Truecaller AB (publ)

Welcome, everyone. I'm Alla Mamedy, and I'm the CEO and the co-founder of Truecaller. And with me, I have our CFO, Ad Bolin. We're here to announce our year-end report covering the fourth quarter of 2024. Today we'll start with overall highlights from the quarter and then walk you through our financial performance in detail. We will then cover some developments on the product side before wrapping up and opening up for questions. So let's get started with the highlights of the quarter. I'm pleased to report that our user base continued to grow during the quarter. We closed Q4 with an average of 374 million monthly active users and an increase of 11%. Average daily active users grew to 305 million, an increase of 12%. This brings us to a strong Dow to Mao ratio of 81%. And we closed the quarter at 425 million Swedish crowns in net sales, a 4% decrease compared to the same period in 2022. Our net sales results continue to be impacted by the slowdown in demand in advertising, but we see consumer subscription and true quality for business continue to grow at a good pace. That said, we continue to operate productively. with adjusted EBITDA landing at 169 million Swedish crown at the end of the quarter and an adjusted EBITDA margin of 40%. We continue to have a very strong cash flow with 229 million Swedish crowns in net cash from operating activities before tax payments. We continue to grow our user base, and in the fourth quarter, we achieved the milestone of hitting 300 million daily active users. Our user growth continues to develop very well. During the quarter, we saw higher relative growth in regions outside of India and the Middle East. Having that said, we're proud to have reached a new all-time high in our net promoter score in India, ending the quarter at an NPS of 62%. We're also pleased with the development of our premium business. The number of paying subscribers increased by 19% compared to the fourth quarter of 2022, which is almost two times the rate of our total user base relative growth rate. In terms of where this growth is coming from, we saw notable traction on subscriptions in India as well as on iPhone users globally. TrueCall for Business developed at a good pace throughout the year, and the fourth quarter was the strongest quarter for TrueCall for Business in terms of both revenue and the addition of new customers. We continue to see healthy demand for our verified business and business messaging offerings. Our newest enterprise product, Risk Intelligence, was also strengthened with the integration of Trust Checker, which we acquired during the quarter. We will cover these in more details in the coming slides. But on our user growth, the number of users is steadily growing. We closed Q4 at an average of 374 million monthly active users, which is up by 36 million from the same period last year, or as I said before, an 11% increase. Our daily active user base grew at a slightly faster rate. We ended the quarter with 305 million monthly active users, a 12% increase from last year. India and the Middle East are regions that we have penetrated fairly well. And as I mentioned earlier, we saw high relative growth in countries outside of these two markets. Majority of our user growth is still driven by organic growth, but the fact that we see faster growth rates in other markets is something we see as an indication that our investments in user acquisition are starting to pay off. As mentioned in Q3, a lower growth compared to the very strong development that we saw in Q2 and Q3 was expected, but we saw user growth start to pick up again towards the end of Q4, and we've begun 2024 user growth on a strong note. That said, we continue to see strong engagement with 81% of monthly active users using Truecaller on a daily basis. We see this as an indicator of our product stickiness and the growing relevance of our services. Now over to Odd.

Thank you. So now it's time to look a little bit deeper into our financial performance during the quarter.

