Truecaller AB

STO:TRUE B

Earnings Call Transcript 2024-Q1

[Alan Mamedi, executive]

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 here to announce our interim report covering the first quarter of 2024. Today, we'll start with overall highlights from the quarter and then walk you through our financial performance in detail. We'll then cover some developments on the product side before wrapping up and opening up for questions. So let's get started with the highlights of the quarter. I'm pleased to report that our user base continued to grow during the quarter. We closed Q1 with an average of 383 million monthly active users and an increase of 11%. Average daily active users grew to 314 million, an increase of 13%. Our growth during the quarter was almost equivalent to the population of Sweden. We closed the quarter at SEK 427 million in net sales, a 10% increase year-on-year. All 3 revenue streams contributed to the growth this quarter with consumer subscription and Truecaller for Business growing at a relatively faster pace. We continue to operate profitably with EBITDA landing at SEK 151 million at the end of the quarter and an EBITDA margin of 35%. Earnings per share landed at SEK 0.38, a 27% increase compared to the same period last year. We continue to have a very strong cash flow with SEK 114 million in net cash from operating activities before tax payments. We continue to grow our user base. And in the first quarter, we started to increase our investments. in our selected growth markets, which is starting to pay off. In Colombia and Nigeria, we grew our user base substantially with an annualized growth rate of 40% to 50%. Our investments in the U.S. are also starting to pay off. In the U.S., our main focus is to grow the number of paying subscribers. And in the first quarter, revenue from subscription in the U.S. grew by over 60% on a year-on-year basis. We're also pleased with the development of our premium business overall. The number of paying subscribers increased by 15% year-on-year, higher than the relative growth rate of our total user base. Truecaller for Business continues to develop well. And in the first quarter, we saw strong growth in terms of both revenue and the addition of new customers. We continue to see healthy demand for our enterprise products and the growth of our partnership with major players such as Airtel, Tata Tele and Tanla, have shown great results in terms of expanding market reach. We'll cover these in more detail in the coming slides. But we continue to see strong user growth, and we can -- and we closed Q1 at an average of 383 million monthly active users, which is up by 39 million from the same period last year or 11% increase. Our daily active user base continues to grow at a slightly faster rate. We ended the quarter with 314 million daily active users, which is an additional 36 million from the same quarter last year or 13% increase. Majority of our user growth is still driven by organic growth, but the fact that we see a particularly high growth in the markets that we are investing in continues to indicate that our investments in user acquisition are bearing fruit. We also continued to see strong retention and are proud that 82% of our monthly active users use Truecaller on a daily basis. We see this as an indicator of our product stickiness and the growing relevance of our services. Now over to Odd.

[Odd Bolin, executive]

