Acast AB (publ) (ACAST) Earnings Call Transcript

Hello, and welcome to Acast Earnings Call for the Q3 2026 Interim Report. Joining us today are our CEO, Greg Glenday; and CFO, Anders Hagg, both in Stockholm. You're welcome to submit questions throughout the presentation using the form next to the stream, and we will raise the questions during the Q&A held after the presentation. I'd now like to start by handing over to our CEO, Greg Glenday. Greg, the floor is yours.

Thank you very much, LP. Good to see everybody. I'm glad you're here for our Q3 interim report at Acast. Hopefully, by now, you are familiar with our famous flywheel. This is our visual representation of our business. And quite simply, we start with our creators. We look for the greatest creators in the world. Those creators generate audiences. Those audiences attract advertisers and bigger advertisers create a meritocracy in the creator economy. So we think this flywheel has really served us well the last couple of years. And Acast, we really focus on the people and the technology in the middle. One of the things that -- the questions that we get pretty often are we'd like a little more detail on the stuff in the middle, the people and the technology. So I thought today, I would do a little bit of a quick tour around our tech stack. From a creator perspective, we have one connected platform powering every stage of the creator journey. So we think about our Creator hub as everything from the minute they create the episode, how seamless, how easy is it to upload video, audio, how are the tools, how does that work? How do we get that out into the marketplace? Then how do they manage the business? Where do they put the ad markers, our ad management systems and then real-time revenue dashboards and analytics. So essentially managing their business on the Acast platform. So from end-to-end for the creator, we have tools that help them run their businesses. And you can think about our ad platform the same way. It's an end-to-end toolkit for podcast advertising all in one place, from campaign creation to smart recommendations as to which audiences or shows to buy and then to take a very manual process and put that all through our platform with AdCollab. All of this is underpinned by Podchaser, our wholly owned data ecosystem within Acast. When we think about Podchaser, Podchaser is a great freestanding business that we use in the marketplace, but it also -- we use this data to underpin all of the technology I just showed you. For example, if we have a large advertiser that's interested in F1, we might have a dozen shows that specifically talk about F1 in their title in the name of the show, what the topic is. Those are very obvious. But by using Podchaser and smart recommendations, we can surface over 300 shows. Maybe it's a comedy show that happens to talk about F1. So there's lots of different ways to use Podchaser to create more context for brands. Acast remains the best place for creators to build and monetize their shows. We have premium publishers like TED, Perfect Day, the Washington Post and Le Monde, big independent shows. And then where we see real value is in the long-tail niche audiences. By using our technology that I've just demonstrated, we can aggregate these audiences and make a very fragmented podcast economy easier for advertisers to work with. So we think about premium talent, exclusive big shows and then long-tail niche audiences. Acast is the world's largest pure-play independent podcast company. As we've spoken about the last few quarters, Acast has a very unique place in the market. When we think about Australia, New Zealand, France, Germany, each of our local markets has a different set of competitors in their market. None of those competitors truly competes with us globally. So when you think about podcasting, it's a borderless medium. So we think the fact that Acast is in all these markets is a real differentiator for us. And now for the Q3 results. The financial highlights for Q3 2026 show 25% sales growth with 18% organic, 10% adjusted EBITDA margin and 6% adjusted EBIT margin. We have record revenue, record margins, and our growth is translating into profit. When I look at year-to-date, January through September, we have 25% sales growth, 26% organic, 7% EBITDA margin and 4% adjusted EBIT margin. Profitable growth, adjusted EBIT of SEK 88 million versus negative SEK 15 million last year at this time. As I discussed earlier, Acast is really powered by our people and our technology. So I wanted to acknowledge 2 key hires we made in Q3. We hired Liv Sandberg from TikTok to join as EVP, Europe; and Mark Bulling from WPP to join us in the U.K. as VP of Product. I'm going to take a little bit of a deep dive into our podcast pulse research in just a moment, and we're going to talk about our acquisition of Backyard Ventures in Austin, Texas. So this is our third year doing what we call podcast Pulse. It's a year-long research study that we spend a lot of time on. We've released in the fall, and it's now become a bit of an industry standard. This is the third one we did now, this is the largest one. We did it in 13 markets with 4,300 global respondents, and we partner with a third-party research company called Differentology to give us a little bit of credibility. A couple of key points from this study. Listen or watch. Last year in 2025, when we first did this question, we kind of thought video was going to overtake audio. And if you look at 2025 to 2026, the one thing that really stood out was the margins have become compressed and the middle has become larger. So increasingly, our bet that podcasting is going to be bimodal, both audio and video, is proving to be correct. So if you see, we grew 11.3 points in consumers saying that they both listen and watch podcast. So the margins, people who only watch and only listen are getting smaller and increasingly, people are doing both. One thing that really jumped out to us is the story travels, so does the audience. 63% of people have started a podcast in one format and finished in another. And very surprisingly, 75% of those people have switched an app or platform to do it. So if you think about that, the key in technology is to try and avoid as much friction as possible. And the fact that 75% of people are stopping in one platform, finding their spot in another platform, just to switch from audio to video and back and forth, we think that our bet on HLS video where you can seamlessly do that is proving to be correct. Also, 88% of follow podcast creators somewhere other than the podcast itself and 43% of people expect to follow creators across more platforms in the next few years. That could be Reddit. It could be newsletters, it could be kit partnerships. It could be YouTube, it could be a live event. And we found this to be really interesting. We've asked this question now 3 years in a row, who are the most trusted sources for brand and product recommendations. We saw a huge leap for podcasters, while journalists, YouTubers and social media influencers have all declined. All of this culminated with our Q3 acquisition of Backyard Ventures out of Austin, Texas. Backyard Ventures is 200 premium creators with a focus on omnichannel, including things like newsletters and social. Those 200 creators will now benefit from the Acast sales infrastructure and technology, and we also get a beachhead in the very important creator economy market of Austin, Texas. Welcome Backyard Ventures. And now I'll turn it over to Anders to talk a little bit more about the financials in detail.

