Truecaller AB (publ)

Welcome, everyone. I'm Alam Amede. I'm the CEO and co-founder of Truecaller. And with me, I have our CFO, Odd Bolin. We're here to announce our interim report covering the second quarter of 2024. Today, we'll start with overall highlights from the quarter and then walk you through our financial performance in detail. We'll 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. We closed Q2 with an average of 397 million monthly active users and an increase of 12%. Average daily active users grew to 325 million, an increase of 12% as well. This brings us to a strong DAO to MAO ratio of 82%. This is the strongest absolute user growth we've seen in a quarter since 2018. We closed the quarter at 456 million Swedish crowns in net sales, a 12% decrease year on year. This is, however, the third highest quarterly net sales ever. But as you know, we have tough comparison quarter and excluding effects related to IPL, our revenues grew. Our EBITDA landed at 165 million Swedish crowns at the end of the quarter, a 31% decrease compared to the same quarter last year due to lower ads revenues, mainly effects related to IPL and larger investments in user growth. That said, we continue to operate with strong profitability and continue to have a solid cash flow with 213 million Swedish crowns in net cash from operating activities before tax payments. This quarter, we saw the strongest user growth since at least 2018 and added 14 million monthly active users. Our investments in our targeted focus markets are paying off. In Colombia and Nigeria, for example, we grew our user base substantially with an annualized growth rate of approximately 40%. Consumer subscriptions continue to develop well. The growth of our subscriber base continues to outpace the relative growth of our total user base. This quarter, we hit an all-time high in terms of quarterly revenue growth in absolute numbers. We also saw increased conversion rates, which demonstrates that our strategic efforts are effectively driving sustained revenue growth. More specifically, on iOS, our focus on subscription is showing strong results, with subscription revenue growing at more than 60% compared to the same period last year. Our initiatives to drive subscriptions on iOS have yielded strong growth, especially in markets with higher propensity to subscribe. Our efforts focusing on driving subscriptions in the US are also showing good results, and revenue from subscriptions in the US grew by over 65% year-on-year. Our enterprise offering, True Color for Business, also had an all-time high revenue growth this quarter. We continue to see strong demand for our B2B offering, and the volume of messages we deliver in partnership with Tanla continues to grow. During the quarter, we introduced new pricing for Truecall for Business, and this has started to impact revenues, revenue and average revenue per account positively. Overall, our quarterly relative growth is outpacing annual growth for both recurring revenue streams, indicating accelerated growth. During the quarter, Apple also announced some exciting things that we will be taking advantage of to our product for iPhone. Apple's upcoming iOS 18 capabilities will enhance our caller ID and blocking features. These updates will bring Truecaller's caller ID functionality on par with Android, which is something that our users have been requesting since we started the company. With the changes that we will be able to make, there is potential to expand our iOS user base and increase our subscriber conversion more quickly. iOS 18 is expected to launch in September, and the full live lookup capabilities are expected later this year or in the beginning of 2025. Overall, these changes represent a major opportunity for Truecaller to grow and monetize our iPhone user base. We'll cover everything in more details in the coming slides. We continue to see strong user growth, and we closed Q2 at an average of 397 million monthly active users, which is up by 41 million from the same period last year. Our daily active user base grew at the same relative rate of 12%. We ended the quarter with 325 million daily active users, which is an additional 36 million from the same quarter last year. We also continue to see strong retention and are proud that 82% of our monthly active users use 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, Alan. So it's time to, as always, take a more in-depth look at our financial performance this last quarter. We'll do the same procedure as last quarter. We start with our revenue development. Even though net sales decreased by 12% compared to the same quarter last year, this was still our second best quarter since the end of 2022 and our third best ever in terms of net sales. The quarter we compare with Q2 2023 was a very strong quarter with a substantial positive impact from advertising during the Indian Premier League. in cricket. This year, advertising during the IPL was very different, which impacted the revenue growth figures quite substantially. We discussed the anticipated effects after the Q1 report in May, and we'll get back to this subject pretty soon. Now, excluding effects from IPL, ad revenues were marginally lower than in Q2 2023. Currency effects impacted net sales also somewhat negatively this quarter, mainly due to weaker currencies in some of our largest markets in the Middle East and Africa region. The effect can be, although we cannot quantify it precisely due to the indirect nature of our currency exposure, but we're talking about a few