Thank you, Alan. So it's time to look a little bit deeper into our financial performance. Starting with the revenue, net sales increased by 10% compared to the same quarter last year. All revenue streams contributed to the growth. Currency effects this quarter had some impact on net sales with a slightly negative effect, but the effect cannot be quantified precisely due to the indirect nature of our currency exposure. Ads income increased with the increased user engagement, newer ad formats and increased monetizable impressions. IPL, the Indian Premier League Cricket also started earlier this year compared to 2023, which had a substantial positive effect on ad sales versus the same quarter last year. Subscriptions continue to develop strongly with increased conversion and an all-time high ARPU. Truecaller for Business also continues to develop well compared to last year, strong intake of new customers and new partnerships with telco resellers was driving part of that growth. Business messaging and also increased volumes, and we get -- we started to get some smaller revenues from our new risk offerings. Now let's look in a bit more detail on the three revenue streams. And let's start with the largest one, ads. Our ads revenue grew by 10% compared to the first quarter last year. After a slow start, the performance gradually improved during the quarter and towards the end of the quarter, demand from the Indian cricket league – I mean, which I will talk more about on the next slide. General demand in India outside of IPL continued to be rather soft and it has been evident also in other companies' public reports where reported price per ad continued to come down. This holds true for all players working with third-party programmatic ads, where we have information. During times when demand decreases, suppliers as ourselves have increased supply to counteract the decreased demand. On a market level, this has further decreased pricing, and we continue to improve our platform through better tech improvements and the growth of the user base. We also continue to optimize the revenue -- to optimize revenue per user rather than pricing or [ fill ] rates. We continue to increase impressions available to monetize within the existing ad slots. These improvements help us marginally now, but more importantly, when demand bounces back, they will generate a good return. When looking at our recurring subscription revenues, you can see that we grew our revenue by 25% compared to last year and that the sequential growth in revenues continues, although we have negative currency effects from weaker currencies in Nigeria and Egypt. Our strategy to add more functionality through the cloud telephony platform continues to pay off with contributions coming from the AI features Truecaller Assistant and call recording, which both yields higher subscription prices. An important driver of our revenues on subscription is our growing footprint on iOS, where the conversion rates and willingness to pay is substantially higher than an Android. As Alan mentioned, our efforts in the U.S. on subscriptions is trending strong and contributed to an ARPU reaching an all-time high. Truecaller for Business continues to grow substantially. In verified business, we continued to see many positive things happening here, net additions of customers, longer contracts and higher pricing plans. We are growing revenues as well as number of customers, both year-over-year and quarter-over-quarter. Growth has increased with successful new reseller partnerships. And during the second quarter, we will roll out new packaging and price plans, which gradually are expected to drive up revenues per customer further. Volumes within business messaging continued to grow and contributed to the growth in revenues both year-over-year and quarter-over-quarter. Quarter-over-quarter revenues declined -- sorry, not quarter-to-quarter, quarter-over-quarter revenues declined due to the fact that in Q4, we recorded higher revenues due to a catch-up of revenues that had not been recorded fully in accounting from the old agreement that we had with Tanla over the last year. The new agreement that started to impact revenues lately in Q1 and expected to further grow revenues and volumes. The Indian cricket league, IPL, is the most important seasonal driver of that in account for this [indiscernible]. This is due to the magnitude of the event and that we are a preferred platform for partners doing performance marketing to attract new users, for example, [ Fantasy Cricketing ]. The IPL started earlier this year, which meant that more of IPL spending came in Q1 compared to last year, when almost all the spend came in Q2. Overall, IPL spending from advertisers during ‘24 is expected to be considerably lower this year than in 2023 as there are fewer companies spending at the same magnitude as in 2023, where we witnessed a very strong IPL season in Q2, as can be seen by -- in the graph. The spending in 2024 is expected to be at the level of 2022, and the lower spending compared to 2023 is due to multiple reasons, like changed GST rules and general demand softness. Our expectation is that this year's contribution to IPL will be evenly shared between Q1 and Q2. For us at Truecaller, our direct sales with the largest advertisers on our platform during IPL were as large as last year, which demonstrates the value we give to our advertisers. And if anything, we have strengthened the contribution from -- we have strengthened. The contribution from third-party programmatic ads is expected to be significantly lower this year as there are fewer advertisers spending due to the reasons that I mentioned just a second ago. Now we continue to grow our recurring revenue streams, consumer subscriptions and Truecaller for Business. Here, we have a strong momentum with sequential growth every quarter, and we're still quite early in the development of their respective