Welcome to the Truecaller Q2 presentation for 2023. During the questions- and- answer session, participants are able to ask questions by dialing star five on their telephone keypad. Now, I will hand the conference over to the CEO, Alan Mamedi, and CFO, Odd Bolin. Please go ahead.
Thank you. Welcome, everyone. I'm Alan Mamedi, and I'm the CEO and co-founder of Truecaller, and with me, I have our CFO, Odd Bolin. We're happy to announce our interim report for the second quarter of 2023. We'll start with presenting financial and business highlights. Let's get started with the highlights of the quarter. In Q2, our user growth accelerated. We closed Q2 with an average of 356 million monthly active users, an increase of 11%. Average daily active users grew to 289 million, an increase of 13%. This brings us to an all-time high DAU to MAU ratio of 81.4%, meaning that the number of users who engage with Truecaller on a daily basis has grown. I am very pleased with the increased growth, which lays the foundation for long-term financial development.
We closed the quarter at SEK 518 million in net sales, an all-time high number and an 8% increase compared to the same quarter in 2022. This was achieved by growth of revenues in all three revenue streams: ads, subscriptions, and Truecaller business. I'm also pleased to say that we report an all-time high profit, with an adjusted EBITDA being SEK 239 million, which is an increase of 9% and an adjusted EBITDA margin of 46%. We continue to have a very strong cash flow, with SEK 251 million in net cash from operating activities before tax payments.
Overall, I'm very pleased to report these numbers in a challenging macro, where the general demand for advertising still is muted compared to 2022, but we're an improved product, new features, improvements of our AdTech and solid cost control managed to beat new records. In the second quarter, we accelerated the growth of our user base across markets and on both Android and iOS. Growth in the rest of the world was at an all-time high, and we see good traction in all our focus markets. The annualized growth rate in markets like Malaysia, Indonesia, Latin America, and the U.S. was about 30%. We report the highest growth of DAUs since 2020. Most of the growth continues to be organic, and we've seen improved retention and more efficient user acquisition contributing to the growth.
We had an all-time high quarter when it comes to Ads income, although macro has slowed down general demands and pricing. As mentioned in the last quarter, Indian Premier League in cricket in India is a big seasonal component here, with increased demand from many advertisers, where Truecaller as a platform serves their needs perfectly. We also made great progress in growing our enterprise offering, Truecaller for Business, as we call it. We saw good growth coming both from the verified business offering as well as business messaging, which reached record volumes. For verified businesses, we saw good growth coming from both new customers, as well as deeper relationship with current customer base.
We continue to see good traction with the Truecaller Premium, and our efforts to improve our pricing packages and product offering have driven strong growth, with a 21% increase in subscribers and revenue year-on-year. I would like to highlight that the investments in AI and cloud telephony solutions now are starting to pay off, and we see good traction on iOS. I will cover these in more detail in the coming slides. More on our user growth, which, as I said, accelerated in Q2. As you can see from the chart, the absolute user growth from Q1 is the highest we've achieved in the last five quarters. For MAUs, it's the highest growth since Q3 2021, and for DAUs, the highest since Q4 2020.
This illustrates the increased need of our product, as this is achieved with lower marketing spend than last year. Increased number of users is the foundation for us to continue to develop well within all our revenue streams, so I'm really pleased to see this development. It was a very good quarter, where we caught up on some of the missed opportunities from previous quarter. The growth comes from all our regions, with the strongest relative growth in the rest of the world and with solid development both on Android and iOS. 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, and I think that is the key. As we've done in previous calls, let's recap what Truecaller actually does for those who are not familiar with what we do. Our two main product offerings are the following: the first one is, of course, our consumer product, which is available globally on iPhone and Android. More than 356 million people 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, for example. 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 for Business, and the, our AdTech capabilities, and Truecaller for Business, of course. As technology advances, so do the tactics of bad actors who seek to deceive and defraud innocent individuals.
With AI impersonations, phishing attempts, and overall sophistication of scams, we do see an increase that goes rapidly across a wider variety of channels due to the use of AI-based technologies. We continue to work tirelessly to provide state-of-the-art solutions that address these risks as they become more prevalent. In light of this, we've ramped up our efforts to combat fraud beyond phone calls. We leverage on-device machine learning algorithms to proactively identify and flag fraudulent SMS messages, thereby preventing users from falling prey to malicious content or scams. The service is designed so that potentially unsafe links within SMS messages are automatically disabled, which adds an extra layer of security for our users. We continue to develop more features that support fraud prevention across multiple channels to protect users from these growing threats.
