Truecaller AB (publ)

During the questions and answer session, participants are able to ask questions by dialing pound key 5 on their telephone keypad. Now I will hand the conference over to the CEO Rishit Ginginwala and CFO Odd Bolin. Please go ahead.

Hello everyone and welcome to our Q1 report webcast. I'm Rishit Ginginwala, the CEO of Truecaller and with me I have Odd, our CFO. We'll start with the overall highlights from the quarter and then walk you through our financial performance. After that, we'll cover product highlights and then open up for questions. So let's get started with the highlights of the quarter. This quarter to a large extent was a continuation of our strategy, which we have mentioned to you in the past. Our strategy has been focused on global growth and growing our recurring revenue streams. We continue to see strong global growth, good business momentum, strong cash flow, and growth of our recurring revenues, which now makes up almost a third of our total revenues. The underlying profit development continues to be great as well, but the bottom line P&L numbers were ironically punished by the increase in share price, which we've seen lately. This share price movement impacts our incentive costs, which we will come back to in a while. In terms of user growth, we continued very well. We crossed 450 million users on April 1st this year, and we continue to grow steadily in all regions. Our biggest income stream advertising continued to show growth for the third quarter in a row. Direct sales of advertisements, which is a focus area for us, improved very well. And even though cricket-related advertising revenues from the Indian Premier League were slightly lowered this year, Our enterprise offering, Truecall for Business, grew revenues with a stunning 60% year-on-year. This growth is driven by strong performance in all product groups towards businesses, which we're really excited to see. Growth for consumer subscriptions stayed strong as well, and we continue to increase conversion and revenue per user while adding more value for our paying customers. As you know, we launched the update of our iOS product and the focus is now on improving the product further, increasing the number of paying subscribers and so on. As mentioned in Q4, we did not expect any impact from the launch revenue-wise in Q1, but we are now gradually starting to see a positive impact on the subscriber numbers in Q2. We will cover everything in more detail in the coming slides. As our iOS product is now a premium first product, as we've informed you in the past as well, we will now focus on user numbers excluding iOS. And for iOS, we will focus on subscription revenues instead. We closed Q1 with an average of 412 million monthly active non-iOS users, which is an increase of 15%. Our average daily users grew 17% to 356 million, and our DAO to MAO ratio was an amazing 86%. Our net sales for the quarter stood at almost half a billion SEC, a 16% increase year on year. All three of our revenue streams contributed to this growth. In constant currency terms, our estimate is that the growth would have been more like 18%. EBITDA without incentive costs increased by 22% to 199 million SEC. This growth comes despite higher growth related investments and extra marketing spend primarily for our iOS launch. Our margin excluding incentive cost also strengthened. When we look at EBITDA, including incentive costs, it was 1% lower than Q1 2024. And this margin was adversely impacted by the increased incentive costs, which we will come back to. We are really proud that we continue to operate with high profit margins, and our cash flow remains strong at 178 million SEC in net cash from operating activities before tax payments, and was not impacted by the volatility stemming from incentive costs in the P&L statement. Now let's go into more detail. As mentioned, we continue to see strong user growth. We closed Q1 with an average of 412 million monthly active non-IOS users. Compared to the same period last year, we grew an incredible 53 million users, which is equivalent to 15% year-on-year growth. Our daily active user base grew at a rate of 17%. This growth is the cornerstone of our business, and we're really happy that we continue to lead the market. With that, I'll hand over to Aude for an update on our financial performance.