Thank you, Greg, and good morning, everyone. So let me walk you through the key financial metrics for Q3 2026. Listens and views reached SEK 1.155 billion in the quarter, up 4% year-over-year, that's an acceleration from 2% growth we had in quarter 2 this year. Average revenue per listen or view increased 20% year-over-year to SEK 0.69. And that's in line with the record level we reached in quarter 2. So we have held the step-up in monetization while growing volume. And as always, our focus is on the value of each listen and view, not volume alone. Net sales reached SEK 802 million in quarter 3, up 25% year-over-year. And that's our highest ever quarterly revenue, above the previous record of SEK 776 million in quarter 2. Organic growth was 18%. The difference reflects acquisitions contributing SEK 32 million, of which Backyard Ventures, SEK 28 million and Wake Word Studios, SEK 4 million and also a modest positive FX effect. Backyard is included from the middle of August. So this is the first time you see it in our numbers. Gross profit increased 25% to SEK 314 million, also a new quarterly record. Gross margin was 39%, in line with Q3 last year as gross profit grew in line with net sales. Margin has held at 39% to 40% in every quarter except Q1, which is seasonally lower at 37%. Looking at our segments, North America is now our largest segment with net sales of SEK 384 million, up 54%. Organic growth in North America was 41%. And as we just mentioned, in August, we acquired Backyard Ventures, which contributed SEK 28 million in the quarter, and there was also a small FX effect. Contribution profit almost doubled to SEK 72 million, and contribution margin expanded to 19% from 16% a year ago. North America accounted for the large majority of the group's SEK 160 million net sales increase. Europe grew 5% with 3% organic growth to SEK 362 million. And that's a more modest quarter after 25% in quarter 2 for 2 reasons. First, Europe is up against a tough comparator. It grew 27% in Q3 last year, our strongest European quarter of 2025. Second, Q2 this year was unusually strong, partly supported by advertiser activity around the World Cup. Contribution profit was stable at SEK 78 million with a margin of 21%. So profitability held while growth normalized. Other markets grew 18% with 12% organic growth and contribution margin improved to 15% from 11%. So all in all, strong momentum in North America, a steadier Europe after a strong Q2 and against a tough comparator and margin expansion in both North America and other markets. At group level, adjusted EBIT came in at SEK 52 million, a 6% margin and our highest ever. That compares to SEK 18 million and 3% a year ago, so almost tripling the absolute EBIT and doubling the margin. Adjusted EBITDA margin was also a record at 10%. The improvement reflects continued revenue growth, combined with operating leverage across the cost base. On a last 12 months basis, adjusted EBIT reached SEK 129 million, up from SEK 2 million a year ago with the margin at 4%, up from 0%. And for the first 9 months this year, adjusted EBIT was SEK 88 million compared to minus SEK 15 million last year. Operating cash flow for Q3 was SEK 22 million compared to SEK 20 million last year. But the underlying picture is stronger and cash flow before working capital was SEK 83 million, up from SEK 26 million. Working capital was an outflow of SEK 62 million compared to SEK 6 million last year, and this is mainly a timing effect. We paid the creators in Q3 for the record Q2 sales. Operating cash flow for the first 9 months was SEK 111 million compared to minus SEK 5 million last year. And on a last 12-month basis, it's SEK 178 million. And we closed the quarter with a cash position of SEK 479 million, giving us the flexibility to continue investing behind our growth strategy. And with that, I'll hand it back to Greg for closing remarks. Over to you, Greg.