This initiative is enhanced by partnership with established players, including Tanla, enabling a comprehensive approach to identifying fraudulent senders and messages. Supporting the focused efforts on this, the new feature, Message ID, which is sort of a caller ID for SMS messages, was released during the first quarter to better alert users about the identity and purpose of an incoming message. That continues to show positive growth, which is now rendering more than 200 million daily impressions, which are currently unmonetized, I should also add. Every day fraud includes the combination of calls and messages such as OTPs, and by enhancing the information's relevance, the ability to protect strengthens. We launched a highly requested feature, call recording, on iOS in the U.S. and Australia. This is the second AI-based feature coming from the cloud telephony platform.
Call recording on Truecaller includes call transcribing, the choice of saving recordings on either the local device or on the cloud, and many more things. The efforts in improving the paid offering on iOS with live caller ID and call recording have been well received during the second quarter. Good growth was experienced on the iOS platform, with the number of subscribers increasing by 8% quarter-on-quarter and 25% year-on-year. We're seeing good progress here. Just before the end of Q2, Truecaller Assistant was launched in the Indian market in English and Hindi. The integration of Hindi marked a milestone, being the first time an additional language was incorporated into the Assistant product.
The process was considerably challenging, especially given the vast complexity of Hindi as a language, such as its grammar, syntax, pronunciation, and its extensive use of transliteration. The product is now available across India on the Android platform, as well as in Canada and Australia on both Android and iOS. Since the U.S. release of Truecaller Assistant in second half of last year, the team has worked on refining and adapting the product experience to local market needs. Clearly, we have a lot to do with a lot of potential. Cloud telephony presents a platform with huge potential. Its flexible and scalable infrastructure allows for the rapid deployment of new features in local markets.
We look forward to releasing both call recording and Truecaller Assistant to the new markets during the second half of the year to add more value to our premium offering and our premium users. Over to AdTech. Building on the advancements made on our ad stack capabilities during the first quarter, we were able to improve the offering to an expanding number of demand partners and advertisers across industries during the second quarter. The enhancements of Truecaller Ad server are now supporting sophisticated features like custom targeting and retargeting, has shown potentially boosting conversion rates for objectives like app installs, lead generation, and sales. These developments have all contributed to the results witnessed in the second quarter with the Indian Premier League, IPL, being a noteworthy highlight.
With more than 250 million users in India, Truecaller offers a high degree of overlap with the IPL audience, making it an ideal platform for advertisers to target IPL audiences digitally at hyper scale and frequency. Truecaller offers advertisers a massive reach and scale, unparalleled by any other standalone publishers in the country, with the ability to deliver 4 billion impressions within 24 hours globally. The unique blend of massive reach, unique insights for precise targeting, high-impact ad solutions, and dedicated servicing offered makes Truecaller Ads a preferred platform for a wide variety of advertisers. On the iOS product, we haven't focused on ads monetization before, since we wanted to get the product right first.
We've definitely made huge progress there, which is why we started to focus on the inventory efforts to show improvements in the supply side metrics to drive more ads per opportunity, as well as ad engagement via improved click-through rates. Our initiative to optimize the ad inventory on the iOS platform has grown the iOS ad revenue by 190% year-on-year, 190% . The team continues to explore high-yielding ad formats that would drive higher user engagement with the ads, leading to higher CPMs and better click-through rates. That, of course, translates into higher revenues. Key indicators show that this experimentation resulted in high-quality ads with higher CPMs on our iOS product. Lastly, for ads, Truecaller Ads aspires to be the most preferred full-stack ad solution that leverages Truecaller's massive scale and user insights.
I'm happy to share a recent case study about Xiaomi that underscores our efforts in this direction. Xiaomi India is a leading smartphone brand. The goal of the campaign was to drive substantial traffic for the highly anticipated online reveal event of their new phone, Xiaomi Redmi A2. The approach was, with Xiaomi's position as Desh Ka Smartphone and their mass appeal across various demographics, we devised a custom, high-reach, high-impact solution to ensure maximum visibility for the big launch event. Truecaller presented the Xiaomi with a never-before opportunity, a custom one-hour pan-India roadblock that would generate an astounding 70 million impressions within just one hour. The result yielded remarkably well. The campaign successfully reached 36 million people, driving an astounding 1.18 million clicks within one hour.
