Acast AB (publ)

Hello and welcome to ACOS Earnings Call for the interim report covering the period January to June 2025. Today, we have our CEO, Greg Glenday, and CFO, Emily Villat, who will present ACAST results for the quarter. You're welcome to submit questions throughout the presentation using the form next to 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 our recently appointed CEO, Greg Glenday. Greg, the floor is yours.

Thank you, Lizzie. Hi, everyone, and thank you for listening in. I am Greg Glenday, the chief executive officer at ACAST since June. I operate out of our New York office in the U.S., where I've been working the last couple of years. I've been a member of the ACAST senior executive team since 2023, and my role is chief business officer. And prior to that, I have extensive experience in leadership roles, media and entertainment, and advertising. including the CEO of Lightbox Out of Home, the Chief Revenue Officer at Shazam, the CRO at Undertone, and the President at iHeartMedia. The unifying theme in my career experience has always been around unlocking value where technology, content, advertising, and creative meet. And that's no different at ACAST. As Chief Business Officer the last couple of years, I've overseen both our content and sales operations globally, with a specific focus on the U.S. market. Today, I'll take you through our business highlights and performance for the second quarter before handing it over to Emily, who will cover our financial performance in more detail. I am honored to share my first quarterly reflections as CEO. For new investors or a reminder, ACAST is uniquely positioned as a top global creator network focused on empowering podcast creators and helping them reach their highly engaged audiences. This focus allows us to help advertisers maximize their return on ad spend by effectively matching them with our network of podcast creators and their valuable audiences. Thank you so much for having me. Simultaneously, we empower creators by maximizing their reach through distribution across all relevant channels and optimizing their monetization. This quarter, we proudly passed a significant milestone, having paid out over half a billion US dollars to our creators since our inception. That's $500 million paid by Acast to our podcasters since inception. This creates, obviously, a self-reinforcing loop that's very powerful. It lays the foundation for strong network effects. More creators with larger audiences strengthen our position with advertisers. Getting more advertisers means we can deliver more impactful campaigns, which enhances revenue generation for our creators and makes us a more attractive destination for new shows. I'm also incredibly excited about our future and the opportunity we have in front of us. I'm very confident in ACAS core strengths as differentiators. Our top tier creator network is one of a kind and our advanced technology platform is also one of a kind. We continue to enable us that continues to enable us to deliver immense value at scale for brands and advertisers driving our next chapter of success. So let's talk about the creators. At ACAST, we're building a one-of-a-kind global podcast network, fostering relationships with creators of all sizes and specialties. Our roster includes household names like Peter Crouch and Digley Squad, alongside established powerhouses such as TED Audio Collective and leading publishers like The Economist, The Guardian, The Athletic. These large creators and publishers are drawn to us because of our robust monetization capabilities, particularly our unique ability to monetize their content across borders due to our global reach. As an example, earlier this year, we signed Tony and Ryan, a very popular Australian podcast. One of the reasons they were such a perfect fit for ACAST was that we have the ability to monetize their large international reach. In fact, their U.S. listens alone would make them a meaningful show in the United States. And ACAST was positioned to sell those impressions from day one. So we're laser focused on driving advertiser ROI or return on ad spend through increased monetizable listens. It's not just about having an immense amount of listens, but commercially attractive listens. This is where both the breadth and the depth of our network differentiates us. Our network thrives on housing diverse niche communities, allowing us to precisely match advertisers with their ideal audiences. The real magic of a unique platform like ACAST, in addition to the larger shows I just mentioned, is the ability for us to also extend those ad campaigns into the longer tail of niche creators that unlocks a lot of value. Advertisers get to extend their reach to an aggregate audience that in many cases is even more engaged and loyal to their podcasters. And of course, this approach brings revenue to more and more creators in our network. So our advertising customers who