Deezer S.A. (DEEZR) Earnings Call Transcript
July 29, 2026
Earnings Call Speaker Segments
Hello, and welcome to Deezer's 2026 Half Year Results Presentation. Please note, this conference is being recorded. [Operator Instructions] I will now turn it over to your host, Alexis Lanternier, Deezer's CEO, to begin today's conference. Please go ahead.
Good morning, everyone, and thank you for joining us for Deezer H1 2026 Results Conference Call. Moving on to Slide 3. Today, Carl and I will present Deezer H1 2026 results. I will start with the key highlights of the year, and Carl will then go into more details on our half year performance. After that, we will discuss our 2026 outlook. At the end of our presentation, we will answer your questions. Moving on to Slide 4. The first half of 2026 marks another important step in digital transformation. We are delivering sustained direct growth, strengthening our competitive differentiation and demonstrating that profitability is becoming structural. Revenue came in at EUR 268 million in H1, up 0.4% year-over-year, in line with our plan. This performance was driven by the continued strength of our direct business. Direct revenue grew 6.7% year-over-year, supported by subscriber growth, both in France and in the Rest of the World. Our direct subscriber base reached 5.8 million, up 8.7% year-over-year, with France growing 8.4% and the Rest of the World growing 9.2%. In Partnerships, revenue stabilized sequentially in Q2 after several quarters of decline. This is an encouraging signal as new commercial initiatives ramp up and the impact from ended partnerships progressively fades. Profitability also continued to improve. Adjusted EBITDA reached EUR 8.5 million in H1 2026 compared to EUR 2.1 million in H1 2025, representing a EUR 6.4 million improvement year-over-year. This reflects strict cost control, continued marketing discipline, while our adjusted gross margin remained at a high level. We also delivered positive net income of EUR 6.7 million compared to a loss of EUR 7.6 million in H1 '25. This shows that Deezer is becoming structurally profitable, reflecting the strength of its operating model and disciplined execution. Finally, we generated positive free cash flow and ended June with a strong cash position of approximately EUR 100 million. This gives us the flexibility to continue investing selectively in future growth while maintaining financial discipline. Let's now spend a few minutes discussing the key business highlights of the year. Moving on to Slide 6. In H1, we continue to innovate to support artists, music lovers, and their ability to connect. This is directly supporting our direct subscriber momentum. On one side, we continue to invest in our AI detection technology as a threshold of 90,000 AI-generated tracks per day has been crossed, representing more than 50% of the total daily deliveries. We believe this confirms the importance of our proactive approach to protecting users, artists and the music ecosystem. Second, we continue to give music lovers more control over the listening experience through Flow Tuner. Flow Tuner allows users to fine-tune their recommendations in real time through genres and sub-genres. The idea is simple. Recommendation should not be a black box. Users should be able to shape their flow, adjusting it to their mood and discover more music in a more transparent and user-led way. Third, we launched Remix Lab in France, directly integrated into Deezer Club. This is a world-first in-app remixing experience that puts fans at the center of the music experience. Users can reimagine tracks from participating artists with prior artist approval, full rights compliance, and artist compensation built-in. Remix Lab includes tracks from major participating artists such as Céline Dion, Tiakola, and Orelsan, making the feature both highly visible and culturally relevant. Importantly, streams generated by remix versions are attributed to the original work and artists, as a result, are compensated. Together, these innovations strengthen user engagement, reinforce the differentiation, and support long-term subscriber growth. On the B2B side, we revamped our partnership offering under Deezer for Business, a more unified platform bringing together our existing and emerging B2B solutions. This is an important step in the evolution of our partnership strategy. For more than 15 years, Deezer has helped brands use music to create differentiation, drive engagement, and build stronger customer relationships. With Deezer for Business, we are making this offering more structured and more scalable across multiple use cases. The platform is built around 5 growth engines. First, Deezer for Partners, which integrates Deezer into consumer offers through bundle and distribution partnerships. Second, Deezer Music-as-a-Service, which provides our licensed catalog and streaming technology for a white label music experience. Third, Deezer for Advertisers, our premium audio advertising solution across Deezer and partner audio