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Thank you. Good morning, everyone, and very welcome to Readly's Q2 presentation. My name is Mats Brandt, I'm CEO of Readly. And with me here, I have Johan Adalberth, our CFO. Let's go straight into the highlights of the quarter.
Next slide, please. We delivered a quarter with significant result improvements and total revenue growth of 30%. We have consistently improved the results for the last 5 quarters and are tracking towards profitability. We are executing in line with the strategic direction to drive sustainable growth, and we anticipate further positive impact from this shift during the rest of the year.
Our subscriber base grew by 6% compared to the same period last year. We expected a lower subscriber growth as we have further reduced marketing spend also in this quarter. We will continue to further optimize our marketing investments ahead given that and that the macroeconomic slowdown probably also had some impact on growth, we are satisfied with the quarter.
Since the spring, we have implemented price increases for new subscribers in selected markets, and we now see early indications of good acceptance on this. Since the beginning of the third quarter, we have also started to adjust prices in most markets. It was also a good quarter in terms of adding new content, and I'm very pleased that we now signed agreements with 2 of the largest magazine publishers in the U.S.
We have now launched a podcast feature that enables publishers to share their podcast on Readly's platform. At this time, we offer podcast from publishers in both U.K. and Sweden. I will come back to this later in the presentation. So all in all, we continue to show significant result improvements on our path towards a positive EBITDA while we continue to grow content and further invest in product development.
So with that, I would like to hand over to Johan to take you through the financial highlights. Next slide, please.
Thank you, Mats.
So then we're on Page #3. If we start on the top, we see our revenue development for the past 5 quarters. In Q2, total revenues was SEK 144 million, which is up 30% compared to Q2 last year. The French acquisition contributed with some 16 percentage points, which means organic revenue growth was 14% and 8.5% adjusted for FX. ARPU, average revenue per user, was SEK 97 in Q2. This is up SEK 6 compared to Q2 last year. I expect ARPU to increase further this year as an effect of our price increases.
On the bottom chart, we see the number of fully paid subscribers, FPS, that was 447,000 at quarter-end. This corresponds to a year-on-year growth of 6%. As we have communicated and as Mats mentioned, we did expect lower subscriber growth as we have continued to reduce and reallocate marketing spend in line with our focus on reaching profitability. In Q2, marketing spend was below SEK 20 million, and this is down 60% compared to Q2 last year. Also compared to Q1, marketing spend was reduced by 1/3 from SEK 30 million in Q1.
Next slide, please, Page #4. On this slide, we see the revenue contribution from our 4 core markets and rest of world combined. The DACH region continues to perform well. Net sales in Germany was $49.4 million, corresponding to 18.3% year-on-year growth, 14.5% adjusted for currency. We continue to see good growth opportunities in Germany, our largest markets. The U.K. grew 8.3% to SEK 27.7 million, 3.2% adjusted for currency. Sales in Sweden was flat compared to last year at SEK 24 million. The lower growth in the U.K. and Sweden was mainly a consequence of the lower marketing spend. However, we continue to see good growth potential, especially in the U.K., where we have a very strong content portfolio. The development in France was stable, and sales amounted to SEK 17.5 million.
Next slide, please, Page #5. On the top chart, we show gross profit and gross margin for the past 5 quarters. Gross profit in Q2 was SEK 48.8 million, and this is up 30.8% compared to Q2 last year. The gross margin was in line with previous quarters at 33.8%. I do expect gross margin to improve towards the end of the year, and we may hit our financial target of 35% gross margin already in Q4 this year despite this target is set for 2025.
On the lower chart, we show gross contribution. Now this stand gross profit minus all our marketing expenses, which was SEK 29 million in Q2, corresponding to a margin of 20.1%. This is an all-time high number for us and compared to Q2 last year, an improvement by more than 30 percentage points. And we now have 5 consecutive quarters with improved contribution margin supporting our path to profitability.