combine those large integrated buys on specific shows with scaled horizontal audience buys across the long tail are seeing amazing results. This makes our advertising much more efficient and scalable, which means better returns for everyone involved. We're also seeing a trend of brands moving past simply being curious about podcasts. Now they're making our audiences a core part of their media strategies. So let's have a look at the highlights of second quarter 2025. Our strong growth momentum continued into second quarter, driving a 27% net sales increase with an impressive 32% organic growth. We're pleased to report no material shifts in advertiser buying behaviors, which allowed us to sustain robust performance. I'm particularly encouraged by the powerful momentum we're seeing in North America, which has been the primary growth engine again for us this quarter. In fact, for the first time ever, the United States was our largest revenue market for a quarter. While this quarter included some one-off costs related to leadership transition and our upcoming main market listing resulting in an EBITDA loss, it's important to highlight that our underlying profitability continues to improve. On the back of scaling revenues, our adjusted EBITDA margin improved by five percentage points year over year to reach 3% in the quarter. This development clearly demonstrates our strong growth and enhanced underlying profitability. Okay, so in May, we announced our first original production from Acast Creative Studios. As a reminder, Acast Creative Studios was formed through the merging of Acast's existing creative team with our acquisition of Wonder Media Network. This move immediately scaled our ability to create premium branded content. We now offer complete full service solutions from initial concept right through to production and delivery and distribution. Our first big win came quickly. It was a bespoke branded content series called Mind If We Talk, commissioned by BetterHelp, a major global podcast advertiser. They were looking to create their own high quality content and distribute it. This isn't just audio. We leveraged omni-channel assets, including video, social media, alongside a reach campaign across ACAST extensive network. It's a perfect example of a deal neither Acast nor Wonder Media would have likely secured alone. Wonder Media's world-class creative production combined with Acast's scale, technology, and distribution create a truly unique offering in the marketplace. It reflects how the acquisition of Wonder Media has enabled us to attract greater advertiser spend through larger bookings and broader campaigns. And this is not the only example in the quarter. In Q2, we received record-breaking individual bookings in two of our top three markets. The Wonder Media team, now ACAS Creative Studios, was also an enabler of the largest booking we received in the U.S. with another client. While I can't disclose the exact figure or advertiser, I can tell you that this specific booking in second quarter was 10 times larger than the average size order we received in 2024. We continue to see positive trends of buyers continuing to transact larger volumes as they allocate more of their ad spend, not only to podcasting, but specifically a greater share to Acast. And the beauty of that is the sales effort for these larger orders doesn't increase proportionally. It takes roughly the same amount of effort and resource to sell a $25,000 deal as it does a $2.5 million deal. This means we're significantly improving our sales efficiency, which directly boosts our profitability. So more on scalability. At the end of May, we rolled out our new AI-based media planner called Smart Recommendations. This is a tool that allows advertisers to find the right podcast audiences in seconds, simply by describing who they want to reach. It leverages AI models combined with the data and experience ACAST has gathered over a 10-year history, together with the more than 5 million data points from Podchaser, our very own podcast database. The objective is to optimize how podcast advertising is bought and sold by making campaign planning faster and more effective. Early testing with select customers showed that 80% of the ad buyers discovered new podcasts they had never considered before, which also shows there are clear benefits for our creators. This technology improves monetization for the niche content, as I discussed earlier. It brings clear benefits in terms of operational efficiency, reducing workload on internal sales teams, and making campaign planning more efficient and more effective. ACAST can encourage advertisers to spend more on podcast advertising. Smart Recommendations is available for advertisers to use on the ACAST platform and is also now used by our internal sales planning teams. So with that, I will hand it over to Emily to walk us through the financial developments in more detail. Emily, take it away.