million Swedish crowns this quarter, approximately, according to our estimate, 15 million on the revenue side. Subscriptions continue to develop strongly with increased conversion and an all-time high in ARPU. True call for business also continues to develop well compared to last year. Strong intake of new customers and new partnerships with telco resellers continue to drive part of that growth. Business messaging also increased volumes and was an important driver year over year. Now we'll look in some more detail into our three different revenue streams, starting with ads as usual. Our ads revenue decreased by 22% compared to the second quarter last year. Excluding the effect from IPL, we estimate that ad revenues declined by only 3%. The general demand in India outside of IPL continued to be soft, and it has been evident also in the public reports from other advertisers with a similar advertising offering where reported price per ad continued to come down. This holds true for all players working with third-party programmatic ads where we have information. During times when demand decreases, suppliers such as ourselves have increased supply to counteract the decreased demand. On a market level, this has further decreased pricing, which is pretty obvious in our numbers. We continue to improve our platforms for tech improvements and the growth of the user base. We continue to optimize for revenue per user rather than pricing or fill rates. And we continue to increase impressions available for monetization within the existing ad slots. These improvements help us marginally now, but more importantly, when demand bounces back, they will generate a good return. Our strategy to focus on strengthening our subscription offering with more advanced features continues to pay off. Our recurring subscription revenues grew by 29% compared to last year, and the growth compared to Q1 was at an all-time high when it comes to absolute increase in revenues. The relative increase compared to Q1 was 10%, which we're very happy about. An important driver of revenues from subscriptions is our growing footprint on iOS, where the conversion rates and willingness to pay is substantially higher than on Android. As Alan mentioned, our efforts in the US on subscriptions is trending strong, but we also see strong traction in, for example, Latin America, and this contributed to ARPU reaching an all-time high this quarter. As for subscriptions, the revenue growth for true corporate business accelerated and the quarterly growth of revenues in absolute numbers was at an all-time high with strong contributions from both verified business calls and business messaging. The relative growth compared to Q1 was 17%. In verified business, we continue to see many positive things happening, net additions of customers, longer contracts, and higher pricing plans that we introduced during the quarter and that will gradually impact our revenues over the next 12 months. We're growing revenues as well as number of customers. Growth has increased with successful new reseller partnerships. During Q2, we also rolled out new packaging and price plans, which gradually will increase revenues per customer, like I said. Volumes within business messaging continue to grow and contributed to the growth in revenues year over year. Let's briefly go back to the IPL issue, since it's an important revenue driver in the Indian digital ads market and had a substantial impact on our ads revenue comparison this quarter. This is due to the magnitude of the event and the fact that we are a preferred platform for partners doing performance marketing to attract new users for, for example, Fantasy Cricket League. 2023 was a very strong year in terms of IPL ads, IPL ad spending, and our IPL revenue grew by 100% from 2022 to 2023. In 2024, IPL-related revenue came back to the 2022 level. The primary reason for this is the changed JST rules in India, which has created a substantial uncertainty as to the viability of the business model of many Indian fantasy gaming companies. However, not all companies allowed this to impact their spending this year. Our largest customer during IPL in 2023 spent as much during 2024, but many other spenders disappeared almost completely. In addition to the demand decrease, the IPL started earlier this year than last year, which meant that approximately half of IPL spending came in Q1 this year, while almost all of the spending came in in 2023, ended up in Q2. All in all, IPL-related revenue in Q2 this year came in approximately 85 million Swedish crowns lower than we saw in Q2 2023, which resulted in this 22% decline of total ad sales. But like I said, when excluding this IPL effect, ad revenues were just slightly lower, 3% from last year. As mentioned, we've accelerated revenue growth for our two recurring revenue streams, consumer subscriptions and TrueConf for Business. Even so, we're still quite early in the development of both these offerings, and we continue to see a lot of potential here. The two recurring revenue streams together grew by 33% and constituted about 27% of net sales, so they're now making up more than one quarter of our total overall revenue, and it's close to 500 million Swedish crowns on an annualized revenue rate. The ambition going forward is straightforward. We want to see and we will see continued growth and increasing and we will increase the recurring revenue streams share of total revenues and thereby adding stability and diversification to the overall revenue mix. We continue to have an exciting