Good afternoon, everyone, a warm welcome to the presentation of Acast's report for the second quarter of 2023. Our CEO, Ross Adams, and our 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. We will answer them in the Q&A session after the presentation. With that, I would like to hand over to our CEO, Ross Adams.
Thanks very much. Hello, everyone. Thank you for taking the time to listen to our report for the second quarter of 2023. In case you're new to our cause, my name is Ross Adams. I'm the CEO of Acast. I'm based out of New York. Our CFO, Emily Villatte, and I will take you through the numbers and events for the past quarter. The second quarter of the year has been marked by a continued improvement of our results, with a positive revenue development, especially in North America. During the second quarter, Acast grew by 22%. The organic growth was 15%, an improvement compared to the first quarter of the year, and a positive indication in an advertising market that continues to be difficult to assess.
The gross margin amounted to 36%, a significant improvement compared to the previous year, when the gross margin was negatively affected by one-off costs linked to certain podcast agreements. In addition, stable development of all of our products and an increasing share of SaaS revenues from Podchaser contributes to an improved gross margin. The EBITDA result improved for the second quarter in a row. We continue on our path towards positive EBITDA in 2024. Acast is the market-leading independent global infrastructure platform in podcasting. We're uniquely positioned at the center of the podcasting value chain, connecting advertisers with podcast creators who want to monetize their content and their highly engaged audiences. Through our work on building the world's most valuable podcast marketplace, we've achieved success in generating substantial revenue streams from our marketplace.
In the second quarter, we continued to strengthen our position by introducing several product improvements and launches that not only enhance our platform but also deliver long-term benefits to our valued stakeholders. By automating the ad buying process, we create higher cost efficiency. At the same time, more opportunities are created for advertisers to reach an engaged and valuable podcast audience. Programmatic ad buying, which allows podcast ad buyers to book ad campaigns efficiently and in real time through the Acast marketplace, continues to be one of our fastest-growing sales channels, with positive development in the second quarter as well. Acast self-serve ad platform has had a promising start since launching late last year, and it continues to show good results in the second quarter.
The number of booked campaigns is up 40% compared to the first quarter, and we're also seeing an increase in new advertisers who use the platform. Additional to this, almost 40% of all advertisers have made repeat bookings, proving that their campaigns booked through the platform are delivering results for them. The work to automate our services and reduce manual sales work continues. Our ongoing efforts to enhance our self-serve platform exemplify our continuous drive to increase automation in our operations. With the introduction of host-read sponsorships on the platform, we have significantly expanded opportunities to advertisers. They can now independently discover and purchase relevant host-read sponsorships from across the entire Acast marketplace, marking a significant improvement in our offering. By now adding host-read sponsorships to the platform, we further leverage our large and growing base of audio influences.
The launch positions Acast as the largest podcast network to enable self-serve ad buying for host-read sponsorships. During the quarter, we also introduced Acast+ Access, an innovative technology that enables companies with existing paid subscribers and subscriptions to incorporate podcasts into their offerings. The functionality allows businesses ranging from news publishers to media organizations and streaming services, to seamlessly integrate podcasts into their existing paywalls, thereby augmenting their membership benefits. Prominent media brands, including The Economist, are already making use of the product to great effect. By doing so, Acast+ Access effectively increases the value proposition for subscribers by enriching the depth and variety of content available within a single subscription package. Acast earns a fee for each private podcast feed activated by the client's paying subscribers.
After acquiring Podchaser a year ago, we have been working hard to build even better solutions that create value for advertisers, listeners, and podcast creators across the whole industry. A good example of Collections+, which was launched in the second quarter. So far, we've enabled nearly 300 brands to run nearly 800 campaigns across thousands of podcasts in our marketplace using this technology, Collections+. Collections+ is an AI-powered data capability, which increases advertiser reach in podcasts. Data about podcasts and their listeners is pulled from a very broad range of sources, including Podchaser's own data, as well as an industry-wide intelligence. The data is then processed using AI models, and podcasts are sorted into richer and more relevant sales verticals based on all available data points. It gives advertisers the opportunity to reach more relevant listeners through a wider variety of podcasts.
