Welcome to the Deezer full year 2024 results. My name is Caroline, and I'll be your coordinator for today's event. Please note this call is being recorded, and for the duration of the call, your lines will be on listen-only mode. However, you'll have an opportunity to ask questions at the end of the call. This can be done by pressing star one on your telephone keypad to register your questions. If you require assistance at any point, please press star zero, and you'll be connected to an operator. I will now hand over the call to your host, Alexis Lanternier, the CEO, to begin today's conference. Thank you.
Thank you, and good morning, everyone. Thank you for joining us for Deezer fiscal year 2024 results. Let's move to slide three. I'm Alexis Lanternier, the CEO of Deezer. Today, Carl and I will present Deezer 2024 results. I will start with the key highlights of the year, and Carl will then go into more details on our 2024 performance. After that, we'll discuss our 2025 outlook and strategy. At the end of our presentation, we will answer your questions. Moving to slide four. In 2024, we achieved a record performance, both in terms of top-line growth and profitability, exceeding our financial guidance and reflecting the successful execution of our strategy. We posted solid revenue growth above our targets, up 12% year-over-year at EUR 542 million and 2% above our guidance.
This increase mainly reflected the growth of recent partnerships, such as RTL+ , Meli, the positive impact of the last wave of price increases implemented last 2023 in the direct segment, and the continued development of our subscriber base in France. This strong revenue growth, combined with gross margin improvement, allowed us to significantly improve our profitability. In 2024, adjusted EBITDA reached EUR -4 million compared to EUR -29 million in 2023, and we achieved adjusted EBITDA break-even for the first time during H2. We also generated positive free cash flow for the year, which is a first for Deezer. As a result, our cash position remained robust, with EUR 62 million at year-end. Finally, given our positive profitability momentum, we confirm our financial target of a positive adjusted EBITDA in 2025.
Overall, this great performance is a testament to the hard work and dedication of our entire team, reflecting Deezer's ability to execute on its strategic vision with discipline and focus. Moving to slide five. Looking back, we can see how we ended up with those results and built a strong foundation for the future. Our EBITDA improvement has been driven by a few key levers. First, subscriber growth in France and partnerships, price increases, gross margin improvements, optimized marketing investment, and a strict control of G&A cost. Thanks to all these efforts, we are well-positioned for a new strategic cycle, one focused on the long-term sustainable growth. Moving on to slide six, let's now spend a few minutes discussing the key business highlight of the year. Let's move to slide seven. During the year, we continue to invest in our brand, innovate, and deliver important industry initiatives.
One year after our brand repositioning, we are seeing positive traction, especially on top of the funnel awareness in France, leading to a seven-percentage point increase in paid consideration and a five-percentage point increase in distinctiveness. Those improvements validate our strategy to focus our brand investments in core markets. On the product front, we are focusing on personalization, social interaction, and AI-enabled features. Here, you can see a few examples that are driving meaningful impact on engagement and advocacy. Our personalized year-end review, My Deezer Year, has resulted in a 27% increase in overall engagement and a 75% boost in social media sharing compared to the previous year. We have also successfully rolled out our fully personalized homepage and are currently testing our new playlist with AI features, with plans for broader deployment based on the positive initial response.
Lastly, we know that fans crave deeper, more immersive experiences, and we deliver that both in and outside the app, generating significant social sharing and advocacy. In 2024, more than 300,000 Deezer subscribers entered a Purple Club contest seeking exclusive experiences with their favorite artists. Through our Purple Door events in France and Brazil, fans enjoyed up-close access to artists in an intimate setting, an experience so compelling that more than 80% of attendees shared it across social media. Finally, our festival sponsorship across France in 2024 brought 1.2 million attendees into the Deezer universe, immersing them in music through our shaker booths and karaoke experience. Moving on to slide eight, we remain committed to pioneering a fair, transparent, and sustainable music ecosystem, one that truly supports artists, helping them to enhance value while embracing innovation responsibly.
In pursuit of this ambition, we continue to develop our artist-centric model, now covering 85% of our recording royalty pool, and we also expanded the model to publishing royalties with the contract signed with SACEM in January 2025. It is the world's first update to the remuneration model for publishing rights since streaming was introduced over 15 years ago. Also, as AI-generated content continues to rise, we are taking decisive action to protect creator rights. Our advanced AI detection technology now identifies approximately 10,000 AI-generated tracks daily, representing 10% of all content submissions. We have implemented clear policies. Fully AI-generated tracks are excluded from recommendation and properly tagged, ensuring transparency for users while safeguarding creators' interest. Moving on to slide nine, we continue to roll out our partnership strategy.
