Good morning everyone. A warm welcome to the presentation of Acast report for the Q1 of 2023. Our CEO, Ross Adams, and CFO, Emily Villatte, will present the results and developments for the quarter. You can ask questions throughout the whole presentation by typing them in the text box below on your screen, and we will answer them in the Q&A session after the presentation. By that, I would like to hand over to our CEO, Ross Adams.
Thanks very much. Hello everyone, and thanks for taking the time to listen to our report for the Q1 of 2023. In case you're new to our calls, my name is Ross Adams, CEO of Acast, usually based out of New York. Our CFO, Emily Villatte, and I will take you through the numbers and events for the past quarter. Okay. During the Q1 of 2023, Acast grew by 11%, of which 6% was organic growth. It is a stable development in light of an underlying advertising market that has weakened significantly compared to a year ago. At that time, the global advertising market was still on the rise, and Acast delivered a very strong quarter in terms of growth.
During the Q1 of the year, we continued to improve our marketplace to create even better conditions for both advertisers and podcast creators to reach their target audiences and earn more money. We succeeded in balancing high internal efficiency and cost control with further development of our products and services, and we improved our EBITDA margin by 5 percentage points compared to the same period last year, with our gross margin remaining stable at 36%. Acast is the market-leading independent global infrastructure platform in podcasting. Now we're uniquely positioned at the center of podcasting value chain, connecting advertisers with podcast creators who want to monetize their content and their highly engaged audiences. Even though the overall advertising market is currently under macroeconomic pressure, podcasting has proven to be a strong industry.
Podcasting is driving audio spend growth and outperforming the ad market, and has done so for many years. It is clear the podcast medium still has room for growth. To that point, during the quarter, we reached two important milestones. Our platform now boasts more than 100,000 podcasts, and we've exceeded 100 million unique monthly listeners. With this, we have achieved a good level of reach and scale, allowing our teams to concentrate on maximizing ad sales across all of these diverse shows. The equation is straightforward. Acast has established a robust network of podcasts that cater to a diverse range of interests and provide engaging, informative, and entertaining content to listeners worldwide. As a key player in the value chain, we facilitate connections between advertisers seeking an engaged audience and podcast creators striving to expand their reach and generate revenue.
As a result, we provide advertisers with access to the listeners they seek, leading to more advertisers joining Acast as the number of connected podcast creators and listeners increases. In the last quarter of 2022, we launched our self-serve advertising platform to allow any advertiser to start their own podcast ad campaign for as little as $250. This removes the need for humans in the loop, as advertisers can plan, book, and measure their own campaigns all through our platform, thus increasing more passive revenues opportunities for both Acast and the podcasters on our platform. A truly scalable solution. For Acast, it opens up yet another revenue channel where we're able to monetize even more of our podcast inventory and automate advertising sales even further.
Talking of automation, we see a continued positive trend in terms of our programmatic advertising sales, our fastest growing sales channel, which strengthens even further the scalability of our business model. In our Q4 presentation, we promised to come back with some early results from our self-serve platform launch and trials. Without a doubt, we've seen positive results. Revenue has increased, from low figures, and it's not relevant to talk about growth figures yet, but as I said, it looks promising. We've noticed that our self-serve platform has been equally preferred by both large and small advertisers. The service has only been on the market for a few months, we're happy to share that more than 150 advertisers have run campaigns through the platform and are seeing measurable results from their campaigns.
Almost 40% of these have made repeat bookings. The more we help advertisers automate the process of buying podcast ads, the better conditions we have to increase our revenues. Acast has pioneered a new method for ad delivery, Interchangeable Ad Slots, which increases the sellability of our inventory. This innovative solution for ad delivery automation increases our advertising inventory by more than 10%. Previously, podcast ad slots were reserved for only one type of advertising format, so a sponsor read from a podcast host themselves or a pre-recorded ad from a brand. Interchangeable Ad Slots allows Acast to automatically detect if a sponsor read slot has not been sold on a show and instantly override the setting to deliver an ad in its place instead. This increases the inventory available to advertisers and ensures fewer ad slots go unsold.
