Welcome everyone. I'm Alan Mamedi, and I'm the CEO and co-founder of Truecaller. With me, I have our CFO, Odd Bolin. We're happy to announce our interim report for the Q1 of 2023. We'll start with presenting financial and business highlights, then go into some developments on the product side from the quarter. Odd will then walk you through our financial performance in more detail. We'll wrap up and open up for questions. Let's get started with the highlights of the quarter. I'm pleased to report that our user base continues to grow during the quarter. We closed Q1 with an average of 344 million monthly active users, an increase of 11%. Average daily active users grew to 278 million, an increase of 12%.
This brings us to an all-time high DAU to MAU ratio of 81%, meaning that the number of users who engage with Truecaller on a daily basis has grown. We closed the quarter at SEK 387 million in net sales, a 3% decrease compared to the same quarter in 2022. As we mentioned in the previous quarter, our advertising revenues have been impacted by the slowdown in demand, which continued in the Q1 . Q1 is also usually the slowest revenue quarter. That said, we continue to operate profitably with an Adjusted EBITDA landing at SEK 150 million at the end of the quarter and an Adjusted EBITDA margin of 39%.
We continue to have a very strong cash flow with SEK 127 million in net cash from operating activities before tax payments. In the last two quarters of 2022, we shared that we were observing increased caution by advertisers regarding their marketing investments and that this materialized in a slowdown in demand towards the end of last year. We're seeing some positive signals. However, we're still very proud to be a profitable high-growth tech company, and we intend to continue to move forward with solid profitability, great margins, continued user growth, and strong cash flow despite market conditions. In the Q1 , we continued to grow our user base across markets and on both Android and iOS. Growth was slightly weaker in the beginning of the quarter, accelerated towards the end of Q1.
This momentum continued at the beginning of the Q2 , and we hit a new record with 350 million monthly active users in mid-April. We saw good traction with Truecaller Premium in the Q1 , and our efforts to improve our pricing packages and product offering have driven strong growth with an 18% increase in subscribers and a 20% increase in revenue year-on-year. We also made great progress in growing our enterprise offering. Truecaller for Business was introduced just 2 years ago, and today we are proud to have over 2,000 customers in 36 countries. We have invested in building out the enterprise offering, including business messaging, which is a more secure and cost-effective way for brands to reach their customers.
In the Q1 , we delivered record volumes with over 1.5 billion messages delivered on our platform. I will cover this in more details in the coming slides. More on user growth, which continued to develop well in Q1. As I mentioned earlier, our monthly active user base grew by 11%, which is an additional 34 million users year-over-year. Our daily active user base increased by 30 million year-over-year to 278 million. As I mentioned, this translates into a DAU to MAU ratio of 81%. This is an all-time high for us, and it's something that I'm incredibly proud of, especially given the market average is below 30% and only a handful or so apps in the world have this type of daily engagement.
This speaks to how even more of our users see Truecaller as a daily essential. Relative user growth was strongest in regions outside of India. For the first time in 3 years, user growth from the rest of the world was just as high as our user growth in India in absolute terms. We're proud of this continued growth, especially in consideration of the fact that global smartphone sales have not trended positively in the current macroeconomic environment. Additionally, the majority of our user growth continues to be driven by organic growth, and we were able to achieve these figures without increasing our spend on marketing or user acquisition. I want to emphasize that we're a product-first company, which means that we continuously invest in developing our product offering to improve the user experience.
This not only makes the product better, but also attracts more new users to Truecaller and also leads to existing users to engage with us more frequently. Before we go into the product updates, I want to share something that one of our employees created.
Hi, it's Alan. I left my credit card in the office, and my phone just ran out of battery. It's been a really challenging day. Can you please send me the corporate card details to this number, so I can pay for the summer party? I'm standing here with the...
Has it played? All right. This was obviously not me talking, but a manipulated recording of my voice using AI. Just by recording a few seconds of my voice from existing interviews that are available online, one of our employees was able to create this as an example of how scamming others is getting much easier, even if you don't have direct access to the person you're trying to impersonate. The current technology is not able to replicate my accent or inflection, but we all know how fast AI is moving right now, and we have already started to see articles like this. A scammer cloned her daughter's voice in a fake kidnapping for ransom money. The technology is accessible for everyone today and improves every single day.
We have always existed to make communication safer and are committed to solving these challenges as they evolve and become more rampant. When we develop our products, we consider the different tactics that bad actors are adopting and make sure that we build relevant things that protect our users. As we build our Truecaller Assistant and our cloud telephony capabilities, we should be able to detect if a voice is manipulated in the future. I just wanted to give you a glimpse into the future, even if it's a bit scary. Let's get back to our current product offering, but there are some exciting things happening in the Truecaller offices around the world. For those who are not so familiar with what we do, there are two main products that we offer.