environments. Fourth, Deezer for Professionals, a turnkey music and audio solution for commercial spaces. And fifth, Deezer AI Detection, which makes our proprietary AI music detection technology available to the broader music ecosystem. Together, these solutions are powered by Deezer's core assets, a premium licensed catalog, scalable streaming technology, proprietary AI detection, and more than 15 years of industry expertise. Our objective is to leverage these assets to move beyond standard distribution and progressively build a broader B2B music platform with multiple revenue streams. Moving on to the next slide. In the first half, we also saw encouraging momentum across partnerships. This was supported by continued execution on distribution partnerships. We renewed strategic agreements with partners such as TIM, Itaú in Brazil, and signed new deals with partners including KPN in Netherlands, m:tel, Virgin Media O2, and Ornikar. These renewals and new signings confirm the resilience of our distribution model and the relevance of Deezer as a partner for consumer brands and platforms. At the same time, we continue to expand beyond standard distribution through new music services. In Music-as-a-Service, we renewed our existing relationships with Sonos and signed new partners such as Winamp. Under this partnership, Deezer will provide its white label music streaming technology and global music catalog, enabling Winamp to launch its own premium subscription offering as a native experience. This is a strong opportunity as more than 40 million people currently use Winamp desktop MP3 player. In H1, we also continued to expand our new offering, Deezer for Professionals, providing fully licensed music solutions to commercial spaces and brands. We signed new partners, among which Cote Sushi, Cash Converters, BuyMyCar, and Avril. Finally, in AI detection, we signed new agreements with rights organizations, including EJI and Buma/Stemra, in addition to our work with SACEM. This confirms the commercial relevance of our proprietary AI detection technology, while supporting our broader commitment to transparency and fair remuneration in the music ecosystem. Overall, this shows the 2 dimensions of our B2B strategy are working, maintaining momentum in distribution partnerships while expanding new revenue streams through music services and technology licensing. This concludes the section on business highlights. And now I will hand it over to Carl for the finance section.
Thank you, Alexis, and good morning, everyone. Let's discuss our H1 results and move to Slide 10. Our subscriber base amounted to 8.9 million at the end of H1. In this slide, we can see 2 separate trends. First, the continued positive momentum in Direct, which is up 8.7% year-over-year. Direct performance continues to be driven by steady subscriber growth in France, which reached 8.4% growth to 3.9 million subscribers. The Rest of the World sustained momentum, reaching 1.9 million subscribers, which is 9.2% growth, reflecting the success of our strategy. On the right-hand side of this page, the anticipated decline in Partnership subscribers due to the residual headwinds as the MeLi deal is still phasing out. Turning to ARPU. We can see several mix effects as ARPU in partnerships improved by 19% year-over-year due to our mix of deals and the positive results of our new strategy. While Direct ARPU slightly decreased 2.1% year-over-year on the back of the success of our family offers. Moving on to Slide 11. In H1 2026, we reported revenue of EUR 268 million, slightly increasing by 0.4%, in line with our expectations. If we look at the segment breakdown on the left-hand side of the slide, Direct revenue grew 6.7%, reflecting the continued growth of our subscriber base in France, offsetting the decline in the other 2 segments. As anticipated, Partnerships declined by 7.6% as Mercado Libre headwinds are phasing out. That being said, we saw stabilization in Q2 revenue and excluding Mercado Libre, this segment returned to growth. Other revenues declined by EUR 5 million in H1 and came to EUR 12 million due to the termination of a content licensing deal in 2025. Now turning to the geographic view on the right-hand side. In France, revenue increased by 4.3% year-over-year, supported by the solid momentum in Direct subscribers. In the Rest of the World, revenue declined by 5.4%, largely due to the MeLi impact and the aforementioned content licensing agreement. This was partially offset by the gradual ramp-up of other partnerships. Moving on to Slide 12. Adjusted gross profit amounted to EUR 66 million in H1 2026, a slight increase of 0.4% compared to H1 2025, benefiting from B2C and Partnership gross profit growth as well as optimization of terms that offset the decline in the other segment. Our adjusted gross profit margin is stable at 24.5% at the end of H1. Direct adjusted gross profit margin came at 26.7%, up 1.2 points, and Partnerships adjusted gross profit margin was at 22.6%, up 2.8 points, benefiting from a better mix. Moving on to Slide 