pipeline for our subscription offering, both when it comes to features and packaging and targeting, as well as looking at new partnerships. We see potential in a continuation of a higher ARPU and increased conversion. At the end of the quarter, we included fraud insurance in the premium offering in India to further enhance our offering and to safeguard our users both before, during, and after calls. For our software as a service offering Truecall for Business, we are growing steadily, but the potential continues to be very large. We started to reprice verified business customers gradually during the spring, which means that new customers are coming on to higher price plans when they join us, while older customers will gradually be adopting the new price plans and packages. Gross revenues grew quarter over quarter, but declined year over year due to the lower IPL revenues from ads. The gross margin development continues to be stable at the 75-76% level. Small variations between quarters are due to factors such as the balance between different sales channels, as well as balance between different methods of verifying new users. Now, time to move the focus to costs. Truecore has a robust business model with very high operating leverage, as you know, but efficiency is key in order to deliver solid margins. I think generally we continue to do a reasonable job in managing our overall cost base. From the start of Q2, the annual salary review increases staff costs. The overall number of employees continues to be under control. And during the present challenging ad market conditions in India, we only recruit very critical resources. The new incentive program that we started after the AGM this year will increase costs somewhat starting from Q3. As you know, part of that incentive cost is due to or depends on the share price at the end of the quarter. So there could be variations up and down. Late Q4 last year, we started to increase investments in targeted growth markets. This is mainly digital performance, digital performance marketing efforts and preloads to boost growth in targeted geographical regions where we see long-term potential, long-term revenue potential, and an ability to further boost our user base as well. and also continued diversification of our geographical mix. These investments are quick and easy for us to turn on and off, depending on where we see the best results. We're pleased with the results we get so far out of the investments, and we expect to continue to do investments at about the similar level as in Q1 and Q2 going forward. But of course, we continuously fine-tune where we get the best long-term return on investment. As we have previously stated, our tax rate is a combination of the Swedish corporate tax rate and the Indian corporate tax rate, and that we have expected the tax rate to increase somewhat. This quarter, the tax rate was approximately 25%, and for H1, the first half of the year, it was 24%. For the longer term, we think about 25-26% tax rate as a reasonable level, but with possible variations in between quarters. EBITDA decreased compared to Q2 last year due to the decrease in ads revenue. With our high gross margins, any change in revenue has an immediate effect on the bottom line. As you're all well aware, EBITDA margin was 36%, which is an improvement compared to the first quarter this year. Excluding incentive costs, the margin is about 39% during the second quarter. We continue to deliver margins about our long-term financial target, although we have a muted ads market and have increased our investments in long-term growth. Cash flow. Our cash flow conversion continues to be strong and the cash flow creates opportunities to continue to give money back to our shareholders through buybacks and future dividends, as well as continuing to invest in growth and scan the market for potential M&As. After our first dividend of approximately 600 million Swedish crowns, we decreased our cash balance, but we continue to be in a very favorable position with no debt and 1.1 billion Swedish crowns in cash and short-term investments. We continue to generate cash at about the same rate as we have been doing buybacks. During the quarter, we canceled 7.5% of our outstanding shares from the buybacks we've done so far, and we received a new mandate to do buybacks up to 10% of their now outstanding shares. The board made a decision to start utilizing that mandate, and we bought back some shares during the quarter. With a new mandate, we can buy back up to a bit more than 28 million shares. Now, lastly, on our financial targets, we grew revenues rapidly in 21 and 22, as you're all aware, with a strong market and strong demand for ads. But since 2023, the challenging digital ads market has put a temporary break on our revenue growth. The strong growth we continue to see in subscriptions and true call for business has not been able to make up for the shortfall in ad revenue growth. The jury is still out there as to whether we will reach our medium-term growth target of 45% annually since it covers 21 to 24. However, the growth targets were set in a very different macroeconomic environment. And we're confident that once digital ads demand in India bounces back, which we are sure it will, we will get back on an overall growth trajectory. Our EBTA margin, we on our EBTA margin, we continue to deliver about 35% even with our increased investments. And even though this target really doesn't take effect until 2025. Now, with that said, I'll give the word back to you, Alan.

