Truecaller : Transcript Q4 2022 Truecaller

Corrected Transcript

22-Feb-2023

Truecaller AB (TRUE.B .SE)

Q4 2022 Earnings Call

	Total Pages: 19
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Truecaller AB (TRUE.B.SE)	Corrected Transcript
Q4 2022 Earnings Call	22-Feb-2023

CORPORATE PARTICIPANTS

Alan Kurdo Mamedi

Co-Founder, Chief Executive Officer & Director, Truecaller AB

Hans Odd Bolin

Chief Financial Officer, Truecaller AB

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OTHER PARTICIPANTS

Akhil Dattani	John Karidis
Analyst, JPMorgan Securities Plc	Analyst, Numis Securities Ltd.
Stefan Gauffin	Yemi Falana
Analyst, DNB Bank ASA (Sweden)	Analyst, Goldman Sachs International
Predrag Savinovic	Erik Larsson
Analyst, Carnegie Investment Bank AB	Analyst, Skandinaviska Enskilda Banken AB

Jesper von Koch

Analyst, Redeye AB

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MANAGEMENT DISCUSSION SECTION

Operator: Good day. Good day and welcome to the Truecaller Fourth Quarter 2022 Earnings Conference Call. All participants will be in listen only mode. [Operator Instructions] Please note today's event is being recorded.

I would now like to turn the conference over to Alan Mamedi, CEO. Please go ahead.

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Alan Kurdo Mamedi

Co-Founder, Chief Executive Officer & Director, Truecaller AB

Thank you. Hi and welcome everyone who is listening in. I'm Alan Mamedi and I'm the CEO and Co-Founder of Truecaller. With me, I have our CFO, Odd Bolin. We're very happy to announce our interim report for the fourth quarter of 2022. I will start with presenting financial and business highlights. I will then provide an update on some of the exciting things we have released during the quarter. And will then walk you through our financial performance in more details. Finally, I will wrap up with a summary of the quarter and then we open up for Q&A. So let's get started with the highlights of the quarter.

We closed Q4 with an average of 338 million monthly average users, a 13% increase year-on-year. Average daily active users grew to 271 million, an increase of 14%. This means that our DAU to MAU engagement remained strong at 80%. We closed the quarter at SEK 444 million, 13% increase compared to the same quarter in 2021. Although macroeconomic headwinds resulted in a lower demand for digital advertising, we were still able to increase revenues thanks to the improvements to our products. Our adjusted EBITDA landed at SEK 136 million at the end of the quarter, with an adjusted EBITDA margin of 30.6%. We continue to have a very strong cash flow with SEK 169 million in net cash from operating activities before tax payments.

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Truecaller AB (TRUE.B.SE)	Corrected Transcript
Q4 2022 Earnings Call	22-Feb-2023

After the third quarter, we shared that we were serving increased caution by advertisers regarding their marketing investments and that this could - likely could lead to muted demand. We saw this materialized in a slowdown in demand during the latter part of the fourth quarter, during a period when seasonal effects would typically result in higher spending. However, we're still very proud to be a profitable high growth tech company and intend to continue. So with solid profitability, great margins and a strong cash flow.

Now we continue to grow our user base across markets and on both Android and iOS. We're proud to have been ranked as the 14th most downloaded app globally, and we continue to be one of the most loved apps in India. In 2022, we were the second most used app in India in the 18 to 24 age group and the third most used app among men. We're also proud to have reached an all-time high in our Net Promoter Score in India, ending the quarter at NPS of 52.

On the product side, we continue to work on optimizing our advertising technology and a number of initiatives that we executed on, which resulted in a significant increase in ad impressions. Our investments in developing our proprietary ad platform have started to pay off as the revenue from our in-house platform grew by more than 3x. We launched a couple of exciting new things this quarter and we continue to work on things that expand opportunities for revenue growth.

