Truecaller AB (publ)

Thank you. Hi, and welcome everyone who's listening in. I'm Alam Amede, and I'm the CEO and co-founder of TrueColor. With me, I have our CFO, Odd Bolin. We're very happy to announce our interim report for the fourth quarter of 2022. I will start with presenting financial and business highlights. I will then provide an update on some of the exciting things we have released during the quarter. Odd will then walk you through our financial performance in more details. Finally, I will wrap up with a summary of the quarter and then we open up for Q&A. So let's get started with the highlights of the quarter. We closed Q4 with an average of 338 million monthly average uses, a 13% increase year on year. Average daily active users grew to 271 million, an increase of 14%. This means that our DAO to MAO engagement remains strong at 80%. We closed the quarter at 444 million Swedish crowns, a 13% increase compared to the same quarter in 2021. Although macroeconomic headwinds resulted in a lower demand for digital advertising, we were still able to increase revenues thanks to the improvements to our product. Our adjusted EBITDA landed at 136 million Swedish crowns at the end of the quarter with an adjusted EBITDA margin of 30.6%. We continue to have a very strong cashflow with 169 million Swedish crowns in net cash from operating activities before tax payments. After the third quarter, we shared that we were observing increased caution by advertisers regarding their marketing investments and that this likely could lead to muted demand. We saw this materialize in a slowdown in demand during the later part of the fourth quarter. during a period when seasonal effects would typically result in higher spending. However, we're still very proud to be a profitable high growth tech company and intend to continue so with solid profitability, great margins and a strong cash flow. Now, we continue to grow our user base across markets, and on both Android and iOS, we're proud to have been ranked as the 14th most downloaded app globally, and that we continue to be one of the most loved apps in India. In 2022, we were the second most used app in India in the 18 to 24 age group, and the third most used app among men. We're also proud to have reached an all-time high in our net promoter score in India, ending the quarter at an NPS of 52. On the product side, we continue to work on optimizing our advertising technology and a number of initiatives that we executed on, which resulted in a significant increase in ad impressions. Our investments in developing our proprietary ad platform have started to pay off as the revenue from our in-house platform grew by more than 3x. We launched a couple of exciting new things this quarter and continue to work on things that expand opportunities for revenue growth. We streamlined our premium offering and introduced new pricing plans, and the number of subscribers grew by 16% year-over-year. We're also very excited that True Colorful Business continues to grow. We now have almost 1,900 customers in 35 different countries. I will cover these highlights in more details in the next few slides. On the growth side, our user base continues to grow. Majority of user growth is still driven by strong organic growth, but we're also seeing our investments in user acquisition start to see the upcoming markets that are of strategic importance to us. We closed Q4 at an average of 338 million monthly active users, which is up by 38 million from the same period last year, or a 13% increase. As mentioned, our daily active user base grew even faster. We closed the quarter at an average of 271 million daily active users, a 14% increase from last year. User growth this quarter was somewhat affected by the global macroeconomic situation. Smartphone sales impacted our user growth to an extent, since some of our new users are those who installed the app when they buy their first smartphone or when they upgrade to a more modern device. The global market for new smartphones decreased by 18% in the fourth quarter, but despite this, we continued to grow our user base and ended the quarter with 13% growth in average monthly active users. Our daily active user growth outpaced our monthly active user growth and engagement remains very strong with over 80% of monthly active users. Both of these are strong indicators of our product's stickiness. We're proud that most of our user growth is still organic as this continues to demonstrate the growing relevance of our service and the product market fit. As a product-first company, we continuously invest in developing our offering to further improve the user experience. As usual, let's recap the product offering for those who are new to these calls or our product. There are two main areas where we focus on from a product perspective. One is our consumer product, which is available on iOS and Android. 338 million people use it every month. And we're proud to be the leading global platform for phone number verification. Consumer use our product in order to have a safer and more efficient calling and messaging experience. It's basically their go-to product for their communication needs. The other side of this is our business product that we call True Call for Business, which allows businesses to verify through a KYC process and become verified businesses on our platform in order to increase trust in their communication with consumers, but also to prevent impersonation and many other things. They can also integrate their calling and messaging experience directly into our product so they can grow their business more efficiently. Now, let's get into the highlights. So the three areas I will cover are the core product offering, TrueColor Premium, and our outtake capabilities and enterprise products. We continue to develop our core offering in order to provide users with a smarter, safer, and more efficient experience across their communication needs. We continue to invest in AI identity, our artificial intelligence and machine learning powered caller ID and spam detection capabilities. AI identity translates called signals and patterns into AI generated labels, for example, likely sales or someone you may know. We continue to build opportunities from community feedback, which drives strong user engagement and also serves as valuable input to the contextual information provided by the AI identity. We also continue to enhance the experience for Android users by building out existing features. For example, Smart SMS highlights the most important information from LinkedIn messages. But Smart SMS is even smarter now and sends intelligent reminders about important events such as travel departure times and bill payment deadlines and so forth. We also continue to focus on improving app performance. In the fourth quarter, we implemented enhancements that deliver a faster frictionless experience while reducing the app size by 50%. This is a big achievement for us. A leaner app size means that we can grow our investments in preloads more due to requirements of OEM manufacturers. It also makes the app more attractive in terms of driving organic user growth, especially in