And as usual, we start with the revenue development. Net sales, like Alan said, decreased by 4% compared to the same quarter last year. And the net sales for ads declined by 12%, while our recurring revenue streams continue to grow in a very material way. Consumer subscriptions grow by 23% in TrueCode for Business, with 42% So this strong growth continued. Now let's look a little bit in more detail on our three different revenue streams. And let's start with the largest one then, ads. It is clear that 2023 was a challenging year for ads compared to 22. In Q4, we saw a small seasonal uptick from Diwali that happened in October. But the general demand was lower than in 2022. And this holds true for all players working with three third-party programmatic ads, as far as we know. The decline has been obvious and has multiple reasons. First of all, global macro and inflation, which impacts overall spending. even among Indian advertisers. Pockets of advertisers that used to drive up prices and demand, for example, risk capital-backed companies, have significantly lowered their spend as they have been forced to focus on profit instead of growth. This has been a global shift and has also been clear in India as in many Western markets. During times when demand decreases, suppliers, as ourselves, have increased supply to counteract the decreased demand in order to save core revenue. On a market level, this has further decreased pricing. Stable spenders can then choose to buy as many impressions as they have done historically, but at a lower price, or spend the same amount and get more impressions. We continue to improve our platform through our tech improvements and the growth of the user base. We continue to optimize for revenue per user rather than pricing and fill rates, particularly seen in this quarter where we choose to increase impressions at the cost of average prices, but with the benefit of reaching higher revenues than we otherwise would have. We also continue to increase impressions available to monetize within the existing slots. These improvements help us to marginally And now, but more importantly, when demand bounces back, they will generate a significantly higher return, significantly higher return than what we saw before this slowdown in demand. We, at this point, don't see any material uptick in underlying demand. And we continue to focus on factors that we can influence, ensuring that we are in the best possible position once the macro situation starts improving again. In the near term, we do not see any signs of a demand recovery, but things can change fast in the advertising business. When looking at our stable subscription revenues, you can see that we grow our revenue by 23% compared to the same quarter last year. This is sequential growth in revenues also continues. The relative growth in the number of premium users is almost twice the relative growth in monthly active users, which is, to us, very encouraging. Our strategy to add more functionality through the cloud telephony platform continues to pay off, with contributions coming from the AI features Truecaller Assistant and Call Recording, which yields much higher subscription prices. An important driver of revenues on subscription is our growing footprint on iOS, where the conversion rates and willingness to pay is substantially higher than on Android. True Call for Business had a great quarter and continues to grow fast. Remember that this revenue stream started in 2021, and Q4 accounted for 12% of total net sales and also grew 42% compared to Q4 2022. We see many positive things happening here, net additions of customers, longer contracts, and higher pricing plans. In 2024, we will continue to focus on upselling on the existing client base as well as growing further. An important contributor to growth in this segment during 2023 and going forward has been business messaging, where we have signed a new agreement with Tanla, our partner in India, but further we'll grow volumes and revenues here. Our first customers for the new product lines within fraud prevention, fraud protection and credit assessment have come on board and are expected to add revenues from the second quarter this year and onwards. While ADS has higher price volatility and cyclicality by its nature, we have over the last years continued to focus on growing our two recurring revenue streams, subscriptions and true corporate business. Here we have a strong momentum with sequential growth every quarter and we are early in the development of their respective offerings. In 2024, we have a lot in the pipeline when it comes to becoming more advanced in our subscription offering, both when it comes to features and packaging and targeting, as well as looking into potential partnerships with, for example, telecom partners and where we see potential in increased pricing. For our software as a service offering, true call for business, the offering is still young. We have past 2,500 enterprises for verified businesses, but the potential is much larger. We will continue to grow the customer base, but also to upsell on the current base and develop new products and features. We have a low involuntary churn, and we look forward to what our risk intelligence solution and what our improved business messaging solution will add in the future. Today, the two combined recurring revenue streams grow with more than 30% and constitute about 25% in total revenues. The ambition going forward is straightforward. Continued growth and increasing recurring revenue streams, their share of the total revenues, and thereby adding stability and diversification to our business. Our gross margin development continues to be very stable, and this quarter we had a small uptick given the efficiency work that has been done for costs related to servers, hosting and verification costs. Now, let's turn to cost development. As usual, costs are seasonally a bit higher in Q4 with some annual adjustments, but overall, as you know, We have been working on efficiency in technology and staffing in other areas, given the overall macro situation that we see. The incentive cost is low this quarter due to the fact that we are not reaching certain performance criterias in the 2021 long-term incentive program. Efficiency is a key in delivering solid margins and Truecaller has a very high operating leverage. I think we have done a pretty good job here in 2023 in managing our overall costs. As stated many times before, we will not hold back on investments when we see long-term benefit for the company and the shareholders. Therefore, we are now doing selective, concentrated and focused long-term investments with clearly measurable KPIs for each investment, which in the near term will increase our operating expenses and thereby, in the shorter term, also impact our margin. The investments which Alan will come back to are made to boost growth in targeted geographical areas where we see long-term revenue potential and ability to further boost our user base as well as the continued diversification of our revenue streams and also the geographical mix. The investments are easy and quick for us to turn on and off depending on where we see the best results. As we have previously stated, our tax rate is a combination of the Swedish corporate tax and the Indian tax rate, and we have expected the tax rate to increase somewhat over time. This quarter, the tax rate was approximately 26%. Year-to-date, it's about 25%. In the quarter, we also reported a 40% EBITDA margin, and for the full year, the margin came in at 41%. I believe this is a great achievement given stable or slightly decreasing revenues and our continued investments in our product offering. Compared to Q4-22, our EBITDA grew by 24% and earnings per share increased by 43%. Our cash flow was also strong and we continue to be in a favorable position with no debt and 1.6 billion Swedish crowns in cash and short-term investments as we continue to generate cash at about the same pace as we have been doing buybacks. During the quarter, we continued doing these buybacks. And over the last five quarters, we have bought back shares for 842 million Swedish crowns and also done smaller acquisitions. But thanks to our strong cash flow and profitability, we have been able to keep the equivalent amount of cash in the balance sheet. With our strong financials, the board has now decided to ask the next AGM in May to cancel the repurchased B shares, which as of now is about 6.7% of the outstanding capital, and also ask the AGM for a renewed mandate to have the option to continue to buy back shares. Now let's look then at how well we track compared to our financial targets that were set by the board in conjunction with the IPO in 2021. The medium-term financial targets were set in a different economic climate than in the current macro climate. The revenue growth target is, as stated previously, clearly less relevant when evaluated on an annual basis. However, even though the financial targets are based on average results during the 2021 to 2024 period, we and the board still believe they make sense also on an annual basis, but in a more normal macro environment, which is not the case right now. So as mentioned in the last reports, with the shift in macro and with outstanding performance we had in 2021, 2022, 23 was a more challenging year on a revenue growth basis. But with that summary, I will hand things back to Anna.

