Truecaller AB (publ)

Hello, everyone, and welcome to our Q1 Report webcast. I'm Rishit Jhunjhunwala, the CEO of Truecaller, and with me, I have Aude Bolin, our CFO, as always. Today, I'll talk about how we performed in the quarter in a few important areas. Then I'll hand over to Aude to talk about the financial performance, and then we'll open up for Q&A. In Q1, the average MAO was 463 million, which is a growth of 12% year-on-year. Our average DAO was 403 million, which is 13% growth year-on-year, and we continue to have a very healthy engagement with a DAO and MAO ratio of 87%. Net sales decreased with 27% year-on-year in SEC. Our EBITDA decreased by 57%, and we reported a margin of around 18%, including incentive costs. As you are aware, our headline numbers during the year have been affected negatively by the strengthening SEK, which is something Aud will cover more in his part of the presentation. In terms of user growth, we added 9 million users this quarter, surpassing an important milestone of half a billion people around the world using Truecaller today. This growth came from all regions, even though we reduced our spending to acquire users, given the current revenue challenges we've been seeing. CNAP in India still remains at a partial rollout, similar to what we said in the Q4 2025 report. So far, the impact on our user growth is limited, which is, while this is a good sign for us, as I've said multiple times in the past, we do expect that CNAP might have some impact on user growth in that region, but it remains to be seen as it rolls out. We're also very excited about the growth we're seeing in multiple regions around the world. We believe we can add value to people across the globe, and hence, this has been a big focus area for us. While our top markets continue to grow, there are numerous countries where we grow really well, mostly organically. And we believe that our focus on this is what will get us closer to our one billion user mark in the coming future. Now I'll talk about our three revenue streams. Let's start with the advertising revenues first. In Q1, we continued to have challenges on programmatic advertising that has persisted for two quarters earlier as well. The year-on-year comparison looks especially weak given that Q1 and Q2 last year included a large contribution coming from the real money gaming sector in India in connection to the IPL season that takes place around this time. Of course, the situation in the Middle East also reduced our revenues from that region. Our direct sales, however, excluding RMG, started to show promising signs with some growth sequentially as well as year on year. As mentioned earlier, we have a robust plan to reverse our revenue trend on ads and have been working hard on it. The progress in Q1 met our expectations, and we're looking forward to seeing results of this in the coming quarters. On the programmatic side, we've made good progress transitioning to a more competitive auction-based bidding model. Around 30% of our user base are now on this new architecture. The next step on this is to roll this out to a wider user base within this quarter itself. Post the wider rollout, we will begin growing yield per ad impression by implementing a new programmatic model. On the algorithm change we saw from our largest demand partner last year, we've done several fundamental optimizations on our inventory in Q1, which we believe will increase the value of our inventory and eventually get us back to better revenue levels than we've been seeing recently. And on the direct sales side, an important part of our strategy of course, we recently announced several partnerships in India and other regions which extends our reach with our high value proprietary ad offerings. These two over time will yield results for us. Moving on to our premium revenues, our premium revenue grew exceedingly well, 37% year on year, which is 52% in constant currency. Our subscriber base grew 43% year-on-year, and the conversion rate as well grew by 27%, with steady ARPU development. Let's now go a bit deeper into the premium revenues. You can see that the geo mix of this revenue stream looks different compared to the total mix of Truecaller's revenue. Compared to last year, all regions are continuing to show significant revenue growth. And remember that this is in SEK, which was negatively impacted by the strengthening of the SEK. So the underlying growth is actually even higher. The monthly ARPU and the conversion to premium, what you can see right now on your slide, varies a lot between different regions. As you can see, conversion in markets outside of India and MEA is five times as high as in India, but it is important to note that all regions have been increasing over time. I'd like to now call out a few exciting markets on premium revenue for us. You can see here there are several markets where we have more than 50% year on year on premium revenues and higher ARPU than our average on premium revenues. This is a focus area for us and we're very bullish on growing these markets where we actually have a lot more headroom left to grow. As you can see in the previous slides, as well as this one, our focus on this area is