markets where app size is a major factor for users who have low budget devices and limited space on their phones or even limited data plans. In the fourth quarter, we built out a few things in our product to protect users from the growing problem of impersonation and fraud. Based on feedback from our community, one of the most common phone scams involves the impersonation of government officials. This led us to create the government service directory for our users in India. This service helps users to connect seamlessly with the government through easy access to verified contacts of government bodies, from national helpline numbers to specific ministries. The information was sourced directly from official sources and covers 20 central ministries and over 23 states. We continue to update the feature with more verified numbers across different departments and states to help even more people across the country. We also began using our instant messaging capabilities at scale by sending market-specific intelligence directly to our users. So what it means is that we have historically helped our user base identify malicious callers in real time, but now we're also building out the capability to scan ongoing trends in order to inform users preemptively. We're excited about the opportunities in this space and continue to invest in building fraud intelligence and detection capabilities. In late August, we launched a brand new version of the iPhone app for users globally. The iOS app was completely rewritten and offers a fundamentally better user experience from end to end. In the fourth quarter, we strengthened the product by improving the AI identity experience on iPhone. iPhone users now have a much better contextual information on who's calling, similar to the experience we have delivered on Android. We also introduced community feedback on iPhone in the fourth quarter, and now Apple users can take advantage of opportunities to suggest names or leave comments. We continue to see significant improvements in adoption of our app from iPhone users. Since we launched a new app in August, average daily active users on iPhone increased by over 80% and daily installs grew by 15%. The team's focus has been to build a great product and get engagement going before we invest in expanding into iPhone dominant markets. Overall, we're very optimistic about growing our share of iPhone users in the coming years. On the premium side, we continue to develop the premium offering. And in the fourth quarter, we grew our subscriber base by 18% compared to the same period last year. We have streamlined the offering and introduced two new subscription plans, an ad-free plan and a family plan to make it accessible to more users. The ad-free plan was made available to specific user segments and has driven high conversion rates with early indicators suggesting that users on this offering are more likely to upgrade. In December alone, over 10% of ad-free subscribers upgraded to more attractive plans. We also launched Family Plan in early December, which allows users to add up to four people on a single paid account. This new plan has proven to be very attractive with about 60% of our Family Plan users being new subscribers and 40% upgrading from cheaper plans. We also worked on a few things to drive more subscription growth from our iPhone user base. We improved the user interface on the iPhone app to make the checkout process much more intuitive. This initiative has demonstrated a positive trend with a 29% increase in revenue from iPhone subscribers compared to Q4 last year. From a feature perspective, we continue to build out our cloud telephony offering. In the fourth quarter, most of the focus was on improving the visibility of the offering and optimizing the core product. Key performance indicators, including conversion, retention, and usage metrics are trending at a healthy rate. So I think we're on a good path here. In preparation for further expansion, we continue to test the assistant offering in other strategic markets and have been seeing great results. Other than the assistant itself, we continue to explore even more use cases using the cloud telephony platform in order to strengthen our value proposition for the paid offering. On the ad side, we continue to build out our capabilities in order to deliver an even better experience. Thanks to investments in our proprietary platform, we were able to grow our ads revenues despite significantly weaker demand for digital advertising in the broader market. On the proprietary platform, we saw the highest monthly revenues recorded in the fourth quarter and growing by over 300% year on year. We also improved efficiency across the advertising lifecycle, and this resulted in growing impressions by over 36%. These initiatives have resulted in improvements in ads engagement and click-through rates, which are expected to enable improved eCPMs and stronger monetization in the medium to long term. We continue to work on performance advertising through more advanced features, data-led machine learning algorithms, newer inventory side opportunities, and so on. Initiatives to build out our demand side platform, which expands the scope of our reach beyond the Truecaller ecosystem, continue to scale very well. The platform will provide us ability to leverage unique audience insights for a range of advertising use cases. We'll continue to do those investments and initiatives which further improve our effectiveness and monetization potential, which will put us in a very strong position when demand recovers. On the enterprise side, demand for our enterprise offering continues to grow. In the fourth quarter, we onboarded a number of notable brands in India across sectors, including Volkswagen, Tata Play and Coursera, to name a few. Our relevance to players in the financial sector also continues to be high as we added a number of leading banks and insurance providers to our client portfolio this quarter. We also continue to expand Truco for Business in markets beyond India, most notably Egypt, Kenya, and South Africa. In the fourth quarter, we introduced Business Profile, which helps brands to engage more dynamically with the end users. Business profiles are fully customizable and allow enterprise customers to bring more life to their profile by including a description of their business, website or social media links and branded media. This enables businesses to reinforce their brand within the TrueColor ecosystem and also helps them route organic traffic to their digital channels to increase engagement. We also continue to work on supporting business messaging at scale. By the end of the fourth quarter, millions of business messages were being delivered through our platform on a daily basis. In close collaboration with TownLab, We continue to strengthen our technical capabilities in order to support even higher volumes while innovating on our ability to support more engaging content through rich media messages, attachments, and more. We continue to develop these offerings to deliver even more value for both businesses and end users. Now, over to all to talk about our financial performance.