Next slide, please, Page #6. On this slide, we show adjusted EBITDA figures. Also here, we continue our positive trend with 5 consecutive quarters with improved EBITDA margins. During the second quarter of last year, adjusted EBITDA amounted to minus SEK 51.5 million or minus 46.5%. Now in the most recent second quarter, adjusted EBITDA was minus SEK 19.7 million, corresponding to a margin of minus 13.7%. This means we have improved adjusted EBITDA by more than SEK 30 million in just 1 year, and the EBITDA margin is approaching single digit numbers, perhaps already in Q3. We're expecting to see an impact on the cost measures that was communicated on 31 March.
Last, I want to mention that we still onboard staff in the product and tech departments to further accelerate our shift towards becoming a true product-led company, and this will have an effect on personnel costs in Q4 and beyond. All in all, we are on track on our path to profitability, and we expect to reach positive EBITDA figures latest in 2025 in line with our financial targets.
Now back to you, Mats.
Thank you, Johan.
Next slide, please, Page 7. So as I was on to the introduction, we can report recent exciting development in the U.S., the world's largest magazine and newspaper market. We have signed agreements with both Dotdash Meredith in June and Hearst Magazines in August, which are the leading magazine publishers in the U.S. Our content is hereby mustered with a portfolio of iconic magazines such as People, Allrecipes and Better Homes & Gardens as well as U.S. editions of Esquire, ELLE, Cosmopolitan. We will now review our growth potential in the U.S. market and these publishers have an impressive reach of about 200 million people. It is worth pointing out that we're also adding value to our readers of international content across all our markets through this.
Next slide, please, #8. In the quarter, our content portfolio grew by 18 new publishers and 176 new tiles. Our newspaper catalog is expanding, as we pointed out in the last call, this drives usage frequency and also discoverability of magazine titles. One of the leading weekly newspapers in the U.K., The Week, is now available on our platform. It has a reach of 400,000 readers.
In Sweden, we have added Coop Mer Smak, which reaches over 1 million readers. We have had a close collaboration with Coop for many years, both through projects to promote [ minimal, in general ], but also through an integration with Coop members, collect bonus points on Readly.
So it is great to see this partnership evolve, especially since we have a joint ambition to allow readers to choose digital format for sustainability reasons. Many of our subscribers sign up for Readly because they also want to reduce their paper consumption. Lastly, I'd like to highlight a record number of added Readly exclusives in Germany, 3 publishers, Klambt, falkemedia and Heise Medien, have decided to publish 45 exclusive titles on our platform during the second half of this year. Readly exclusives are popular among our readers because the times are often repackaged with the most popular and evergreen content from previous issues.
Next slide, please, #9. Our network of partners continue to perform as they promote and distribute our service in their marketing and sales channels. During the last couple of years, we have seen a growing share of our subscribers -- of our subscriber base being generated through partnerships, which is very positive for sustainable growth. They serve as an important channel of cost-efficient growth and enable further steps to optimize marketing. Part of the success factor is our ability to customize the offering to fit different target groups of all ages and interests within Readly's wide choice of content. And that is also why we place so much emphasis on extending our already substantial content portfolio even further.
During the second quarter, we launched 15 campaigns with new and existing strategic partners. We have seen continued good traction in the travel sector, where Readly is promoted by Virgin Group's loyalty program, Virgin Red, and the travel company, TUI, as part of a summer travel campaign in the U.K. In Germany, the charter airline Condor is integrating Readly in several touch points, such as boarding passes and confirmation pages.
The telco industry is another strategically important segment in which we continue to add partners. This quarter, we have signed agreements with Vodafone, who promotes Readly in their loyalty program VeryMe. German mobile network operator congstar with over 5 million subscribers and a subsidiary, Telekom Deutschland, now also offers Readly to their customers.
Next slide, please, #10. As I mentioned before, we're extending our offering now with audio and have launched 37 podcasts in collaboration with leading British publishers such as BBC, Good Food and The Guardian and 5 Swedish publishers such as Offside podcast and Filterpodden. With the podcast, we will improve the value we bring to publishers and subscribers. Our aim is to increase engagement and strengthen the content experience as well as enabling new usage patterns. This is the first step into audio, and we expect to get great use of behavior insights to also share with publishers on how audio can complement and enhance the reading experience, then also expand further offerings within audio going forward.