The first is our consumer product, which is available on iPhone and Android with over 350 million people that use Truecaller every month, and we're proud to be the leading global platform for trusted communication. Consumers use Truecaller 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 communication with consumers, but also to prevent impersonation. They can also integrate their calling and messaging experience directly into our product, so that they can grow their business more efficiently.
This quarter, we continued to make progress around product development for the core offering, Truecaller Premium, our ad tech capabilities, and Truecaller for Business. We continue to invest in our core offering to ensure that we continue to deliver the best communication experience. We continue to improve our data quality through investments in our AI identity technology, which leverages artificial intelligence and machine learning in order to provide users with the most up-to-date and relevant information about unknown numbers in real time. Our efforts to improve our data quality and provide the most comprehensive search experience extended to our partnership with the Indian government. We continue to grow coverage for in-app government directory service and also established a partnership with the Delhi Police to help citizens easily identify verified official numbers versus impersonators and other malicious actors.
We also made significant progress in improving our onboarding experience and other important parts of the product that resulted in a notable increase in retention of new users. These improvements are subtle, but they have a material effect on long-term retention and will be important when we enter more markets, which obviously could contribute to overall user growth. We've also made investments in improving our server infrastructure and verification process that not only have benefits on the user growth side, but also sets us ready for scaling our user base and engagement at a lower cost in the long term. There are more investments to be done here during the year. We're looking forward to that. In the Q1 , we expanded our AI identity capabilities to cover SMS as well.
Our new Message ID provides a caller ID-like service for text messages and helps users easily verify the authenticity of an SMS sender. This is made possible through our advanced machine learning models. All processing is conducted locally on the user's device, which ensures complete privacy protection. We also updated the iPhone product with enhanced SMS filtering, which uses the same machine learning models that we have on Android. SMS filtering automatically sorts messages in the relevant inbox for a cleaner, more, and more organized SMS experience. These initiatives are important to us because they demonstrate our commitment to developing the best product for all communication needs, not just caller ID.
Many of the things we have worked on in the past few quarters have resulted in growth in usage of our app and engagement with our smart SMS feature alone, which grew by 159% year-on-year. We continue to invest in improving our capabilities on desktop. We've expanded our online search experience, which brings the benefits of using Truecaller to the web and also brings people who are searching for unknown numbers online to Truecaller website. A big focus on this Q1 was improving our localization on the web. This brings a much more relevant experience to each user and also attracts organic traffic from a wider range of markets.
We have already seen a big improvement in website traffic with our number of unique visitors growing by 600% versus Q4. We believe we can grow this even more, especially in our focus markets, because what people usually do when they don't know of a service like Truecaller, they Google a phone number. We continue to develop the premium offering by introducing relevant features and continuing to refine our portfolio of subscription plans. For example, by expanding our family plan to include access to Truecaller Assistant for subscribers in the U.S. Some of these features introduced to our paid offering have generated high interest from users and have had a direct impact on our subscriber base, which grew by 18% compared to the same period last year.
We get many questions on when the Assistant will be rolled out to more markets. I'm happy to share that it will be rolled out to several markets during Q2. For Premium subscribers on iPhone, we introduced Live Caller ID, which is available to all paying users globally. We're very proud to say that Live Caller ID is the first real-time server-based number lookup solution on the iOS platform. This is a big breakthrough for us in bringing the Truecaller experience even closer to the one we have on Android. These improvements resulted in positive outcomes beyond increased revenue. Our subscriber base grew by 21%, and we also saw a boost in conversion and increased usage.
On the ad tech side, we continue to build out our capabilities in order to deliver an even better experience while providing better monetization opportunities for the long term. We remain focused on driving efficiency throughout the advertising life cycle. As a result of these efforts, we achieved a 20% year-on-year growth in impressions. Other KPIs, such as ads engagement and click-through rates, continue to develop positively. These indicate that we will be in a much stronger position to monetize from advertising opportunities when the market recovers. Our investments in our independent tech stack have yielded positive results, with strong growth in demand coming from our own ad server. The Truecaller ad server now supports more advanced features to support performance advertising and has shown promising indicators in terms of further improving conversion rates. For example, app installs, lead generation, and sales.
We also continue to build out our demand-side platform, which gives direct advertisers a holistic solution for setting up and managing campaigns both within and outside the Truecaller ecosystem. This is an important step for us as we transition towards becoming a full-stack advertising solution partner that caters to a wide range of use cases across the advertising funnel. We'll continue to invest in further initiatives which further improve our effectiveness and monetization potential, which will put us in a very strong position in the long term. Demand for our enterprise offering continues to develop well. We're proud to have on board a number of notable brands this quarter. Indian brands continue to dominate our enterprise portfolio, but we see growing adoption of Truecaller for Business in other markets as well.