We've been testing Interchangeable Ad Slots with a group of creators and will now roll it out across our network. The aim is to create the most valuable podcasting marketplace in a scalable and automated way, benefiting both advertisers and creators. I'm eagerly anticipating the upcoming year, even with the continued macroeconomic uncertainty. Over the past few years, Acast has solidified its position as the leader in the global podcasting market, and today we are well-equipped to fulfill advertisers' needs by providing them with a high return and relevant media channel. After the end of the Q1, Acast teamed up with Higher Ground. Higher Ground was founded in 2018 by President Barack Obama and Mrs. Michelle Obama to tell powerful stories that entertain, inform, and inspire while elevating new and diverse voices in entertainment.
Higher Ground continues to deliver among the most engaging and high caliber audio content in the industry, and Acast is proud to become their exclusive partner for managing ad sales and distribution of their premium podcasts. Higher Ground produces some of the most popular and iconic podcasts in the industry, including Michelle Obama: The Light Podcast, Renegades: Born in the USA with President Barack Obama and Bruce Springsteen, and the Michelle Obama Podcast: Tell Them I Am. The partnership with Higher Ground is another example of how Acast in collaborative, in collaboration with podcast creators, production companies, networks, and advertisers can offer unbeatable content to both advertisers and listeners worldwide. When publishing our annual report, we also released our first report on environment, social and governance, ESG.
Sustainability has always been a big part of Acast culture. In 2022 we put together a team to create a sustainability report. Our ambition in the coming years is to expand our report of sustainability KPIs in order to measure our progress and in order to comply with the new requirements set out in the EU's Corporate Sustainability Reporting Directive, CSRD, by 2025. We believe it's important to act responsibly and make a positive impact on the world, and we're determined to do that through the products and services we provide and the way we conduct our business. You'll see that in the report laid out by our Chairman, John Harrobin, who is previously experienced in this area as the former Chief Marketing Officer at both Amazon-owned Audible and Verizon.
As a fast-growing tech company, we wanna make sure that we're doing our part to make a meaningful difference. So the team did a materiality analysis that helped us understand what sustainability means for our business. We used a double materiality perspective to analyze Acast impact on sustainability and sustainability's impact on Acast. We also engaged with our stakeholders, podcast creators, employees, investors, and management team through a survey to identify the sustainability aspects they considered important for us to focus on. Based on the impact analysis and stakeholder dialogues, we identified 12 sustainability aspects and grouped them into four strategic sustainability areas. This analysis will help us direct our efforts in these areas. One of the four strategic areas that I'm particularly passionate about is diversity, equity, and inclusion.
It is Acast's mission to identify and support storytellers and give their stories the audience they deserve. We believe that we have an important role in ensuring that the podcast industry reflects the outside world and develops a strategy to find and support underrepresented voices. By elevating voices that are not given space in other traditional media, we aim to build a more just society and generate more revenue for more podcast creators in the industry. In 2022, Acast promoted underrepresented voices through committing support to many important awareness months, including Black History Month, Hispanic Heritage Month, Asian Heritage Month, LGBTQIA+ and Pride Month, Disability History Month. I don't have time to do it justice here, so please do look through the sustainability report in our annual report.
There are interesting facts and KPIs and key performance indicators that are important to our business and will become even more interesting in the future when we can compare the numbers quarter-over-quarter. We believe that companies working towards long-term sustainability also have the ability to become long-term profitable. I'll now hand over to Emily, who's gonna talk you through our financial performance for the quarter in more detail. Emily?
Thank you, Ross. All right. Let's have a look at the numbers. Starting with the listens, we grew 22% compared to Q1 2022 as a result of the business having an increased focus on monetization of existing inventory. So this deliberate strategy did result in our full average revenue per listen growing by 8% and reaching 0.26 SEK compared to Q1 2022. Of course, our number of shows increased and reached 100,000, with listens remaining at around 1.2 billion in the quarter. Our net sales delivered double-digit growth of 11% in the quarter. I'm sure everyone's aware, but let's recall the growth in Q1 2022 represents the toughest comp of the year for net sales growth, and that these comps are easing into Q2 and into H2.
FX did contribute 3% to net sales growth, and of course, the acquisition of Podchaser contributed as well to the tune of around 2 percentage points. Organic growth was 6% for the quarter. Looking at our different segments, we did have a stronger start in Europe and other markets whilst Americas remained subdued. Europe delivered 14% net sales growth in Q1 despite the macroeconomic climate we're in, and the profit contribution or EBIT increased, and the EBIT margin was stable at 17%. It has to be acknowledged that North America's net sales did decline by one percentage point as growth remained subdued in Q1, which we saw equally in Q4. The profit contribution margin equally saw a decline to negative 19% compared to negative 8% in the same quarter last year as some selected investments have continued.