In 2024, we renewed several major and long-standing partnerships, including TEAM, FNAC, Darty, Bouygues, and Orange, confirming our ability to foster lasting relationships with our partners. Building on our successful expansion in Brazil and Mexico in 2023, we also extended our partnership with Mercado Libre into Chile. We have also diversified our partnership portfolio across new verticals. In the media sector, we established an alliance with TF1+ while expanding our hardware integration capabilities through Titan OS, now powering Philips TV. Our geographic footprint continues to grow with strategic partnerships with WIM in Mexico and Telenor in Denmark. This concludes the section on business highlights, and now I will hand it over to Carl for the finance section.
Thank you, Alexis, and good morning, everyone. Let's discuss our 2024 results and move to slide 11.
First, I would like to give some details about our subscriber base, which amounted to 9.7 million at the end of 2024, compared to 10 million one year earlier on a like-for-like basis. As you may remember, we took the decision to remove nearly 500,000 inactive family accounts from our subscriber base, mainly in our direct business in France. This optimization mechanically increases our profitability with no impact on our revenues. We continue to grow in our key market, with direct in France posting 4.3% growth year-over-year. Our direct rest-of-the-world subscriber base declined in 2024 by 6% year-on-year, in line with our strategy to focus on targeted markets, but with a sequential stabilization for the past two quarters. Our partnership subscriber base declined by 7% due to the anticipated conversion mechanism of the first cohorts of Deezer Family subscribers from trial accounts to premium accounts with higher margins.
At the same time, we improved ARPU in both of our segments, with direct ARPU growing by 5.1% in 2024 and partnerships ARPU growing by 1.5% year-over-year, thanks to the price increase rollout and more favorable mix. Moving on to slide 12. Our fiscal year 2024 revenue grew by 11.8% year-over-year, or 12.7% at constant exchange rate, and it reached a new all-time high of EUR 542 million in 2024. Looking at the performance by segment on the left-hand side of this slide, our partnership segment grew at 24%, now representing more than one-third of our total revenue. We also reported revenue growth of 4% in the direct segment, and that reflects the continued growth of our subscriber base in France and the impact of ARPU increase at the end of last year.
Other revenues, mainly consisting of advertising and ancillary revenues, increased by 63% compared to 2023, reflecting notably the performance of one of our ad-supported white labeling solutions. If we look at our revenue performance by geography on the right-hand side of this slide, we recorded solid revenue growth of 8.6% in France. In the rest of the world, our revenue was up 16.5%, thanks to the strong performance of our partnerships business. Moving on to slide 13. Adjusted gross profit amounted to EUR 134 million in 2024. This represents an increase of 21.2% year-over-year and led to a higher adjusted gross margin reaching 24.7% in 2024, up nearly two percentage points compared to 2023. This mainly reflects the higher level of activity, the positive impact of price increase on our margins, and the strict control of our infrastructure costs.
Looking at the details by segment, we increased our adjusted gross profit and margin across all of our verticals. Direct adjusted gross profit was up 11.3% year-over-year, reflecting higher revenue, impact of price increase, as well as a more favorable offer mix than last year. This led to an increase in direct adjusted gross margin, which reached 25.9% in 2024, up 1.7 percentage points. Partnerships adjusted gross profit was up 28.7% year-over-year to EUR 36 million, with an adjusted gross margin reaching 21.5% in 2024. Lastly, the other segment delivered a gross profit of EUR 8 million compared to EUR 2 million in 2023, reflecting the strong revenue performance of this segment. Moving on to slide 14. During the year, we continued to invest in our brand in France while maintaining our operating expenses under strict control.
On the left-hand side of this slide, you can see that we maintained our selected approach to the geographic distribution of our marketing investments, with more than 80% allocated to France. On the right-hand side of this slide, you can see that we managed to keep our staff and G&A expenses under very strict control, down EUR 2 million year-over-year. Moving on to slide 15. Now, let's take a look at the significant progress we've made in improving profitability. Thanks to the strong performance we highlighted earlier, we have significantly improved the company's profitability. After reducing the operating losses by nearly half in 2023, we made even greater strides in 2024, improving adjusted EBITDA by EUR 25 million, bringing it to EUR 4 million for the year.
As Alexis mentioned, we reached a key milestone in the second half of the year by achieving positive adjusted EBITDA for the first time, generating just over EUR 1 million. That is a major step forward in our journey towards long-term financial sustainability. Moving on to slide 16. Let's take a look at our cash position. We maintain a robust cash position of EUR 62 million, with net cash reaching EUR 47 million at year-end, an increase of EUR 4 million compared to last year. Looking at the bridge, what you can see is that the primary driver of this improvement was the EUR 7 million in free cash flow we generated this year. This reflects our enhanced profitability as well as the positive impact of working capital management. It also underscores our structurally low capex model, along with minimal lease obligation and net interest expenses.