Truecaller Ads played a pivotal role in Xiaomi's Redmi A2 series launch event, creating an immense buzz and capturing the attention of smartphone enthusiasts across the nation. We stand committed to delivering robust solutions for advertisers and enhancing the user experience. Building on the milestone in the second quarter, Truecaller aims to drive further innovation in the time to come. Let's talk about Truecaller for Business. Truecaller for Business experienced consistent growth throughout the second quarter of 2023. While its adoption remains strong in India, there has also been an increase in the rest of the world segment. The account base of companies using Truecaller for Business' verified service grew by 50% year-on-year, with notable brands like Volvo, Paytm, National Bank of Kuwait, Domino's Pizza, and Aramco, to name a few.
The range of brands from multiple industries joining Truecaller for Business indicates an upward trend in enterprise interest in the platform's verified business solution and fraud detection capabilities. An encouraging trend among long-standing customers was observed through expanded contracts and increased utilization of the platform's advanced features. During the second quarter, we introduced a new call management API and webhook alerts to empower businesses with the ability to seamlessly manage information and experience from each call. Companies can leverage this new infrastructure to manage a series of processes using the same number and create more personalized communication for their customers. The expanded integration capabilities allows enterprises to connect their CRM and dialer systems directly to the Truecaller for Business platform, which significantly increases the use of Truecaller in their core workflow.
We also released an upgraded and enhanced version of Truecaller SDK, which is a solution that provides companies with the tools needed to facilitate user logins through quick and efficient user verification via the Truecaller's platform. The focus for the coming quarter is to migrate all existing partners to the new SDK solution, which provides a better end-user experience with much more secure authentication. Over to Odd to talk about our financial performance.
Thank you. Thank you, Alan. Let's look a little bit deeper into the financial for this quarter then. As usual, we'll start with the revenue development. Our overall revenues increased by 8% compared to the same quarter last year. And as mentioned before, Q2 is, It's a seasonally strong quarter due to the Indian Premier League in cricket. We are, however, very pleased with the improvements coming from all three revenue streams, in a pretty challenging macro environment still. As also mentioned last quarter, IPL is a seasonal effect that impacts the second quarter. The general demand for digital ads has stabilized on the levels we had when we released our Q2 report. We continue to develop our premium offering, and here we see a steady increase in the number of subscribers across platforms and geographies, and a higher conversion, which we are very happy about.
For Truecaller for Business, which consists of our verified business solutions and the messaging business messaging product, which we deliver in cooperation with Tanla, the income grew strongly on a year-over-year basis, as well as quarter-over-quarter. Let's look at it bit in more detail on these three revenue streams and start with the largest one, with ads. Q2 2023 was an all-time high quarter for ads revenue. This was achieved to a large extent by the fact that we could capitalize well on IPL, and the ads demand that came through IPL. That demand was somewhat different from what we have seen in the past. We had a wider base of IPL advertisers who could buy our inventory, and we could offer these advertisers a larger impression base from their targeted, for their targeted audience.
We saw lower CPM this year, our inventory improvements offered much more scale in terms of impressions, and that led to a higher IPL revenue. General demand, apart from IPL, continues to be muted, but it has stabilized, not getting worse, but so far, no obvious improvements either. We continue to improve our platform through our tech improvements and the growth of the user base. We continue to optimize for revenue per user rather than pricing or fill rates. The increase in impressions were made possible as different stages of the ad lifecycle were optimized, the ad request, caching, serving, et cetera, leading to an increase in monetizable impressions within the existing ad slots. These improvements help us now, but more importantly, when demand bounces back, it will generate a significantly higher return.
The normal seasonal pattern is such that Q3 usually is stronger than Q1, but slower than Q2 and Q4. We think this holds true also this year, as all large festivities, including Diwali, take place in Q4. We don't yet see any material uptick in the underlying demand, and we continue to focus on factors that we can influence, ensuring that we are in the best possible position once the macro situation starts improving again. When looking at comparison numbers, remember that the general slowdown in the demand started to impact us in Q4. That should be taken into account when looking at Q3 and Q4 this year. When looking at our subscriptions, you can see that we grew our revenue by 21% compared to last year.
The relative growth in the number of premium users is exceeding the relative growth in the monthly active users, which is encouraging. We see growth coming from many different markets. The biggest contributors have been India, the U.S., and Malaysia. Our strategy to add more functionality through the cloud telephony platform has started to pay off, with contributions coming from the AI features, Truecaller Assistant and call recording, which is a higher subscription price. We look forward to introducing these features in more markets going forward. Truecaller for Business continues to grow the customer base, and the trend with longer and deeper relationships with clients continues. New sales continue to be a bit more challenging than last year, but we keep on developing more products to integrate tighter with our clients.