Cool. Thank you, Odd. Thanks to our focus on cost optimization that Odd mentioned, throughout the year, we were able to reinvest in our product and make sure that we continue to serve our users' evolving needs. Now let's cover some of the exciting things that our teams have worked on to develop an even better product experience. The three areas we will cover are the core product offering, TrueColor Premium, and our ad tech capabilities, and TrueColor for Business. We continue to invest in the core product to give users the best experience possible. We continue to prioritize performance optimization and improve the technical side of it. This is especially important as we grow our user base, as we want to make sure that our product works smoothly on all devices, including lower end phones. Ongoing improvements to the core product have yielded positive results, and by the end of the quarter, we saw app engagement grow by 21% compared to Q4 2022. This helps us grow all monetization engines such as subscription conversion, ads impressions, and so on. We continue to build out our machine learning capabilities, not only to strengthen caller ID and search, but also to improve experience in other parts of the offering. One of these initiatives is our AI chatbot, which we went live with in Q4. We've already seen the volume of support tickets drop by almost half. This means that we will be able to continue growing our user base without the need to grow our support team in the same speed. On the theme of machine learning, we continue to improve our data quality through investments in our AI identity technology, which leverages machine learning to provide users with the most relevant information about unknown numbers in real time. We're now identifying spammers even more accurately and are flagging over a million additional extra spam calls every single day. We continue to invest in building out our fraud intelligence capabilities. In early Q4, as I mentioned, we acquired TrustChecker, a service that verifies customer information and detects fraudulent activities. We're very proud that we've completed the integration of their models into our app during the quarter as well. This improves our ability to detect suspicious numbers and alert users in real time. We've also beefed up other initiatives to stay ahead of fraudsters. We continue to proactively inform users about ongoing scam trends. And during the fourth quarter, we focused on ensuring that the alerts we deliver are locally relevant in terms of content, as well as the languages that we offer. We see that the trend of fraudulent activities on mobile phones is becoming a more common problem globally. What makes this worse is that fraudsters are getting smarter and getting creative with how they execute their scams. This is why we're ramping up our efforts to fight this problem more aggressively. I want to show you a sneak peek of something in the works that we are very excited about. With the combination of our data, our cloud telephony platform, and the way we actually use AI, we will soon offer something like this. And we'll play this video for you now.