Additionally, exceptional one-off items unrelated to our core business totaled EUR 7 million, lower than last year, mainly due to the tax regularization in certain markets. Finally, we continue to repay our loans, amounting to more than EUR 6 million in 2025. I will now let Alexis discuss the 2025 outlook and strategy.
Thank you, Carl. Let's move to slide 18. Looking ahead at 2025, we begin an exciting new phase of value creation. From a revenue perspective, following a year of strong growth in our partnership segment and with no anticipated increase in ARPU for 2025, we expect a flat to slightly declining year-over-year revenue. On the bottom line, we reaffirm our guidance for positive adjusted EBITDA in 2025. This will be achieved through the full impact of our 2024 profitability initiatives and continued cost discipline while sustaining our business expansion. Our successful delivery of positive adjusted EBITDA in H2 2024 reinforces our confidence in this objective. Furthermore, we expect to deliver positive free cash flow in 2025, our second consecutive year of positive cash flow generation, marking a significant milestone in our financial trajectory.
From a strategic standpoint, 2025 will be a pivotal year, a year of innovation, laying the groundwork for the future and setting the stage for a new cycle of growth. Now, let me walk you through our strategic roadmap. Let's move to slide 19. For many years, music streaming platforms have delivered exceptional value to users, revolutionizing how we access and experience music. The early success of streaming can be attributed to several key factors, in particular, on-demand access to a global music catalog, curated playlists, and algorithm-driven recommendation. This was further propelled by subscription and distribution models, alongside the increasing penetration of smartphones worldwide. All this at a very affordable price for music fans. The first wave of innovation fueled massive growth, with the market expanding from EUR 8 billion in 2016 to nearly EUR 40 billion in 2024.
What we are seeing coming right now is an evolution to what is broadly coined as Streaming 2.0. Similarly to what we saw with Web 2.0, we see a shift from our user to being more active in shaping their music experience and connect with like-minded fans and artists in more meaningful ways. This new behavior will be enabled and amplified by the transformative potential of generative AI technologies. Let's move to slide 20. Gen Z will be at the core of this evolution. The first thing to understand is that the young generation consumes relatively much more music. The population between 15 and 34 years old represents 40% of music streaming. Second, Gen Z really cares. Music isn't just another form of entertainment for Gen Z. It's their primary passion, and they demonstrate this by spending 30% of their entertainment budget to music.
Third, Gen Z has some specific asks very much in line with what has been coined as Streaming 2.0. The top three asks that we have identified through our research are: number one, a greater personalization and customization in their music streaming experience; number two, increased control over their music recommendation and algorithm; and number three, a deeper, more direct connection with their favorite artist. Gen Z will drive growth for streaming platforms that successfully meet this expectation, and Deezer will focus on answering their needs. Moving on to slide 21. Zooming in on one of their asks, which is a deeper connection with the artist. We believe this links directly with another partially untapped opportunity, which is coined as the super fans.
For years, super fans, which are the most dedicated music enthusiasts, have been eager to spend significantly more to support and create a stronger emotional bond with their favorite artists. Looking back at history in 2014, they were spending three times more on music than the average listener. However, the one-size-fits-all streaming model has leveled that spending. Super fans today are looking for exclusive experiences online and offline, as well as connecting with the community. They are willing to pay a meaningful premium for this. Moving on to slide 22. Now, let me outline why I'm convinced Deezer is well-positioned to capture those opportunities through technology. Deezer has a very strong music streaming product that is consistently ranked number one or two among music apps on app stores, outperforming major competitors.
Since its inception, Deezer has been dedicated to leading music innovation, from pioneering the subscription model and developing recommendation algorithms in its early days to more recently launching its AI detection solution. Deezer continues to push the boundaries of technology in music. Finally, Deezer is widely recognized for collaborating closely with music industry stakeholders to drive innovation. This commitment is exemplified by being the first to launch the artist-centric model. More broadly, Deezer's DNA is rooted in working alongside its 45 partners to co-develop technological solutions, expanding the realm of possibilities for the industry. Deezer will leverage its strengths, combining innovation capability and ecosystem openness, to seize the Streaming 2.0 opportunity and embark on a new strategic cycle of growth. Moving on to slide 23. 2025 will be a year for creating the foundation for profitable growth in the year to come.
