Acast AB (publ)

Good morning and welcome to ACOS earnings call for the interim report covering the period January to September 2025. We have our CEO Greg Glenday and CFO Emily Villat who will present ACOS results for the quarter. You're welcome to submit questions throughout the presentation using the form next to the stream and we will answer them during the Q&A held after the presentation. I'd now like to start the presentation by handing over to our CEO Greg Glenday. Greg, the floor is yours.

Thank you, LP. Good morning, everyone. Thanks for listening in. I'm Greg Glenday, the CEO of Acast, normally operating out of our New York office, but today I'm thrilled to be over in Stockholm. I'll take you through our business highlights and performance for the third quarter before handing over to Emily, who will cover our financial performance in detail. For new investors, ACAST is the world's largest independent podcast company. Podcasting is a very fragmented ecosystem, making it hard for creators to be discovered and for advertisers to buy. We're solving for this. We help podcast creators reach highly engaged audiences by maximizing their reach through distribution across all relevant channels and, importantly, maximizing their monetization across those channels. We do this by leveraging both our human expertise and technology, connecting advertisers who seek to maximize their return on ad spend to these valuable audiences. And we do this on a global scale. We are, in fact, the only true global independent podcasting company with our geographical spread of both listens and revenue unmatched by any competitor. This gives creators access to audiences and revenue worldwide and advertisers a single point of entry to a fragmented global market. We truly hold a unique position in the rapidly changing media landscape. Podcasting is moving into an exciting phase that takes the industry beyond audio only. As the influencer market continues to mature quickly, the concept of premium narrative-led influencers is taking shape. Podcasters will be the centerpiece of this valuable category where brands can unpack a more nuanced story. As audiences redefine consumption and brands seek authentic connections, ACAST can deliver this value at scale. This is thanks to our extensive network of more than 140,000 podcasts and the technology investments we have made and our commitment to innovation. Annually, we generate clear value for more than 3,300 advertisers by maximizing their return on ad spend. And this creates clear value for our creators. Since inception, we have paid out more than $550 million to our creators, over half a billion dollars to the creator economy. These dynamics create a powerful self-reinforcing loop that lays the foundation for strong network effects. More creators and larger advertisers and larger audiences strengthen our position with brands. Getting more advertisers to spend more means we can deliver more impactful campaigns, which enhances revenue generation for our creators and makes us more attractive home for new shows. I'm incredibly excited about our future and the opportunity we have. I'm very confident in ACAST's core strengths, our top-tier creator network, advanced technology platform. This will continue to enable us to deliver immense value at scale for brands and advertisers, driving the next chapter of our success. 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 and large independent podcasters like Peter Crouch, The Giggly Squad, alongside established powerhouses such as TED Audio Collective and leading publishers like The Economist, The Guardian, and The Athletic. Our exclusive partnerships with hundreds of thousands of the world's most talented creators is our greatest asset. Our track record of helping them monetize their content and build sustainable businesses is our most powerful proof point. We provide them with all the tools and support they need to focus on what they do best, creating. We're their partner and their success is our success. Our network is both broad and deep, which is a key differentiating factor. It allows us to precisely match advertisers with their ideal audiences. This is the real magic of a unique platform like ACAST. In addition to larger shows that I mentioned, the ability for us to extend ad campaigns into the longer tail of niche creators unlocks a lot of value. We describe this as selling podcasting, not just podcasts. 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 creators in our network, which is the ultimate goal. So our advertising customers who combine those larger integrated buys on specific shows with scaled horizontal audience buys are seeing amazing results. This makes our advertising much more efficient, scalable, and effective, which means better returns for everyone involved. So let's have a look at the highlights of third quarter. We maintained our strong growth momentum into the third quarter, driving 35% net sales increase, of which an impressive 41% was organic growth. We're seeing tremendous momentum in North America, which continues to be the primary growth engine again this quarter, while also supported by strong growth in Europe. With increasing revenues, profitability improvements continue to follow. This