Next slide, please. So to summarize, this was a good quarter with significant result improvements and good revenue growth of 30%. This proves that we continue to take important steps towards profitability. As we reduced marketing spend substantially, this affected subscriber growth. But as I said earlier in the presentation, we have taken several initiatives to support sustainable growth going forward. We know the early good signs of acceptance for the price increase, and we're looking forward to giving you an update on further progress in the next earnings call. The publisher agreements in the U.S. will substantially strengthen our position in that market, but it will also add a lot of value for English regions across all markets. We continue to invest in product development to enhance the reading and discovering experience and to accelerate sustainable growth. So finally, I want to reiterate the transition to becoming a profitable company is proceeding well.
So with that, let's open up for questions. And next slide, please.
[Operator Instructions] The first question comes from Derek Laliberte from ABG.
So I think it was great to see overall sales growing in line with your updated target and also great to see margins improving, but still a bit concerning that subscribers sort of continuing to decline here on a sequential basis. Do you expect this trend to reverse at any point in the future? And when would that be?
Derek, thank you for the question. We are not satisfied with the FPS growth quarter-on-quarter. But that was very much expected for the reasons that we've been talking about, primarily, the significant reduction in marketing spend. But it's important to note that we have the flexibility to adjust this. And as we look to growth potential, and we've been mentioning here DACH, where we see a lot of further growth potential. We have the ability to change this relatively quickly.
But also looking a bit further ahead, we are about to launch in France during the later part of this year. And with the new addition of the U.S. content, we see a lot of opportunities to leverage growth going forward. And finally, I think it's worth mentioning the investments that we do in product development, podcast being the obvious one that we talked about today. But that will, over time, certainly help to bring us back to better FPS growth.
All right. Sounds good. And on the price increases here, you mentioned -- I mean -- and we've seen that you've made some additional changes after the end of Q2. Have you introduced everything that was planned now? Or are there more price increases on the horizon as you see it right now?
We have started to roll out price increases across most markets, but we are not through because this is implemented gradually. There is no plan to further increase beyond the plan, but the full impact is yet to be seen. As I mentioned before, we have early signs of good acceptance to this, but we're humble to that -- the macroeconomic situation is a challenge. But so far, we are in the early stage of seeing the impact of the price increases. But we follow the plan and have no reason to change it.
Okay. Great. And with regards to Sweden, here, you mentioned previously that you were entertaining some discussions with publishers about adding some attractive content. Is there any update on that front?
Nothing really that we can share here now. The only thing I can say that we are progressing, and it's looking promising.
All right. All right. And if I may also on product and innovations here, what should we expect going forward here in terms of improvement following this introduction of all your functionality? Is there anything else that you're planning in addition to the podcasts? And perhaps also, if you could say a few words on the reception amongst your subscribers so far to these new features?
Yes. We don't share any data on the audio because it's early days. But obviously, that is a big, strategic addition to how we expand to enhance the reading experience. But also we gather data to help us to -- with publishers discuss not only within podcast, but how we, in audio, can expand going forward. What's worth mentioning here is all the incremental improvements that happens at a faster pace now to continuously improve how subscribers discover [ and consume ] our product. That is -- there is nothing in particular I want to highlight there, but just to drive home the message that the pace is increasing.
Great. Great. And finally from my side, given the clearly deteriorating macro situation, what are you experiencing and seeing on your side in light of this? Or is it too early to see any signs amongst sort of the consumer behavior here?
Derek, I think it's obvious, I mean, the lack of visibility that we see in the market. And I mean in this climate, we are respectful of shareholders' money. So we will keep monitoring the macroeconomic factors and then be aware of the low visibility. So there's nothing really I can say, just we keep monitoring this and are being cautious with our money.
All right. It's understandable. Okay.
[Operator Instructions] Our next question comes from Kristoffer Carleskär from Handelsbanken Capital Markets.
So I think Derek exhausted most of my questions actually. But if we start with marketing, you've only, if I put that away in quotation marks, spent SEK 20 million in the quarter, which is a reduction of roughly 60% year-on-year, I presume. Just curious how sustainable is this level? I mean you've mentioned France and U.S.A. as a possible driver, so I would expect that level to come up a bit. Is that a reasonable line of thinking, that SEK 20 million is a bit low?
