Acast AB (publ)

Good morning and welcome to ACAS Earnings Call for the interim report covering the period January to March 2025. Today we have our CFO and Deputy CEO Emily Villatte who will present ACAS results for the quarter. You're welcome to submit questions throughout the presentation using the form below the stream and we will raise the questions during the Q&A held after the presentation. I'd now like to start the presentation by handing over to Emily. Please Emily, the floor is yours.

Hi, and thank you to everyone for listening in. I'm Emelie Willat, CFO and Deputy CEO of Acast, operating from our Stockholm office. Unfortunately, our CEO Ross Adams was not able to make it today due to illness. But I'll take you through our highlights and financial performance in the first quarter before we open up for Q&A. Now for all new investors listening in, Acast is in essence the leading independent podcast network globally and we're uniquely positioned at the center of the podcasting value chain, matchmaking advertisers with podcast creators who want to monetize their content and their highly engaged audiences. So essentially we bring together creators who produce compelling content to attract listeners using their creativity to build a loyal audience base and this high quality content attracts sizable and engaged audiences, who are highly attractive to advertisers, seeking and paying for efficient reach and engagement at scale. And we underpin this with the widest dataset in podcasting through our data company, Podchaser, allowing us to drive discovery for podcasts, matchmaking between advertisers and audiences, and creating revenues for both creators and Acast. Our competitive edge is based on the fact that we are true podcasting pioneers, being the inventors of the technology behind global podcast advertising as we know it today. And we have unmatched scale and exclusivity. Our portfolio, in fact, consists of more than 140,000 podcasts that generate more than 1 billion listens each quarter. And we connect to more than 3,300 advertisers spanning global brands and smaller companies. And we have now paid out more than $470 million to creators worldwide. We are innovation leaders, consistently first to market with technologies like AI-driven targeting, real-time podcast campaign planning and first-party data onboarding. And we also go beyond the podcast. We are podcast first, but not podcast only. We have the capabilities needed to deliver broad omni-channel campaigns that span across social media, video, live events and more. And in essence, Acast empowers podcast creators and advertisers with global reach, strong monetization and cutting-edge technology. And we foster and grow relationships with podcasters of all audience sizes and types around the world. Our portfolio of creators ranges from the biggest personalities like Peter Crouch, and Giggly Squad to establish networks like TED Audio Collective and news publishers like The Economist, The Guardian and CNN. We have heightened focus on increasing monetizable listens and at the end of the first quarter we announced an exclusive ad sales deal with The Athletic. Now, The Athletic is a New York Times company covering daily sports stories and the world's biggest sports moments. It's a network with a portfolio of more than 35 high quality podcasts covering every major sport, including the NFL, Premier League and F1. The network is home to some of the most trusted voices in sports media and their worldwide audiences. It's an ideal match for ACOS international reach. And this partnership will bring over 100 million annual global listens to ACOS network. And ACOS will have the exclusive rights to audio ads and sponsorships, podcast video and branded content across their podcast portfolio. But we also support niche shows of all types who bring with them dedicated communities. And this diverse range of content allows us to connect advertisers with the creators and audiences that perfectly match their needs. And the common thread among these creators is that they all choose ACAST to help them find and grow their audiences and earn revenue from advertisers of all sizes. So let's have a quick look at the highlights in the first quarter of 2025. We started the year with strong growth, delivering 30% net sales growth, of which 26% was organic growth. In Q1, we did not see any impact on our campaign deliveries from the global macro uncertainties. Our gross margin amounted to 37% in the quarter, down slightly from prior quarters impacted by a lower gross margin in the US. And we also continue to deliver profitability improvements and close the quarter with an adjusted EBITDA margin of minus 1% versus minus 4% a year ago. With a proven track record of navigating economic downturns we're confident in our ability to adapt investment levels quickly and effectively if needed to ensure sustained profitable growth. In early April we presented new financial targets ahead of our capital markets day and we provided two short-term targets related to 2025 and one mid-term growth target extending through to 2028. And our financial targets are as follows. For the period 2025 to 2028, we target an organic net sales compound annual growth rate of 15%. In 2025, we target an adjusted EBITDA margin of between 3% and 5% as we focus on continuous profitability improvement. And we are of course committed to generating a positive cash