quarter, we noted an EBITDA margin of 6% and an operating margin of 2%. This development validates our strategy and execution, with us continuing to deliver strong growth and continued profitability improvements. In conjunction with this report, we've announced new financial target framework that builds on our strategic momentum. The new framework clearly defines our commitment to sustain value generation for the coming multi-year cycle. The new financial targets that we've set out are organic net sales growth CAGR exceeding 15% in the 2025 to 2028 time period. We are also committing to deliver an EBIT margin of 10% by 2028. And I'd like to point out that that's a milestone, not a final destination. This new framework supersedes all of our previous formal financial targets, including the old full year 2025 targets. I do want to be clear, however, our commitment to delivering against our previous financial goals for the full year 2025 remain firm. We are heavily committed to delivering 3% to 5% adjusted EBITDA margin and positive operating cash flow for the full year 2025. How do we get there? The trajectory is supported by the operational discipline we've established, continued broad-based local market profitability, improvements and leverage gain by effectively scaling against our global cost functions. Our conviction in our growth trajectory stems from our unique position in a large growing and significantly under monetized market where consumption is four and a half times higher than advertising spend. We also have a track record of outgrowing the market that we plan to continue. We benefit from global scale, which is anchored by our strong positions in the UK and the Nordics with vast potential for growth in the US and continental Europe. We will continue to drive monetization growth, expanding the amount of listens and the average revenue per listen we generate. We provide a scalable, accessible and sophisticated marketplace for advertisers to tap into the power of podcasting in audio, video and beyond at scale. Over the past five years, we've achieved strong improvements in local profitability across key markets. As we showed previously in our capital market stay in April, the data clearly illustrates that in established markets like Sweden and the UK, our very high market share has translated into higher local contribution margins. This is compelling proof that we are effectively monetizing our scale. And as we continue to grow and execute on our focused local strategies, we're confident this strong margin trajectory will continue. And we are targeting further improvements in local profitability across the board. This next slide shows how those local market improvements are taking effect at the group level, demonstrating our successful execution over the past five years. As the dashed group line shows, we've successfully driven total group contribution margin from 8% in 2020 to above 17% as of Q3 2025 last 12 months. Our Europe segment in dark blue represents the highest margin development, currently delivering 23%. Apart from Sweden and the UK, it's worth reminding you that this also includes markets that are on a strong upward trajectory. Another important driver of the group development is North America, which has improved significantly over the past three years to reach 11%, which we expect to continue delivering improvements benefiting the group's profitability. Our other markets category are following a similar path, also reaching 11%. This momentum across our segments enables continued expansion of the group margin, confirming our strategy is effective. Sustaining this momentum across our segments will enable us to continue expanding our group contribution profit. Another crucial driver of our profitability is how effectively we're scaling against our group-wide global costs. These are costs for global shared services covering our central functions, including product, administration, finance, and legal. The data clearly shows a substantial improvement. Since 2020, we've successfully scaled these costs down from 33% of sales to 17% on a last 12 months basis by Q3 2025, which is proof of our operational leverage at the group level. We remain absolutely committed to continuously optimizing these global costs. Our goal is to ensure they remain a diminishing percent of our growing revenues, which is key to enabling further profitability improvements across the entire group. This chart brings together two key elements we just discussed, contribution margin and global costs, to show how they translate directly into our EBIT margin. This shows our operational leverage in action. Our strategy is to continue growing the dark blue contribution margin while seeing decreasing share of global costs to drive further EBIT increases. For several years, like 2020 to 2022, the high relative size of our global costs meant that despite an improving contribution margin, our EBIT margin remained largely negative. The hard work of the last few years have paid off and expanding contribution margin and declining global costs have driven adjusted EBIT up and over the zero mark by Q3 25 on an LTM basis. The operational momentum is not stopping there. We expect this trend to deliver sustained