13. During H1, we maintained strong cost discipline, reducing operating expenses by EUR 6 million year-over-year. This cost efficiency is structural and had a direct positive impact on the sharp improvement of our profitability over the period. Marketing and trials spend decreased by EUR 2 million, reflecting some optimization, including a greater focus on digital spend, but also a phasing effect, which we expect to reverse in H2. As a result, marketing expense represented 6.5% of revenue compared to 7.1% in H1 2025. In parallel, staff and G&A expenses were reduced by EUR 5 million, now accounting for 14.9% of revenue compared to 16.6% in H1 2025. Moving on to Slide 14. Our adjusted EBITDA improved by EUR 6.4 million, reaching EUR 8.5 million in H1 2026 as compared to EUR 2.1 million in H1 2025. Looking at the bridge on this slide, the key drivers behind this performance were the continued cost discipline with EUR 6 million in operating expenses reduction over the period, while maintaining our adjusted gross profit at the same level as last year despite the loss of a very profitable content licensing deal in 2025. Importantly, this reflects operating leverage in the business rather than temporary cost actions. Now turning to our cash position. At the end of H1 2026, we delivered a strong cash position of EUR 100 million compared to EUR 65 million in December 2025. Looking at the bridge, this performance reflects both the positive contribution from adjusted EBITDA at EUR 8 million and the change in working capital, EUR 31 million, including a significant one-off payment from a partnership deal. Excluding this effect, our cash position remains very robust and above full year 2025. Our net cash position amounts to EUR 95 million after repayment of EUR 3 million of the French state guaranteed loan during the period. The solid liquidity position gives us the flexibility to accelerate our selective investment in H2 to drive future growth. I will now let Alexis conclude on the 2026 outlook.
Thank you, Carl. Moving on to Slide 17. Looking ahead to fiscal year '26, we confirm our financial targets. First, we continue to expect fiscal year '26 revenue to be in line with fiscal year '25. This reflects our expectation of continued growth of our Direct business where partnerships are expected to progressively improve sequentially as the Mercado Libre headwinds fade and new commercial initiatives ramp up. In the second half, we will increase selective investment to support future growth, especially in areas where we see clear return potential. These investments will remain disciplined and ROI driven as we confirm our positive adjusted EBITDA target for the year. Lastly, we expect positive free cash flow for the third consecutive year. Our strong cash position at the end of June gives us the flexibility to invest while preserving financial discipline. So overall, our priorities remain clear, continue to strengthen digital differentiation, invest selectively to accelerate sustainable growth and maintain disciplined capital allocation. This balanced approach will allow us to deliver profitable growth while delivering positive adjusted EBITDA and free cash flow, while building a structurally stronger business. Thank you for your attention, and Camilla will now open the discussion for questions.
[Operator Instructions] We now have a question from Eric Ravary from CIC CIB.
First one is on the marketing spend. So I understand that you didn't launch any significant spend in H1, but you are waiting for H2 to move in some selective markets. Could you be more specific on the countries that you are targeting? I remember that you are considering Brazil, Germany, and the U.S.? Is it still the plan? Second question on strong cut in G&A in H1. Is it sustainable or is there an exceptional component there? And could you give us the number of headcount at end June compared with end 2025? And the last question was on working cap. So there is an exceptional component in H1. So are you expecting the working cap to reverse over the second half?
Eric, thanks for the question. In terms of marketing spend, so we always have a little bit of difference between H1 and H2. We invest slightly more in H2 because it's just more favorable to acquire new users. So that's the typical phasing we have. It's a bit more pronounced this year as we reduced a bit H1 because we saw last year that it was not as effective as what we can do in H2. And then in terms of the countries we invest in, so we are, as you know, very committed to France and Brazil. What we observed, though, is that we had quite significant growth in some other, mostly mature, markets. So you mentioned Germany, U.S., U.K. And so, as a result, we restarted to do very selective investment in the sense that it was mostly paid acquisition at bottom of the funnel, basically conversion investment. Overall amount is still very minimal compared to the rest of the marketing spend, and it's not planned to become something significant and it would still be very ROI driven.