Thank you, Alan.

Let's see. As usual, we'll start with our revenue development. This quarter, we saw a slowdown in the revenue growth as a consequence of a general lower demand for digital ads, which we see as an effect being in effect of the depressed global macro. The lower demand affected pricing also in markets where the general economy still is developing well, such as India, where the underlying economy is supposed to grow by 6-7% this year. But despite this reduced demand for digital advertising, we managed to increase advertising revenue thanks to the improvements we made on our advertising platform, which enabled a meaningful increase in monetizable ad impressions, like Alan mentioned. We continue to develop our premium offering and here we see a steady development with an increase in the number of subscribers across platforms and geographies. As mentioned earlier, we also see a continued positive trend for our B2B offering, True Cool for Business, which is growing nicely both when it comes to customers as well as revenue. At year-end, the customer base has almost doubled versus a year ago. We have increased revenue at a strong pace and continue to develop more value-added services and insights to our connected businesses. We believe that we have still only scratched the surface when it comes to our offering and our penetration in the market. Overall, I would say that we continue to execute well on the things that we can control, with improvements in all three income streams, but with a macro effect that hurts our income development this quarter. We believe that the current negative macro sentiment will persist at least through the first half of 2023, but our focus is on ensuring that we stand even stronger when demand recovers. Now we will look a little bit more in detail on our three revenue streams and we'll start with the largest one, ads. In Q3, we noticed an increased cautiousness among advertisers. And in Q4, we saw that resulting in a noticeable decrease in demand, which became more apparent during the latter part of the fourth quarter, which is a period when seasonal effects would normally result in higher spending. The generally lower demand in the market impacted prices negatively. With the global depressed macro, the risk sentiment has changed and more companies have focused on profitability versus growth, which impacted demand in markets. Even in markets like India, where the underlying economy still is expected to develop very well. On the other hand, we continued to improve our platform, and this quarter, through our tech improvements, we were able to increase the number of impressions substantially, which meant that we saw ads revenue increase with 13%, even though CPMs decreased with 18%. The increase in impressions were made possible as different stages of the ads lifecycle were optimized, the ad requests, catching, serving, et cetera, leading to an increase in monetizable impressions within the existing ad slots. During the year, we continue to invest in ad tech and traffic on our own proprietary platform. And traffic on our own proprietary platform has been growing significantly. On the platform, we can offer our advertising space without using intermediaries such as Google. And income on this platform more than tripled compared to the fourth quarter last year, 2021. These developments and the improvements made to increase impressions make us feel confident that when the external situation improves, we will be very well positioned for continuing growth. When looking at our subscriptions, you can see that we grew our revenue by 25% compared to last year, which is the highest growth rate we've had for a while. The relative growth in the number of premium users is exceeding the relative growth in monthly active users. We see growth coming from many different markets and both on iOS and Android. During the quarter, we rolled out a new entry plan in India, a family plan globally, and started to offer a plan in the US, including true code resistance. During 2023, the assistant will be rolled out in all our larger markets. True Call for Business continues to develop well with many new large enterprise clients. We are now present in 35 countries and we continue to improve our capabilities with new features and more and more customers have longer relationships with us. In 2022, we reached almost 1,900 customers, which we are very happy about. We started this business slightly more than two years ago. We are now 25 resellers and more than 5 billion verified calls were made on our platform. As said earlier, we have only scratched the surface here. We believe both when it comes to penetration in the markets as well as our product offering, we see many opportunities ahead that we will benefit from. Gross profit increased by 9% year-over-year, and our gross margin continues to be strong, although it decreased 3 percentage points compared to Q4 last year. This decrease has, as mentioned before, two primary reasons. One is the increased cost for servers and hosting due to our larger user base and also higher verification costs for new users. We're continuously looking at different ways to become more efficient here going forward and lower this cost as a