Q2: EBITDA margin passes inflection point and profitability brought forward

Interim report January-June 2022

Second quarter 2022 (Q2 2022)

• Net sales growth of 39% (130%) and quarterly net sales of SEK 315.8 million (226.6) 
• Organic net sales growth of 28% (134%) when adjusting for FX 
• Gross margin at 30% (37%), as the softening ad-market resulted in one-off costs in the quarter 
• Adj. EBITDA margin reached -31% (-21%) 
• Adj. EBITDA of SEK -98.3 million (-46.6) 
• Operating loss of SEK -112.0 million (-85.0) 
• Net loss for the period impacted by positive FX and amounting to SEK -70.6 million (-179.7) 
• Cash flow from operating activities of SEK -97.6 million (-64.5) 
• Basic and diluted earnings per share for the period of SEK -0.40 (-1.28) 
• Listens reached 1,238 million (880) and grew by 41% versus the same quarter previous year. ARPL remained flat at SEK 0.26 (0.26)

Significant events in Q2 2022

• Inflection point for EBITDA-margin reached. This means that margins going forward will improve until we reach EBITDA profitability 
• Updated financial targets, e.g. bringing EBITDA profitability forward to 2024 
• Number of shows reached 66,000 during the quarter, as Acast strengthened our offering for podcasters 
• Acast teamed up with Meta, the owners of Facebook, as their first podcast partner for the launch of Interoperable Subscriber groups, allowing our podcasters to create exclusive Facebook groups for their Acast+ subscribers 
• Acast signed a distribution deal with Resso, the world’s first social music streaming platform. Our integration will give Acast’s podcasters exposure to millions of potential new listeners and more of the global advertising market 
• Acast entered into a three-year contract with podcast creator Marc Maron and his podcast WTF with Marc Marcon. Maron’s podcast has approximately 55 million listens per year, primarily in North America 
• Acast launched new Conversational Targeting capabilities for advertisers. Advertisers can now target specific conversations within podcast episodes

Comments from the CEO: EBITDA margin passes inflection point and profitability brought forward

As the ad market softened, Acast has been investing to strengthen its’ business model and position. This culminated in the acquisition of Podchaser which was announced after the end of the quarter. The heavy investment phase is now over and even if we will continue to invest in new markets and in our product development, the EBITDA-margin will improve from here to pass the point of break-even in 2024. Acast has taken several important steps forward - both within the open podcast ecosystem and relative to our competitors. Podcasts joined Acast at record pace, with the total number of shows we host now standing at more than 66,000, and the number of listens to our hosted podcasts increased by 41% versus Q2-2021. We also improved our offering for advertisers by providing more accurate tools and data to reach the right audiences.

EBITDA MARGIN TO IMPROVE FROM HERE 

The world’s uncertain macroeconomic circumstances are there for all to see, and have led to a cooling of the advertising market globally, across all industries. While podcast ad spend has proven more resilient and is expected to grow by 15%, our industry is not immune to overall market sentiment. 

During the quarter, Acast’s net sales amounted to SEK 316 million, corresponding to growth of 39% compared to the same quarter last year. In Europe, growth amounted to 28%, while in North America and ROW the figures were 72% and 48% respectively. The average revenue per listen (ARPL) remained flat at SEK 0.26, as per Q2-2021. A lowerthan-usual gross margin at 30%, as the softening ad market resulted in one-off costs of SEK 18 million for the quarter. The costs are related to a reassessment of podcaster contracts in the US, running over a longer period of time and which are affected by a lower ad-sales outlook. Excluding this oneoff, the underlying gross margin was 35%. 

EBITDA for the period amounted to SEK -99 million, in a quarter where we made selective investments. The EBITDA-margin was -31%. The margin will improve from now on until we reach profitability, even though the quarterly margin will fluctuate due to normal seasonal variations. This will be possible through continued market growth in the podcast industry, an adapted pace of investments and improved efficiency. In terms of efficiency we see that investments made so far have made our markets reach critical mass, and the investments made in our technical platform contribute to scalable growth, where we can grow our revenues without increasing our costs at the same pace. 

UPDATED FINANCIAL TARGETS

Acast continues to grow in a controlled manner, with an adapted pace of investment and continued cost control. But the world has changed over the past few months, and we find ourselves in a different macroeconomic context than last year — one that we’ve adapted to, and continue to do so. To reflect the changes in market conditions we’re updating our financial targets:

	New Financial Targets	Previous Financial Targets
Organic Net Sales Growth	Average annual organic net sales growth of 40%-45% between 2020-2025	Average annual organic net sales growth of 60% between 2020-2025
Gross Margin	Annual gross margin of 35-38%	Annual gross margin of 37%
EBITDA	Full year EBITDA profitability in 2024	EBITDA profitability in the next 3-5 years
Dividend Policy	Retain available funds and future earnings to support growth and development. Acast does not intend to pay cash dividends in the foreseeable future	Retain available funds and future earnings to support growth and development. Acast does not intend to pay cash dividends in the foreseeable future

When it comes to the new organic net sales growth target of 40-45% between 2020 and 2025, the higher organic growth achieved in 2020 (74%) and 2021 (69%) implies an average organic net sales growth rate of around 30% over the years 2022-2025, which is twice as high compared to the general podcast advertising market, which is expected to grow by 15%. The target of a gross margin of 35-38% reflects the one-off costs taken in 2022 as well as expected improved gross margin going forward and supported by the SaaS-revenue from Podchaser. The previous profitability target, set at the time of the IPO, implied reaching EBITDA profitability on an annual basis between 2024 and 2026. This has now been brought forward to 2024

CAPITAL MARKETS DAY OCTOBER 4 

On October 4, 2022, we will be holding a Capital Markets Update, focusing on Acast’s business strategy, financial management, and these updated financial targets. We are inviting all of our stakeholders to take part and will be running a live stream. We will come back with more information regarding timing as well as the registration link, in due course. 