offerings. In 2024, we have a lot in the pipeline for our subscription offering, both when it comes to features and packaging and targeting as well as looking at new partnerships, and we see a potential in a continuation of higher ARPU and increased conversion. For our SaaS offering, Truecaller for Business, we are growing steady, but the potential continues to be very large. We will start to reprice verified by business clients gradually from the second quarter on, and we will see benefits coming in from the new agreement on business messaging as well as our new risk offering. The two combined revenue -- recurring revenue streams grew by 33% and constitutes about 25% of net sales today. The ambition going forward is straightforward -- continued growth and increasing the recurring revenue streams, share of total revenues and thereby adding stability and diversification to the overall revenue mix. Our gross revenue grew year-over-year, where all revenue streams contributed. The gross margin development continues to be very stable at the 75%, 76% level. Now let's turn to cost of [ margins ]. Efficiency is key in delivering solid margins and Truecaller has a very high operating leverage. I think generally, we are doing a good job in managing our overall cost base. This quarter, incentive cost is back to previous levels after the one-off in Q4, which was due to not reaching performance criterias in the long-term incentive program in 2021. The Board has suggested a new long-term incentive program 2024 to the Annual General Meeting in May. And if approved, it should start impact costs from late second quarter this year. Staff costs, excluding incentive costs continue to be well managed. From Q2, the annual salary review will start to impact cost. Last quarter, we guided the market that we will also increase investments in targeted growth areas in specific markets. This is mainly digital performance marketing efforts and preloads to boost growth and invest targeted geographical areas where we see long-term revenue potential and ability to further boost our userbase as well as the continued diversification of our geographical mix. The investments are easy and quick for us to turn on and off depending on where we see best results. We are pleased with the results we get out from the investments so far, and we expect to continue to do those investments [ at by ] a similar level as in the first quarter going forward. But of course, we continuously fine-tune where we get the best long-term return on investment. As we have previously stated, our tax rate is a combination of the Swedish corporate tax rate and the Indian tax rate. And we also said that we expect the tax rate to increase somewhat over time. This quarter, the tax rate was approximately 23%, which is a bit lower than what we can expect for the longer term, which is about 25% to 26%, but[ with ] continuing possible variations between quarters. In the quarter, we reported a strong increase in profit and earnings per share. It is driven by a strong net financial income from primarily currency gains and income from short-term interest rate funds. Earnings per share growth is further improved by our buybacks. EBITDA grew by 1% and the margin was 35.4%, which is above our long-term financial target that is supposedly taking effect from next year onwards. And as we get in the market at the last report, the margin was lower than last year due to the increased growth investments we've done. Currency effects had a small negative impact on the margins. Our operational cash flow was stable versus last year, although we had some negative effects from changes in working capital. During the quarter, we continued to buy back shares, and we have, in total, bought back 7.5% of the outstanding shares at an average price of approximately SEK 32.8 per share. The Board of Directors have suggested to the AGM that we should cancel those shares. We continue to be in a favorable position with no debt and SEK 1.5 billion in cash and short-term investments as we continue to generate cash at about the same pace as we have been doing buybacks. With our strong financials, the Board has decided to introduce a dividend policy, that means that 25% of the profit after tax for this period should be distributed to shareholders. We have consequently suggested an ordinary dividend of SEK 0.4 per share to the AGM in May. We have also proposed an extra dividend of SEK 1.3 per share to adjust the capital position in the company. Our strong financials means that we can finance both growth investments, pay dividend and have room to continue doing buybacks. The Board has asked the AGM for a renewed mandate to have the option to continue buying back shares after 10% of the outstanding share capital –outstanding number of shares. After the suggested dividend, we will have cash and short-term investments of around SEK 1 billion on the balance sheet. Let's now look at how we compare it to our financial targets that we set -- that were set by the Board in conjunction with the IPO in 2021. The medium-term financial targets were set in a different economic climate than we have today. And the current macro climate and -- in the current macro climate, I'll say, the revenue growth target, as it was stated in 2021, clearly, is less relevant when evaluated on an annual basis. However, even though the financial targets are based on average results during the period of '21 to '24, we and the Board still believe that they would make sense also on an annual basis, but in a more normal macro environment, which is not the case right now. We continue to deliver an EBITDA margin above the 35% long-term target that probably is not taking effect until next year, even though we still are in a quite difficult macroeconomic climate and including the fact that we also have initiated those higher investments that I have spoken about. With that, I will hand the word over to Alan.