You will recall, of course, that growth rates in North America have moved faster both up but also down during last year. We've seen this current subdued macroeconomic environment impact the ad market in North America more than in our other segments in this quarter. We will note that momentum did pick up during the quarter as we progressed from January through to March for North America, which was a positive sign as we progressed through the quarter. Podchaser as well contributed to Q1 North American net sales growth by 7%. In our other markets, this is mainly our Australian, New Zealand business, they delivered 24% net sales growth. This represents the segment with the highest growth in the full quarter. We also saw a marginal increase in contribution profits.
Looking at our gross margin, it was stable at 36% compared to the same period last year. I will note that we had a sequential improvement in the gross margin from Q4 of last year into Q1, and that is explained by the SaaS revenues that Podchaser is contributing. That might seem like a small change, but it is not typical for us to increase our gross margin in Q1 compared to Q4, I'm pleased with this development. Looking at our operating expenses, the focus on efficiencies continues. Our operating expenses increased by 6% to SEK 197 million in the quarter. These increases came from the acquisition of Podchaser as well as increased resources in some markets. When we look at the global or central costs, these reduced year-on-year.
That follows the reduction in staffing that we saw over Q3 and Q4 of 2022. There is an ongoing focus on cost efficiencies. Moving on to EBITDA, we did see an improvement in our EBITDA and adjusted EBITDA to negative 61 million SEK in the quarter compared to negative 68 million SEK last year. This means that we delivered an EBITDA margin improvement to negative 18% compared to negative 23% in the same quarter last year. In other words, an improvement of five percentage points. There were no adjustment items in the quarter's EBITDA, adjusted EBITDA. We are at the same figures here. Of course, looking ahead, looking at our development in EBITDA, we are following the usual seasonality that we see.
We remain very comfortable that we're on track to reaching our objective of EBITDA, a positive EBITDA in 2024. We ended the quarter with a strong balance sheet, and cash flows from operating activities improved to negative SEK two million compared to negative SEK 88 million in the same quarter last year as we handled some very solid debtors collections in the quarter, and that had a positive impact on our working capital. Looking at the impact on working capital, the positive impact that we had, it's notable that it is much stronger than the prior four quarters. This, of course, contributed to us ending the quarter with a strong cash balance of SEK 851 million. Ross.
Thank you, Emelie. Looking at what is coming up, we're continuing to deepen the Acast and Podchaser collaboration, including developing even more effective targeting for advertisers with the help of Podchaser's data capabilities. We'll also be introducing further new self-serve advertising capabilities. As I mentioned, the early results from the self-serve platform launch and the trials look promising. Interesting fact, in the study we ran with 500 marketers and advertisers in the US, over half of marketers prefer to book through self-service tools. Now, let's go to the Q&A. If you want to post a question, feel free to type them in the box below.
Great. Thank you for that. Our first questions comes from Dennis Berggren at Carnegie. First question being, could you explain in detail on the increased focus on existing inventory? What does this mean in practice? What efforts are made to increase sales from existing ad inventory? Should we expect less focus on adding new shows?
For us, you know, we're always gonna be growing shows. For us it's focusing on being a lot more efficient with the inventory we have. You know, we have an ability to sell through even more of the content we've got, and Interchangeable Ad Slots helps us along that path.
Great. Second question from Dennis. Could you please remind us of your view on the development in North America in the H1 of 2022? How did sales trend, and from what month should comps ease?
All right, I'll pick up on that one. You're asking us about the development in North America in 2022 in H1. You will recall that in Q1 of 2020, North America grew by 107%, to be precise. North America was still growing at pace in Q2 of last year at 72%, but then came down and bottomed out at 16% growth in Q3, picking up to 28% in Q4. From now we should start to see these comps ease. We have the toughest comp in North America and the business overall in Q1, easing into Q...
The easiest comp is Q3, but H1 overall, sorry, H2 overall in 2023 should represent easier comps when we get to, you know, as we work through the year. This was the toughest comp of all of the quarters, particularly for North America.
Good. third question, view on overall market development in the quarter. What's your expectations for the market growth in 2023 given that the development during the first one-third of the year?
I mean, for us, you know, it's still low visibility. Obviously there is that continued uncertainty around the advertising market. We did see momentum pick up throughout Q1, but again, it's still very low visibility. It's obviously an uncertain ad market.