In the Q1 , we welcomed established brands in a range of markets, including Kenya, South Africa, Israel, and Jordan, to name a few. We delivered a number of product milestones during the quarter. Verified Business expanded to include SMS as well, which provides users with assurance that a text message is genuine and from a legitimate business. This is a significant step in the evolution of the Verified Business offering, since SMS continues to function as an important channel for business communication. Verified SMS was commercialized at the end of the Q1 has already generated interest from some of the highest volume SMS senders in India, especially from the banking and financial service sector. Other product development efforts in the Q1 focused on facilitating two-way communication between users and businesses.
This is extremely valuable as it provides high intent signals from users to businesses. Call Me Back, for example, is an existing feature that allows users to request a call back from a business. In Q1, we upgraded the Call Me Back experience based on user feedback, so they can now indicate their preferred time for the business to call them back. This is expected to drive conversion rates for businesses, since end users who interact with the feature are more likely to make a purchase or take an action on the call. User feedback was introduced last year. This quarter we made it even better. Now, businesses can set up and customize their own surveys. The customer insight from these are accessible to them in real time using the dashboard.
Lastly, I am happy to share an update on our business messaging product, a first-of-its-kind service, delivered in partnership with Tanla. This product gives businesses a more efficient, cost-effective way to distribute their important messages. Businesses can also analyze their performance on our platform in order to optimize their campaigns. Compared to Verified Business on SMS that I just mentioned in the previous slide, business messages are sent through our platform to the user without any carriers involved and also being verified. In the Q1 , we scaled business messaging significantly and delivered over 1.5 billion messages throughout the platform, which is a 100% increase in volume from the previous quarter. We continue to strengthen our technical capabilities in order to support even higher volumes while innovating on our ability to support more engaging content through rich media messages, attachments, and more.
Now over to Odd Bolin to talk about our financial performance.
Thank you, Alan. It's time to look a little bit deeper into our financial performance this quarter. As usual, we start with our revenue development. Our overall revenues declined somewhat compared to the same quarter last year. This is a consequence of the general lower demand for digital ads, which started to impact our revenues from the mid or the end of the Q4 last year. The sentiment from the Q4 remained during the Q1 , although we could see some positive signs at the end of the quarter. Important to note this year is that all ads income related to IPL will be recognized in the Q2 . Last year, part of the IPL income was realized already in the Q1 , so that affects comparison.
If we were to adjust for that, we would have seen a small revenue growth in the Q1 this year in comparison with the Q1 last year. Just as during the Q4 , the lower demand for ads was somewhat offset by the improvements we made in our ad tech platform, which enabled a substantial increase in monetizable ad impression. We did also see small signs of improvements during the quarter. Given that we now are a bit more of an amount into the Q2 , I can also add that the Q2 has started off well due to the increased demand from IPL, where our investments in enabling more ad impressions is paying off.
I mean, the individual days we have actually recorded all-time high ad income due to us making more impressions available, which scales very well when we see higher demand in the market. Should be noted that IPL is a temporary effect that will impact the Q2 . How the more general demand will develop during the second half of the year remains to be seen. We are, of course, hopeful that it will be better than during the first half. We continue to develop our premium offering, and here we see a steady development with an increase in the number of subscribers across platforms and geographies, and most importantly, general higher conversion, which is promising for the future.
For Truecaller for Business, which consists of our verified business solutions and the business messaging product, which we deliver in cooperation with Tanla, income grew strongly on a year-over-year basis. We saw a slowdown on a quarter-over-quarter basis, which I will come back to in the next slide. Now let's look at it a bit more in detail on our three revenue streams. Let's start with the largest one, ads. The general decrease in demand, which became more apparent during the latter part of the Q4 , was sustained during the Q1 , as I mentioned previously and as we mentioned in our previous earnings call.
With the global depressed macro that we see, the risk sentiment has changed, and more companies have focused on profitability versus growth, which impacted demand in markets like India, where the underlying economy still is expected to continue to develop very well. On the other hand, we continue to improve our platform through our tech improvements, and during the quarter, we were able to increase the number of impressions substantially. We continue to optimize for revenue per user rather than pricing or fill rates. In combination with the general decrease in demand, this meant that we accepted more low-priced ads, which took down our overall CPM.
The increase in impressions were made possible as different stages of the ads, you know, exactly were optimized, ranging from ad request, caching, serving, et cetera, which led to an increase in monetizable impressions within the existing ad slots. These improvements help us now, more importantly, when demand bounces back, it will generate a significantly higher return. This has already proven to be true at the beginning of the Q2 when we on certain days reached, like I said, new record levels of advertising revenue, which was tied to the increased demand in connection with the IPL. The Q2 has started better with the help of a strong demand, IPL demand, our assessment of a more muted demand for the ads market in the first half of 2023 is likely to remain true.