Acast Collections+ creates a unique opportunity to combine Podchaser's highly detailed and industry-leading podcast data with Acast proprietary marketplace. It helps us scale up ad sales and monetize more podcasts, especially the mid-sized ones with a lot of untapped potential. We're already seeing a positive trend. Collections+ allowed our marketplace to monetize more shows during the seven-week trial than it normally does. By combining Acast and Podchaser's data, we will also reduce our reliance on third-party data providers, giving us an increased cost efficiency. We're proud to become Higher Ground's exclusive partner for managing ad sales and distribution of their premium podcasts. We did tell you about this during the presentation of the first quarter, but since it actually happened in the second quarter, I'm actually taking the opportunity to tell you about it again.
In April, Acast teamed up with Higher Ground, which 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 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. Alongside such important new partnerships, we are continually strengthening our existing relationships with our largest podcasts, which hold a lot of appeal to advertisers. Here is just a snapshot of some of the creators across the U.S., U.K., and Ireland, Sweden, Australia, and New Zealand, that have renewed their agreements with Acast so far in 2023.
The podcasts shown here alone represent over 36 million monthly listens in our marketplace. This evidences the depth of our relationships with our creators and the high levels of satisfaction we afford them across monetizing and growing their shows, as we continue to focus on monetizing the inventory we have. I'll now hand over to Emily, who's gonna walk you through our financial performance for the quarter in more detail.
Thank you, Ross. Let's have a look at the numbers. Now, listens grew by 4% compared to Q2 of 2022, as a result of the business having an increased focus on monetization of existing inventory. These efforts resulted in an average revenue per listener, or ARPU, growing by 15% to 0.3 SEK. We can therefore conclude that the monetization of our portfolio of podcasts continues to improve. Looking at revenues, these grew by 22% in the quarter, despite mixed ad market sentiment, which means that we doubled our pace of growth compared to Q1 of 2023. Our organic growth was 15% in the quarter, as Podchaser contributed some 2%, and FX contributed around 5% to reported revenue growth. When it comes to our segment performance, our growth came mainly from North America and other markets.
Let's start with North America here, where net sales increased by 31%, and profit contribution margins equally saw an improvement to -12% compared to the -34% we had in North America the same quarter last year. You will recall that growth rates in North America have moved both up and down over the last year, more quickly than other areas, and we're happy to see North America back in solid growth. Other markets delivered 35% net sales growth and a marginal increase in contribution profits. Europe is also holding its own, considering a more subdued prevailing advertiser sentiment in this region, and Europe delivered 17% net sales growth in Q2. Europe's profit contribution margin also increased compared to Q2 of last year and is now 22%.
Our gross margin in the period was 36%. SaaS and other non-ad revenues from Podchaser continued to contribute to the gross margin in the quarter. The gross margin is stable compared to the Q1 '23, but an improvement on the gross margin of 30% that we saw in Q2 of 2022, which you will recall, as Ross noted earlier, was impacted by some podcast contracts in the US. I'd like to think that we were transparent and forthcoming in reporting around those podcaster contracts at the time. Now, operating expenses. These decreased by 4% year-on-year overall. A note here that the Podchaser acquisition was done on the first of August of last year, hence, Q2 2022 costs do not include Podchaser's operating expenses.
In this quarter, Q2 2023, these costs amount to 9.5 billion SEK, without which the cost reduction year-on-year would have been -9%. Following the reduction of staff in Q3 and Q4 of last year, there is ongoing focus on cost efficiencies, and you'll know that staffing has continued to see a small reduction. Under the hood, we're managing our fixed costs while making deliberate decisions around discretionary spend to support our growing business. In the quarter, EBITDA improved to -42 million SEK, compared to the -99 million SEK that we saw in the same quarter last year. The EBITDA margin of -11% compares to the -31% in the sam quarter last year, and is therefore an improvement of some 20 percentage points. A quick note on item-specific comparability.
