Acast

Third quarter 2022 (Q3 2022)

• Net sales in the quarter amounted to SEK 322.0 M (265.1), corresponding to net sales growth of 21% (89%)
• Organic net sales growth amounted to 7% (87%). The current macroeconomic environment, which has a direct impact on advertising spend, has affected Acast’s lower growth compared to last year
• The gross margin for the quarter was 35% (36%)
• The adjusted EBITDA result amounted to SEK -75.1 M (-42.0) and the adjusted EBITDA margin to -23% (-16%). This represents a SEK 23.1 M improvement to adjusted EBITDA and a margin improvement of 8 percentage points compared to the second quarter this year, when the company reached an inflection point and now moves towards profitability
• Operating profit (EBIT) amounted to SEK -102.0 M (-52.7), including SEK 8 M in restructuring costs related to redundancies and SEK 3 M in costs related to the acquisition of Podchaser
• The loss for the period was positively affected by currency effects and amounted to SEK -68.5 M (-46.1)
• Cash flow from operations amounted to SEK -120.3 M (-70.8)
• Cash flow from investment activites amounted to SEK -217.9 M as a result of the acquisition of Podchaser and the cash and cash equivalents at the end of the quarter was SEK 901.9 M
• The period’s earnings per share before and after dilution amounted to SEK -0.38 (-0.26)
• The number of listens amounted to 1,318 million (891) an increase of 48% compared to the same period previous year and Average Revenue Per Listening (ARPL) amounted to SEK 0.24 (0.30)

Significant events in Q3 2022

• Acast has acquired Podchaser, the world’s most comprehensive podcast database. The combined companies will offer the industry’s best metadata for podcast creators and advertisers
• Acast has communicated the intention to review the organization to reduce the cost base and thereby create profitable growth. The planned cost reductions affect approximately 15 percent of Acast’s current workforce and are expected to be finalized by year-end
• Acast has signed an agreement with The New York Times to represent the media company regarding the sale of audio advertising in the UK. The agreement includes, among other things, The New York Times’ iconic podcasts “This American Life” and “Serial”
• The successful podcasts “WTF with Marc Maron” and “Sh**ged. Married. Annoyed.” have launched WTF+ and SMA+ via Acast+. The launches mean that subscribers get access to bonus material, exclusive benefits and archive material from the respective show
• During the quarter, Acast expanded into Italy through a partnership with the American podcast network Wondery. Initially, the shows “Bunga, Bunga”, “Dr Death” and “Business Wars” have been translated and introduced to the Italian market via Acast’s platform

Comments from the CEO: Moving towards profitability
The third quarter has been marked by an increased concern and uncertainty regarding the macroeconomic development worldwide. History tells us that when a recession is close, the advertising market is generally affected early in the cycle, and indeed we have noted a gradually cooler market year to date. But Acast is one of the largest market-leading businesses creating technology for the distribution and monetization of podcasts and we have strenghened our position in this challenging market, not least through the acquisition of Podchaser. This improves our competitive positioning and ability to create new revenue streams for Acast. As noted, in the quarter we saw sequential improvement in EBITDA illustrating that we are moving towards profitability, in line with our plan laid out earlier this year.

Continued growth and positive profit trend
Turnover during the third quarter amounted to SEK 322 M, corresponding to a growth of 21 percent compared to the same quarter last year. With the outlook clouded by the increasingly uncertain macroeconomic situation worldwide, we are pleased to note that Acast continues to show good growth, thanks to a strong position as a market leader in podcast advertising sales and monetization. In June, PwC published its Global Media and Entertainment Outlook report, noting that the ad market for podcasts is expected to grow by 15 percent annually on average until 2026, while the media ad market as a whole is forecasted to grow around 7 percent over the same time period.

Net sales in Europe amounted to SEK 211.7 M (173.9), an increase of 22 percent. The slow-down in the advertising market during the year was also noticeable in the third quarter, however we advanced our position in several European markets. Growth in North America amounted to 16 percent and in the rest of the world 36 percent. Towards the end of the quarter, a certain recovery was visible in advertising sales.