percentage of our revenue. We also saw increased cost transparency from advertising platforms that previously only reported their net figure stress. We now get some explicit cost of goods sold figures, which decreases our gross margin somewhat. In comparison to Q3, we saw a somewhat increased gross margin, which is in line with what we have communicated. If we turn to costs, we have had a quite stable underlying cost level the last three quarters when looking at staff expenses as well as other external expenses. As we continue to grow our offering, we have also continued to grow the number of employees, but we're still a very efficient organization given our huge user base. As pointed out last quarter, we had a temporary increase in marketing spend during Q4 as we continue to invest in seeding new markets or sub-markets. But given the macroeconomic backdrop and the effects it had had on demand for ads, we will in 2023 adjust our investments in marketing and use acquisition to the current climate. When it comes to the incentive program, we just want to remind everyone here that this year's program included, or last year's program, 22, included restricted stock units, which result in a higher cost being booked in the property and loss statement than for warrants or options. However, these costs will have no cash flow effect until 2024 at the earliest when we will have to pay social security fees for the value of the shares being given to our employees in Sweden at that time. The cost could also be potentially be quite volatile, depending on the share price development. As you know, from the last quarter, we are now reporting breakout costs for incentive programs to help you as investors and analysts see the development, both including and excluding incentive programs. As we have previously stated, our tax rate is a combination of the Swedish corporate tax rate, 20.5%, and the Indian tax rate, which is closer to 30%. This quarter, the tax rate overall was 22%, and I think it's reasonable to expect that it is to be at this level or somewhat higher as we increase our profits in our India operations. The taxes we pay are partly based on our transit pricing policy. And the purpose of that policy is to ensure that we pay tax in a correct way from the perspective of both the Swedish and the Indian tax authorities. Adjusted EBITDA decreased mainly due to the macro effect on ads and the temporarily higher marketing spend that we had in Q4. EBITDA margin for Q4 was 31%, and excluding the temporary marketing spend that we had in Q4, the margin would have been 39%. Last quarter, I guided the market that the effect was expected to affect the margin negatively 5 percentage points, but the effect became slightly larger than expected. slightly larger as the expected income growth decreased due to the macro situation. So we had slightly lower revenue than we expected when we guided towards 5%. As mentioned, we will adjust the level of investments we do in the current situation to continue to deliver good return even in a more challenging situation. We continue to generate cash at a good rate. This quarter, we made tax payments covering much of the full year, which impacted the overall cash flow. When instead looking at the cash flow from operating activities before taxes paid, it amounted to 169 million in Q4. And we now have 1.7 billion Swedish crowns in cash and short-term investments and another 500 million Swedish crowns available in an unused revolving credit facility. We continue to consider this to be an excellent position to be in at this point in time with this macroeconomic uncertainty. And we much rather have this much cash on our balance sheet than no cash like unfortunately some other companies end up having. During the quarter, we bought back shares to trim the capital position, and that is a tool that we could continue to use and will also continue to scan the market for potential acquisitions. We're looking for both companies that can add value to our existing business model through more data and or users and new functionality and for investments that may give us new growth opportunities where we build on our customer base and distribution power. In 2022, we delivered on our financial targets with strong growth and solid profitability for the full year. For 2022, the net sales growth was 57% and the EBTA margin was 40%. With the shift in macro and with the outstanding performance we've had in 2021 and 2022, it is fair to say that 2023 will be a more challenging year. in terms of financial targets. As mentioned earlier, we continue to improve things that we can control internally, and we see a solid development within subscriptions and true quality for business. When it comes to ads, it is difficult to assess when we will see demand pick up again. And in the meantime, we focus on safeguarding the profitability and making sure that we are in a better position and even stronger position once demand in the market increases again. I think the targets are still valid and something we will continue to strive to have performed. But of course, there might be variation between quarters. With that, I will hand back to Alan to wrap things up before we start the Q&A session. Alan.