[Alan Mamedi, executive]

Thank you, Odd. So let's move on to our quarterly product update. The three areas we will cover are the core product offering, Truecaller Premium and our ad tech capabilities and Truecaller for Business. We continue to invest in the core product to give users the best experience possible. In the first quarter, we improved data quality further by expanding our scope of partnerships with external data providers, especially in markets that are strategically important to us, like the U.S. At the same time, we continue to advance our AI and machine learning capabilities to ensure that users receive the most relevant information about unknown numbers. Our machine learning efforts have enabled more precise business categorization, leveraging calling patterns and name suggestions from user contributions, our algorithms assigned a tag to inform the user of exactly what type of business is calling. This capability was expanded to cover 19 languages in the first quarter to give more context on communications from businesses for even more users. Last year, we introduced AI-driven fraud protection for SMS, which uses machine learning algorithms to actively identify and flag fraudulent messages. This quarter, we expanded this through a combination of community feedback and machine learning initiatives. Through a fully automated flywheel system, we detect fraudulent messages by analyzing sender signals and message patterns. By the end of the quarter, we sent over 9 million fraud alerts on a daily basis with an accuracy rate of 99% and the number of uses protected from SMS fraud through this feature grew 13x compared to the previous quarter. We continue to enhance our overall experience by delivering products and performance improvements. And in Q1, app engagement grew by 19%. We made improvements to managing contacts, which not only streamlined the flow, but also introduced a simple method for users to compute suggested names and make our service even better. We continue refining channels for community feedback for both Android and iPhone users to make it easier for users to contribute in the form of spam reports, fraud alerts, survey responses and much more. By the end of the quarter, over 20% of users were actively contributing insights. We also achieved a significant milestone during Q1 as we continue to extend Truecaller availability beyond mobile devices. Truecaller for Web was launched at the end of the quarter and expands the app's features to desktop and reduces -- globally it can now link their phones to send and read messages by SMS and chat, receive call alerts and search for numbers on their PC or Mac. This not only improves the user experience, but also opens up opportunities for additional features, business integrations and other use cases. Moving on to our progress for the product on iPhone, our focus is on driving revenue growth across both free and paid versions of the app on iPhone, converting more users into subscribers while finding innovative ways to monetize free users more effectively. We continue to introduce more engaging ad inventory, including video ads throughout the app. We're happy to see this scaling well on iPhone, and we'll start integrating these kinds of ads on Android as well, but we'll talk a bit more about that later on. Advertising revenue from iPhone users witnessed substantial growth in the first quarter, increasing by over 150% compared to the same period last year. On the subscription side, our initiatives aimed at converting iPhone users into paid subscribers have yielded positive results. This have led to significant growth in both subscribers and recurring revenues from the iOS platform across markets. Revenue from iPhone subscribers in the U.S. demonstrates particularly good performance, growing by 100% year-on-year. As the share of iPhone users continues to expand, we remain committed to investing in the product enhancements on the platform to deliver the best search and caller ID experience globally. On subscription products, more broadly, meaningful paying users on both Android and iPhone, we continue to see robust growth. Revenues from subscriptions grew by 25%, while the number of paying users grew by 15% year-on-year. We continue to invest in developing new packages and refining existing premium offerings, for example, Android users now have the choice between basic spam protection, which automatically blocks calls from a limited number of top spammers in their region and Max Protection, which is premium features that blocks all known spammers. This has shown strong conversion potential with the average daily new subscribers increasing by 40% from this sales funnel since its launch. We continue to invest in call recording and assistant, as Odd mentioned, which are only available to paying subscribers. And we also continue to improve call recording, which records, transcribes and summarizes your calls. In the first quarter, we introduced support for these transcriptions and summarizes for more languages and also launched a product in 7 new markets, including India, where we're seeing strong early adoption. Truecaller Assistant