Thank you, Greg, and good afternoon, everyone. And let me just say congratulations on your appointments. Now, let's start by having a look at our listens and the average revenue per listen. We have continued to see solid ARPL growth increasing by some 27% year on year to reach a record high of 0.55 SEKs in Q2, meaning that this is almost doubled compared to two years ago. Good progress there. And this development is really a result of our continued improvements to monetize our portfolio across shows, across the entire portfolio. Now, our listens are flat compared to the same period last year, but it is important to note that we have strategically focused on more commercial inventory, as Greg noted earlier. And this ultimately means that we have a stronger base of monetizable listens compared to a year ago. And this is partly reflected by having more inventory, which has actually increased by more than 25% compared to last year. We've also seen some CPMs increase during the quarter, which has also been helpful for our full development. I'll also note that our omnichannel efforts to monetize beyond RSS audio also contribute here as well. Now, as Greg pointed out, we've not seen any material shifts in advertiser buying behavior despite the global macro uncertainty and geopolitical instability. And we've continued to perform very well in this market. And our growth momentum has been maintained. We grew sales by 27% compared to Q2 last year. And the organic growth was an impressive 32% year on year when adjusting both for negative FX impact and the acquisition of Wander Media Network. Again, we continue to see growth mainly being driven by strong performance in North America. And I'll come back to that and add some more color shortly. Our gross profits grew by a strong 33% in the quarter, and our gross profit margin reached 40%. And this positive performance was driven by several factors. Favorable product mix, efficient yield management, and also better scaling against our ad tech and distribution costs. And I'll note here as well that despite significant growth that we've seen in North America, where we have highlighted that margins can be lower, These efforts helped us achieve this 40% gross margin level, which we're pleased with. And looking back at the historical development, you can see here on the slide that we've maintained a solid and positive trend of gross profit growth. So let's have a look at our performance by geographical segment. Europe, of course, delivered 9% revenue growth in the quarter, of which 12% was organic growth. And we've seen strong growth performance in continental Europe, similar to Q1, actually, whereas the performance in the UK in this quarter was a little bit softer. We continue to see improvements to the contribution profits in Europe, increasing by 23 percent compared to last year, with a strong contribution margin of 24 percent. Now, over to North America, which delivered a very strong net sales growth at 70% in the quarter and a stellar 77% organic growth. And this strong performance has, in fact, been driven by the team in the US, which for the first time ever was the largest individual market in Q2. So congratulations. Contribution profits have also followed, increasing to 25 million SEKs, reflecting a 10% contribution profit margin for the segment at a time where we have continued to allocate increased resources to the region as we see that our efforts are clearly paying off. In other markets, we saw a 12% reported growth and 20% organic growth, primarily driven by positive developments in Australia. And the contribution profit has marginally improved compared to last year as well. Now, holistically, there are, of course, some variations between our individual markets, but I am very pleased to report that all of our segments are growing top line with consistent improvements to contribution margins, all supporting the group's profitability improvements. I'm sure you've noticed that we have had larger costs than usual in the second quarter, and this was primarily due to 59 million SEKs in items affecting comparability. And these were mainly related to our leadership transition, as Greg mentioned, but they also included smaller costs tied to our future main market listing. So when we adjust for these significant items, our operating expenses increased by some 17% compared to last year, which I will note is the same level as in the first quarter. I'll also note that our product development costs include some 9 million SEKs of costs related to the departure of our CPO. And these costs have not been adjusted as part of items affecting comparability. So if we set the items affecting comparability to one side, which are in the admin cost line, and we also note the CPO departure related costs, which are in product development, you will see that the OPEX increase is mainly driven by higher sales and marketing costs. And these, of course, reflect our continued focus on the North American segment where we are seeing very strong returns. A reported EBITDA was affected by these previously mentioned costs, with EBITDA coming in at the negative 43 million SEKs. But the underlying profitability, however, continues to improve as we benefit from stronger revenue generation. And the adjusted EBITDA amount to a positive 16 million SEKs, reflecting a margin of 3%. And this corresponds to a 5 percentage point improvement compared to last year. And if we look at this on a last 12-month basis, we have generated adjusted EBITDA of 65 million SEKs, also corresponding to a 3% adjusted EBITDA margin. So to conclude, the positive trajectory of underlying profitability improvements continues. Our operating cash flows amounted to negative 53 million SEKs in the quarter, and these were heavily impacted by negative 85 million SEKs in working capital changes, mainly driven by higher accounts receivables. I do expect the working capital impact to unwind during the second half of the year. We maintain our target of positive operating cash flows for the full year of 2025. We've also had some negative FX impact on our cash, and we close the quarter with a cash position of 572 million SEKs, and we maintain a robust balance sheet. So with that, I would like to hand back over to Greg for a final wrap up before we open up for Q&A.