During the quarter, business messaging volumes reached record levels and contributed to the income improvement. Here, it is worth highlighting that the volumes were positively impacted by seasonality and that Q3 is expected to be somewhat slower. As you're aware, we are doing business messaging exclusively with one partner, Tanla, at this point, but from the fourth quarter this year, we have the option to open up this partner to more partners. Our gross profit improved, although the margin was somewhat lower than last year. We saw an improvement from the last three quarters as investments and work that has been done to increase efficiency in server and verification costs has started to pay off, and we will continue to put efforts in these areas going forward. Let's now turn to the cost side.
Our overall cost base is at the same level as Q2 last year. We have increased our costs somewhat due to more FTEs and due to the inter-annual salary review, which came into effect from the start of Q2. The number of FTEs in the quarter was stable compared to the previous quarter, Q1. For other expenses, we continue to report lower expenses than last year. As macro has made it tougher on the revenue side, we have increased our focus on efficiency, we will continue to keep a close eye on costs, but at the same time, executing on our growth ambitions.
A note for the coming quarters is that the new incentive program that we decided on the AGM in May, is expected to increase incentive costs by approximately SEK 3 million per quarter starting from the third quarter. As we have previously stated, our tax rate is a combination of the Swedish corporate tax rate and the Indian tax rate. We have expected the tax rate to increase somewhat going forward. This quarter, the tax rate was approximately 21%, and for the first half of the year, 23%. The operating leverage is something that I like to talk about. We have the operating leverage that we have in our business is quite extraordinary, and thanks to our lean machine, we're able to deliver solid returns, even in a tougher macro environment.
The leverage when demand comes back is, on a better scale, is quite substantial. In the quarter, we reported our second highest quarterly EBITDA margin, which for the quarter was 46%. As usual, we have a very good cash conversion, as you can see on the next page. At this point, we have approximately SEK 1.6 billion in cash and short-term investments, and another SEK 500 million that we have in an unused revolving credit facility. We continue to believe that this is an excellent position to be in at this point in time, when the macroeconomic uncertainty is what it is.
During the quarter, we, however, continued buying back some shares to trim the capital position. The board got an increased mandate to, from the AGM, to buy back up to 10% of the outstanding shares, including the ones that already have been bought back. Share buybacks continue to be a tool that we can use when appropriate. We'll also keep scanning the market for potential acquisitions. Let's then look quickly on how we track compared to our financial targets that were set by the board in conjunction with the IPO. The medium-term financial targets were set in a different economic climate compared to what we have right now. In the current macro climate, the revenue growth target is clearly less relevant when evaluated on an annual basis.
Even though the financial targets are based on the average results during the period 2021 to 2024, we and the board still believe they make sense also on an annual basis, but in a more normal macro environment, which is not what we have right now. As mentioned last quarter, with the shift in macro and with the outstanding performance we had in 2021 and 2022, it is fair to say that 2023 will be a more challenging year on a revenue growth basis, compared to our financial targets. We intend to continue to deliver well when it comes to our profitability ambitions.
When it comes to the ads business, it is difficult to assess when we will see the annual demand pick up again, and in the meantime, we focus on 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, and to wrap things up before we start the Q&A.
Cool. Thank you, Odd. To wrap this up, I'm really proud of what we've achieved this quarter amidst of the challenging operating environment. We recorded the highest ever quarterly revenues, profits, and user base. Despite declining smartphone sales, we accelerated our user growth, and saw the highest growth of daily active users since 2020, and all-time high growth in rest of the world. Our advertising business continues to be affected by macro conditions, as mentioned before, but with the strong impact of IPL and with the internal improvements we've made, we were still able to achieve record high ads income, although average prices are 14% lower than the same quarter last year. Our subscription revenues continues to develop well, with good growth in terms of both revenue and number of subscribers.
We see solid development in many markets and positive effects from our AI features, as well as newer price plans. We continued to see solid development with Truecaller for Business and continue to innovate in order to serve growing demands and evolving needs of enterprise customers. We'll continue to develop new products to help businesses become more efficient and provide safe and secure communication with their clients. Finally, we've always prioritized efficiency and engineering excellence, but an enhanced focus and investments this quarter enable us to deliver good profitability ratios. Overall, we're proud that we continue to be in a strong position with solid financials, strong cash flow, and strong organic growth with zero debt.
Our strong position and our continued growth means that we still will 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're 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 with AI and other technological changes. It is always a priority for us to ensure that the product stays ahead of these challenges. We will increase our efforts within fraud prevention, both for consumers and businesses. On the advertising side, we continue to invest in improving our technology to offer 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 a 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. Beyond this, we focus on growing further in new markets. That will grow our ads revenues in the long term. Regarding the user growth, our focus remains on investing in targeted markets with high potential, alongside the organic growth that continues to drive our overall expansion. For Truecaller for Business, we will continue to integrate deeper into our partner companies and introduce new features to make them more efficient, along with the growing with more clients, basically.