also made a good progress in product localization, revenue growth and subscriber retention. Retention improved from 40% to 70% since its launch. We continue to work on new offerings using cloud telephony technology to tackle growing communication challenges, including fraud. These new features will use AI to detect suspicious calls, making sure users stay safe as we've always done. On the advertising side, we continue to make strategic investments to deliver an even better experience while providing better monetization opportunities for the long term. In the long term, we see an opportunity to introduce more engaging ad formats in the product on Android such as videos to all our users, which would broaden our ads business further. And this is an area we haven't tapped into yet on the Android platform, and we see great potential in it. As a first step, this requires that we increase the number of app interactions per user per day by improving the user experience and building further value into the product. Small but meaningful improvements make a difference. And this has been a major focus internally since last year. The number of app interactions from our daily engaged users has until today, increased by more than 50% compared to the first quarter in 2023. This work is progressing. And the next step is to test our new video format in the coming quarters before we scale it up to all our users. Our efforts to improve our capabilities have scaled well and we continue to deliver meaningful impact for advertisers. For example, Xiaomi, one of the most popular smartphone brands in India engaged us to drive visibility for the launch of their newest device. We not only offered an innovative click to experience format for the campaign, but we also provided customized targeting. This ensured that Xiaomi was able to drive awareness and engagement with the right audience. The campaign gave Xiaomi a massive reach and visibility with over 40 million impressions delivered in just 2 days to the right customers. Engagement was also high with a high click-through rate. Now Truecaller for Business continues to demonstrate strong revenue growth in terms of both revenue and new customers as Odd mentioned. We continue to secure larger deals and see strong retention from major accounts. The enterprise offering has already demonstrated a clear product market fit within the banking and financial services sector, and we see our customer base expanding across industries. Outside India, adoption continues to gain traction. In the first quarter, we onboarded prominent brands such as [indiscernible], a major telecom operator in LatAm and Talabat, Egypt, the largest food delivery brand in the MENA region. Business messaging, our service delivered in partnership with Tanla, helps businesses distribute messages to end customers in a more reliable and cost-efficient way. During the first quarter, implementation continued to scale with over 2.3 billion messages delivered to end users on this channel. We continue to enhance our business messaging capabilities. During the first quarter, we introduced Rich Media, which enables businesses to deliver dynamic and engaging messages. For example, various attachment types and customized calls to actions, for example. This lays the groundwork to drive even higher user engagement through capabilities that enable 2-way communication between users and businesses. And now to wrap up things, we continued to grow our user base and saw this develop very well, especially in the markets that we've chosen to invest in, like Nigeria, Colombia and the U.S. as mentioned. Our revenue growth this quarter was driven by all revenue streams. Revenues from ads benefited from IPL timing this quarter, but our advertising business remains affected by macro conditions and the impact of an increasing digital ad inventory in the Indian market. Our recurring revenue from both subscriptions and Truecaller for Business continues to develop very well, growing at 33% year-on-year. We continue to innovate our offering in both areas in order to serve the growing subscriber base as well as evolving needs of enterprise customers. Since we've seen promising results from the investments towards our selected growth markets in Q1, we expect to continue to make these investments going forward. We're also proud to continue delivering a solid profitability with an EBITDA margin of 35% and year-on-year EPS growth of 27% while making investments towards long-term growth. And lastly, as you know and are aware of by now, the Board decided to introduce a dividend policy, proposed a dividend of SEK 1.7 per share to the AGM and proposed to cancel all bought back [indiscernible] shares as well as for a new mandate to be able to buy back up to 10% of the outstanding shares. Our profitability allows for us to finance investments in growth, give dividends to our shareholders, finance smaller acquisitions as well as the opportunity to continue to buy back shares. As always, a big thank you to our users, the great partners that we work with and the phenomenal Truecaller team across the world. And now we're happy to take your questions.