The average revenue per listen (ARPL) was 0.24 SEK (0.30), a decrease of 19 percent compared to the same quarter last year. The gross margin amounted to 35 (36) percent which is within our financial target range despite the fact that the current macroeconomic climate is putting some pressure on the gross margin. Adjusted EBITDA for the quarter amounted to SEK –75.1 M (-42.0). Sequentially, the EBITDA result is improving, which is in accordance with our plan to reach a positive EBITDA result in 2024, and to gradually improve the result as a consequence of reduced investments and cost savings. The adjusted EBITDA margin was -23 (-16) percent.

Market position remains strong
The core of Acast’s model is the infrastructure that we have developed that generates commercial value for Acast when pod creators and advertisers meet at our platform. We were first to develop the capability to sell ad space in podcast episodes dynamically providing a premium tool for creators looking to grow their listener base while increasing advertising revenue, and allowing advertisers to reach a relevant audience at a high ROI per ad. At the end of the quarter, the number of podcasts using our platform was 88,000 and the number of listens in the quarter was 1.3 billion, an increase of 48 percent.

After the end of the period, Podtrac published its first ranking of ad sales networks for pod-casts in the US market, with Acast ranked second in terms of reach and delivery capacity in North America. This is of course very gratifying and fully in line with our strategy to increase presence in this interesting market.

On the road to profitability
Our path towards profitability means we are constantly looking at our internal efficiency and our ability to improve and scale our delivery to advance our position in the market.

During the quarter, we have announced that we are reviewing the organization with the intention of reducing the cost base, and reorganizing for a new phase, going from hyper-growth to profitability. For several years, we have worked hard and invested heavily in building our technology platform to generate new revenue streams. We are now in a position where we can reduce the cost base without compromising on quality vis-à-vis our customers and partners, and thus create profitable growth in line with the company’s updated financial goals. The planned cost reductions affect approximately 15 percent of Acast’s current workforce and are expected to be completed before the end of the year. During the third quarter, the operating result included costs of approximately SEK 8 million linked to staff reductions. On an annual basis cost savings of c. SEK 77 M will be delivered.

We continue to expand our network of advertising partners and develop our offering to allow those partners to reach as many valuable listeners as possible, at scale. After the end of the third quarter we launched the ability for advertisers to integrate their own first-party data into podcast campaigns. For the first time ever in podcasting, advertisers can harness the power of their own first-party data to create even more effective campaigns.

Programmatic sales, i.e. an automated way of buying and selling media through the use of tech, real time data and algorithms, now represents more than 10 percent of the overall revenues delivered in the third quarter for the first time. This is a highly promising trend as automation of the media buying process represents an important piece of the puzzle to further develop the number one powerhouse for podcast revenue generation. Acast is the market leader in programmatic sales of advertising in podcasting after four years of investment in technology, skills and processes.

We have a highly valuable asset of untapped ad inventory in our growing base of 88,000 shows, many of them in the midsize segment. These shows offer outstanding engagement and ROI for smaller advertisers, like SMEs, that want to access the podcast medium but may have fewer resources than the big brands. Conversational targeting and first-party data targeting is a part of our tech to match shows with advertisers in a scalable way, selling across more podcasts that are not yet monetized to their full potential.

Podchaser enables better matchmaking between podcast creators, listeners and advertisers
During the quarter, the acquisition of Podchaser, the world’s most comprehensive podcast database, was completed. Together, Acast and Podchaser offer the industry’s best metadata for podcast creators and advertisers. With Podchaser, we will, among other things, be able to improve the matching between ad content with relevant podcasts with the help of this data and, in addition, increase the number of ads sold in more shows.

I am incredibly proud of the passion and tenacity our employees show every day in making Acast the world’s premier podcast distribution and monetization platform. This has meant that during the third quarter, we have advanced our positions even further and have been able to take several important steps towards future profitability.

Ross Adams
Chief Executive Officer

Report presentation
CEO Ross Adams and CFO Emily Villatte will present the report in a webcast today 8 November at 10:00 CET. The presentation will be held in English and there will be the opportunity to ask questions during the presentation.

Link to the presentation: https://ir.financialhearings.com/acast-q3-report-2022

Link to report
The Interim Report is attached to this press release and available on https://investors.acast.com/