We streamlined our premium offering and introduced new pricing plans, and the number of subscribers grew by 16% year-over-year. We're also very excited that Truecaller for Business continues to grow. We now have almost 1,900 customers in 35 different countries. I will cover these highlights in more details in the next few slides.

On the growth side, our user base continues to grow, majority of users - user growth is still driven by strong organic growth. But we're also seeing our investments in user acquisition start to see the upcoming markets that are of strategic importance to us. We closed Q4 at an average of 338 million monthly active users, which is up by 38 million from the same period last year, or 13% increase. As mentioned, our daily active user base grew even faster. We closed the quarter at an average of 271 million daily active users, a 14% increase from last year.

User growth this quarter was somewhat affected by the global macroeconomic situation. Smartphone sales impacted our user growth to an extent. Since some of our new users are those who installed app when they buy their first smartphone or when they upgrade to a more modern device. The global markets for new smartphones decreased by 18% in the fourth quarter. But despite this, we continue to grow our user base and ended the quarter with 13% growth in average monthly active users. Our daily active user growth outpaced our monthly active user growth and engagement remains very strong with over 80% of monthly active users. And both of these are strong indicators of our products stickiness.

We're proud that most of our user growth is still organic. As this continues to demonstrate the growing relevance of our service and the product market fit. As a product first company, we continuously invest in developing our offering to further improve the user experience. As usual, let's recap the product offering for those who are new to these calls or our product. There are two main areas where we focus on from a product perspective. One is our consumer product, which is available on iOS and Android 338 million people use it every month. And we're proud to be the leading global platform for phone number verification. Consumer use our product in order to have a safer and more efficient calling and messaging experience. It's basically their go to product for their communication needs.

The other side of this is our business product that we call Truecaller for Business, which allows businesses to verify through a KYC process and become verified businesses on our platform in order to increase trust in their

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Truecaller AB (TRUE.B.SE)	Corrected Transcript
Q4 2022 Earnings Call	22-Feb-2023

communication with consumers. But also to prevent impersonation and many other things. They can also integrate their calling and messaging experience directly into our product so that they can grow their business more efficiently.

Now let's get into the highlights. So the three areas I will cover are the core product offering, Truecaller premium and our AdTech capabilities and enterprise products. We continue to develop our core offering in order to provide users with a smarter, safer and more efficient experience across their communication needs. We continue to invest in our AI Identity or artificial intelligence and machine learning-powered caller ID and spam detection capabilities. AI Identity translates calls, signals and patterns into AI-generated labels, for example, likely sales or someone you may know. We continue to build opportunities from community feedback, which drives strong user engagement and also serves as valuable inputs to the contextual information provided by the AI Identity.

We also continue to enhance the experience for Android users by building out the existing features. For example, Smart SMS highlights the most important information from length in messages. But Smart SMS is even smarter now and sends intelligent reminders about important events such as travel, departure times and bill payment deadlines and so forth. We also continue to focus on improving our performance.

In the fourth quarter, we implemented enhancements that deliver a faster, frictionless experience while reducing the app size by 50%. This is a big achievement for us. A leaner app size means that we can grow our investments in preloads more due to requirements of OEM manufacturers. It also makes the app more attractive in terms of driving organic user growth, especially in markets where app sizes a major factor for users who have low budget devices and limited space on their phones or even limited data plans.

In the fourth quarter, we built out a few things in our product to protect users from the growing problem of impersonation and fraud. Based on feedback from our community, one of the most common phone scams involves the impersonation of government officials. This led us to create the Government Service Directory for our users in India. This service helps users to connect seamlessly with the government through easy access to verified contacts of government bodies from national helpline numbers to specific ministries.

The information was sourced directly from official sources and covers 20 central ministries and over 23 states. We continue to update the feature with more verified numbers across different departments and states to help even more people across the country. We also began using our Instant Messaging capabilities at scale by sending market specific intelligence directly to our users.

So what it means is that we have historically helped our users - user base identify malicious callers in real time. But now we're also building out the capability to scan ongoing trends in order to inform users preemptively. We're excited about the opportunities in this space and continue to invest in building fraud, intelligence and detection capabilities.