It's not unreasonable to believe that the second half of this year will be somewhat stronger than the first half, but forecasts are very difficult to make in the current economic climate that we are all in. When looking at our subscriptions, you can see that we grew our revenue by 20% compared to last year, which is the highest growth rate we've had for a while. The relative growth in the number of premium users is exceeding the relative growth in monthly active users, which is encouraging. We see growth coming from many different markets in both on iOS and Android. We see good growth from the new plans we have introduced in the last quarters, and I can especially highlight that we see good traction in India, where the conversion historically has been low.
Truecaller for Business continues to grow the customer base. We are now present in 36 countries. We continue to improve our capabilities with new features. More and more customers have longer and longer relationships with them. During the quarter, new sales slowed a little bit in Truecaller Business as the challenging macro means that sales processes take longer time than they did during last year. We continue to roll out new features during the year which are anticipated to help us grow our revenue in the future. Growth rates for business messaging increased late in the quarter. This did not have any material financial impact on the quarter. It is encouraging for the future. It will have a positive impact going forward.
Looking a little bit at the gross margin, the gross profit, our gross margin has stabilized around the 75% level, which is in line with the levels we talked about in conjunction with our IPO. We see a somewhat positive trend quarter-over-quarter, but a decline year-over-year, which is mainly due the increased cost for service and hosting, which comes to a large extent from our larger customer base, user base, and also higher verification costs for new users. We are continuing our investments to become more efficient, and we think there is potential to decrease cost of goods sold over time. Doing that comes from server and verification costs decreasing, and we see a long-term trend, long-term benefits in our investments when our user base and engagement continues to grow.
Looking at the cost side, we can see that in the last quarterly report, we talked about focusing more on efficiency as macro has made it tougher on the revenue side. The focus has really paid off, with many parts of the business contributing to make our daily operations more efficient. Underlying costs are down as much as 20% compared to the Q4 , which we're pleased with, and our focus here is to be more efficient on a day-to-day basis without hurting our growth ambitions. When it comes to staff costs, they are stable, and during the year, we expect to grow our teams that focus on user and market growth and revenue growth. That will contribute to an increase in FTEs, we now more than 5% or 10% during the year.
Looking at the cost development year-over-year, the costs excluding incentive programs are stable. A note for the coming and upcoming quarters is that the annual salary increase will start impacting costs from the Q2 and onward. As we have previously stated, our tax rate is a combination of the Swedish corporate tax rate and the Indian tax rate, that we have expected the tax rate to increase somewhat. This quarter, that tax rate was approximately 26%. The taxes we pay are partly based on our transfer pricing policy. The purpose of the policy is of course to ensure that we pay tax in the correct way from the perspective of both the Swedish and the Indian tax authority.
Looking at profitability, thanks to our investments, to the investments we made in our tech, we are able to deliver a fairly healthy 39% EBITDA margin in the quarter, which is our seasonally weakest quarter, which I think is a good achievement. The efficiency gains that we have done puts us in an even better position when the macroeconomic situation improves. Cash flow-wise, with our solid profitability, we continue to generate cash at a good rate. We now do tax payments on a quarterly basis, which impacts year-over-year comparison. When instead looking at the cash flow from operating activities before taxes paid, it's amounted to 127 million SEK in Q1, which is stable compared to Q1 in 2022.
As always, we have some movements in working capital due to timing of invoices, et cetera, but nothing that is out of the ordinary. At this point, we have SEK 1.6 billion in cash and short-term investments. We also have still access to another SEK 500 million in an unused, unutilized revolving credit facility. We continue to think this is an excellent position to be at this point in time with the macroeconomic uncertainty. During the quarter, we bought back shares to trim the capital position. That is a tool that we can continue to use. We also continue to scan the market for potential acquisition. The board has asked the AGM this year for a mandate to buy back up to 10% of the outstanding shares.
That mandate would include the shares that have been bought back up until the AGM. That includes the share that we already bought back this year. Then looking at we, how we track compared to our financial targets, that were set by the board in connection to the IPO. The medium-term financial targets were set in a different economic climate than we're in today. In the current macro climate, the revenue growth target is clearly somewhat less relevant than when evaluated on an annual basis. Even though the financial targets are based on average results during the period of 21 to 24, we and the board still believe they make sense also on an annual basis in a more normal macro environment.
As mentioned last quarter, with a shift in macro and with outstanding performance we had in 21 and 22, it is fair to say that 23 will be a more challenging year on a revenue growth basis, but we intend to continue to deliver well when it comes to profitability. When it comes to the ads business, it is difficult to assess when we will see the general de-demand pick up again. In the meantime, we focus on continuing safeguarding the profitability and making sure that we are in a better position once the general demand in the market increases again. With that, I will hand back to Alan to wrap things up before we start the Q&A.
