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.