clearly paying off. Not only do we have sustained revenue growth, but the rate of converting free users to premium subscribers is growing both on iOS as well as Android. Although Android might look like a laggard here compared to iOS, it is important to see the rapid growth in conversion during the last few quarters. Given the huge user base we have on Android, it is, of course, very promising for us in the long term. Now on to Truecall for Business, our third revenue stream. Net sales declined 25%, amounting to 59 million this quarter. It is important to understand that this decline is an effect of two primary things, FX movements, which were quite significant during this period, and a deliberate change in the business model for business messaging. Our ARR for verified business declined in SEC, but grew 19% in constant currency. The growth rate for verified business is lower as indicated in the last quarter due to lower new bookings in Q4, which shows up as lower growth in Q1. As compared to the lower new bookings in Q4, Just to talk a little bit about Q1, we did see some recovery in Q1 with more customers being signed on for the core TrueCall for Business offering. Now, Truecore for Business has grown well for several years now. In the last quarter, we pointed out that we're seeing competition from telco offerings in India, which only shows the name of the business calling you. We're still confident we add more value than just showing the name of the business, and that's what our product development has been focused on. Businesses face multiple challenges when communicating with their audience, and we're staying focused on expanding our offering to become the CX platform of choice. We believe this is the right strategy to fight off competition and come back to the higher growth levels we've seen earlier in this part of the business. On business messaging, new partners are ramping up and we're signing up additional partners as well. This was an expected phase with our move earlier this year from a single exclusive longstanding partnership to a more diversified partner approach. We're currently trending around 10% of last year's volumes, but we are growing each month. Now onto a few product highlights for the quarter, and then Aude will take you through the financial performance. The first part is Truecaller Lite. First time smartphone users and some users in emerging markets often have a limited mobile phone. Truecaller's philosophy has always been to ensure every phone can use Truecaller's core proposition because this seeding leads to sustained user growth over time. In Q1, we launched Truecaller Lite to better serve entry-level phones, which widens the addressable audience and eventually compounds to solid organic growth. You will hear more about progress on this in the future as we expand markets and beef up the product as well. Family protection, which we launched in select markets earlier, is now fully rolled out globally. This is a unique way of tackling the fast-growing fraud problem by empowering what we call the family CTO to protect the entire family. Millions of families have already enabled this capability, and we will continue to make this more powerful in the coming quarters. We also launched voicemail in India in Q1, mainly to let users send unknown callers to their mailbox if they want to know more about the call. This also creates a whole new use case for Truecaller, something we believe is an important part of our strategy going forward. We're already seeing five million voicemails a day on this feature and are excited to see how people use it for different use cases. With that product update, I'll hand over to Aude.

Thank you, Richard. So let me, as usual, walk you through the financials in more detail. This quarter has been characterized by three major factors, namely a continuing very good growth for premium revenues, as Richard has pointed out, substantial ads headwinds, and then the currency effects. Like before, to make it easier to understand the underlying development for our business, we will give you the net sales and EBITDA development in both SAK and in constant currencies this quarter. The constant currencies figures are our best estimates based on the information available to us. Like I've said before, we don't have full information on how partners like Google are managing exchange effects, which limits the precision we can achieve. But this is our best estimates. So, in Swedish krona, our net sales decreased by 27%, but looking at it in constant currencies, the decrease was 16%. EBITDA decreased by 57% in SAK and 44% in constant currencies. The EBITDA margin was 17.8% in SAK, but slightly higher, 20.1% in constant currencies. Now, like last quarter, we are obviously not happy with these figures. I'll give you the causes of these pretty mediocre results, while I should give you more insight into how we intend to evolve the business to a position of stronger growth and profitability going forward. Net sales decreased, like I said, by 27% versus 25% Q1, first quarter last year, or 16% in constant currencies. As you can see in the waterfall graph, most of the decrease was due to the weakening demand for our ads