Thank you. I'm proud of what we have achieved this quarter amidst the challenging operating environment. Despite declining smartphone sales, we continued to grow our user base and saw this develop very well, not least in markets outside of India. Our advertising business was affected by macro conditions as well as timing effects, but in general, somewhat more positive outlook throughout the Q1 compared to the beginning of it. Q2 has started off a bit more encouraging with the demand boosted by IPL. Our subscriptions, revenues developed well with a good growth in terms of both revenue and number of subscribers, especially in India.
We continue to see healthy development with Truecaller for Business and continue to innovate in order to serve growing demand and the evolving needs of enterprise customers. Finally, we've always prioritized efficiency and engineering excellence, but an enhanced focus and investments this quarter enabled us to deliver good profitability ratios. Overall, we're proud that we continue to be in a good position with solid financials, solid cash flow, and strong organic growth. Our strong position and our continued growth means that we'll still continue to make strategic investments, and even in a time of uncertainty, we will continue to take advantage of our strong position and find opportunities to continue growing. We want to share some insights into what we are focusing on, both short-term and long-term. As always, product innovation is a priority for us.
The problems that we solve are constantly evolving. It is always a priority for us to ensure that the product stays ahead of these challenges. For example, one feature that we are excited to put into production soon is the extension of AI identity and our caller ID service to platforms outside the Truecaller ecosystem, for example, on WhatsApp. On the advertising side, we continue to invest in improving our technology to offer a best-in-class experience while improving our monetization potential. In recent quarters, we invested significantly in building out our advertising capabilities to set the foundation for our transition towards becoming a full-stack advertising solution partner.
This will allow us to cater to a much wider range of use cases across the advertising funnel, meaning that in the medium to long term, we will be able to serve more advertising needs in addition to being a top-tier publisher. Regarding user growth, our focus remains on investing in targeted markets with high potential alongside the organic growth that we continue to drive our overall expansion. This might not show up in the quarter or 2, but in the long term, we believe this will pay off. With subscriptions, we'll continue to invest in introducing even more relevant value add features, especially taking advantage of our cloud telephony capabilities. We'll work on continuing to grow this income stream, especially in markets with higher subscription adoption.
We're encouraged by the upward trends in subscription rates in our largest market, India, and are working on continuing to grow this subscription base as well. Truecaller has always been a company that values efficiency in everything we do. That's why we're only 400 people serving over 350 million users. To continue to have a big operating leverage is key for us, and we have more investments to do to maximize server utilization and optimizing server costs. With our strong profitability, cash flow, and balance sheets, we will continue to pursue relevant investment opportunities. We're confident that our continued operational improvements set us up well for growth and continued profitability once the broader sentiment improves. As always, a big thanks to our users, the great partners that we work with and the phenomenal Truecaller team across the world.
Now we're happy to take your questions, so we're opening up the floors for the Q&A.
We will now begin the question and answer session. To ask a question, you may press star then one on your touch tone phone. If you're using a speaker phone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we'll pause momentarily to assemble our roster. The first question will come from Akhil Dattani with JPMorgan. Please go ahead.
Hi. Good afternoon, Alan, Odd. Hope you're both well. I've got a couple of questions, please, if I may. The first, if I can maybe focus on the comments you've made around the positive signs you've seen to the back end of Q1 and on specific dates in Q2. I guess I was just hoping for a little bit more color on exactly, I guess, firstly, what you think is driving that. What are the things you're seeing from your customers on the ad side that's supporting that positive trend? Secondly, linked to that, you know, when you say record levels of ads, obviously that's positive to see, but in a growing business, it's hard to know what that really means in terms of growth rate.
I guess what I'm trying to understand is when you think about Q2, you've got quite a tough comp because of IPL and the fact Q2 last year was your strongest ever quarter. Do you think in that context, revenue trends in Q2 will be better or worse than Q1? I appreciate it's super hard to call, but any sort of thoughts around the moving parts there, that would be super useful. Two other quick ones. One is, Alan, you mentioned obviously the very strong customer growth you're seeing in Middle East and Africa and rest of the world. One of the things I didn't quite understand was when I look at Middle East and Africa, your revenue trends were the softest. There was -13%, I couldn't quite square that.
I don't know if there's any currency impacts or other things going on, that are why Middle East and Africa is having a particularly softer revenue trend. The very last question is more for a bigger picture one. You've talked a lot about investments and opportunities. Obviously, one move you made in the quarter was buying a stake in Mayhem Studios, and you talk about the opportunities in mobile gaming, for advertising going forward. I'm sure it's super early days, but I guess it'll be interesting to understand how you think about that. You know, how is it through that stake you might be able to leverage that and potentially attack the fast-growing mobile gaming space? Thanks.