Thank you, Rashid. So let me walk you through the financials, starting with the top line. This quarter we grew, like Richard already mentioned, revenues by 16% compared to the first quarter last year. All our three revenue streams contributed positively to this. We saw accelerated growth for recurring revenues. And in addition, ad revenues grew also this quarter, although at a slightly lower relative pace than we have seen during the two previous quarters. Happy to say that our recurring revenues now contribute 32% to total revenues with a good 49% growth year-on-year. Although there presently is a lot of global macroeconomic uncertainty, we have so far not seen any really material impact on our revenues or our business momentum. We do have a negative effect coming from the strengthening of the Swedish crown that impacts us to a certain extent during the quarter. These currency levels, currency effects will have a larger impact on our revenues during the coming quarters though. Now let's look at our three different revenue streams starting with ads. This quarter we saw continuing growth in India as well as the Middle East and Africa, but somewhat lower revenues from the rest of the world. The primary reason for this minor decrease was the strengthening of the Swedish crown. For ads, an important part of our strategy is to increase our direct sales efforts, and we did see an increasing share of our ads revenue coming from direct sales this quarter. Apart from creating more stability and better visibility, higher direct sales also results in a better gross margin for us. As usual, our Indian ad sales in Q1 and Q2 sees a material impact from the Indian Premier League in cricket, IPL. This year we have seen IPL demand through third-party channels to be somewhat weaker than last year, although we managed to increase direct IPL sales instead. All in all, IPL revenues were 10 million Swedish crowns lower in Q1 this year compared to last year. Last year we had approximately 30 million, now we are down to 20 million in IPL direct or IPL-related revenue. We haven't seen any other material demand fluctuations this quarter versus the previous quarters. Obviously, we remain watchful of any impact from the present macroeconomic situation, and we do continue to focus on the areas that we ourselves can control. The increased value that we have put into our subscription offering over the last two years continues to translate into revenue subscription growth. Our recurring subscription revenues grew by 40% compared to the same quarter of 2024, and we see strong development across all regions. India and the Middle East and Africa continue to grow at a good pace, but the strongest growth continues to come from the rest of the world, which now accounts for almost 50% of the overall subscription revenues. True Cool for Business, which has been an area where we have invested substantially over the last three years, had another strong quarter with a growth of 60% year-on-year. These are SaaS revenues that are sticky and where we continue to see many more opportunities going forward. The current product offerings can be expanded much further with higher adoption, larger geographic spread and to other segments of the market. We're growing revenues both with new customers as well as expanding current partnerships. An important driver of the growth has been that our customers utilize more functionality in our offering, which increases revenue per count as well as overall revenues. Volumes within business messaging continued to grow strongly and also contributed to the growth in Truecall for Business revenues. So did actually our new product area where we offer risk products to the financial industry. Ads is still our largest revenue stream, and again, it grew by 5% year on year. Our ad revenues per daily active user decreased somewhat, and so did the average price per impression. Within ads, we put more and more effort into increasing our direct sales. This quarter, direct sales increased more than 35% compared to the last year, but our ambitions on direct side are considerably larger than that, and we continue to focus on this area. Subscriptions continue to be a good revenue driver for us. We grew the number of subscribers by 25% and the average revenue per subscriber by 12%. We see continuing growth in the adoption of our family offering, as well as iOS. The rest of the WordCon segment continues to be the strongest growth driver, although we see a good development globally, including on Android. Again, True Color for Business grew revenues by a good 60% year-on-year. The customer experience platform verified business is the core of the enterprise offering based on a SaaS model. Today, this offering is primarily for larger enterprises. Annual recurring revenues for the verified business segment grew by almost 40% year-on-year. We have, from the very start of this business, had a low revenue churn, and that trend continues. The majority of revenues is coming from India, but growth in Middle East and Africa is a focus for us in 2025. In Q1, revenues from that region grew by 60% year-on-year. The other major part of our True Call for Business offering is business messaging, which has seen good growth in both messaging volumes and revenues. This quarter, we also started to see some revenues from our number intelligence product. It is still small compared to the other two product lines, but the commercial traction is growing, and we expect revenues to continue to scale up during the year. Our strategy to focus on recurring revenues, premium subscriptions, and true corporate business continues to do well. Combined, these two revenue streams grew by 49% year on year, reaching close to 650 million Swedish crowns on an annualized basis. We continue to see a lot of potential in both these revenue streams. The conversion from free users to subscribers has potential to increase substantially based on continued product innovation that creates more value for our subscribers. And the new iOS product has potential to scale much further. Regarding Truecall for Business, there are many levers left for us for the longer term, both when it comes to regional growth and growth among small and medium-sized businesses, as well as growing in more and new product areas for businesses. Now, our gross profit grew by 25% year-over-year and the gross margin improved to 77.3%. We saw positive impact from the increased share of direct sales, increased revenue for Truecore for Business, as well as efficiency gains when it comes to server costs. Going forward, we expect the gross margin to be rather stable around this level, but with possible variations between quarters. So let's move to the cost side. Underlying staff costs are stable with only a limited number of new employees versus last year, but those costs will as usually increase with our annual salary revision starting from Q2. Incentive costs increase mainly as a consequence of the positive share price development like Rashid mentioned in the last six months, but I will cover that in more detail in the next slide. Other external expenses increased primarily due to increased costs for preloads in selected growth markets and temporarily higher marketing costs related to the launch of the new iOS product. Our tax rate continues to be a combination of the Swedish corporate tax rate and the Indian tax rate. The tax rate was somewhat higher this quarter, but we continue to think that 25-26% is reasonable, but with once again certain possible variations in between quarters. Now, on incentive costs, this quarter we increased our accruals for our incentive programs which had a substantial impact on our bottom line. Incentives to our employees is part of our remuneration model, but the accrued costs for these incentive programs depend on the share price, as well as a number of other factors. When the share price increases, options and RSUs become more valuable, and since we will pay social security fees on the profits that hopefully will be made by our employees, the accrued social security fees that we recognize in our profit and loss account also increase. In addition, there are some other aspects of those programs that impact our quarterly costs, such as the remaining time to the exercise, the probability that the performance criteria will be met, and our staff turnover. All in all, the cost that we book for incentive programs each quarter has the potential to be quite volatile as the share price and our operational performance fluctuates. Now, we have seen a considerable uptick in the share price recently, and the financial outcome for 2024 fulfilled the performance criteria. Both these factors contributed to higher incentive costs during the first quarter. It is however important to note that although incentive costs have a substantial impact on our bottom line, they do not give any material insight into our operational performance. Part of the cost are accounting figures that reflects the potential dilution that options in RCU eventually may have. Part of it includes social security fees that only will impact cash flow when and if these instruments are in the money at exercise. Our operational performance and our operational leverage is best understood by looking at our profit excluding these costs. Turning to our profit development and first we start to look at the profit development excluding incentive costs. Excluding those costs, EBITDA grew by 22% and our margin improved to 40% when excluding. As you can see from the chart, we continue to deliver a quite stable profit margin excluding those incentive costs. When we look at the EBITDA including the incentive cost, we have a small decrease of one percentage point and a margin of 30%. Our cash flow conversion continues to be strong with no financial costs and working capital that develops in a manageable way. We still have no financial debt and 1.4 billion Swedish crowns in cash and short-term reinvestments. Ahead of the AGM, the board has proposed a dividend of 1.7 kronor per share, which is similar to what we did last year. Since we did the IPO in 2021, the company has given back 2.2 billion Swedish kronor to our shareholders, quite evenly split between dividends and buybacks. We have been and continue to act in a position of strength with this strong cash flow and the financial profile of the company. But with that, I'll hand over to Rashid again.