Thanks, Alex. So I'm concluding slides to wrap this up. I'm pleased to report this quarter that our business continued to develop positively despite the challenging operating environment. We continued to grow our user base across markets despite an 18% decline in smartphone sales and saw strong growth in adoption from iOS users after the launch of the new app. Our advertising business was affected by macro conditions, but we were able to counteract some of the negative effects with the enhancements we made to our app and ad platform. We continue to see healthy development with subscriptions and true colorful business and continue to innovate in these areas to drive continued growth. As we mentioned, we expect the first half of this year to be a challenging one, but we continue to focus on bringing the best solution to the market and to deliver good profitability throughout the economic downturn. Despite the challenges we see ahead, we are proud to be in a good position with solid financials, strong cash flow and strong organic growth. This puts us in a different position compared to other global platforms that have had to cut staff. and initiated different kinds of cost-cutting programs. Our strong position and our continued growth means that we still will continue to make strategic investments. And even in a time of uncertainty, we'll continue to take advantage of our strong position and find opportunities to continue growing. And I think it's pretty clear that regardless of how the world looks like, a service like Truecall will always be needed. It goes without saying that none of this would be possible without our users, the great partners that we work with, and the phenomenal Truecaller team across the world. And with that, we're happy to open the floor for questions. Thank you.

We will now begin the question and answer session. To ask a question, you may press star then 1 on your touch-tone phone. If you are using a speakerphone, we ask that you please pick up your handset before pressing the keys. To withdraw your question, please press star then two. Today's first question comes from Akhil Dattani with J.P. Morgan. Please go ahead.

Hi, good afternoon. And Alan, thanks for taking the questions. Can I ask a number of different questions all related to the macro commentary that you provided? You gave us some interesting comments around the Indian economy being strong, but yet you are seeing corporates reacting to the general border macro softeners. Could you maybe help us understand the way the conversations with these customers are going? What exactly is it they're reacting to? Is it fears of an Indian slowdown? Is it just preemptively moving? I guess what we're trying to understand is, is this very clearly temporary in their behavior, or is it harder to read how this evolves? The second bit is, I think you said, if I understood correctly, that some of the impacts you saw a little bit later through the quarter. So it sounds like maybe the reaction your customers are having sort of progressed through the period. Maybe if you could comment on what you're seeing so far through Q1. And I appreciate it's difficult given everything going on. But given what you're saying about a tough H1 and a, let's say, hopefully better H2, is there any sort of color you can provide us on how you think the shape of that revenue trajectory will play out? just so that we can think about how the next one or two quarters might potentially look. And then the last piece is just on margins. I mean, I guess it's historically been something that you've had a huge amount of control over, and it's a very profitable business. If we do have a weaker macro, how do you think about margins? Does it mean you preserve margins, focus on cash flow, or do you keep on investing? Thanks a lot.

Thank you, Akhil. Maybe I can start and then you can take over. So I think my sense on the markets in India is more a psychological reaction to what's happening around the world, where there are uncertainties on what's going to happen. We definitely see capital flowing in, both into the tech sector, but other sectors as well. But I think everyone is right now keen on showing good results and there are different ways to do that. But we're not seeing some of the issues that you might see in the Western world. So I think in general, I think most companies are just being cautious because there's a lot of unknowns right now, basically. And as you mentioned, we did see this happening at the mid to end of the quarter, where we did expect certain revenues to come in from certain holidays like Black Friday and so forth and Christmas, which came out more muted than expected. And that's also why the results came in as they came in. What was the other question?

Yeah, I was just, I guess the other question was just appreciating the challenges of giving any comments. I guess I just wondered if you were able to give us some directional color on Q1. I mean, I guess the simplest question is more, do you think the overall revenue trajectory for advertising is soft or not than Q4? But again, I don't know how much willing to comment on that.

Yeah. Well, what I can say is that the muted demand that we saw in December is more or less the same so far. It's what we've seen. We'll have to see how that develops in the coming weeks and months. But as you might know, this can change overnight as well. So depending on how things change, it can actually bounce back pretty quickly. But because we don't see any major signs yet, we rather stay cautious. And then I'll do just a margin.

An investment. We're a listed company and we understand the importance of... continuity. And we are seeing effects on our growth rate from the weaker macroeconomic climate, but we can still control our profitability and we intend to safeguard that. We will We will obviously be opportunistic when it comes to investments, for example, within M&A, but we will definitely ensure that our regular costs, including investments in use acquisition and marketing, are kept at a level where we can safeguard the margins.

Fine. Thanks so much.

Thank you. And our next question today comes from Stefan Gelfen with DMV. Please go ahead.