We've not had a habit of adjusting for the likes of share-based compensation, and our historical costs related to podcast and guaranteed contracts have been deemed operational, not exceptional. Historical adjustments have been related to our IPO cost and the reduction in force undertaking last year, and you will have noted that we have no adjustment items in quarter. To conclude this slide, the path to profitability full year 2024 remains firmly on track. Moving on to cash, we can report that our balance sheet remains strong, and our cash flow from operating activities improved to negative SEK 58 million in the quarter, compared to negative SEK 98 million in the same quarter last year. The quarter did see a negative impact from working capital movements, which, I think is natural, given the 2 prior quarters, which were very strong when it came to cash flows.
The cash balance as of the end of quarter was SEK 801 million. We are well-financed, and our cash position will take us through to EBITDA profitability in 2024, and also on to future cash generation with a comfortable margin. With that in mind, it means I actually get a pretty good night's sleep at night. Ross, back to you.
Thank you, Emily. It's almost been one year since I moved to the U.S., and I'm pleased with the progress we're making and momentum we're building in this market. Please do keep an eye out for future announcements we have coming very soon. We're also continuing to focus on driving sales and efficiency in our ad operations, and we'll be rolling out more tools which support our automation and efficiency goals. Now let's go to the Q&A. If you want to post a question, feel free to type it in the box below.
Great. We have a first question here. Please elaborate on metrics, determining number of listens. Modest 4% growth, how will this improve over time, and how can this be influenced by Acast?
I can pick that one up first, and if you have something to add, Ross, please feel free. We've had a deliberate strategy of improving the monetization of our existing portfolio. If you recall the numbers that we disclosed as at the end of 2022, that included our sell-through rate of our portfolio, the sell-through rate as of the end of 2022 was just below 30%. That means that in this market, we've taken an active position to make sure that we deliver on the promises to the portfolio that we have and that we improve on monetization of the, of the listens portfolio that, that we currently have. We saw that in Q2, as we improved our average revenue per listen to SEK 0.3, compared to the SEK 0.26 we saw in the same quarter last year.
Improved our monetization by 15%. We're anticipating that in the foreseeable future, our revenues should be growing faster than our listens to continue to grow into our suite and continue to monetize our portfolio in an effective way.
Great, thank you. We have a few questions from Derek at ABG. First one, could you break down the strong performance in North America based on, for example, tailwind from somewhat improved ad demand, execution on adjusted strategy, demand for specific shows, more broad-based, et cetera?
I'd note that the, the growth in North America, is both aided by some positive macroeconomic data points that is helping advertisers make, more forward-leaning decisions in terms of deploying their spend. I'd also argue that, this comes down to, strong execution of our narrative, and activities in market. Ross, do you care to add anything there?
Yeah, I think for us, you know, it is definitely a, you know, how we've executed our strategy. I also think it's a multitude of things, you know, signing, the content we have. You know, as I spoke about last quarter, audience buying becoming a trend, which, you know, Acast is incredibly well-suited for. All these kind of things together, you know, the focus that I've given on the US market, me being here, has really helped us excel in this market with the, the team here. All round, it's a, it's a great execution and a continued execution of our strategy.
Good. Next question from Derek: Could you give a rough breakdown of the non-ad revenues between SaaS and subscription?
We haven't broken down these earlier, but we note in the quarter that SaaS revenues and non-ad, non-ad revenues in total make up just over 10% of our revenue in, in total. The SaaS/other non-ad revenue line is now over 10%.
... Yeah, 2 more questions from Derek: "How has Q3 started, and which individual European markets contributed the most to growth in Q2?
I mean, Q3, we don't comment and, and give sort of specific guidance on this, on this quarter. We've seen, based on Q2, we have had some very positive indications in North America, but it is a market that continues to be, fast-moving. We're continuing, we're continuously monitoring developments closely, of course. In our European markets, we've seen strong support from some of our, smaller, markets. Everyone has, given the macroeconomic circumstances, delivered, well, including our, our UK and, and Swedish operations, which are the two biggest markets. We have, had the benefit of smaller markets, too, supporting the overall growth in, in the European region.