inventory that primarily is an effect of the partner algorithm change in the third quarter of last year. TrueCall for Business also contributed to the decrease due to the previous business messaging partnership coming to an end, thereby reducing revenue from that particular partner very sharply. Premium continued to grow and a greater substantial contribution to overall net sales. But currency effects continued to have a material negative impact as the Swedish krona stayed strong versus USD, INR and other currencies. Looking at ads, ads revenue decreased by 44% versus the same quarter last year and 34% in canceled currencies. Currency effects obviously continue to have a material negative impact. Again, most of the decrease was, however, due to the weakening demand for RRS inventory. That's an effect of the partner algorithm change last August. Now, the real money gaming ban that was also introduced last summer in India has decreased overall demand in the market and thereby also the auction pressure, resulting in material negative impact on our ads revenue versus the same quarter last year. This is particularly true for Q1 and also for Q2, when our IPL historically has been a strong market driver, but where the RMG ban has profound negative demand effects. The geopolitical conflict in Q1 has caused some Mao and ad revenue decrease in that region, but nothing substantial on overall numbers. So far, I should say. We don't see any signs of that changing, but given the uncertainty of the situation, we're obviously well aware that things can change. Overall, demand has seen a slight decline, which impacts revenue from other programmatic partners too. Within Truecall for Business, the verified business portion continued to grow year over year in constant currencies, although at a lower rate than earlier. Richard gave you some of the background on that previously. Business messaging dropped sharply as the previous business messaging partnership ended, like I mentioned. And once again, the strong S&K versus mainly INR continues to negatively impact financials and pretty much counteracted the organic verified business growth this quarter. Looking at recurring revenues, they continue to grow well, 23% in constant currencies. Obviously, this quarter that was entirely driven by premium. But recurring revenues in total now make up 47% of our overall revenues, and their share has been growing constantly for the last few years, even though we've seen a weaker TFB quarter now. Some period last year was only 32%. We continue to have this as a core focus area to create more resilient revenue distribution going forward. Now, looking at profits, gross profit decreased by 33% year over year in SAK, while gross margin declined to 70.9% versus 77.3% last year. This margin decrease is due to primarily two factors. Lower revenues impact the margin directly as costs for servers and verification, which is part of our cost of goods sold, is not directly linked to revenues. So when revenues decrease, that cost becomes a more important driver of gross margin. And then improve transparency on ad partner fees, lower the margin from the fourth quarter 2025. Some of the ad partners that we have been working with have finally been able to give us more precise information on the fees that they take out, and we can then book that as cost of goods sold in a way we couldn't do before, in accordance with our accounting principles. Looking at OPEX, our staff costs has been stable, but will decrease from the announced cost reduction programs that we did in Q1 and the one that we're now doing in Q2 by at least 20% versus the seasonally adjusted monthly figure at the beginning of 2026. When I say seasonally adjusted, there are certain factors that change month over month, like changing vacation pay. And that can have a rather substantial impact on a specific month. But adjusting for that, we will come down with at least 20%. No restructuring cost was taken in Q1. Instead, we let the salary decreases coming from the Q1 cost reduction program take effect gradually as affected employees leave the company. And most of those total employee cost reductions from that cost program in Q1 will materialize in Q3. For the Q2 cost reduction program that we are doing now, we will, as opposed to the previous program, take a one-off restructuring cost of approximately 23 million Swedish crowns that will hit Q2. But we will then have no further cost associated with the employees that are forced to leave us this time. Other expenses were lower during the first quarter due to the efficiency initiatives that we took at the beginning of the year, as well as lower investments in user acquisitions. Tax rate was 32%, 28% one year ago. This is, as we explained after the fourth quarter, due to the fact that a high proportion of group profits are now attributable to India. due to the algorithm change from this large partner that we have where we recognize the revenue in Sweden. Now we see a larger share of our profits being made in India, meaning that the Indian tax rate becomes a more important driver for the group tax rate. Looking a little bit on incentive costs, what I like to call the dilution cost was higher