Thanks, Odd. Let's move on to our quarterly product updates. The three areas we'll cover are the product offering, in a core product offering, TrueColor Premium and our ad take capabilities and TrueColor for Business. We continue to work on making our core services smarter, safer, and more efficient. By investing in AI and machine learning, we have improved our caller ID, message ID, and spam detection, making it easier to identify unwanted calls and messages. Thanks to these investments, we've identified a lot more spammers, especially in India, where the volumes of spammers that we identified grew by over 100% compared to Q2 last year. We've also made great progress in fighting fraud this quarter. Using feedback from our users, we've enhanced our algorithm to better detect suspicious calls. We rolled out this improved model in India where we saw the number of fraudulent callers identify grow by more than 100x. We'll soon roll this out to other markets as well. We continue to improve the user experience, and in the second quarter, in-app engagement grew by 25% compared to last year. We made it easier for users to give feedback on unknown numbers through comments, vote, survey, and name suggestions, and these efforts are growing well. In the second quarter, the number of users sharing insights grew by 1.5x year-on-year. This shows our biggest strength, our global community of hundreds of millions of users whose feedback keeps improving our service are critical. As more people compute, our algorithms get smarter and the quality of our data gets better as our active user base grows. On iPhone, we continue to improve the user experience to make our app the best it can be. In the second quarter, we redesigned the home screen for easier navigation and search, updated the interface to better educate users about the app, and added new features that makes it easier for users to give feedback and help improve the service. We made progress in monetizing the iPhone app using both free and premium models. Adding ad inventory with higher CPMs and driving more engagement has supported ads revenue growth. The inventory that we added during the quarter is scaling well with ad revenues growing by over 90% year on year from a low base. On the subscription side, our targeted efforts and experiments are paying off with subscription revenues from iPhone users growing by more than 60% compared to last year. These initiatives are especially successful in markets where people are more likely to subscribe. What we're also very excited about is that at the end of the quarter, Apple announced the introduction of live lookup capabilities with iOS 18. With this coming change, we'll soon be able to offer users a caller ID functionality on par with Android, something that has been requested by users since we started the company and something we have discussed with Apple. The upcoming changes on iOS provides a significant opportunity for us to expand our iOS user base and increase the subscription conversion. The new version of iOS is expected to be released in September with the full release of live lookup and we're expected to follow up in the near future. Overall, we see these changes as very positive for our potential to accelerate growth and monetization on iPhone. As a teaser, here's a sneak peek of what our team is working on behind the scenes with these upcoming changes in iOS 18. Fantastic. So the way Truecaller works for iPhone now is that the app relies on a local database on the device for number search results, unlike the cloud-based system used on Android. This restriction meant that we could only show the top thousand or so spammers for a specific market without advanced call routing systems to iPhone users. Now Apple is changing its system, and this will allow us to improve our caller ID for iPhone to work just like it does on Android, as you saw in the video. With this change, when an iPhone user searches for a number or receives a call from an unknown number, TrueCall will be able to perform a live lookup on the cloud, utilizing the billions of data points that we have developed from user contributions and machine learning. Even with the previous limitations, iOS has been an important driver of our subscription revenue growth. The changes Apple is making will likely boost this even more. Today, iPhone users make up about 7% of the overall user base. Even with this small user base, we have seen that the conversion rate to premium is more than five times higher compared to Android users. iPhone users account for 40% of our subscription revenue, and revenue from a subscriber on iOS is 80% higher than on Android. With all that said, we're extremely excited about the opportunities that this update provides for the future. Beyond what we offer on Android and iPhone, we continue to work on creating a broader ecosystem and expanding our services beyond just mobile apps. At the end of the quarter, we released a beta version of the app for Android smartwatches. This will let users identify and manage calls directly from their wrist, and we plan to roll it out more widely in the coming weeks. As more people start using smartwatches, this app is expected to improve our user retention and make the app more useful. Moving on to our progress on consumer subscriptions. During the