In late August, we launched a brand new version of the iPhone app for users globally. The iOS app was completely rewritten and offers a fundamentally better user experience from end to end. In the fourth quarter, we strengthened the product by improving the AI Identity experience on iPhone, iPhone users now have a much better contextual information on who's calling. Similar to the experience we have delivered on Android. We also introduced community feedback on iPhone in the fourth quarter. And now Apple users can take advantage of opportunities to suggest names or leave comments.

We continue to see significant improvements in adoption of our app from iPhone users. Since we launched the new app in August, average daily active users on iPhone increased by over 80% and daily installs grew by 15%.

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Truecaller AB (TRUE.B.SE)	Corrected Transcript
Q4 2022 Earnings Call	22-Feb-2023

The team's focus has been to build a great product and get the engagement going before we invest in expanding into iPhone dominate - dominant markets. Overall, we're very optimistic about growing our share of iPhone users in the coming years.

On the premium side, we continue to develop the premium offering. And in the fourth quarter, we grew our subscriber base by 18% compared to the same period last year. We have streamlined the offering and introduced two new subscription plans and Ad-free and a Family Plan to make it accessible to more users. Ad-free plan was made available to specific user segments and has driven high conversion rates with early indicators suggesting that users in who's on this offering are more likely to upgrade. In December alone, over 10% of ad-free subscribers upgraded to more attractive plans.

We also launched Family Plan in early December, which allows users to add up to four people on a single paid account. This new plan has proven to be very attractive, with about 60% of our family plan users being new subscribers and 40% upgrading from cheaper plans. We also worked on a few things to drive more subscription growth from our iPhone user base. We improved the user interface on the iPhone app to make the checkout process much more intuitive. This initiative has demonstrated a positive trend, with a 29% increase in revenue from iPhone subscribers compared to Q4 last year.

From our feature perspective, we continue to build out our cloud telephony offering. In the fourth quarter, most of the focus was on improving the visibility of the offering and optimizing the key, the core product. Key performance indicators, including conversion, retention and usage metrics are trending at the healthy rates. So I think we're on a good path there. In preparation for further expansion, we continue to test Assistant offering in other strategic markets and have been seeing great results. Other than the Assistant itself, we continue to explore even more use cases using the cloud telephony platform in order to strengthen our value proposition for the paid offering.

On the ad side, we continue to build out our capabilities in order to deliver an even better experience. Thanks to investments in our proprietary platform. We were able to grow our ads revenues despite significantly weaker demand for digital advertising in the broader market. On the proprietary platform, we saw the highest monthly revenues recorded in the fourth quarter and growing by over 300% year-on-year. We also improved efficiency across the advertising lifecycle and this resulted in growing impressions by over 36%. These initiatives have resulted in improvements in ads, engagement and click through rates, which are expected to enable improved CPMs and stronger monetization in the medium to long term.

We continue to work on performance advertising through more advanced features, data led machine learning algorithms, newer inventory-side opportunities and so on. Initiatives to build out our demand side platform, which expands the scope of our reach beyond the Truecaller ecosystem, continue to scale very well. That platform will provide us ability to leverage unique audience insights for a range of advertising use cases. We will continue to do those investments and initiatives, which further improve our effectiveness and monetization potential, which will put us in a very strong position when demand recovers.

On the enterprise side, demand for our enterprise offering continues to grow. In the fourth quarter, we onboarded a number of notable brands in India across sectors, including Volkswagen, Tata Play and Coursera to name a few. Our relevance to players in the financial sector also continues to be high as we added a number of leading banks and insurance providers to our client portfolio this quarter. We also continue to expand Truecaller for Business in markets beyond India, most notably Egypt, Kenya and South Africa.

In the fourth quarter, we introduced business profile, which helps brands to engage more dynamically with the end users. Business profiles are fully customizable and allow enterprise customers to bring more life to their profile by

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