A new line of defense for true caller users. Real-time AI-powered fraud protection. Here's how it works. First, add the AI to the call with the tap of this button. It will listen and analyze the call for scam and fraud patterns.

Hello? This is Acme customer support. We see some unusual activity on your account. Can you share your login code so we can check that for you?

If it detects either of this, Truecaller will warn the user in real time.

This is a Truecaller alert. We detected a pattern of known fraud in this call. Please be careful.

Great. When it comes to phone fraud, there's one thing that's always there no matter what, and that's the human voice. It's like our own personal fingerprint. This is where voice biometric and sentiment verification comes in. Instead of waiting for something fishy to happen, this tech keeps an ear out for imposters in real time. It's like having a virtual bouncer at the door, basically, making sure to always keep you protected. And the more calls that our service can protect, the better it becomes at learning the different patterns and how they change in behavior. And in a world where cybercrime is running rampant, having super secure and lightning-fast ways to verify authenticity and purpose is a must. We're building on products right now to both combat fake voices and to detect fraudulent patterns, and we'll make them available to all our users where it's possible. Now, moving on to our progress for the product on iPhone. As our base of iPhone uses grows, we of course continue to invest in making sure that our two-color experience on iPhone is top-notch to ensure the best search and color ID experience in all markets. iPhone has previously been an under-monetized platform for us, but our investments in the platform have driven substantial progress in revenue growth on both the free and the paid version of the app. On the free version, we have improved our ads monetization by introducing inventory in new formats. This has scaled very well and has started to pay off as we saw advertising revenue from iPhone grow by 76% compared to Q4 last year. On the subscription side, we've been working on some targeted monetization initiatives that are also starting to show promising results. In the fourth quarter, we saw an increase in our iPhone subscriber base, which grew by 41% compared to last year. Recurring revenue from iPhone users is getting a nice boost as well, especially in markets where pricing works in our favor. On a subscriptions product more broadly, meaning for paying users on both Android and iPhone, we continue to invest in developing the offering to ensure that we give subscribers the most value for their experience. We continue to improve the assistant, Truecaller's personal call screen and virtual assistant. In the fourth quarter, we rolled out some major upgrades, thanks to the integration of large language models into the premium experience. This lays down the groundwork for deeper integration and even smarter features. During the quarter, we also took the call recording feature to the next level by integrating LLMs. This model or these models work behind the scene to transcribe your calls and then condense them into precise summaries and bullet points. It's like having your own personal note taker, but way, way smarter. With this feature, you can instantly capture the essence of your calls, turning lengthy discussions into bite-sized insights. It even generates subject lines for easy references. Over time, the integration of LLMs into TrueCall's assistance could enable other exciting use cases, for example, live language translation during calls. TrueCall Assistant and call recording are now available in seven markets. The response from subscribers in these markets has been very encouraging, and so we will continue to focus on improving the offering and bringing them to even more markets in the coming months much faster. Further supporting our subscription growth, we continue to build out our user monetization engine, our scalable in-house tool that helps us segment and target users for better chances of conversion. In the fourth quarter, we expanded the capabilities of the engine to focus not just on conversion, but also to improve retention. In the fourth quarter, we witnessed a notable increase in conversion and saw revenue grow by 23%, and the subscriber base grew by 90% compared to Q4 last year, as mentioned earlier. On the ad tech side, we continue to build out our capabilities in order to deliver an even better experience while providing better monetization opportunities for the long term. We continue to invest in our in-house ad server with a focus on evolving into a comprehensive full-stack advertising solution partner that caters to a wider range of use cases across funnel. A growing focus area for us is our capabilities in performance ads, which helps advertisers improve return on their investments for different outcomes. For example, driving app installs, closing sale transactions, and capturing prospect leads. As we grow in this area, we will be able to offer more customized solutions to help advertisers solve their specific business needs. Our investments in these capabilities have scaled well, and we've already delivered meaningful impact. For example, Game 24-7, one of India's leading gaming companies, engaged us to support their user acquisition efforts during the fourth quarter. With a focus on driving lower funnel marketing objectives, we offered custom targeting, consistent optimization, and customized creatives. This ultimately resulted in over 50,000 installs, translating into 2x growth as compared to previous campaigns executed prior to our partnership. So this is fantastic, and these are the initiatives that we continue to work on. And we'll continue to invest in these initiatives, which will improve our effectiveness and monetization potential, which will put us in a very strong position in the long term. TrueConf for Business developed at a good pace throughout the year and this quarter. We grew not only our revenue, but also portfolio. As Odd mentioned, this quarter we reached a milestone of serving over 2,500 large business customers. What's noteworthy is that the shift towards long-term plans