Great. There's actually one more question from Derek at the ABG: "Could you remind us what the Amazon revenue is classified as, and how much did it contribute in the quarter, roughly?
We don't break out the Amazon revenue, but it's in our non-ad revenue. It contributes to the 10% SaaS and other non-ad revenues I spoke about earlier. I'm not going to give specific details on the contract in quarter.
All right. We have a couple of questions from Joakim Hellquist at Affärsvärlden. First one being: "What are the main drivers towards positive EBITDA next year?
I think the main drivers next year are similar to the drivers that we have seen in this quarter, and that is the revenues growing faster than cost. Us maintaining, a stable and strong gross margin, of course, supports this. We are in a market that is still growing. Podcasting is growing faster than the advertising market, overall, and underpinned by the diligence and cost management that we have implemented across the business. A growing top line and a tightly managed cost line is what gives us confidence that we're going to deliver positive EBITDA in 2024 for the full year.
Great. Second question from Joakim at Affärsvärlden: "Do you believe the SaaS offerings will continue to advance in terms of its revenue share for the group? Do you have any targets here, and can you say anything about gross margins for the two SaaS offerings?
The SaaS offerings are typically in the 80% or 90% gross margin category, and our SaaS offerings typically in that space as well. We haven't set any targets for our SaaS or other non-ad revenues, but we will continue to monitor and give more disclosures around this if and when this share of revenue grows over time, of course.
Good. We have a question from HPO: "How is the roster of pod shows developing? Can Acast offer guidance on available shows by year-end?
In terms of the number of shows, we, we have had an increasing number of shows. We actually have 106,000 shows as of the end of the quarter. Given the fact that we have so many shows in our podcasting network, and we have great availability of inventory, at this point in time, we don't feel that it's the sort of main leading indicator in terms of our potential growth at present time. We have a lot of runway to go in terms of monetizing the listens and the shows that we have. Having said that, we have still had positive growth on shows in the quarter. I see you're very diligent in picking up that we didn't report on this specifically in the marketplace slide. Well noted.
I think I can add to that as well, that obviously the roster is developing well, in each and every market for us. You know, we continue to attract, to attract great shows, and as we, we showed today, we, we are, are re-signing and renewing, fantastic shows as well. The roster's developing well.
Good. We have a question from Sven at AIP: "You still have a lot of cash at the balance sheet. How much will you need for operational use over the next year?
We haven't given guidance on cash. What we've said is that the cash that we have will take us through to positive EBITDA in 2024, and beyond that, will also take us through to delivering a business that is generating cash with a good and comfortable margin. We'll leave it at that, at present time, but we're very comfortable with our cash position, as you have also noted, Sven. Thank you for the question.
Yes, Joakim at Affärsvärlden have another question: "Do you think gross margins over time might go up when automation becomes more important through self-serve collections, plus conversational targeting, and so on, and perhaps when SaaS also becomes larger?
I mean, those are the dynamics, right? If, if we sell more of our mid-sized and smaller shows, and penetrate the full tail of our podcasting portfolio, in theory, that can support an increase in the gross margin. Of course, SaaS revenues, potentially taking a larger share of revenues, would also, in that scenario, support a high gross margin. But gross margins can also be dependent on the cost of content and negotiations with the major podcast partners. And we'll note that, in an ad market that is buoyant and producing a lot of growth, the competition for content increases. Whereas right now, in the market that we're in, we're seeing a slight decrease in that competition, which is also favorable to gross margins.
Overall, we have given guidance on our gross margin in the range of 35%-38%, and I'm happy that we're comfortably within, that range at time being.
Great. There are no further questions right now, so I suppose I'll then hand over to you, Ross.
Great. Thank you, everyone. Thank you for your very engaged questions there. Don't forget to follow us on investors.acast.com, or our Acast blog, or listen to our financial results, of course, as 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. Thanks very much, and see you next time.