Let's start with the revenue development during the Q2 , and in particular ads. What we're saying is that we do see a very strong effect coming from IPL. When you say that the Q2 last year is a strong quarter, that is certainly true. I remember that the IPL last year was partly also in Q1. That's an important thing to keep in mind when you compare quarters that this year, IPL is Q2 only. Last year it was partly Q1 and then Q2. I think it's premature to try to predict what is gonna happen after IPL. Whether that is gonna be extorting some stronger general growth or not in the Indian market.
What we see now is that IPL is doing, you know, is having an impact. We can benefit from that demand in a good way this year because we have opened up so much new ad space that we can now monetize in a way that we couldn't have done 1 year or 2 years ago. IPL becomes an important driver for us during this during April and May. Like I said, I think it's premature to say whether that is something that will last going forward. Like we said in the call, we hope that and we think there are reasons to believe that the second half of the year may be somewhat stronger than the first half.
Once again, IPL is not necessarily part of that equation.
I think if I can add to what Odd was saying was, you know, if we compare Q4 with Q1 this year, in Q4, every day looked slightly worse than the previous day, so let's say. We didn't see a trend that was going in an upward direction. This time this year in Q1, every day has started to look slightly better than the previous day. We're seeing at least some signals and trends that are indicating that, you know, advertising is might come back soon. I think one thing to also keep in mind is that Q1 is also the sort of slowest quarter for us since Indian companies close their annual financials end of March, basically. The new budget starts in Q2.
What we are seeing with IPL is more encouraging sort of investments that companies are doing, so it's moving in the right direction. I think to comment on what was it? Mayhem was another question you had. There are a couple of reasons. I mean, we met the founders and, you know, we liked their vision and their big ambitions. We also like their way of thinking when it comes to revolutionizing the gaming industry in India. If you look at the Indian market, they have a few 100 million people who play games on a monthly basis. If you look at the App Store rankings, most of the apps in the play stores and App Stores are actually not games.
It's utilities compared to many other markets around the world where it's usually games. We believe that that will shift over time, more people will start playing games. In just a few years, you will have hundreds of millions of people playing games on their mobile phones. We believe that more gaming studios will pop up in the future in India. We do believe that Mayhem has great potential to become a fantastic gaming studio. They're soon to launch their first game. We know that it's going to be important for us to develop our advertisement product so that we can deliver good engagement on these ads towards gaming studios in the future.
The best way to do this is to work close with a gaming studio and learn and measure in real time basically how we're doing and tweak our own product. If we can do that with a great company like Mayhem, then, you know, we think it's a big win for us. Obviously, we do think it's a great investment for the company in the future. That's where it comes from, and it gives us a great opportunity to improve our product, just like we've done in the partnership with Tanla when building out our business messaging product.
Finally, on the Middle East and Africa issue, first of all, we have good traction on the Truecaller business in the Middle East and Africa. We see new customers coming on. In terms of advertising, which is still our largest revenue driver in that region too, we have a considerably less strong market position in most of the markets in the Middle East and Africa than we have in India. We will always be, or not always, but we are at present, seeing more variability due to the fact that we are a smaller player in those markets in terms of online advertising.
Which means that even though, we can see new customers coming in at a good rate, we are more sensitive to price changes that we are not able to influence the same way as we are in India. That's how you can see.
The fact that we are seeing a decrease in overall revenue, primarily ads revenue in this region, while at the same time seeing very good demand for particular Truecaller business offering.
Makes sense. Thanks a lot.
Thanks again.
The next question will come from Stefan Wöhrmüller with DNB Bank. Please go ahead.
If I could first start with Truecaller for Business, that has shown a really strong trend since launch, but this quarter it decreased in revenue quarter-on-quarter. That is despite that you continue to grow number of business customers. What explains this and what should we expect going forward? I mean, if you could perhaps explain the different kind of revenue streams you have in this business, just to get us understand this business a little bit better. Thank you.
Yeah. I can take this one, and thanks for the question. When it comes to Truecaller for Business, what we have seen a bit in the Q1 has been longer sales cycles, when closing new customers. It is still growing. You know, if you compare with the same quarter last year, then obviously you see the growth. It's also the end of the budget cycle as well. I think it's important to be aware of that. This is a new, fairly new product for us. I mean, it's just been around for 2 years. While we're building out the product, we're also building out the team, and we're building, you know, building out the processes around that.
I wouldn't put too much emphasis into, you know, the Q1 number. It's still a very attractive product for the businesses. The different products that we monetize, I would say, is, you know, to sort of simplify it. The first one is verified calls, which we've talked about in the past, where we KYC the businesses, and they can integrate into the calling experience. The other one is the Verified SMS messages that we just launched now, and got a couple of big customers on board to that where, you know, we bring the same experience to text message. Then we also have, you know, our business messaging solution, which sends messages through our infrastructure instead of going through carriers. I would say those are the 3 verticals that we're focusing on right now.