flow from operating activities in 2025. And these targets reflect our dedication to deliver continued profitability improvements alongside strong revenue growth. So let's have a look at the financial developments in more detail, starting by having a look at our lessons and the average revenue per lessons. Now listens were down marginally at minus 1% compared to Q1 last year, but the listens increased sequentially and are now back at the highest level since Q1 of 2024. And this points to a stabilization of the previous iOS 17 related decline. It's worth pointing out as well that this was our first full quarter without the BBC, while we've had positive contributions from the likes of TED Audio Collective and Casefile that were signed in Q4. And we've also continued to increase our unique reach year over year, which means that we reach more unique listeners. We have continued to see a positive momentum in monetization with the average revenue per listen increasing by 31% in the first quarter. And this is another awful record high for Q1, which seasonally is our lowest revenue quarter. And the development reflects that we have maintained the positive trend in increasing our efficiency in monetizing our portfolio. We had a strong start to the year, growing net sales by 30% in the first quarter and the organic growth was 26% when adjusting for FX and also the acquisition of OneDrip Media Network that was completed on the 2nd of January 2025. Our growth was heavily influenced by an impressive performance in North America, which I will come to discuss shortly. Our gross profits saw an increase of 26% year over year and our gross margin amounted to 37% in the quarter. And it is worth noting that this margin reflects the impact of a lower margin in our rapidly expanding North American segment. Looking at the long-term performance, we are pleased to maintain our trend of consistent gross profit growth. Now let's turn to our performance by segment. Europe had a solid quarter growing sales by 17% of which 16% was organic growth. And in the quarter we've seen solid growth performance in France, Sweden and also improvements in the UK. The contribution profit was up slightly to 62 million SEKs and the contribution margin was 21%. North America delivered strong growth at 65% versus last year, and 55% of this growth was organic. At the same time, we have continued to see an improved contribution profit stemming from the higher sales levels. And we see that our efforts in this segment continue to pay off, and we've also continued to allocate resources to the region. In our smallest segment, other markets, we saw a minor revenue decline of minus 1% versus last year, while the organic growth was actually plus 1%. And the contribution profit in that segment was the same as last year. Our EBITDA was a negative 8 million SEKs including transaction costs of 0.6 million SEKs related to the acquisition of Wonder Media Network and some 4.1 million SEKs of costs incurred related to preparations for a main market listing. If we adjust for these items our EBITDA was minus 3 million SEKs reflecting a minus one percentage EBITDA margin. So this reflects an improvement of three percentage points versus last year. And I will make a note that we expect higher costs related to our listing work in the second quarter. And we will provide you with an update on the listing status at a later stage. Our operating expenses increased by 19% in the quarter versus last year, primarily explained by initiatives in our high growth markets where we see the greatest ROI. And to reiterate my previous comments, we are aware of the ongoing macroeconomic uncertainty and will maintain a strong focus on cost control. On the right side, you will see that we have continued to deliver consistent profitability improvements with the EBITDA margin amounting to 2% on a last 12 month basis. The operating cash flow amounted to a positive 29 million SEKs in the quarter, including 17 million from positive working capital changes. And that means that our operating cash flow in the last 12 months perspective now amounts to 79 million SEKs and that it continues to track ahead of our EBITDA. This quarter, we also had investments related to the acquisition of Wanda Media Network, resulting in a total cash outflow of 36 million for the quarter. And this left us with a cash position of 652 million SEKs, reflecting a robust capitalization. So to summarise, we've had a strong start to the year with 30% net sales growth. We're glad to see that our efforts in North America are paying off and this was again a quarter where the region led the way with an impressive 65% net sales growth. Our focus on profitability of course continues and it continues to deliver results and we're pleased to report another improvement in our adjusted EBITDA margin. We did not see any impact from the macroeconomic uncertainty on our campaign deliveries and the quarter, but we are proactively monitoring the economic situation, of course. We are firmly dedicated to delivering against our updated financial targets with solid growth, profitability improvements and positive operating cash flows.

We are now moving into the Q&A portion of our session. Please use the message box below and I will make sure to read them out. So first question comes from Andreas at Carnegie. Significant growth in the US. Have you seen any macro impact post Q1, i.e. in April?