The business messaging, the exclusivity deal with, we have today with our partner ends after Q3. We have the choice to open up this product to other CPaaS companies and partners if so. With subscriptions, we will continue to invest in introducing even more relevant value-add features, especially taking advantage of our cloud telephony and AI 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 the 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 356 million users.
To continue to have a big operating leverage, being 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 sheet, we will continue to pursue relevant investment opportunities. We are confident that our continued operational improvements set us up well for growth and continued profitability once broader sentiment improves. As always, a big thanks to all 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. Over to the operator.
If you wish to ask a question, please dial star five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial star five again on your telephone keypad. The next question comes from Predrag Savinovic from Carnegie. Please go ahead.
Thank you, operator. Hello, Alan. Hello, Odd. I think first off, just on the growth in Q2, if you could quantify how much you think is coming from IPL?
Well, we know how much is coming from IPL. We haven't made that a public figure. That's not something we can give you an answer to. What we are saying is that IPL was normal, so to speak. We didn't see any. There were changes made to IPL this year that created some uncertainty ahead of the season. It turned out that the IPL season from a digital advertising perspective, was normal versus, say, last year. Which is also to say that we didn't see any weakening in IPL demand as we have seen in the general demand situation. IPL this year was a normal, a very normal season all things for us.
Okay. Okay. In the report, you write that users on average interacted with Truecaller around 30 times per day in India. Could you say roughly what the average is for the entire user base? Maybe it could be around 20-25x then. I'm just tying this to the impressions per user today, I believe it would be around half that number, right? Over time, could we assume that the impressions number could be much higher than you have already?
Hi, Predrag. I can take that one. Well, the thing is, every market looks very different. Some markets could have, you know, 20, 25, others could be, you know, 10-15. So it really depends. Usually, what we see is that markets with slightly lower sort of impressions are also those markets with higher CPMs. So in some way, it evens out. I think you're onto something, and that is, you know, how can we grow our retention, our revenues per user over time, and engagement is, of course, key.
We've done a lot of great improvements in the product during the first two quarters, I would say, which we've seen, you know, returning into higher retention, meaning users stay longer, they find more value in the product, which also leads to more revenues or more ads impressions. You know, I would probably stop at that, but it is very different from market to market.
Perfect. Odd, you were speaking a little about operating leverage, and I was just wondering if you could theoretize with me a bit here. The margin's arguably quite strong already, but we know the demand is sluggish. When demand returns and you have this nice operating leverage, could we be seeing EBITDA margins that are, you know, 50%, 55%, or even higher, assuming this kind of return to ad spend or normalization, if you will?
Sorry, Predrag, but I'm not gonna give you a number there, but it is. I think it's obvious to everyone, particularly to us within the company, but also outside of the company, that we could do more revenue that we do with the existing cost base that we have today. Yes, the answer is clearly that we could have a higher operating margin than we reported this quarter. What that could theoretically be is something that I will, I have an idea, of course, pretty good idea, but it's not something that I am about to communicate externally. Sorry about that, Predrag. Good try, though.
Yeah, okay. Okay, thank you, sir. Let me try to see if I can get something extra on the growth rate instead. Not for Q3, but assuming, you know, longer term or so, without also considering a return on macro. We see the user growth is quite consistent, at least a 10%. The utilization, as we discussed earlier, it's probably quite low. Impressions could increase, say, I don't know, 10-15% per year for a few years. If we think about these inputs, growth of 20% or say, 10%-15% top line without market recovering, and then factoring that on the business side, where are we going wrong then?
Could you sort of quantify the question?
Just grasping for some outlook comments on. If this theory is wrong, then, I mean, user growth consistent, the ad load being quite low, should be able to increase the number of ads. Then you have the Truecaller for Business side, which is, well, arguably growing quite much faster than the average.
You're pointing out a number of factors that can and will improve. I think the best number-wise indication I can give you is to say that we still continue to believe that the revenue related financial target that we have makes sense on more of an annual basis, and just not annualized over the 3-4 years that we're talking about. I think that should give you an indication of what we think is believable.
Okay, perfect. Just finally, on the user growth, if you could share how much is coming from preloads and how happy or unhappy you are with that initiative at this point?