MORE REASONS FOR PODCASTERS TO CHOOSE ACAST 

During the second quarter, Acast has signed several partnerships and collaboration agreements that strengthen our offering to podcasters. 

We teamed up with Meta, the owners of Facebook, as their first podcast partner for the launch of Interoperable Subscriber groups. This allows our podcasters to create exclusive Facebook groups for their Acast+ subscribers. We also worked closely with Apple to align on its Delegated Delivery tool, for which Acast will be a launch partner. The tool will empower Acast podcasters to upload, manage, and distribute premium content directly to listeners using Apple Podcasts Subscriptions. 

In June, we signed a distribution deal with the social music streaming platform Resso. Owned by ByteDance, the company behind TikTok, Resso is a fast-growing community for listeners in South-East Asia and Latin America, and our integration will give Acast’s podcasters exposure to millions of potential new listeners and more of the global advertising market.

We have also made it easier for new podcasters to create content by partnering with both Podcastle — an all-in-one solution for podcast production — and the internationally renowned audio interface manufacturer Focusrite, which has bundled access to Acast’s Influencer hosting plan into its new Vocaster podcasting product. 

We have further strengthened potential revenue opportunities for our podcasters through a partnership with Spring — a social e-commerce platform for merchandise and other products. 

Altogether, these partnerships have contributed to the number of podcasts hosted by Acast now exceeding 66,000 — with that growth rate tripling compared to the previous quarter. In fact, the second quarter was a record-breaker for Acast in terms of new podcasts joining us. This, combined with very few deciding to leave, further proves our competitiveness and the value we can bring podcasters — both by distributing their shows to listeners everywhere, and by helping them make more money from their hard work. 

When it comes to prominent, well-known podcasters, we also had a strong quarter – adding the likes of WTF with Marc Maron, Berning in Hell, and one of Ireland’s biggest shows, Second Captains, to the Acast Creator Network. We also signed a deal with the world’s biggest podcast, The Daily from the New York Times, to monetize its listens in the UK, while several of our podcasters – including Marc Maron, Richard Herring and Sh*gged, Married, Annoyed – have joined our Acast+ subscription service, launching exclusive content for their paying listeners. 

CONVERSATIONAL TARGETING BRINGS NEW ADVERTISING OPPORTUNITIES 

Before now, podcasts and their advertising space have mostly been tagged in relation to their genre, meaning two very different shows might be tagged and presented to potential advertisers in the same way, simply because they cover similar topics. 

Acast’s new Conversational Targeting capabilities launched during the second quarter, and advertisers are now able to target specific conversations within podcast episodes — offering the opportunity to target conversations that may differ from the podcast’s genre or the episode’s overarching theme. For example, a sports podcast that discusses cooking might present a relevant sponsorship opportunity for a food brand, one that may not previously have been realized. 

PODCHASER ACQUISITION STRENGTHENS ACAST’S BUSINESS MODEL 

After the end of the quarter, Acast signed an agreement to acquire Podchaser, the world’s largest and most comprehensive and authoritative podcast database. It’s known as “the IMDb for podcasts”, and strengthens our position as the world’s largest independent podcast company.

The acquisition means Acast podcasters will benefit from enhanced discoverability to drive their growth and monetization goals. Advertisers will benefit from superior performance metrics, enabling them to more efficiently reach their valuable audiences — with access to data points covering demographics, consumption, reach and favorability. 

Podchaser’s SaaS-based structure collects and monetizes data, adding additional revenue and strengthening Acast’s own business model. 

Despite market uncertainty and the challenges being faced by all industries, podcasting — with Acast at its heart — remains steadfast on its strong growth trajectory. We’re here to make sure that continues for many years to come.

Ross Adams
Chief Executive Officer

Report presentation
CEO Ross Adams and CFO Emily Villatte will present the report in a conference call and webcast today 2 August at 10:00 CEST. The presentation will be held in English and will be concluded with a Q&A session.

Link to the presentation: https://tv.streamfabriken.com/acast-q2-report-2022 

Telephone number for the conference call:
SE: [phone]
UK: [phone]
US: [phone]

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

For more information

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Emily Villatte, CFO and Deputy CEO, Acast
Tel: [phone]
E-mail: [e-mail]
 
Ross Adams, CEO, Acast
E-mail: [e-mail]

About Acast

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Acast is the world’s largest independent podcast company. Founded in 2014, the company has pioneered the open podcast ecosystem ever since – making podcasts available on any listening platform. Acast provides a marketplace, helping podcasters find the right audience to monetize their content. When our podcasters make money, we make money. Today, Acast hosts nearly 66,000 podcasts, with more than 400 million listens every month. The company operates worldwide and is headquartered in Stockholm, Sweden. Acast is listed on the Nasdaq First North Premier Growth Market. Certified Adviser is FNCA Sweden AB, [e-mail], [phone].

This information is information that Acast is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact persons set out above, at 2022-08-02 08:00 CEST.

Attachments

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Acast Q2 2022 ENG Final

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