[Operator]

Thank you. [Operator Instructions] The next question comes from Predrag Savinovic from Carnegie.

[Predrag Savinovic, analyst]

Congrats, great figures again. Alan, if you could elaborate a bit on the launch of video ads? And I recall that you have previously said that you see demand in the market for this, but it's a feature that you have been lacking. So if you can deliver on this, then you could theoretically then get the revenue per user up. And also recall that historically, when you have made platform enhancements, then they have been quite impactful. So how substantial is this initiative from you guys?

[Alan Mamedi, executive]

Yes. Thanks, Predrag, for the question. And it's a very important one. So, the most obvious thing would be that we would put a video ad that shows up when you open the app, and we would probably make a lot of money because we know that the video ad category is very different from the banner ads category that we're playing in right now. But that would be -- that would be too obvious, and that's not the way we want to work and build products. So instead, our focus has been to increase the number of times people engage inside of our app and we can only do that by creating more value inside the product and drive that type of growth. So that has been a big focus for us. And as I said, we've been able to grow the number of views inside the app with more than 50% compared to last year. And I think we have a bit more to do to grow that even further even though it's at a really high level because what we really want to do is to introduce full-screen video ads in places where it makes sense, where our consumers, where our users feel that we get something and they get something back at a very high scale of volumes. And the first step is to get to the volumes, then the second step is to introduce those ads. What we have done -- so we're at step 1 right now, but what we have also done now in Q1 is launching some of these video ads inside our Android product to see what's the potential and start to sort of understand how big this actually can become, and it's very encouraging, I should say. And at some point, we will roll this out in different parts of the product. So that's, in short, like how our strategy has been the last 12-plus months, I would say, and we're getting close to the step 2 in this.

[Predrag Savinovic, analyst]

And it sounds -- based on your presentation on subscribers and Truecaller for Business, that the growth could accelerate further from the level we have in Q1. And what I mean is you talk about new pricing, new partners, there's demand for new products, you have more customers in and so on. Is that a fair assessment?

[Alan Mamedi, executive]

I think it's a fair assessment that customers love our products on the Truecaller for Business. They continue to stay as customers. And we do -- we have seen that there is room to actually increase the prices while we also have been increasing the product offering to our clients. So the plan is to roll out a new price plan pretty soon to existing customers and to new customers and roll them over into this program.

[Predrag Savinovic, analyst]

And just a final one to Odd, if you could discuss the net working capital in Q1? What is driving it and what you expect for the second quarter?

[Odd Bolin, executive]

Sure. The long-term trend in the working capital is set by our increasing direct sales and increasing throughput for business sales. However, there are also timing effects coming from ads where, as you know, our primary customers or partners/customers that are paying us are Google, Facebook and Apple. And we had a strong March due to the IPL season, which meant that the amount that Google [ returns ] us for March is considerably higher than what we had expecting from them for December. So the difference between the March and the December numbers really shows up as a negative working capital [indiscernible]. That was the primary effect that you saw in the first quarter.

[Operator]

The next question comes from Stefan Gauffin from DNB.

[Stefan Gauffin, analyst]

Yes. A few questions, please. And if I first can follow up from Predrag regarding price increases for premium users and also for Truecaller for Business, you say that our price increase is planned. But can you somehow talk about the magnitude and timing of these price increases?

[Alan Mamedi, executive]

So the price increase that I was referring to is for the Truecaller for Business, and it will actually be announced in just a few days. So it will happen this quarter. And on the subscription side, it's a combination of campaigns that we run. So the price can change quite frequently. So it's -- we don't have a specific plan that, hey, let's go and increase the price for everyone, but rather do it in a more strategic way where we have launched a campaign and then maybe increase the price a bit and then roll over those campaign users into the new price plan and so forth. But that's a totally different story on how to do that.

[Stefan Gauffin, analyst]

And then just a question on IPL. Thanks for the slide showing the revenue impact. But I just don't really understand. So this year, the IPL is running from around March 20 to May 26. How come do you see these revenues evenly split between Q1 and Q2, a lot more Q2 tilted?

[Odd Bolin, executive]

Because the daily IPL revenue is not the same during the entire season. It's heavily tilted towards the beginning of the season where we see the most activity during the first week or weeks and then less activity, potentially more activity at the end of the season, but that's nothing we can say for sure right now. But we have clearly seen that the data revenue and the daily activity from advertisers were much higher at the very beginning of the season and after that initial phase.