We're happy with the preloads initiative, but then again, we do see a clear impact on, from the macroeconomic environment on global smartphone sales. The smartphone manufacturers that we have signed up are not selling as much as they thought they would do at this point. Looking back to when we started those corporations. That doesn't mean we're not going to get where we thought we were going to get, but it's going to take longer time. Preloads are good. It is eventually an important channel for us to grow our user base, but it hasn't had as much of an impact at this time that we, as we thought it would when we started those when we entered those deals. Far, most of our user growth continued to be organic.
I would say, just to add, Fredrik, I mean, if you look at the growth, user growth during the quarter, how much of that is actually coming from preloads? I would say it's a single percentage, is below $0.05. It's not that that is driving the current growth right now. It's more the other initiatives that creates more of a stronger organic growth.
Okay, that's perfect. Thank you very much.
Thank you, sir.
The next question comes from Jesper von Koch from Redeye. Please go ahead.
Hi, Alan, and hi, Odd, and congrats to the strong quarter.
Thank you.
All right. Let's just start with the ongoing change in data regulation in the, after the Digital India Act. Particularly, particularly if you think you will need to change anything, like how you manage data for underage users, or how you target ads for these, or if there's any other change that you see coming for you.
Well, I think it's too early to say, since the latest draft has not been published yet. Looking at what we've seen, you know, floating around, you have to understand that when it comes to data processing of for, let's say, ads targeting, that is for our own users. Those are users that are using our product, so we don't see how that would get impacted. Regarding other operational changes, we just don't know yet. There might be certain things, I would say many of the things that we have been anticipating, we've already made those changes in the past. Some of them, like data localization, for example, happens to so far at least in the latest draft that we've seen floating, that got dropped, for example. We'll have to wait and see. We are still on the confidence, you know, it will change the experience for our users, basically.
Okay, good. Also regarding your UA investments, I understand that you maintain strict cost control and margin focus until the advertising market improves. When it does, do you still plan to increase UA investments? I mean, do you feel that you've found a way to do this efficiently enough?
I think we've found ways to do it efficiently at the current rate, of, you know, the spending that we do. Of course, once you start to increase it to a higher level, then you will have to adapt that strategy as well, because you sort of inflate the market. We'll have to wait and see. We're still investing in some of our focus markets. We've just narrowed it down to certain markets where we see a higher impact and a higher return of investment as well, that are strategically of importance to us. I mean, I've said this before, and it's in the report as well, we still wanna maintain a high profitability.
You know, if the market goes, you know, in a positive direction in terms of ads, revenues, and so forth, then, you know, we might, and most likely will, adjust some of these investments even more, to stay on a similar sort of, profitable level.
All right. All right, good. That's all from me. Thank you.
Well, thank you, Jesper. Thank you.
The next question comes from John Karidis from Numis. Please go ahead.
Thank you. Hi, everyone. Huge congratulations to the entire Truecaller team for a great result. I'm really pleased for you. I have three questions, please. I'll start with the first one, which is: could you help us think all the reasons why adding more than 11 million people, users to your MAU base is likely to be the new normal for Truecaller going forward?
Yeah. Thank you, John. Always great to hear your voice. As we wrote in the report, we should expect the coming quarters to be somewhere in between what we saw in Q2 and Q1. Please don't you know, set the expectations too high. We are definitely, you know, as it seems right now, we're, you know, far from. I mean, we're doing great, and we're seeing an accelerating growth from what we saw in Q4, basically. You should expect the coming quarters to be somewhere between what you saw in Q2, and somewhere in between Q2 and Q1, basically, once it's stabilized.
Okay, lovely. Thank you. Secondly, just for the next couple of quarters, relative to what we saw in the first couple of quarters, is it possible to get some sort of commentary about likely trends in your two OpEx lines, your other external costs, and your employee costs? I note what you said about the LTIP 2023 adding SEK 3 million per quarter. Apart from that, based on what you expect your revenues to be over the next couple of quarters, what can you say to sort of help us sort of think about other external costs and employee costs, please?
When it comes to employee costs, we are recruiting, but we are only recruiting very selectively. We don't expect to add a whole lot of people to the roster over the next quarters. Employee costs, excluding everything incentive program related, will grow, but at a slow rate. You did see the effects of the annual salary process in the second quarter, and that will, of course, stay there in the third quarter and going forward. There should be no major changes to that. Other operating expenses is, as you know, to a large extent, marketing user acquisition.
We intend to stay where we are, in the sense that we are in a position right now where we know that the user acquisition marketing we do is efficient and cost-effective. You know, we may increase our spending and investments in these areas going forward, but we don't foresee that happening in the current macroeconomic climate. You shouldn't expect any major changes there.