Yes, actually, two follow-up questions to Akil's questions. First of all, well, you state the weaker sentiment is expected to persist at least throughout H1 2023. But you also commented now that things can change overnight. Just what kind of visibility do you have in terms of CPM? Are you just a price taker overall on CPM? And secondly, you say that you'll save for margins. But during 2022, employee costs have increased fast. with also close to 30% growth in number of employees. Should we read that you will hold back on recruitment in beginning of 2023 until we see the market improve? Thank you.

Thank you. I can take that one. The visibility we have in front of us is more or less in real time. We see what happens on a day-to-day basis because it works like a stock market, more or less. But we do have dialogues and conversations with our advertisers, the larger ones, to get an understanding of how they're thinking about their business. their budget for the coming months or quarters or or year so those are the conversations that we can have but it also makes it slightly difficult for us to to make accurate predictions especially when when you know there are these type of uncertainties globally basically um On your second question, I think Truecaller as a company has never been a company that just hires people for the sake of hiring. We always make sure we hire based on need and we hire the best people, which also means that it takes time for us to hire certain roles, especially on the engineering side. So we're going to continue to hire on those roles. functions where we see a need. But as always, and as historically, we've always been aiming to hire the best people, which takes time. Having that said, we have never seen any need to prove our company to be successful by being a thousand people company. And I doubt we'll be there for a couple of years. So we're doing things in a, we've always done things in a very cautious way to make sure that everyone in the organization also grows with the business.

So just to add on the medium to long-term outlook, Stefan, we are dependent on the macroeconomic background and demand for digital advertising is something that is an effect of the macroeconomic general demand. So when we look at the medium to long-term outlook, we are looking at... the economics expert out there, the different organizations and banks, et cetera, that are doing estimates and forecasts. We don't have more insight than they can give us. So we don't know whether this downturn that we see now Primarily in the Western world, it's going to last for six months or a year or two years. And we don't know how the psychology will work out in India and other markets where we have a large exposure that are doing much better than the Western world. Even though we can hope for the psychological effect that we seem to be seeing right now to disappear once transparency increases and there's more stability in the macroeconomic climate.

Thank you.

Thank you. And our next question today comes from Predrag Savinovich with Carnegie Investment Bank. Please go ahead.

Thank you very much, operator. Hi, Alan. Hi, Odd. Building further a bit on the same topic, is it possible to quantify in roughly or give some flavor on the level of growth you could achieve even with the same type of sentiment in the ad market and the Mac or currently seeing, I mean, from your own ability, from tweaks you make, improvements to the ad platform, the utilization and so on.

I think that is very difficult to say. Even if we were to increase our market share within digital advertising very substantially, we could still see lower prices. This is an auction market, and lower demand materializes in the shape of lower prices. And if demand goes down, sufficiently we could increase our market share fill our ad slots but still see lower pricing and that way see an impact on our revenue so it's a very difficult question to answer fortunately maybe if i can pitch in on that

So one of the questions or some of the questions we got made last year was whether TrueColor has capped in terms of impressions that we can show on our product. I think this was some of the worries that the investors had. And what we've been able to prove in Q4 is that we have been able to increase the impression, the number of ads that we can display on our platform. So I think that's a very good sign to look at. And once the market becomes more positive, we will leverage that in a way that we haven't seen before. And just want to re-emphasize that our main objective has not been to drive up CPM levels. If we would have wanted to do that, we could have done it already in Q4 and driven the CPMs to be higher than in Q3. But we're optimizing for revenues. And that means when you open up for more impressions, you dilute the CPMs. And that is fine. I think that's okay. Because for us... it's more important to drive revenue and profitability for shareholders rather than driving a vanity metric as CPM.

That's great. Thank you.

I appreciate that color. And then if you could double click a little bit on the campaigns in the U S and Q4, and also going forward is a, More of a general question of how has it been received overall in line better, worse than your expectations, level of consistent users you've gained, and also how large of a priority do you see this expansion being now and going forward?

It's a very good question, Frederik. So we do these type of burst campaigns from time to time. This time it was targeted towards the US market, more in the sort of real world. And the reason why we do this is because we want to get an understanding of the uses that we acquire, the behavior, the patterns, so that we can improve the product further. And what we have seen so far with this campaign that we did was that the number of users obviously increased. We could definitely see how users appreciated the product and the problem that we solve. But the idea is not to grow our market share in US or any new market by throwing money into these markets. These are initiatives we're doing to educate ourselves and the market. We don't expect to do any of these larger campaigns, you know, at least for the coming six months because we've already done it and we have some key data points to look at to make sure that we over time can build out the product so that the organic virality takes over because that's what's going to make us win in the long term, not throwing money at the problem.