year over year, mainly due to the introduction of the long-term incentive programme in 2025. They are, however, expected to decrease from Q3 onwards when the LTIP 2022 rests in June. Now, the cost reduction program that we are initializing now will also have some effect on that, decreasing the cost of the program. Now, the vesting event that we will see in June this year will have a cash flow impact similar to what we reported in 2025 Q2 and 2025 Q3. That was due to the vesting of the same program last year. Looking at operating profit, including incentive costs, due to lower ad and TFB revenues, EBITDA decreased from 264 million Swedish crowns versus 149 million in the corresponding quarter last year. In constant currencies, EBITDA decreased by approximately 39%. EBITDA margin, including incentive costs, was 17.8%, which is a substantial decrease from 30% last year. Excluding incentive costs, EBITDA decreased to 103 million versus 199 million in 2025. Once again, constant currencies, the decrease was 37%. And the EBITDA margin then became 28.6% versus 40% last year. A little bit on cash flow. Net cash flow from operating activities, excluding paid income tax and changes in working capital, was 106 million Swedish crowns versus 189 million last year. Accounts receivable were stable. We continue to work hard to ensure that we're paid for our services in a timely manner, and so far we have been quite successful. You can always do more, and we work hard in order to do better, but we are in a position that is well under control. As of today, Truecaller holds 22.3 million B and 5 million C shares, corresponding to approximately 7.8 of the outstanding capital. The board have proposed cancellation of 16.3 million B shares, or approximately 4.6% of the capital. As you may remember, we need a certain amount of B shares in order to cover some previous long-term incentive programs. So that's the reason why we're not canceling all of them. We have approximately 900 million Swedish crowns in cash and short-term funds available. Our revolving credit facility of 500 million is still not utilized. but continue to be available for interesting M&A opportunities. And we continue to actively evaluate such opportunities, either when we get inbounds coming our way or due to the fact that we see areas where we could further strengthen our product and services portfolio and reduce time to market for important initiatives if and when we can find the right fits. And finally, in accordance with the dividend policy, the board proposes a dividend of 0.28 SAK per share to the annual general meeting later this month. And with that, I give the board back the word back to Rishit.

Thanks. So I want to talk. about what we communicated this morning, that we are reorganizing ourselves and creating a more nimble and a focused organization. In early Q1, we undertook initiatives to reduce our cost base. This was primarily due to the revenue downturn we saw in our advertising business. Now, given the revenue situation, it is very important for us to stay healthy as a business while we work hard on getting the revenue back on track. Like Aude mentioned earlier, we're taking further steps to cut down our costs by reducing our organization by approximately 70 people. We're also using this as an opportunity to simplify our org structure so we can be laser focused on high priority items, which will give us the long-term growth that we aspire to have. The financial implication, like Odd spoke, is that our staff cost, excluding incentive cost, is expected to reduce by at least 20% from Q3 onwards compared to the Q1 levels we see. And during Q2, we will also take a one-off restructuring cost of approximately 23 million sec. Needless to say, this was a very tough decision for all of us to make because Truecaller is a very close-knit group of people, but it was strategically an important one to take. Now I'll summarize the quarter and then we'll open up for questions. In summary, this quarter we continue to grow our user base and now have more than half a billion people across the world using Truecaller. This growth continues to validate the need for the product and the solution we provide. What we have been experiencing in the last couple of quarters are challenges in part of our own monetization structure, something we are now working hard on resolving. Our recurring revenues are growing driven by continued strong development of our premium offering. Our ads business transformation is underway, and we will continue to drive that change in the coming quarter. While we are experiencing revenue challenges, we are restructuring our organization to simplify our structure, centralize various parts of our business, and because of this, we will see a lower cost base from Q3 as an effect of this initiative. and from a somewhat lower accounting burden on incentive programs as well. The execution in the coming quarters is critical, and the entire team and I won't rest until we are satisfied. Once we are past this phase, I'm confident we will start seeing gains on the investments. And in the meantime, we will make sure that the company is lean enough to be agile and laser focused. Thank you very much.