margin expansion as we continue to realize this leverage. We've set the structure and we continue to execute our strategy to ensure further profitability improvements. The foundation of our growth is an unmissable market opportunity. We are actively participating in a large and growing market where podcasting ad spend is catching up with consumption. This is key for us. We are riding a powerful secular tailwind where consumption already exists and the ad spend is playing catch up. Our strategy is to systematically remove barriers and obstacles between this emerging demand and our valuable supply. This growth ensures that we are the primary beneficiary of this market growth. We are global. We've built strong positions and successfully monetized scale in our high share markets like the UK and Nordics. We're seeing strong momentum and massive growth in the highly strategic U.S. market, laying the foundation for strong long-term growth opportunities. And we're also growing our reach and scale in continental Europe. Finally, our growth strategy is more efficient than ever, benefiting from increasing campaign sizes on the direct sales side and an elevated use of our low-touch channels, meaning our sales process becoming inherently more efficient over time. As clients continue to buy larger deals and place more of their transactions in our low-touch channels, our revenue grows while the relative cost of servicing those transactions grows much slower, reflecting operational leverage. By leveraging this established position in the market and our operation model, we are set to translate our opportunity into delivery for our upcoming financial targets. Everything we've shown from local market profitability to scaling global costs feeds into these goals. We are confident in delivering organic net sales growth exceeding 15% on a CAGR basis for the period 2025 to 2028 and achieve EBIT margin of 10% by 2028. I also want to be clear that the margin set out again for this 2028 is a milestone, not an ultimate destination. Our path built on validated execution informs our clear commitment to long-term value generation. Now, let's look at the business highlights for the quarter that serves evidence of our ongoing success in optimizing low-touch sales channels. At the end of July, we announced a new partnership with Magnite, the world's largest independent omnichannel SSP. Magnite has over 100 partners on both the demand and supply side integrated. In essence, it provides a wider choice of DSPs for which to buy our premium ad inventory. Advertisers can now seemingly plan and execute campaigns across podcasts in addition to CTV and video, all from a single Magnite interface. This is crucial because it solves a major pain point and allows us to capitalize on the trends of brands incorporating podcasts into larger multi-channel campaigns. This robust programmatic approach is a step in maximizing value for 140,000 creators. By making our inventory easier to buy programmatically, we are strengthening our opportunities to increase flow of transactions into our low-touch channels, ensuring our scale translates directly into higher revenues and greater profitability. It's also a clear signal that podcast advertising has come of age when players with a scale as big as Magnite enter this space. Now, let's look at the other major engine of our low touch strategy, our self-serve ad platform. This channel is crucial because it allows us to efficiently and instantly onboard the long tail of smaller advertisers curious about podcasting. By enabling them to plan campaigns with less direct sales effort, this platform provides another powerful source of operational leverage for the group. Let's have a look at how it works before I hand over the mic to Emily to run you through the financial performance of Q3.

Welcome to Acast Ad Platform. There are two types of podcast ads you can choose from, pre-recorded ads and sponsorships. Let's start with pre-recorded ads. Set up your campaign info like name, dates, budget and frequency cap. Then, you can upload your own audio. Use our free AI-powered tool to create studio-quality ads. Or, for larger campaigns in select markets, work with Acast Studios to create bespoke audio ads. Next, decide who your ad reaches by defining your audience. Start with location, from broad countries to specific zip codes, and select the podcast language you wish to target. Let's refine your targeting. Use audience attributes to get precise using behaviors, interests, or niche demographics. Use topics and genres to reach audience based on podcasts they're listening to, such as comedy, history, or true crime, or even target specific podcasts. Finally, set up tracking with pixel-based attribution. We offer Podscribe for free or use your own compatible third-party tracking. Now let's look at sponsorships. Search by podcast name if you already know your pick or filter by category, podcast availability, target market, podcast language, age, gender to reach the right audience. Not sure where to start? Use smart recommendations. Type in your target audience and our AI-powered planner suggests shows that fit your campaign. And that's your tour of Acast's ad platform. Now it's time to launch your podcast campaign.