Thank you. I'm sorry, just related to this, I guess three and a half questions. The sort of 70% target that you have in your sort of midterm financial targets, i.e., 70% being revenue growth and EBITDA margin. Did you say that this could apply to this year as well, or did you say this year will be exceptional, it won't apply this year, but it will on average for this year and the next two years?
That's very specific, John. That's more like a full question, so I wouldn't call that a half question, John.
I'm sorry.
What we're saying is that the financial targets that we have, like I said, were set in a different macroeconomic climate, and we're not in that sort of climate right now. That impacts our growth rate. We keep on doing things that will put us in an extremely good position when things turn up again, but it does impact our growth rate for the time being. We can, we can, and we'll continue to show good profitability. But the 70% number you're talking about is a combination of growth rate and profitability, and that is clearly impacted by the macroeconomic situation, too. That's, that's the best answer I can give you.
Okay, fair enough. I guess, making up for this, an easier question. I'm not quite sure why the tax rate, from quarter to quarter, yo-yos between sort of 22 and 26%. What is it that makes it go up and down like this?
You should look at the trend and average because the quarterly variations comes from smaller things, like how much money are being taxed in India in a quarter, versus how much is being taxed in Sweden. Over a year, it is more stable. Sorry about that, if that is confusing you, but that's how it is.
Fair enough.
We recognize revenue in India, and we recognize revenue in Sweden. That doesn't always happen in sync, so to speak. Over a full, I can assure you that, and I can show you the Swedish and Indian tax authorities, that we pay all the taxes we are obliged to pay in both these geographies. Which means-
That's great. Thank you.
Which means that the tax.
Thank you.
It, a mix.
I understand. Thank you, all. Keep knocking it out of the park, please. Thanks very much.
Thanks, John.
Thank you, John.
The next question comes from Yemi Falana from Goldman Sachs. Please go ahead.
Hello, Alan and Odd. I'd like to add my congratulations on the quarter, thanks for taking my questions. Firstly, I think very strong user growth is clearly one of the key takeaways from today's print. Are you able to provide a slightly more precise split between organic versus paid user acquisition? I'm just trying to understand if you're still running at kind of 90%+ organic user growth, or if paid acquisition is beginning to play a bigger role. Secondly, piggybacking a little bit on Predrag's question, I appreciate the cash generation and the net cash position are symptoms of strong delivery.
Could you maybe refresh us on how you're thinking about deploying capital against your long-term objectives, whether that's kind of paid user acquisition or M&A? How should we think about kind of EBITDA margin evolution from these very high levels? On a related note to that, kind of to what extent are you considering further investments, like Mayhem Studios, in adjacent markets? Thank you.
That's a lot of questions at the same time. You want to start with the first one while I.
I can do.
Mentally prepare the answer for the second one.
Do it. Hi, Yemi. Good to hear your voice. We on the growth side, user growth side, you know, we still have 95%+ that are coming from organic growth. The remaining is it's probably less than five, actually, but it's basically pre-loads and user acquisition we're doing on these focused markets. Basically, to sort of seed the markets, but also to grow where we see a high ROI.
For the cash position and liquidity, yes, we do have a very strong cash position, and we do have a very strong operating cash flow. We are continuously scanning the market for potential acquisition targets. Maybe not as much as we would like to, because we don't have the resources to do all the scanning that we would like to do. But we do scan for the most important opportunities that we think may be out there, and we do get a bit of inbound. We're continuously looking at acquisitions, and we think that we're in a time period right now, where acquisitions can come our way, or potential acquisitions may come our way that could be very interesting to us.
In terms of what they would constitute and how they contribute to our business, and in terms of what the sort of price we would have to pay for them. We're very happy about having the strength that we have right now. We believe that there are opportunities that we should be ready to take whenever we see them. We're trimming the cash position, as you know, through buybacks. Like I said before, and like I will continue to say, up until the point where either the macroeconomic climate gets better or we do find some larger acquisitions that we may be interested in doing. You know, for the time being, we're happy where we are. We're in a weak macroeconomic climate.
We want to stay strong, but we also want to be strong whenever someone else becomes weak, because then we can do things opportunistically. Mayhem was an interesting investment for us. This is sort of a trial. We may do more of this if interesting things come our way or we come up with good ideas. It's more opportunistic, like I said. We have a strong base. We have a good organization that continue developing our product. We have a strong base. We are not forced to make any acquisitions, neither for consolidation or for technology. There are interesting opportunities out there, and we're looking at them, and we want to be ready to do these things whenever there is a chance.