quarter, we simplified our pricing strategy to offer just two plans worldwide, premium and premium family. We adjusted the prices for these plans based on how likely people in each market are to buy subscriptions to strike the right balance between conversion and monetization. We roll out the new pricing gradually during the quarter and have already seen many people adopting to the new plans. Overall, our consumer subscriptions are doing very well with revenues growing on both iPhone and Android. And in total, subscription revenues are growing by 29% year on year. The number of paying users is growing faster than the total user base at 18%, showing that our premium features are becoming more valuable as we improve our offerings. During the quarter, we also made progress in ensuring subscribers are protected throughout their mobile communication, before, during, and after suspicious activity, as Aud mentioned. At the end of June, we introduced fraud insurance for annual plan subscribers in India. This insurance launched in collaboration with HDFC Ergo, one of India's top general insurance providers, covers losses from fraudulent calls or messages, This new feature supports our commitment to safer mobile communication by compensating premium users for financial losses from mobile scams. On the advertising side, we continue to focus on enhancing ads monetization through focus initiatives on the supply and demand side. We also continue to invest in our in-house ad tech to optimize the delivery of ads and to improve our targeting capabilities. Our efforts to improve our capabilities have scaled well, and we continue to deliver meaningful impact for advertisers. For example, Make My Trip, one of India's top online travel platforms, engaged us to support their user growth. Using unique insights into user behavior, we developed a target audience interested in travel and placed these ads strategically within the app to increase visibility and attention. We carefully monitored how well each ad placement performed and adjusted them to maximize their effectiveness. This ensured that Make My Trip was able to drive awareness and engagement with the right audience. The campaign resulted in significant installs for Make My Trip, which surpassed the benchmarks expected. We also, during the quarter, started to roll out to a certain amount of our users our interstitial ads and parts of that also being our video ads. And we've been optimizing that to see how it can scale in the future. So far, the numbers that we're seeing are very encouraging. And we're looking forward to gradually, over the coming quarters, roll that out to more users with a frequency that is accepted by our community. Truecore for Business had a standout quarter, achieving record revenue and acquiring numerous new customers for the verified business product. We introduced new packaging and pricing to deliver greater value, resulting in an all-time high in average revenue per account. We also saw a lot of upgrades among existing customers to higher pricing tiers. On the product side, we expanded the offering as we completed the new product verified campaigns, which will launch in the third quarter. This new service empowers marketing teams to engage customers with personalized display units during and after the calls, leveraging the verified business call screen for targeted offers and lifecycle communications. Business messaging, our service delivered in partnership with Tanla, continues to see growing volumes in the number of messages delivered. Revenue from business messaging grew by 50% year-on-year, driven by higher message volumes and adjusted pricing strategies. The introduction of rich media capabilities is gaining traction with real-time call-to-action click insights, helping brands measure their campaigns' performance effectively. In parallel, we continue to improve the messaging experience on the consumer app to grow adoption of business messaging, which will enhance the potential market for this product. And now to wrap things up, we continue to grow our user base and saw the highest quarterly user growth since at least 2018. We are especially happy to see user growth develop positively in the markets that we have chosen to invest in. While our ad revenue comps were impacted by the strong IPL period that we saw last year and the timing of IPL this year, we're proud that our recurring revenue streams, subscription and true call for business are performing very well. The quarterly absolute growth for these two streams reached an all-time high, indicating accelerated growth. We're also very optimistic about the upcoming changes to iOS, and we've said this a few times, but we've already made great progress in improving monetization on iPhone before this announcement and with the limitations that we've had in the past. The changes will enable us to deliver a significantly better experience for our users on iPhone and ultimately allow us to accelerate growth and monetization even further. Finally, we're proud of our profitability, which creates continued opportunities for growth investments, as well as dividends and buybacks. As always, a big thank you to our users, the great partners that we work with, and the phenomenal Truecaller team across the world. And now we're happy to take your questions.