indicating the stickiness and continued relevance of our offering. This trend is reflected not just in India, but also with the majority of our business customers in other markets also committing to long-term plans, which is signaling a robust growth in markets beyond India. Demand for our flagship product verified business caller ID continues to develop very well, particularly among large enterprises. We also broadened our network of reseller partners. We have previously only worked with CPaaS resellers, but in the fourth quarter, we expanded our network to include telecom operators as well. So with Tata Tele as our first verified business reseller in space, we're very excited about what's about to come. Business messaging, our service delivered in partnership with Tandla, helps businesses distribute messages to end consumers in a more reliable and cost-efficient way. We saw business messaging scale significantly throughout the year. In the fourth quarter alone, we delivered over 2 billion messages throughout the platform, which is over 100% growth in volume compared to the same period last year. The success of this partnership has, as mentioned, further strengthened our collaboration with Tanla, meaning that we can expect business messaging volumes to grow as we have the opportunity to serve other partners and business customers via Tanla's network. We also continue to enhance the offering itself. So in the fourth quarter, we fully integrated rich media capabilities, which enable more dynamic interactions with end users. This is expected to drive more relevant experience for users, as well as increased engagement for the businesses. Last quarter, we talked about the risk intelligence, our newest offering for businesses. Risk intelligence is a scoring engine, as mentioned, that uses our own machine learning magic to assess the risk associated with a phone number. In the fourth quarter, we have been beefed up the effectiveness of our risk assessment, making it even more powerful and informative for business customers. Right now, our risk intelligence offering is available to a few business customers who are part of our early access program. The early results from our pilots are encouraging, and we've already secured two deals before we fully commercialized the product in the first quarter. And now to wrap things up, we continue to grow our user base, as mentioned, and saw this development very well, not least in markets outside of our core markets. Our advertising business remains affected by macro conditions as well as the impact of an increased digital ad inventory in the Indian market. We've seen promising results from the initiatives we've invested in on both the supply and demand side. And we see great potential in more direct sales, which makes us optimistic for a strong recovery when conditions finally will improve. Our recurring revenue from both subscription and true coffee business is developing very well, and we continue to innovate our offering in both areas in order to serve the growing subscriber base, as well as the evolving needs of enterprise customers. Quickly, I also would like to highlight that during the fourth quarter, a new telecom legislation was adopted in India, where previous provisions that would legislate a requirement for telecom operators to display the caller's name were removed. Together with the decision on the new data protection legislation taken in 2023, the new regulatory frameworks within which we will operate in our largest market have now been established, creating continued favorable conditions for us to grow our business in India. Overall, I'm proud of what we have achieved this quarter despite a continued challenging operating environment. We continue to be in a good position with solid financials, strong cash flow and strong organic growth. Our strong position in our continued growth means that we'll still 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. I will also share a quick update on the start of 2024. We had a strong start in terms of user growth this year. We expect to continue to see organic growth as well and also expect our investments in the acquisition and preloads that will continue to ramp up. In terms of advertising market, we expect the muted demand and therefore lower pricing in India to continue in the near term. Other markets are off to a strong start, but given the scale of our presence in India, we do not expect this to offset the trend that we're seeing in India in the near term. But on the enterprise side, we're very pleased that our collaboration with Tunnel is about to be extended. And we expect to see growth in this area in terms of both volume and revenue as the partnership continues. We continue to work hard on premium offering and will continue to expand assistant and call recording products to other markets. And as Odd mentioned, the board has also mentioned, has decided to ask the AGM in May to cancel the bought back shares, which is currently 6.7% of the capital, and ask for a new mandate to be able to buy back after the AGM. But our focus in 2024 is to continue to grow our user base, to further invest in AI-based fraud prevention, and to increase the share of recurring revenues in our revenue mix. To achieve medium-term recurring revenue growth, we are doing targeted growth investments At the beginning of this year, as Odd mentioned, these efforts have already begun to yield positive results, such as an 8% increase in subscription revenues in the U.S. in January 2024 compared to the previous month, and an increase of more than 50% compared to January 2023. The investments we're making will have a short-term negative impact on our profitability, but are important to broaden our recurring revenue base and strengthen our position, both geographically and product-wise. Our goal is to achieve a balance between good profitability and growth of predictable revenues over time. With our robust financial position, we expect to continue our long-term growth initiatives while having the opportunity to continue share repurchase. As always, a big thanks to our users, the great partners that we work with, and the phenomenal TrueQuality team across the world. And now we're happy to take your questions. Thank you.

