quarter, operating cash over the last 12 months amounted to a positive 14 million SEKs. Recall that positive impact we had in Q4 of last year. By the end of the second quarter, 2024, we held 712 million SEKs in cash, reflecting that our financial position remains very strong. Back to you, Ross.