Okay, super.

And have you learned anything on this organic virality? Is it achievable, do you think? Do you have any sense of the opportunity you have here?

Yeah, absolutely. I think we've seen a lot of similarities with some of our other markets. I think there are things we can improve and those are the things that we're working on right now in order to improve the the hit rate in the market, but also parts of the product towards certain demographic groups in the country. So I think there are some good nuggets to double-click on.

Okay, super. Thank you very much, guys. Thank you.

And our next question today comes from Jesper von Koch with Red Eye. Please go ahead.

Hi, Alain, and hi, Ard. Thanks for taking my questions. So you state that the number of ad impressions per user was lifted in the quarter thanks to the efficiency improvements in the advertising lifecycle and that this also improved engagement and click-through rates for your ads. So could you just provide some more flavor on what you've done there?

Well, I don't want to go too much into the details because it's various product specific and to some degree, you know, it's things that we would like to keep internally. But we have done improvements in the product so that we can render ads in a more efficient way. We've also opened up a few more ad units inside the product that we're testing out. One of them are performing quite well. So that one we're opening up a bit more. So we're testing out both new ad inventories inside a product, but also just improving things on the render rate side. I think if you use the product, you might notice it, at least on Android, but it's not super obvious. And when we do improvements that are not super obvious, that's when we're successful.

Good. And then, I mean, regarding that, like the improved engagement and the improved click-through rates for the new ad units that proved successful, is that, I mean, the CPM rate, is that something that you could lift by like in retrospect or like afterwards, after having showed that, like those new KPIs to your advertising customers or how does it work?

I didn't understand the question either, Jesper.

Yeah, I mean, you see these promising new ad units that showed better click-through rates. So I guess they are more valuable. Is that something that you could now show to your ads customers so that your CPM rate will go up in the near future.

Yeah, I mean, absolutely. We do demonstrate these to some of our larger ads partners to show them the performance of them and also what's new. But right now, what will drive CPM up is not going to be us doing improvements or opening up more ad units. It's all in the hands of the macro, I would say, unless we want to take down the inventory and reduce it. But then we want to be able to deliver higher revenues. I mean, it's an effect of it.

And then also regarding CPM, I mean, rest of the world was pretty strong. Is that stemming from like an increased share from the USA or how should we interpret that number?

If you look at CPM in particular, you need to remember that we have a very, very large market share in India, which means that we are more sensitive to general macroeconomic developments in India. than we are in markets where our overall market share is lower, where we can position ourselves slightly differently. We can focus on segments and find better revenue per user, which results in better CPM. You cannot really compare the developments we see in India with the developments we see in markets where we have less penetration. There are other markets where we have similar penetration to India, but many of the markets in the rest of the world segment are markets where we have lower relative penetration and where we see slightly different dynamics.

All right, understood. And then my last one. where you said that volume of ads on your own platform rather than Google's or Facebook's tripled compared to last year. So roughly what percentage does currently go through your own platform?

We haven't given any number on that one, but what we're saying is that we're still doing most of the business through Google and to some extent Facebook.

Yeah. All right. Thanks. That's all for me. Yes, yes. Thanks. That's all for me. Thank you.

And our next question comes from John Curtis with Numis.

Please go ahead. Thank you. Hi, everyone. A few questions. Firstly, is there a meaningful update to be had regarding the timing of the enactment of the Digital Personal Protection Bill in India? Secondly, regarding ad revenue, I hear what you just said, Odd, about not interpreting too much or not comparing CPMs between the regions. It was a bad day for me when you sort of stopped giving ad revenue per region. So it would be really useful to figure out of your 1.5 billion for the full year, of ad revenue, India was how much, and then what was the second and the third largest country in terms of their contribution to the ad revenue. And then thirdly, adjust marketing costs in 2023. What does adjust mean? What were the marketing costs as a proportion of other operating costs? up to q3 when you didn't have to you didn't spend extra as you did in q4 please

Well, you're asking, hi John, you're asking for a number of things we haven't gone public with. So I can't give you any specifics on a number of these. I hear what you're saying about communicating revenue, ads revenue per market, and that's something we will take into consideration. We don't have it here now. India is making up the lion's share of our ads revenue simply because we have so many users in India. But that's something we'll have to come back on and consider from our side. Do you want to talk about the legal situation in the first question?

Forgive me to interrupt you. Are you also saying no to giving us some quality, some information about the marketing costs, please, as a proportion of other operating costs?