Yep. Could you give any indications on the development you're seeing on ad prices, both from the overall market perspective and your own product mix versus your sell-through rates?
I think with, you know, unique targeting capabilities, that allows us to actually increase pricing. In a market of uncertainty, you know, this is when, you know, time when people are trading, and you will, you know, naturally see slight fluctuations in CPM prices as deals are being done to pitch for, you know, that business. Again, I don't think you'll see huge fluctuations in the CPMs.
Great. Thank you. Our next couple of questions comes from Richard Kramer. What are you seeing in terms of time spent per listener among the 100 million listener figure you mentioned? What portion of spend is buying your cohorts, target audiences across multiple titles versus advertisers buying single shows? Do you see a material opportunity in representing or selling ads into shows that some competitors are now moving off of exclusive terms?
Yeah, three parts to that question. Can you just remind me the first part of the question, please?
What you're seeing in terms of time spent per listener among the 100 million listener figure we mentioned, what portion of spend is buying through your cohorts, target audiences across multiple titles versus advertisers buying single shows?
Yeah. You know, I think it's a good question about more time spent. I don't have any stats to hand, unfortunately for the first part of your question. We see different trends in different quarters about, you know, short-form content, long-form content, time spent with content. I can come back, I think, on that question, actually, Richard. I think when it comes to buying across our entire portfolio, you know, audience buying has been a trend in Europe for the past few years. Audience buying is relatively new in the U.S. I think if you look at the top 500 podcasts, they represent, you know, roughly, you know, almost half of all spend in podcasting in North America. Roughly 12% of the audience sits in that top 500 shows.
You can see there's a huge opportunity to reach audiences outside of that, and that is throughout the heart, throughout the long tail of podcasts out there. You know, Acast, we've always done audience selling. Audience buying is becoming a trend in the U.S. You know, we have huge reach now, over 100 million uniques. We have the ability to reach audiences that other networks can't, who are buying and selling single shows. I think the next question was around exclusives. I think, yeah, there are gonna be opportunities for content that starts to fall out of exclusive periods. You know, we obviously saw a huge, kind of golden period of content where content was very expensive through the last few years.
I think now is a period where actually it's becoming a lot more of an even playing field. You know, when you see the likes of audience buying becoming a trend. Creators want to go to the platforms that deliver revenue, and we continue to deliver revenue. You know, we've delivered over a quarter of billion dollars worth of revenue back to creators to date. We are, you know, the platform that creators want to be on. You know, having the likes of Higher Ground join us highlights exactly that.
Great. Next question is actually regarding Higher Ground. Did you have to make any upfront commitments to Higher Ground in terms of minimum guarantees? Do you have any limitations on ad sales depending on the platform the content is distributed on?
We don't comment on individual contracts naturally. In general, I would say that we haven't assigned any new U.S.-based minimum guarantees this year. I think that would answer the question.
Yep. I think when it comes to restrictions, we have the exclusive sales rights to their content. We can monetize that on every platform. That's the beauty of being the central position that Acast takes. We can monetize all listens on all platforms.
Good. Our next question comes from Emily Johnson. Anything you can say on current trading as we finish lapping through the toughest comps? What was the exit rate at the end of Q1 for the group and for North America, which you mentioned had improving momentum?
I mean, we saw improved momentum throughout the quarter, but again, you know, we still see or still have low visibility as to where the ad market is going. Obviously, the macroeconomic is really affecting the ad market, so I can't give you any more clarity than that. Emily, do you wanna add any points there?
Well, we started the year with a tough couple of months in North America. We ended the quarter still in negative growth but with improved momentum. What's the name of the game for North America? A, get to pass flat growth rate and then move into growth during the year, and that is still our plan. It's too early to call as to any timings, and we are subject to the macroeconomic developments.
Emily actually has a follow-up on North America. What's happening there? What is the organic growth rate in North America for Q1? Something like -10%, -15%, excluding Podchaser and foreign exchange effects. Should we expect that growth rate to improve over the course of the year? Are there any podcast account losses to be aware of impacting this, or do you think that it is what the market is growing?
You shouldn't expect any material account losses to be impacting this. We see this as a macro impact on North America. Emily, you're right that North America did have double-digit negative growth at the, at the start of the quarter, including February and March. Absolutely. There was a positive contribution from both Podchaser and Acast+.