Our focus is clear, and our roadmap is built around our three key pillars: enhancing fan experiences, empowering artists, and scaling our business with partners, all while maintaining strict financial discipline. When we look at what we are going to do in 2025 to deliver on our roadmap, we break it down into three buckets: expand, build, and explore. In our expand pillar, we are still committed to growing our subscriber base on our core markets, reinforcing our partnership business with a particular emphasis on existing business models, and continuing our progress on innovative models that ensure fair artist remuneration. Under our build initiative, we will develop new features that cater for Gen Z needs, focusing on personalization capabilities, giving users more control over their algorithmic experience, and enriching social experience. Looking toward the future with our explore pillar, we are pursuing several exciting opportunities.
We are developing new models for direct artist-fan connections. Additionally, we are exploring innovative white-label partnerships to expand into new sectors, opening up fresh revenue streams and market opportunities. In parallel to that, we remain committed to strict financial discipline as we execute these initiatives, targeting positive adjusted EBITDA and fresh cash flow in 2025. We have an actionable plan, and we will report on our progress throughout the year. We are at the beginning of a new chapter for Deezer, one filled with opportunities. With our outstanding product, amazing team, and strong financial position, I'm confident that we will deliver significant value for fans, artists, partners, and shareholders in the years to come. Thank you for your attention. Carl and I will now open the discussion for questions.
Thank you. As a reminder, if you would like to ask a question, please signal by pressing star one on your telephone keypad. We will take the first question from line Silvia Cuneo from Deutsche Bank. The line is open now. Please go ahead.
Good morning, everyone. Thanks for taking my questions. The first one is on the growth outlook. You're guiding for flat to slightly declining revenue in 2025 due to the absence of price increases and focus on consolidating the gains in partnerships. Given this, I wanted to ask, what are your specific subscriber growth expectations for this year in France and other markets? Do you anticipate maintaining subscriber stability outside of France if you have now achieved the geographic mix that you wanted? Do you expect any ARPU growth thanks to mix effect too perhaps? A second question on the adjusted EBITDA guidance.
Since you're targeting a positive adjusted EBITDA this year despite a flat to slightly declining revenue outlook, can you comment about what are the cost drivers that will help you achieve this target and other specific areas where you anticipate cost reductions or efficiencies in particular? Finally, if I could ask another one on the direct business licensing terms. You mentioned improved terms with the labels as a contributing factor to the expansion of the gross profit margin in the direct business. I was wondering if you could elaborate on these improved terms, if they relate to artist-centric, and if you've already been in negotiations regarding the licensing terms for the content related to Streaming 2.0. Thank you.
Thank you, Silvia, for your questions regarding the growth outlook. As you may imagine, we're not giving specific details on the evolution of the subscriber base for 2025. What we have mentioned about the ARPU is that we do not anticipate increasing the ARPU again in 2025. I think that that's the guidance we should stick with at this stage regarding ARPU beyond any mix effect. That's on the KPIs. Now, looking at your question on what are the levers to achieve our guidance on adjusted EBITDA, we are very confident again that we can deliver that target in 2025. This is a promise we gave to the market a few years back.
We think that will mostly come from two things, which is first, the full-year impact of all the improvements we've made in the business from an operating standpoint in 2024, and second, the continued strict control of our expenses, the fixed cost expenses notably. Now, going back to your third question on the terms with label, as you may imagine, we do not really give details as to what are the key drivers that help us amend those terms. Having said that, I think what we mentioned is that the key factor in being able to improve our gross margin to 2024 was the price increase in 2023, of course. Now, looking at our gross margin, I think we're very happy with the improvements that we've been able to secure in 2024, and that will continue in 2025.
Obviously, we'll continue to optimize our business and work to expand our gross margin in the coming years.
Thank you, Carl. Just to add on your question, maybe around subscriber growth and geographical focus, I just want to be clear on the fact that we are focusing our B2C subscriber growth on our core markets. For the rest of the world, we optimize our marketing spend to continue to focus on overall profitability, and we develop through partnerships.
Thank you. We will take the next question from line Eric Ravary from CIC. The line is open now. Please go ahead.
Yes. Good morning. Two questions. First one is on the guidance for stable growth in, or no growth in 2025. I understand that you won't give any precise guidance for subscriber base, but does it mean that the partnership subscriber base should continue to decline in 2025 as maybe the Medi+ base is still declining? Could you comment on the trends there since the beginning of the year for the partnerships subs? Alexis, in Les Echos this morning, in your interview, you mentioned that you plan to launch a super fan offer by the end of the year. Are you assuming any revenue contribution from this new segment offer in 2025? That's the first question. The second one is on your partnership strategy. Could we have an update there? In the press release, you mentioned a plan to develop white-label partnerships in new sectors.