Thank you, Anders. So the key takeaways, another record revenue quarter. North America is now our largest segment. Omnichannel is accelerating, and we've recorded record profitability. Thank you.

[Operator Instructions] So starting off with a number of questions from Andreas Joelsson at Carnegie. Do you see any change in advertiser behavior going into the second half of 2026 and into 2027 besides the evolution to omnichannel strategy? Also, what does it mean more concretely for you given this change? And what is the biggest challenge for you, both from a marketing perspective and a technology perspective?

Thanks, Andreas. I'll take this one. It's a great question. Omnichannel isn't a thing that advertisers call us up and say, "Hey, we'd like to buy omnichannel." What's happening now is they're realizing that podcasters -- podcast creators are building these communities that they want to participate in. So we find -- what's interesting is we're getting brands that are not saying, "Hey, we want to buy impressions in podcasting." They want to surround a creator's community. A good example might be we have a show in the U.S. called The Best One Yet, TBOY, 2 finance guys. We actually have a sponsorship on that show for Liquid I.V. because they do a run club. Whenever they go to a new city, they do a run club. So you can do things like sponsorships for live events that sort of start in a podcast and then move to the real world. So we're excited about omnichannel. It's not a thing that people buy, but it's a community that they tap into, if that makes sense.

Great. Another question from Andreas. What is the main hurdle for you to convince advertisers to allocate more spending to podcasts versus other channels?

Well, the good news is we know the hurdles. The main one is fragmentation and confusion. I think any frontier market like this, I think podcasting is still evolving with the advertisers. So the biggest hurdle is just solving their problems. And that's what we've been doing for the last couple of years, spending time with big brands, figuring out what they need to be able to participate in our industry. We know we can drive outcomes for them. We can sell soft drinks, we can sell cars, we can sell movie tickets. So it's just a matter of connecting the dots and solving the transactional problems that the larger advertisers have.

And another one, what type of investments do you need to do in order to be prepared for this omnichannel evolution? Not really a new shift. So what is left for you to solve or deal with?

Kind of a similar answer. We've been laying these train tracks for the last couple of years. We've been making these investments. And a good example is we started our work with Apple HLS, I think, 22 months ago. So we've been making these investments, and now it's time to harvest the results.

And what does it mean for Acast that more and more video platforms such as Netflix, for instance, that are not really advertiser-funded offerings offer more and more podcasts. How do you see the risk that the funding of podcast becomes more and more revenue share based sort of sharing subscription revenue rather than advertiser funded?

It's a good question. It's also not a major concern for us. We've watched the last couple of years. I think a lot of companies, and this is not a shot at Netflix specifically at all, but I think a lot of media companies look at podcasting as a pretty easy way to make money. If you're Netflix or Amazon Prime and you're creating content, it can be very expensive. And if a show that you paid a lot of money to produce is not a hit, that can be a disaster. So you look at podcasting and you can fund a couple of hundred podcasts and hope for a hit. So I think people think it's easy to do. It really isn't. We've seen some people try and then back away from podcasting. And then as far as subscriptions, our belief is because of the way the podcast community works, it's much more of a meritocracy for listening and viewing. I know most people have dozens and dozens of podcasts that they go in and out of. So I think there's a little bit of subscription fatigue with the streamers, and I think the same thing is going to happen with podcasting. I don't see a world where somebody is paying several bucks a month for 60 podcasts. So we think it's going to be an ad-supported medium, and it's going to be a meritocracy to hold on to your audience, you have to earn it.

Great. You've accelerated the number of listens growth in the quarter. Is that from the acquisitions? Or have you expanded the footprint organically also?

Good question. I think it's a combination of both. We have a new Head of Content this year and Jenny Kaplan that came to us through the Wonder Media acquisition 2 years ago. And we've really been focused on using our podchaser data, bringing all the tools we have at Acast to bear, not just on the ad community, but on our creator community and how we think about acquiring new shows and new listings. So growing listens isn't necessarily a priority as we've been talking about the last few quarters. We want to get better at selling the inventory we have. So it's exciting when both of those things happen in the same quarter.