Yes. Kristoffer, yes, I mean, first of all, what we always do is that we monitor lifetime values over acquisition costs. So I mean we spend money based on the return that we want to see. What I think I said before was that you could expect maybe half the spend that we had last year, and that was like SEK 50 million a quarter, meaning 25-ish. So perhaps you can expect slightly higher spend levels. But it's also depending on which opportunities we see. I must mention now we see opportunities in the U.S. We see further opportunities in our current core markets. France could be a big thing for us depending on how well we succeed there. So it depends on which opportunities we see. But absolutely, I think it was SEK 19.8 million marketing. It was a long time ago. We saw no figures like that. So of course, you can expect that to be higher.
And I would like to add to that, that as we've been talking about a couple of times in this call, our investment in sustainable growth. And what we expect that the partnerships will be able to deliver indeed a lot more and that's a cost-efficient channel. So I think it's important not just to compare krona for krona, so to speak. But the yield we are managing to get out of it, we see our unit economics improving significantly.
Right. If I may follow up on that one. We see, as Derek mentioned, these subscriber losses accelerated in the quarter. And so -- and you had mentioned in your -- especially the CEO [ word, right ], there's much down in Sweden and the U.K., I guess, to lower marketing spend. So I'm just curious if you have like a percentage of sales that you believe that you need to spend on marketing going forward to be able to, I mean, sustain that customer base, that you don't lose customers, you have to keep it flat. Do you have that? Any commentary on that?
We don't have a specific number. I mean as I've said here, there is low visibility and therefore, we're being cautious. I mean we continuously monitor this. And of course, I can reassure you that we are not happy with the decline in the FPS number. We have our focus very clear. The strategic direction is to grow organically with help from the product and also from partnerships, so that is clear. But I mean we don't know what the macroeconomic is going to look like. And nobody does, right? So the visibility is low, and we act accordingly upon that. We're not happy with the FPS growth. We always want to grow more, right? But it's too early stages to say what's going to happen with the economy, especially in Europe.
But I think it's also worth adding here that the investments we make and the additions we -- in product development and the additions we have made in on-plant and the launch coming up in France, we do see opportunities to definitely grow at a different pace. But these changes will not happen overnight. But in the next few quarters, we expect to see a good return on that.
Got it. And if I may turn to the cost side, we know that you have said that savings should materialize to a larger extent from Q3 onwards. Could you just mention -- or maybe you did, I may -- maybe I missed that. Did you have anything, I mean, worth mentioning in terms of cost savings in Q2? Or will it fall into Q3?
Yes. As we said, I think last time, this is due mostly on the second half. I think Q3 naturally is lower spending months. I mean there are fewer consultants working during Q3, for instance, as there is a summer effect. But I do also want to reiterate that we -- I mean, we put the gas and the brake on at the same time, right? So we are slowing down the marketing activities. We'll make sure the yield even better than before. But at the same time, we do invest in our staff to become a truly led -- product-led company. And that means that we still onboard people within tech products, analytics and more. And that will also mean that we will have cost increases for those departments. And at the same time, we have reduced elsewhere. So it is a bit of a mix, and it's sometimes hard to follow -- to hit the gas and the brake at the same time, but that's what we're doing, if that makes sense.
Got it. And final one for me also on the cost side. I mean now we're seeing your organic growth rate slowed down to both 8.5% here, excluding Toutabo and these VAT and FXes on. So which is clearly behind the 25% target you have for the CAGR for the next 3 years, right? So in light of that, it sounds like you need to save your way to EBITDA breakeven in 2025. And we know that you have the cost savings program for this year. But so then -- I mean, expect you to also have a savings program in 2023, 2024, to actually make your way towards that EBITDA breakeven in 2025.
Yes. Like I said, I mean, due to the lack of visibility now, it's too early stage to know anything and predict the future. We continuously monitor this. We continue to have discussions in the leadership team to see what the right direction is to go. Right now, I don't see any need for further cost reductions, especially not when it comes to staff. I think we're good where we are, where we continue to onboard staff in product tech, analytics. But we will see what the macroeconomic will look like.