We're also, while we're running, we're also building out more things, that can help our business customers, our enterprises, but also the end consumer.
Okay. Just to understand, you stated that if adjusting for the cricket season, advertising revenues would have been basically flat year-over-year, and this indicates close to 10% higher revenues in higher advertising revenues in Q1. How do you quantify this?
Well, I think what we said was-
Yeah
we know that, you know, the last two weeks of March last year had IPL revenues, and we know how much of that spending came from that. If we would exclude that, or include that this year, then we'll probably be a bit above, last year's revenue numbers.
Okay. That's.
Yes.
Yeah. That's fair enough. Okay. Thanks.
The next question will come from Predrag Savinović with Carnegie Investment Bank. Please go ahead.
Thank you very much, operator. Hi, Alan. Hi, Odd.
Hello.
First a question not specifically tied to the report. It's, it's on WhatsApp. You recently entered into a partnership here. I'm just curious of the scope here. If you can tell us what does it entail, how can this be expanded, can this bring more users? Is there a roll-up plan? Is it just a testing phase? Just really put the context in what we're looking at here.
I know that some news articles that came out the other day on this nature, we did get a lot of coverage when we launched it, because a lot of users are getting a lot of spam and scam calls and messages on WhatsApp. It's becoming a nuisance on their platform. We launched this feature to our beta community earlier this week. Some news articles wrote that we have done this in collaboration with WhatsApp. That's actually not the case. We've built out these capabilities on our own to help our users. There is no sort of official partnership with WhatsApp.
Okay. The rollout, if you can tell a little bit about the value it brings, basically bringing Truecaller features into that ecosystem and how we should see it?
The way you should see it is, the way the Truecaller sort of caller ID and after-call screen experience works on regular phone calls will also work the same on what incoming WhatsApp calls from unknown numbers.
Okay. Brilliant. On the effectivity gains or efficiency gains you made on the cost side, the OpEx is down a bit Q2. I understand the word marketing spend, what else is there? Has there been any You know, e-efficiency gain you've made also which we can see benefit from in the coming quarters. Any color on that side?
Yes. Unlike some other tech companies, we haven't recruited more than we needed over the last year, so we haven't got to the point where we need to let anyone go. We have the people we need and we continue to need them. There are always other things where you can, where you can save money and be more efficient. There are many, many small areas that, taken together, have a reasonably substantial impact. Of course, we are more careful with marketing and user acquisition investments now. We have, like many others, decided that we don't get the sort of return on those sort of investments that we get in a more normal market at this point, so we have decreased them.
We also learned a lot over the last years, not least in terms of user acquisition, how we can do that in the most efficient way. And we are continuing to invest in user acquisition in the areas and in the geographies, and in the ways that we have learned by now or gives a good return. But we are careful about not expanding those investments at this point because we think that the timing of that is not correct. Yes, we believe that what we have done this quarter will play out also in the upcoming quarters in terms of lower costs than we would otherwise have had.
If I can add, some of the investments that we've done on, you know, service sides, efficiency, initiatives, and also investments we're doing in becoming more efficient on the verification process of getting users on board. These are investments that we've done the last couple of months, and we'll continue to do them because we see benefits in the long term that we'll be able to scale with more users at a lower cost, which at some point should show some effect on the, on the COGS, basically. The main ambition internally is to make sure that we build, you know, the best possible architecture and the best possible code, and that's always been the case. There are always ways to improve this, and that's the sort of investments we are continuously doing.
Okay. Thank you. The final one on the iOS product, which it has improved quite a bit. There are a lot of features, though, that you can receive as a user without really engaging with the application. I mean, I can get a, you know, banner, passively when receiving a call, for example. I'm thinking of, do you have any strategy or on how to also monetize freemium users on iOS? I know it's much better with your premium users, of course, but you will have the other part of the users there as well. How can you increase that market, so to speak?
Yeah. It's a very good question. It's also something that we continuously evaluate. That's why we also decided to make the Live Caller ID actually a premium feature, because we know the willingness to pay is, you know, it's at least 20 times higher on iOS than it is on Android. We know that the Live Caller ID feature on iOS is something that people have been asking for since we started the company, basically. That's one of our ways to sort of monetize further on our iOS platform. Over time, we'll see how, you know, we can build more value to sort of bring users back and also build out the premium offering on the platform.
Okay. Super. Thank you very much, guys.
Thank you, Predrag.
The next question will come from Jesper von Koch with Redeye. Please go ahead.
Hi, guys. Thanks for the presentation. Just some thoughts on the profitability going forward. I mean, you say that you are becoming also, like, more careful about spending UA investments. I mean, considering the now ongoing IPL season, I mean, how much do you expect that to increase your UA spend?