Yeah, right. Well, when we started out 2022, we said that we were going to grow our marketing costs at a certain rate. We believed at that point we were going to grow our marketing use acquisition costs at a certain rate. Back then, we gave some, I think, pretty good pointers on how to calculate our historical marketing use acquisition cost. Now, what I can say is that Once again, I'm sorry, John, but we haven't at this point decided that we will explicitly discuss the marketing costs that we have. I think you can do a calculation on Q3 based on what we said would happen with the margin development versus what you see in the numbers. And that gives you a good indication on how much extra we spent in Q4. But generally speaking, for 2022, we spent about the same amount, slightly more than we did in 2021. Sorry about not being able to be more specific, but if this is something we would decide to change, I wouldn't be able to do it in a call like this anyway.

Understood. Thank you, Claude.

So from my side, John, on your question regarding the personal data protection bill, nothing new has come out yet since last time we spoke. And I guess there will be some updates on next steps after the meeting. After summer, I guess it is. But we'll have to see. As we've seen before, it gets postponed every time. So we'll have to see. But we still remain confident that what's on the table at the moment, which would most likely be the final draft of the bill, would not affect the experience or True Colors business. That's great. Thank you both.

Thank you, John.

And our next question today comes from Yemi Fawana with Goldman Sachs. Please go ahead.

Thank you. Good afternoon, and thanks for the helpful presentation. There's been a lot of focus on pricing and monetization via CPMs and impressions, and rightly so. But perhaps if I could shift to volumes, given that it's much more of a structural driver Going forward, so firstly on daily active user growth, clearly 4Q was okay, but somewhat weaker than we would have expected. Is that just a function of slower smartphone sales that you flagged, which means that preloads have been less impactful, or are there any other effects that you would explicitly be calling out? Secondly, on your iPhone progress, while you may not want to give precise numbers there, could you maybe point us in the right direction? I would have thought your iPhone daily active user base prior to the app launch was in the ballpark of 12 to 13 million users. And so 80% growth since then implies another 10 million or so users over the last few months. So put another way, is it fair to assume that more than a quarter of your incremental daily active users are on the iPhone platform? And on a related note, while the iPhone base is still small, does the iPhone base have a similar country distribution to your Android business? That would be helpful to know. Thank you.

Thank you. Thanks for the questions. On the iPhone distribution, it's actually lower on the daily active user side as you expected. The mouse side is, however, on a similar ballpark, as you mentioned, but slightly higher. What has been the challenge on iOS in the past has been how do you get users to use it more frequently? And that's... basically the engagement, the DAO and what the team has been working on. And that's what we've been able to drive up with over 80% since August. I would say what we can see, what we have seen is we did expect the preloads to ramp up faster. That's what we saw at least in Q3, how it started to ramp up. It's still growing, or it still grew in Q4, the preloads, but not at the pace that we were expecting. And that is obviously due to smartphone sales declining in Q4. Does it have an impact on us in general? Yeah, a bit. But we do still see a positive growth on new users coming on board and also the MAU and DAO growth. I think what we did successfully in the quarter was to drive up more engagement inside app to build more value internally. in our product. And that's what we've seen. That's why Dow grew with 14% while Mao grew with 13%, which normally for most companies is the opposite, to be honest. So I think, you know, the team has done a great job and hopefully we'll see smartphone shipments catching up during this year. But in general, I think we had a good growth in terms of monthly active uses and daily active uses during the quarter.

Very clear. Thank you.

And the next question today comes from Eric Larson at SCB. Please go ahead.

Thank you. Good afternoon. A lot of good color. I just have two quick follow-ups. So on the user acquisition costs, do you expect that to grow or decrease or remain flat over 2023? And can you just remind me on the split between organic and inorganic user intake? Because it's majority organic still, right?

Yeah, around 85 cents and more is still organic. When it comes to the inorganic, the user acquisition, we do have a budget set aside for this. And when we see opportunities, we do try out things every single day. And where we see that it sticks, we continue a bit more. But we're going to do this in a healthy manner during the year. You want to add something?

Like I said, we understand the importance of continuity. Profitability is something we can control and continuity will be a focus for us in this respect. And we will adapt our investments according to that doctrine.

Okay, great. But I guess it's fair to point out that you still have a solid user intake from an organic perspective.

Yes.

Great. Okay, thank you, guys.

Thank you.

Okay, ladies and gentlemen, this concludes our question and answer session. I'd like to turn the conference back over to the management team for your final remarks.

Thank you. Thank you everyone for listening in. We're extremely proud of a great quarter. We're excited about the future and we look forward to see you at our next earnings call. Thank you.