Thank you for the question, Andreas. Whilst I will not be providing any specific commentary or forecast on Q2, I can reiterate that in Q1, we did not see any impact on our campaign deliveries. And in fact, we had a strong ending to the quarter. We started the quarter a little bit softer and we had a strong ending in March. So that was positive. But when we look to the future, of course, uncertainty and likelihood of a broader downturn has increased and we will continue to monitor that as we move forward.

Thank you. And we have another question from Andreas. It seems you have been able to take large accounts. What kind of visibility do you have when it comes to their budgets?

I think it's been a consistent trend even since COVID that the decision cycles for marketeers have become shorter, which means that we have shorter visibility when it comes to the outlook. But we have good visibility in the near term and we monitor our bookings, of course, moving forward. But I think since COVID, there's been a... marketeers out there are more agile, and they are able to make quicker decisions. And in this type of scenario, it's great to have a tech platform like ours that can deploy big campaigns at scale underpinned by great targeting and technology. So we're well positioned to operate in this environment.

Thank you. And we have another question from Andreas. Can you say something on the trends in sell-through rates, ad load and prices, and if possible, in the various regions?

Of course, that's another good question. So the main reason why our average revenue per listen has gone up by 31%, which we're very pleased with, is that we have achieved a higher sell-through rate. There's not been a material change in our ad load, but we have been able to sell, on average, sell more ads per show. And that has driven our ARPL. The pricing has been relatively stable but what could also be said is that we have been able to sell good sponsorship deals in North America in the quarter which comes at higher CPMs but slightly lower cross margins.

Thank you. We now have a question from Derek at ABG. Considering the IAC in the quarter, what is the expected timing of the planned Nasdaq main market listing?

When we have anything more to report regarding the main listing preparations and execution, we'll get back to you. But I don't have anything further to report at this stage.

Okay, further question from Derek at ABG. Given the growth improvement in Europe, have you experienced a significant pickup in UK demand in Q1? Yes, we did.

The UK, in fact, had a solid quarter. You will recall that they had a tougher journey in 2024, flat to slightly down. But we've seen improved momentum in the UK in the start of the year, which is very encouraging. It is still our biggest market when it comes to local market operations.

Okay, thank you. And a further question from Derek. Looking at the strong 55% organic growth in the US, how much of the improvement would you say is driven by improving market conditions and how much is because of your own efforts?

We've seen positive results from our general initiatives in the region dating back a number of years. We've had record-breaking bookings, we've executed larger campaigns, and this trend and momentum has continued into Q1, to your note. We wouldn't say that the strong performance is attributable to any specific events or so forth, but it's consistent efforts over time. But, you know, in short, we are operating in a market subject to growth. We have a really beneficial position and the right strategy in place, and we have strong execution and that is enabling us to deliver this solid growth consistently in North America.

And a further question from Derek. From your perspective, why are you outgrowing the US market apart from your successful offering? Is it because of your small market share, 2% to 3%, in combination with a few very large players growing at a slower pace?

You're correct that we have a smaller market share in the US compared to, for example, the UK. And it is when you have a good position and your brand and proposition resonates with the market, it is easier to take market share when you're coming from a position of having lower single digit market share. In the UK we have a much higher market share and we're more exposed to the macroeconomic environment. So I would say it's a combination of our momentum, our positioning, execution of our strategy and the fact that there is so much market share to take.

Okay, we have a question here from Peter. Could you please increase our understanding of the increased sales and marketing costs to better understand your operational leverage?

Absolutely it's a very good question and we did deliver operating operational leverage in the quarter to your point and we have continued to allocate resources towards the markets that we deem strategically important and provide the best ROI for example markets in North America. And in Q1, these have mainly been channeled through our sales and marketing expenses, as you can see. Of course, we're keeping our ear to the ground and we're managing our OPEX closely, especially in the light of ongoing macro uncertainty.

And a question from Derek at Barclays. How are you thinking about growth margin development going forward, given high contribution from North America?

It's a good point. The main reason for the lower gross margin in the first quarter is that North America had a lower gross margin compared to Europe. And this is explained by some more competitive negotiations with key podcasters in the market and sponsorship sales on some of these high value contracts. So as North America continues to grow, we're delighted with the growth and it may have an impact on our gross margin but we should also note that there's an element of product mix in here when we have strong sponsorship sales they come at a lower gross margin and that has been part of why our margin in q1 particularly skews towards these high value contracts with sponsorship sales so that's just a new one that i would take into account as well

And we have a further question from Derek. What drove the significant organic growth in North America?