Now we have a few questions from Martin Wahlstrom at SB1 Markets. Any impact from the Spotify skip ahead button, CPM pressure, skip rates increasing, et cetera? And do you see an elevated risk in relations with Spotify and others related to this?

No. In fact, we reached out -- this news broke, I think, the Friday before a big podcast week in New York City, where we were asked about this on stage quite often. So it dominated the news. We think it's a nonissue. We actually supported Spotify in the trades because I think the story got a little bit overblown. Podcasting was born with a skip button. From day 1, on every platform, you've been able to skip ahead. And we've still created a really, really high-value platform for advertisers. So we think this is sort of not really a new story. Everyone is going to experiment with different things. But again, you've got to hold your audience, people have always been able to skip ads and we still drive great outcomes. So we think not much of a story. And again, I've said this before, but our relationship with Spotify has never been better. I think as we focused on what we're focusing on and they focused on what they're focusing on, we've become even better partners. So probably as strong as the relationship has ever been.

And OpEx growth adjusted of minus 11% year-on-year, a slight pickup from H1, but still distinctly lower than top line. Any comments on costs into Q4?

Yes. Thanks for that question, Martin. So I mean, the increase is mainly driven by a higher number of employees through both acquisition and new hires. And I mean, Wake Word and Backyard Ventures added 33 FTEs. And we will keep on investing in sales and product capacity, but at a pace materially slower than revenue growth. And we don't really guide on cost by quarter, but historically, Q4 has been our seasonally strongest quarter.

Any additional comments on the backyard contribution in the quarter? Happy, not happy expectations going forward? And does it compare to the rest of the business in terms of seasonality?

Yes. We're extremely happy. I think it's easy to buy companies. It's hard to assimilate them properly. And Matt Cisneros and John and Kevin, they've built an amazing team. We call them -- it's now Acast Austin, so now it's a regional hub. And we've spent the last several months assimilating them into the business. So it's going really well. They've got regional relationships that Acast didn't have. They're experts in selling newsletters, baked in YouTube, things that we were getting better at and vice versa. They were looking at building technology over the next few years. Well, we've been able to accelerate that. So their 200 creators are benefiting from Acast data and technology, and we're benefiting from their regional expertise, newsletters and YouTube. So it's been great. They have a wonderful culture, and we couldn't be happier.

Questions from Derek Laliberte. Europe's organic growth slowed quite sharply from 3% -- sorry, 2%, 3% from 26% in Q2. You mentioned tougher comparisons and the World Cup-related advertising activity in Q2. But could you elaborate on how much of the slowdown reflects these factors versus underlying demand? And are there any particular markets driving the weakness such as the U.K.

Sure. I think either one of us can take this, but I'll just -- the comps in Europe, both Q2 for us, Q2 '26 and Q3 of last year made for difficult comps. I think the World Cup isn't an excuse. I just think it's a massive gravitational pull in the marketplace. A lot of money gets absorbed in Q2, and we were the beneficiary of some of that. Then the summer is kind of the activation. I think any time you have a World Cup, particularly in the U.S., there was a lot of interest around it. So we see, again, not Acast looking forward, but we see the ad community in Europe seems to be from all the prognosticators that the ad community has returned in Q4. So it looks like it's back to normal and Q3 was a bit of a blip for Europe.

Looking beyond the quarterly volatility, how would you characterize the underlying demand environment in Europe currently? Have you seen any changes in advertiser behavior or bookings entering Q4? And should we expect growth to recover towards the levels seen earlier this year?

I think that's the same answer, not Acast specific, but the general theme in the market seems to be that Q3 was an anomaly. Q4 is back to normal.

North America accelerated to 41% organic growth from 37% in Q2, which is particularly impressive given the tougher comparisons. Could you elaborate on what's driving the acceleration? Are you seeing stronger underlying market demand, continued share gains or improved monetization?

I'm happy to say it is all of the above. I think in the presentation, you heard me talk about our technology and our people. I think North America, in particular, we have amazing leadership that has been building relationships with the ad community at an extremely high level. I think because we're global, we're spending a lot of time with global decision-makers at the holdcos, with clients directly. It's a matter of how many and how often can we get there. So we talk a lot about revenue-generating activities and having people out in the marketplace with solutions for advertisers. And there's no end in sight. There's lots and lots of upside for us in doing that. So I think it's the people. Laura Hagen is our EVP, who runs North America now with fantastic senior relationships. And then our technology, we're just making it easier to buy. Podcasting for 15 years was extremely difficult to purchase, and we've just made it easier and easier to do. We've been using our data and Acast intelligence to get a lot smarter with matching brands to more shows. So all of those things just create a real flywheel momentum.