If you wish to ask a question, please dial pound key 5 on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key 6 on your telephone keypad. The next question comes from Predrak Savinovich from Carnegie. Please go ahead.

Good afternoon, Alan and Odd. Thanks for taking my questions. Alan, first to you on growth. And I appreciate the final comments you made on some outlook for 2024. But if we assume then that CPM falls a little bit more in the first quarter, when you have consistent trends in business and subscribers, it sounds like, then this positive organic growth you are talking about, you should see that already in the first quarter. Is that a fair assumption?

I'm not sure I followed. Can you repeat that?

You gave us a little bit of a summary here at the end of your presentation saying you expect to see organic growth and to see strong user growth and other markets are off to a good start. You expect a lot of good things from the business side and so on. So if we assume and try to blend all of this, you also said CPM could fall a bit more. But is it a fair assumption to assume that the growth will be positive already in the first quarter of 2024?

On the user growth, is that what you're referring to?

Revenues.

I think that would be premature to say. We are still not halfway through the quarter. And there are a lot of things that can change either way. The advertising market is very fast moving. We do see continued very good momentum in Truecall for Business and subscriptions. But we are not at a position where we would like to give you any sort of guidance for the quarter as usual. So we'll have to pass on that one.

Sorry, Predag. Could you quantify maybe then a little bit more on the investments for Q1? Maybe walk us through the balance here.

So you will take up some costs, but at the same time, that could potentially lead to you growing a little bit more, which improves.

than the margin so how should we think about this phasing for q1 and q2 and you did mention it might come at the expense of margin but how much

We don't give you any more details on that, but what we can say is that these are investments that are aiming at short, medium, and long-term improvements and advantages for the business and the shareholders.

Some of that will materialize fast.

Like Alan pointed out, we've seen considerable growth in number of subscribers in the U.S. month over month. Those are the sort of short-term effects that we hope to see, continue seeing. And then there are medium-term effects that will have more of an impact on the profit and loss account. And then, of course, there are long-term effects that we believe will have a strong impact on our strategic position. Now, we haven't given any details on the investments we are making. Apart from that, we are making them in the markets and in product lines that we see very considerable potential in. What we can say, though, is that we we give you this heads up. For the same reason we gave you a heads up in Q3 in 2022 when we said we were going to do certain marketing investments in Q4. And we wouldn't do that unless we felt that it was a reasonable thing to do given the amount that we are.