The organic growth in North America is a continuation of the good momentum that we have. But I will also link it to the prior question related to gross margin. When we sell more host-read sponsorships, and this was an ad product that saw strong, significant growth in Q1, those campaigns come at higher CPMs, which help us drive up our net sales growth. but they come at a slightly lower gross margin. So that's just a nuance. But the organic growth in North America is a continuation of our solid momentum that we have built. And I will also note here that we did close the acquisition of Wondry Media in the quarter. And whilst their standalone revenues do not contribute to the organic growth, this acquisition we've also made because of the great synergies that we can see between our Acast US team and the new Acast Creative Studios team that we have rebranded the Wondermedia sales team. And you might recall in our Capital Markets Day, one of the new great signings and new deals that we've done was highlighted there. whereby ACOS Creative Studios will help one of our key clients better help on a big branded series related to mental health. So we're already seeing these synergies flow through and are building a good pipeline that will also support the US ACOS growth.

And a further question from Derek. How are you thinking about FCF for 2025? Free cash flows.

We love free cash flows. We've guided to having positive operating cash flows, positive cash flows from operating activities for the full year. We started Q1 with positive 29 million SEKs in positive operating cash flows. um it was interesting to see actually that we were almost able to finance um the outgoing cash flow related to wonder media network which were negative 36 so we almost balanced the the acquisition outflows with the the cash flows from operating activities. So we feel we're in a good position to continue to make progress both when it comes to our operating cash flows and our free cash flows.

And now we have a question from Richard Kramer. Can you talk about the competitive intensity of ad spend? Do you see some rivals retreating or pausing efforts? And how do you anticipate the move to video podcasts?

Thank you, Richard. Great to have you on the call. When it comes to the competitive intensity of ad spend, we've seen a good start to the year, as have other players in digital and audio, but there's been a great spread. I'll not comment on what our competitors are doing. I think as ACOS, we have a good strategy, good position, and we're executing on our strategy in good order. And that is helping us drive growth. We didn't see any impact on sort of retreating or people pulling their ad spend in Q1. So that was great to see. Of course, we're monitoring this very closely moving forward. When it comes to the move to video podcast this is something that Ross and the team elaborated at length at our capital markets day and we see this as a great addition to the market and our stakeholders. We have the capabilities to deploy and and run campaigns that span um audio first of course but not only we have great creators that operate in in many different channels and we're able to work with advertisers who want to reach these creators engaged audiences across a different platform so that's that's part of our positioning we are the friendly independent we're here to support creators and their journey for growth and monetization and the wonderful thing is that as we follow them into these different channels we can also generate revenues and share those revenues with creators so we think this is a great addition to podcasting

And another question from Richard, is access to inventory from top 20 or top 50 shows, which are now no longer exclusive, giving you a larger TAM to sell into?

The inventory on our top shows has changed a little bit over the last quarter. You will recall that the BBC stepped out and actually in Q1 it was the first full quarter when the BBC was not part of our Listens portfolio. But we have brought in very commercial content such as TED Audio Collective and Casefile and this is very highly commercial content with good ad load and great opportunities for both ads and sponsorships. So we see a bigger TAM arising both within our portfolio as we continue to monetize our shows to a greater degree. But we also see the TAM expanding from structural growth and continued increased listening to audio podcasts. And then the TAM is further expanding into video and beyond.

And another question from Richard. Do the top down industry forecasts saying that podcast ads are worth $2.4 billion in the US seem correct to you? It is hard to come to these figures bottom up from yourselves and competitors.

I agree that The data that we have within podcasting, I think reflects the fact that this industry is still at an early stage and growing. It's not an exact science and I agree, it's not entirely easy to understand all of the assumptions that have been made but roughly those figures seem reasonable and I guess the way that I would think about it is that the US represents significant share of the global market possibly half of the global ad market and comparing that US figure to global market figures it looks like this relation is reasonable. We could argue about the exact number but the relationship between the US podcasting ad market and the global ad market seems reasonable.

Okay, we have a question from Max. What's the reason behind the relisting?