And for your 2 remaining questions on G&A and the exceptional working cap impact. So on G&A, I think you're referring to 2 different things. There's the G&A as part of the IFRS P&L. Last year, we expensed a significant one-off related to a legacy data issue, which was fully resolved in between, and therefore, had a significant impact on our G&A, a positive impact this year, which explains the difference between last year and this year. When we look at the adjusted EBITDA and the way we look at G&A, I think this is the way to look at the structural improvement in our G&A spend year-over-year, which has been improved by more than EUR 2 million and which actually reflects the trend at which we're able to optimize our business and is sustainable, back to your question. When it comes to the headcount, our headcount as of Q1 and Q2 are more or less in line with last year. We've optimized and, as we said in the past, done significant effort to be more efficient in the way we deliver our objectives. But now we think we're at the right level. And therefore, you shouldn't expect significant reduction in the next few quarters. Coming back to your question on the exceptional working cap, there is naturally some normalization coming following the one-off payments. But we don't see any change in the underlying characteristics of the business. The working cap remains structurally negative, and we continue to expect renewed positive free cash flow for the full year. I think the way to think about it is we've always been able to translate EBITDA generation into free cash flow generation at the level that is now close to 100%. So that gives you a rough estimate of the free cash flow performance, excluding that one-off impact.
[Operator Instructions]
Thank you, Christophe, for your question. I think on AI detection, it's fair to assume that other streaming platforms have the skills in-house to develop it. It's an open question. I think, obviously, different types of DSPs, in terms of size, have different technologies. We can assume that GAFAM, of course, can develop that if they want. I think that's what we can assume. Did they develop it? We cannot know. They don't communicate on that. And Deezer is the only streaming platform that is communicating on what's happening on a regular basis. That is blocking the AI music to enter the recommendations to users and that is making it transparent on the platform when an artist is significantly AI. And those 2 elements are driven by the need or the wish to be transparent to users, which we know is a clear demand from our user base and is helping us differentiate Deezer as the true support for the music industry, artists, and the real music hub. So I think that was the first question. And thinking about fan offers, I think that's what we have started to develop and it's all embedded within the Deezer Club. Our thinking here is that we enable artists to offer exclusive experiences to users. We have started with private events, private concerts, free tickets. We have done a lot of presales, last chance sales of concert tickets. And now we are expanding to more digital offers, typically the one we were talking about with the ability to remix songs. So this is also part of the interaction between superfans and fans, by way of offers. So that's on the offer we do. I think the challenge is to scale is to bring -- it's on 2 sides. One on the scale side to bring, like, meaningful benefit. We have millions of users participating. We don't have yet millions of benefits to offer them. So it's really about the scale. I think the artists and the rights holders are all extremely motivated to do it. And maybe probably the subsequent question is how do we price it? And for now, there is no plan to do a supertier as we don't find that yet -- we don't have yet the benefits that justify it, and it will require quite a lot of, obviously, complexity. And so there is no plan there. So it's more about differentiating the brand, continue to position Deezer as the true house for connecting music lovers with artists. Second question, when you said the only DSP communicating on AI blocking, I mean other DSPs, I mean, they're not communicating, so we don't know what they do. I think there is a few -- there is one DSP, which is TIDAL, that tried to communicate about what they want to do, which is tagging AI songs, but I don't think it has been implemented yet. And then bridge between adjusted EBITDA.
Yes, so Christophe's question is the bridge between adjusted EBITDA and operating income, so EUR 6 million nonrecurring item, a positive item, what does it relate to? So this is actually, as I explained during my answer to Eric's question, the fact that last year, we booked a provision that related to a legacy data issue that had an impact on G&A. And this year, as we've been able to resolve that issue, we've actually reversed that provision. We had a significant positive impact on our operating income.
There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.
Thank you very much, all, for attending and looking forward to the rest of the year. We're happy to take any questions offline if necessary.
Thanks, everyone.
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