Thanks, both. That's super helpful. Maybe if I follow John's lead and tack on maybe half an additional question. Clearly, you've taken a patient approach, and as you mentioned, you're operating from kind of a position of strength in terms of thinking about potential acquisitions, et cetera. Is it fair to say you're closer to pulling the trigger on some of these acquisitions than you might have been kind of 6-9 months ago, for example? You've mentioned a few different opportunities, kind of inbound opportunities. Is it fair to say you're closer? Just at a big picture level, I know you can't speak to specifics, but is it fair to say you're closer on executing on M&A than you have been kind of in the fairly recent past?
I think that'd be fair to say that we are closer. That doesn't mean that we're gonna do anything, we're definitely closer in the sense of we've had six more months to look at potential opportunities and have any sort of discussion that may be justified. There are still companies out there that have valuation views of their valuation that we don't really agree with. You know, with this slowdown, the macroeconomic situation continues for a while, that will most likely change. If it does, we may be in a position where we can do things that we don't feel being worthwhile for our shareholders at this point.
Awesome. Very helpful. Thank you.
Thank you.
The next question comes from Stefan Gauffin from DNB. Please go ahead.
Yes, hello. Thanks for taking my questions. First, I would just like to get some clarity on what you're actually saying regarding the near future. You say you do not expect a weaker nor stronger advertising demand compared to the end of the first quarter. What does that tell us for CPM? It was down 24% year-over-year in Q1 and 14% year-over-year in Q2. Can you provide some more information on that? Thank you.
Q2 number was influenced by IPL, and that is something that must be taken into account. What we're saying is that the underlying demand, excluding IPL, is pretty much where it was at the end of the first quarter. At this point, we don't know when that is gonna change. Q3 is gonna be a festivities-free quarter. It's seasonally somewhat weaker. We have no IPL, we have no Diwali, we have no other festivities. It needs to be taken into account. Like I said, we don't know when the macroeconomic demand is gonna change in such a way that demand for digital advertising starts increasing and consequently, prices start increasing.
We know it will happen, and we know that whenever it does happen, we are standing by, ready to take full advantage of that. We don't know when it's gonna happen. I like to say to some people that when you talk 10 different economists today, you get 11 different answers on timing when things are gonna get better again. We are not even economists, we are just regular people, so we don't know. We are ready whenever it happens.
I think one thing to emphasize here, you see in the report as well, is that last year, Diwali, which is a big festive season, was in Q3. This year, it's gonna be in Q4, so we do have some success plus Q3 last year wasn't really hit by the macro. There will be, you know, the comps will not be equal, just like this time in Q1 and Q2. We continue to invest in our product and, you know, our ad units, and driving more performance trade than as to compensate this. We're only 21 days into, you know, this quarter, so, you know, it's hard to say. I would say, you know, it's looking pretty decent.
Then, just, you launched the Truecaller Assistant in India, just, what are you seeing in terms of pickup for premium users following this launch?
Yeah. It's being rolled out as we speak. It's the feedback we're getting from users extremely positive, to be honest, more positive than we expected. You can easily see that on Twitter. I mean, you will see users raving about it. I think it's been well received. We should also remember that this is a market where they never had a voice mailbox in the past. They've never had it. This, in some way, not only does it, you know, introduce a voicemail to the market, but also with an intelligent Truecaller Assistant on top of that. What we're hearing from customers is that it's definitely worth the money. It's a good sign.
It's a good signal. It's in the early phase of the rollout, so we'll have to see. The reviews that are coming out from equity analysts are also extremely positive. I'm very optimistic about it, and we'll have to see.
Okay, perfect. Thank you.
Thank you.
There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.
Thank you. Just one second here. We got one question here. What are the margins on Truecaller for Business and premium versus ads? Is that something you want to take?
I can take it, but I'm not going to answer it. That's pretty rough, but we obviously have a good view on the gross margin for these two or for all three revenue streams. That's not something that we have decided to share externally at this point. When it comes to bottom line profitability, it's a very difficult thing to calculate, because most of the work that is being done internally by our employees benefits all three revenue streams. If we were to do a more serious calculation on that one, that's something we would have to disclose externally. At this point, we haven't decided to go there down that road.
Maybe I can give some answer. I'm just kidding. I mean, if I would rank them, I would say the highest one is Truecaller for Business, with the highest margin. Number two is advertisements, and number three is subscription. Is that okay to say?
You just said it, so what can I say?
All right, cool. Great! Thank you, everyone, for listening in, and we look forward to see you at our next earnings call. Thank you.