Thank you, Max. Great to have you on the call. It is part of our company journey, and this will strengthen our credibility and enables for a broader investor base. And we'll get back when we have something more to report.

And a question from Jonathan Grass. Could you explain why ACAST has some seasonality in its results and if we can expect the past seasonality to continue going forward, Q1 being the lowest and Q4 the highest revenue?

Of course, yes. Ads business is the seasonal business where advertisers will spend in the year they will spend the most amount of money in Q4 and this is to follow the consumer. In Q4 and leading up to Q4 and Q3 we have Black Friday coming up and then the holiday season. So it's a natural season for higher consumer spend. Then once that spend is up and we enter into January, it's not the time of year when consumers are the most forward leaning in their consumption. So this is a typical seasonal pattern within advertising and it's entirely natural that our Q1 revenues are lower than our Q4 revenues, which also then are reflected in our bottom line results. But all things equal, the same seasonality would be expected this year.

we have a question from peter rest of world is unchanged year on year higher impacts from bbc or same as we saw in q4 and any new initiatives to improve momentum

You're absolutely correct that the BBC has a great global following and is great for international reach. But in our other markets, the main impact there has been from our international team and just a change in a few larger campaigns facing between quarters can impact this growth rate since it is our smallest. segment. So that is the underlying reason. And this team is a great, very capable team. Other market segments also houses Australia, New Zealand, and we believe that we have good prospects for good momentum moving forward. But of course, we're operating in a backdrop of global macroeconomic uncertainty. So we're continuing to monitor that. But you're absolutely right that the BBC was a great asset for international reach and monetization.

And another question from Peter. Strong performance in Europe. Any other market that you would like to highlight?

I mean, of course, we've spoken about North America, where the US is the largest market. And within Europe, we spoke about improved momentum in the UK, which is fantastic to see, but also good momentum in the likes of Sweden and France.

And a question from Ramil. How do you recognize Wonder Media Network margins across the P&L? What kind of gross margins do they have?

The Wonder Media Network margins stand alone are slightly lower than the ACoS gross margins. And this is a team that works with production efforts. So production related costs also go in to the cost of sales element of the P&L for Wonder Media Network. But when it comes to their overall profitability, there is some variation among the quarters, depending on project deliveries, of course. And last year, WandaMedia's strongest quarter was Q4, so also a seasonal business. And overall, when we look at bottom line, we do expect a positive profit contribution from WandaMedia Network in the full year of 2025, which we now call Acast Creative Studios.

Further question from Ramil. Contingent liabilities were down quite significantly quarter over quarter, would constitute a bit more than 10% of revenues in Q1 if my maths is correct. What kind of margins did you have on these MGs in Q1?

The margins on MGs without going into any specific contracts are typically a little bit lower than the average margins of the group. These relate to big high value contracts that ACoS work with and we are delighted to work with some of these premium publishers and independents. But on average those margins are slightly lower than the ACoS average.

And another question from Andreas. The consumption of podcasts exceeds the ad spending on podcasts. Can you remind us of the various shares of consumption versus spending?

Great question. So when we look at the difference between how much time people spend listening to podcasts and other media and how many ad dollars are spent in that media, ad spend allocated to podcasts would need to increase by around four to five times to align with the share of consumption. So that is the current state of how podcast consumption relates to ad spend. So an under-indexing of four to five times when it comes to time spent versus ad spent in the media.

And a further question from Richard. Are there any publishers you can identify in the pipeline which have the potential to offset the loss of the BBC?

I mean, in Q1 we were delighted that both TED Audio Collective and Casefile that we're signing Q4 stepped into the portfolio in Q1. And now we've also signed The Athletic and we're delighted to have had them come on board in April. So they will contribute to our network from April onwards. It's a great slate of shows and I recommend you to listen.

And that concludes the Q&A. So back over to you, Emily.

Thank you to everyone who has listened in. Now, the next upcoming event that we have is the AGM that we are hosting in Stockholm on the 20th of May. Our Q2 report will be released on the 25th of July, and you're welcome to join us for that presentation as well. And don't forget to follow us on investors.acos.com, our ACOS blog, or listen to our financial results as a podcast. You can also visit our investor relations website to sign up for press releases, news and financial reports. And this concludes our Q1 2025 earnings call. Thank you.