Great. Third question from Emily. Do you still think you can outgrow the podcast ad market growth of 15% this year? What range of profitability do you think you can reach if you achieve 15% growth? Is there a potential that Q4 could be positive EBITDA?
I mean, we don't give guidance on individual quarters. Clearly we have guided overall that ignoring quarter-by-quarter developments, overall, we are expecting still to outperform a podcast, the ad market growing around 15%. That remains our ambition for the coming years, and that is in line with our financial guidance. Then, of course, we will, we'll have to stay close to developments. Quarterly losses or profits will naturally be impacted by seasonality, and Q4 is the strongest quarter. It would be possible in 2024, for example, to start the year with a loss-making quarter but make that up through the year and still deliver a positive EBITDA for the full year of 2024.
Great. Last question for now from Emily. Quite a large slowdown in podcast listening in Q1. What do you think is driving that? Is that just the market, or should we expect the same for the rest of the year?
I mean, I don't believe it's necessarily a slowdown in listening. You know, for us, we haven't necessarily focused purely on growth. You know, we still grew shows, we still grew listens. You know, we focus on growing, obviously, listens for our creators as well. But for us, it's been about efficiencies. I think, you know, you look at the great work we're doing with our self-serve platform and introducing new advertisers to buy new inventory, the ability to do Interchangeable Ad Slots. That's another kind of innovation that we've done to help make us even more efficient. That's been a focus for us, you know, those numbers, you know, isn't something that we are worried about at all.
We have a few questions from Derek Laliberté at the ABG. Is a meaningful macro recovery required for you to reach your financial targets, or are you confident that structural tailwinds and strong performance will get you there?
I would say that we are dependent on the macroeconomic environment not to deteriorate further in a meaningful way over long periods. That would hamper our ability to reach our target if we saw a material deterioration of the macroeconomic climate.
Another question from Derek: how has Americas developed in Q2 so far? Any signs of recovery in demand?
As we mentioned, we saw that momentum picked up slightly through Q1. We don't comment on obviously how we're trading Q2, but it is a late market. You know, there is low visibility, and we still have the macro around us, so you need to take that into consideration.
Good. Last question from Derek for now: could you specify growth rate in programmatic? We're at in % of total sales?
We're not commenting on programmatic each quarter, but you can deduct from where we ended last year, with programmatic being more than 10% of our overall revenues, and programmatic being the fastest growing sales channel, that it is taking share of our overall revenue. It's increasing in the double digits senses.
Good. We also have a follow-up from Richard Kramer. Can you give us a realistic long-term target for self-serve platform? Won't the largest campaigns and spends still mostly come via direct sales? Are margins via self-serve much better when it matures?
I mean, when we look at self-serve, it is early days. It had some very encouraging start. We look at self-serve over the long term. We see wonderful potential in serving these clients who haven't perhaps been able to buy podcasting from a self-serve platform previously. It might even be able to increase the target addressable market that we're going for as some of these advertisers have historically used those difficult channels to access their audience. We're opening up a new way of reaching a highly engaged audience for them. I think it's too early to call.
Clearly that channel is more scalable and therefore more profitable given the lower touch solution and technology driven and product-led innovation that we're driving through that channel. Absolutely. The more our self-serve channel, our programmatic channels should support us in delivering and operating leverage and profitability over time.
Great. We also have one question from Sven Törnkvist. It seems like growth is weaker than expected, and you are still indicating that you're following the plan for positive EBITDA in 2024. Have you identified further savings in order to reach the target? Admin cost is still increasing sequentially. Is it just phasing? That is, when should we expect lower admin expenses?
Wonderful to hear from you. We're always looking at our cost line, and you've made a correct observation around admin expenses in Q1. There was an element of a slight phasing related to us exiting a couple of office leases, which created an element of realizing dilapidations. However, that's not a material element. To your point, over time, we should see conservative... We are taking a conservative view on our admin expenses, and we are continually reviewing our cost efficiencies. Absolutely.
Okay. Let me see. I don't think we have any further questions in the webcast now. No, we don't. Yeah.
Great.
I think that's it. Ross, if you wanna say a few last words.
Thank you everyone for that. Don't forget to follow us on investors.acast.com, our Acast blog, or listen to our financial results as, of course, a podcast. If you wanna receive company data continuously to your inbox, please subscribe to press releases, news, and financial reports on our investor relations website. See you next time. Thank you.