What Mats mentioned here before is that we still have not seen even the beginning of the effect of the price increases. I mean you need to -- as you have been with us for a while, it's 10 years really now with continuous pricing. And now for the first time, we increased prices 20%, even 25%. And that will have an effect. That will impact revenues going forward, even though we experienced a slightly higher churn, especially during the first months commencing a price increase. So we are proceeding according to plan, perhaps even a little bit better, even though it's early stages. So we keep monitoring this and are happy the way it looks like now.
Our next question comes from [ Stefan Hansen from GBC ].
A question on the price increases. As I understood it from the report so far, you only introduced the price increases in the U.K., is that correct?
No, it's not correct. Then, of course, there are different steps here. We do thorough testing that was commenced already in Q1, then we increased the price for new customers. And finally, we test and then increased prices for existing customers throughout the markets. So as of today, we have increased prices for both new and existing customers in almost our 12 markets. I think 1 or 2 markets may remain. So the vast majority is already on the higher price points, but it is a natural lagging when it comes to pricing because we do send out offers, providing a lag in this. So you shouldn't expect the full impact on price increases until Q4.
Okay. And could I ask you on the podcast investments you're making, is that mainly a sort of better service to your customers? Or is it something that you're going to generate revenues on as well?
At this stage, it is very much the first. It's extending the offering, enhancing the reading experience and also gathering insights of how to take the next step within audio. But clearly, there is an ambition to monetize this, but exactly how, it's something we need to come back to.
What we -- what I'd like to add to that is, generally, the interest for podcast is very big, and we see a lot of interest and inquiries from publishers on how we can sort of expand on this. But it's an early stage at this stage. But we're happy with being out with this into core markets at this stage.
Yes, I can only second that and then perhaps add that the overall -- I mean, the goal that we have within product development is to increase engagement because we know that high engagement correlates with high retention. So this is the hero metric that we steer all our product development towards. And we know that audio functionality most likely, through our testing, will drive engagement, and that correlates well with high retention and lower churn. So this is what we steer all our development towards, to improve the engagement figures.
Okay. And then on the cost reduction, you were talking about, as I recall it, a cost reduction of about SEK 16 million, is it still -- is this still in the cards? Or is -- have you reviewed that plan?
Yes, we constantly review and adapt our spend levels. If you look at the cash flows from the second quarter, I think that was minus SEK 17 million. Of course, we're not happy with those levels. But if you compare it to last year, it's a huge improvement. And last year, if you look quarter-on-quarter, we had a cash burn exceeding SEK 50 million. So we're down already at levels which are much more sustainable than they were in the past.
If you look also in the financing activities, for instance, we still pay off loans, I think about SEK 6 billion, SEK 7 million in Q2. That will go away already in, I think, early Q1 next year. So then you're down to a cash flow all else equal to SEK 10 million a quarter. And that's, I mean, a huge difference compared to the past and this also gives us flexibility. And it's what I tried to explain before, it is about putting the brake, but also the gas at the same time. So we will invest in things that we think [ will yield ], drive engagement, look at opportunities in the U.S. and elsewhere. France is interesting. But at the same time, we also need to reduce costs in areas which are not being critical at this stage to monitor that we make the money that we have left. We still had about SEK 250 million at the end of Q2. And looking at the cash flow, we have flexibility. So I think our situation is in this tricky landscape. It could be much, much worse, I can say.
And on the U.S., could you be a bit more specific on what your plans are there?
At this stage, no, besides just emphasizing, it's the world's largest market. And competition is steep, but we also have a very strong international content, so we're looking at how we can leverage that. And again, I'd like to reiterate that it's not only the expansion possibility in the U.S., but the strengthening these additional titles brings to all readers, all English readers across all our markets. So we are revisiting on how we will ramp up in the U.S.
Okay. And really impressive what you've done so far.
Thank you, everyone. That does conclude our question-and-answer session and also our conference for today. Thank you all for participating. You may now disconnect your lines.