Nothing really. There is no direct connection between the IPL season and the revenue that we see from IPL and the spending we do. We do much spending outside of India in order to, like we communicated previously, we seed new markets in order to quicker get to the point where we have a minimum or critical mass where organic growth takes off. We do some investments in India too, because there is a big part of the Indian market that we don't own yet, and we want to own that too. There is no direct connection to the IPL season, no.
Okay, good. Then just. Sorry. Go on.
No. Yes, I just wanted to add. There, as Odd mentioned before, we've learned many things in our user acquisition strategy. One of them is that, you know, when we do these more type of burst campaigns, those, you know, turns out to be more efficient for us. We spend more money in a shorter period of time in a certain market instead of seeding it in several markets. We've changed our user acquisition strategy. That has become, you know, led to more growth, but also at a lower cost. These are the optimizations we've been doing and, you know, we'll continue to optimize and change our sort of way of working to get as much as possible for that.
Of course, when the ads prices go down, that also means that our user acquisition cost becomes cheaper as well. We try to take advantage of that situation.
Good. Just about the geographical development. Could you make any comments about the results from the U.S., from the efforts made in Q4 and also possibly in Latin America?
Yeah. I think, you know, we've said this before, that the U.S. market is, you know, something that we have high ambitions of, to reach a critical mass. I've also tried to be, you know, open and transparent that this will take time. What we focused on last year was getting our iPhone product as good as possible, and I think we achieved that. We also made sure that the data coverage or what we call hit rates has become much better. We've gone from like 55%, 60% hit rate to over 85% hit rate. These are the initiatives that needs to be done in order to not churn users, as fast, you know, as you could if you have poor data quality.
What we've started to do now is to identify more like which communities do we want to double down on. We've also started to see a more positive trend on our user growth in the U.S. We're far from, you know, having any numbers that we can brag about. It is a focus, but it will take time. On the, on the Latin-
Okay. Okay.
Yeah, on the Latin, I would say, you know, that region or like 5, 6 markets in that region continues to grow really strong. We do help out a bit with user acquisition, but to be honest, I don't think, you know, we're past that stage now. We're just boosting it a bit. We're doing really well, I would say, in many of these markets, including, you know, Colombia, Chile, Peru, and so forth. These are markets with slightly higher CPM levels and higher conversion rates of Premium subscribers as well. It's a growing region for us. That's why we also made sure that we doubled down on localizing everything we do into the different Spanish versions in that region, such as our website, for example, because we are seeing growth coming from these regions.
Okay, good. Then just one last bit I found quite interesting you said that you are like regarding your investments in growth engineering, you state that it partly aims to enable the product itself to build underlying growth. If you could just elaborate on what that means.
Could you repeat the question?
Like you state that, like regarding your investment in growth engineering, that it partly aims to enable the product to build underlying growth.
Yeah.
If you could just elaborate on that.
Yeah, sure. You know, we've last year we started to build out our growth engineering team that focus on two areas. One is the organic growth, the other one is the inorganic growth, which means the user acquisition. What the organic team has been focusing on is to make sure that they identify exactly where we churn users, why we churn them, and how we can improve that experience. The initiatives that the team has done the last couple of months has actually returned in 6% higher retention on the 30-day sign-up retention numbers, which is quite significant because if you add it up every single day, then, you know, you will see a growth that is much more noticeable.
You know, they have some exciting stuff in the roadmap for this year to improve the onboarding experience, so that when and modularize it, so that when we, you know, focus on new markets, then the value proposition of the service might not be the same as it is in India, for example. We need to make sure we have a flawless onboarding. People in India who download the app, they know what it does. They know everything about it. They know what to expect. In a new market that we want to sort of double down on, they don't really know what the promise is, and these are the things that we, that we're focusing on.
We got a question on.
Thank you.
Yeah, please go on.
No, I'm done. I'm happy.
Okay. We can just bring in a question that we got regarding the buybacks. Question was whether we're gonna cancel the shares we have bought back. So far we haven't, and there's no decision made that we will. It's even though we have bought them back, it's a currency that we could use in case of a potential M&A, for example. The next question related to that was whether we can actually fulfill, so to speak, the 10% mandate that we are asking the AGM to give to the board at the present rate of buybacks. First of all, we don't have a 10% mandate at this point. We have a 5% mandate that goes up until the upcoming AGM this month.
We're still waiting to see whether the AGM will give the board an extended mandate. If they do, we could continue to buy back shares. We don't have to buy back shares. It's a decision that the board will do from time to time. It's premature to say whether we could use that full mandate. Obviously, if the board decided to use the mandate and we do get a mandate that goes on to the next AGM next year, I'm quite confident we could be able to use up that mandate if we wanted to.
This concludes our question and answer session. I would like to turn the conference back over to management for any closing remarks.
All right. Thanks for all the great questions, and thank you everyone for listening in.
The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.