Could you be a bit more specific about potential there? Thank you.
Thank you, Eric. I will take your first question on the guidance and the impact of mainly. Overall, when we look at our guidance, the primary driver for the revenue guidance in fiscal year 2025 is the high comparison base from 2024, which exceeded our initial estimates, largely due to the strong growth in our partnership segment, and particularly Mercado Libre. As Mercado Libre users transition from a free trial to a premium offer, we anticipate a short-term impact of revenue. The free trial attracted a significant number of new users, generating substantial revenue for Deezer in 2024. While the premium offer has stronger unit economics, the conversion rate results in a net revenue decline for us in 2025.
Our ability to offset this impact and achieve or exceed the upper range of our guidance will mainly depend on the renewal and expansion of existing partnerships, as well as the successful signing of new deals currently in the pipeline. Now, thinking about your question on the evolution of the Medi+ subbase, and as I mentioned, what you should expect, of course, for 2025 is a continuing trend with regards to the subscriber decrease in line with the switch from free trial to converted users.
Thank you, To come back on your other question, on the super fan, it's really that we are in an exploring phase in 2025. You shouldn't expect a significant impact on top line in 2025. What we plan to deliver by 2025 is a proven model that gives us confidence that it can be scaled afterwards. On the strategy around partnership and in particular white-label, partnership stays a key pillar of the long-term success of Deezer. White-label evolution is something that has been started a few years back by Deezer. It's basically the ability for Deezer to power other brands and offer them a top streaming music solution. This is particularly appealing for large consumer brands, digital consumer brands that want to create more engagement with their base as music drives a lot of engagement, as we know.
Typical examples of those partnerships are the partnership we have built with RTL Plus, with Sonos. That gives you a few examples of verticals. There are other verticals of large digital consumer brands that want to create more engagement. We are exploring other types of verticals and planning to double down on the vertical we already have explored.
Thank you. As a reminder, if you would like to ask a question, please signal by pressing star one on your telephone keypad. We'll take the next question from Renan from Euroland. The line's open now. Please go ahead.
Hi, Carl, Alexis. Thank you for your presentation and congrats for those results. Just some questions by my side. First one, looking on the direct segment in France, I saw that the music market grew by 7-8% in 2024. It was a year of overperformance for you. What could you give us a bit of color for 2025 on your thoughts about this? Second one, on the OAK partnership that you signed in Q3, how is it going? What do you think about it? That's all by my side.
Thank you very much for the questions. We are still very committed again to grow our subscriber base in our core market, which is planned. That will continue to do in 2025. We believe the driver of this is focused on what are the needs of the new generation, what we call Gen Z, which are craving for personalization, control over the algorithm, more social experience, more connection with the artists. That is what the team is focused on. We think that will increase the growth that we are seeing in B2C France. On partnership, we are very happy again with our model. We keep signing deals that are either existing model, which are co-distribution, and we are happy to be continuing to sign those deals in more and more geographies. On the exploration side, I think it is a bit early to say.
We have, as I was saying, a new white-label model. We have a new vertical that we are exploring. Obviously, this takes time. It is a bit early to say if it is already a perfect win because we are improving all the time the experience and exploring what is the best fit for the consumer. I will tell you more when we have a proper post-mortem on this.
Thank you. It appears no further questions at this time. I'll hand it back over to your host.
Okay. A number of questions online. I think the first one, which is the reason to expect our guidance in 2025, I think we mentioned. I will not come back to that question. There's a second question regarding the use of cash. Could you accelerate the buyback? How many shares have been bought so far? On that one, our share buyback program was executed in August and September, and we bought in excess of 50,000 shares on the market. Going forward, we will continue to review our capital allocation strategy, but we are clearly focused on investing in our business at the moment, given the opportunity that we see ahead of us. The next question is on the mid to long-term gross margin target. We do not provide mid to long-term targets on gross margin.
What we can say is that we're happy about the improvements we've made and that we'll continue to optimize our business to continue increasing our gross margin. I think there's another question which mentions on our growth and the guidance. In the annual result statement, mentioning stable or slightly declining growth for 2025, while seeing some interviews where the growth is about 5-10% per year. On that one specifically, I think the first part of the question relates to our guidance for 2025, where we expect flat to declining revenues. Now, we know, and we don't give details for the future, but we know that there is a great opportunity in front of us. In 2025, we will focus on building the foundation for future profitable growth. Of course, if we deliver, there is an opportunity to generate strong growth.
Thank you for joining today's call. You may now disconnect.