[Stefan Gauffin, analyst]

And then just -- perhaps I missed this during the call, but the cost increase in other external costs of SEK 23 million is set to be primarily related to the increased investment in user acquisition. And you're planning to continue -- you plan to continue with this. Is this cost increase representative for what you expect for the remaining quarters in 2024 approximately?

[Odd Bolin, executive]

We have a plan that covers a number of quarters. And I'm not going to go into detail on exactly how many quarters that will be. But for the foreseeable -- for the next -- for the foreseeable future, so to speak, we expect to see -- or to invest similar amount as we did in the first quarter. We are opportunistic. We continue to measure the return we get. So of course, there may be changes, but they should be quite minimal because we do see a good effect of the investments we've done in the first quarter, and we have no reason to believe that that effect will, in any way, decrease during the second quarter. So yes, for the near future, you can expect the same level.

[Stefan Gauffin, analyst]

And then just a final one. You say that average revenue per paying user in the U.S. is 100x the average for 3 users of Truecaller globally. This would indicate around SEK 100 in quarterly ARPU. Can you confirm that calculation?

[Odd Bolin, executive]

That is a reasonable figure to use.

[Operator]

The next question comes from Akhil Dattani from JPMorgan.

[Akhil Dattani, analyst]

I've got a couple of questions as well, please, if I can. Firstly, can I just ask a follow-up on the IPL commentary that you've given? Given you're saying that the IPL contribution in '24 is expected to be more like the level in 2023, I just wondered, does that mean that we should be assuming that the ad revenues in Q2 should be similar to Q1 in absolute terms? Or are there any other sort of impacts we should be considering there? So just to understand better how your commentary on IPL impacts the absolute numbers? That's the first question. Second one is just a follow-up.

[Odd Bolin, executive]

Let's do them one at a time. Otherwise, we'll just get confused on our side. What we have said -- we've given 2 pieces of information that we feel confident about and that we believe will be useful. One is that the IPL season as far as we can see at this point, will be quite evenly split between the first and the second quarter. And the second piece of information is that we don't see any major change in the underlying demand as of now.

[Akhil Dattani, analyst]

So second question is just on the point you've been making around app engagement and pivoting towards video-based ads over time. Alan mentioned a comment around the significant increase you've seen in the app engagement and you said it was, if I understood correctly, a 50% increase in user engagement to the app. Can you help us understand what that is in absolute terms, just so we understand, 50% of what base? And Alan mentioned as well the point around the importance of driving up app engagement before you push video ads into the base, which obviously makes a lot of sense. But how should we think about the potential monetization opportunity there? As you said, I mean, video ads are generally a lot higher CPM than traditional banner ads. Is there any sort of scale or magnitude you can give us to help us understand just how big of a step up that could really be?

[Alan Mamedi, executive]

Yes. I mean our ambition is, of course, to drive the same type of volumes that we do on banner ads with video ads. That's sort of the long-term goal. But I think at some point this year, we should be able to drive significant volumes that are almost comparable, but maybe even on a revenue side, even closer to what we're doing on banner ads, given CPMs are more than 10x the banner ads. In some cases, it's over 20x. So the volume doesn't necessarily need to be on the same level, but that's our sort of long-term goal. Now how much the 50% is -- we don't want to reveal that yet because it's sort of internal metrics. But what I can say, it is actually a material move, I would say.

[Akhil Dattani, analyst]

And Al, just to complement that. I mean if we back out from the numbers that you report, the implied daily [ monitors ] ads per [ Dow ], it's at about 15. Does that include things that you're doing inside the app? Or is that purely outside of the app today?

[Alan Mamedi, executive]

That's both.

[Akhil Dattani, analyst]

That's both. Okay. And then just a last one on Truecaller for Business. I just wanted to understand a little bit better the point you're making around price increases. How should we be thinking about the incentive structure that you're putting through to facilitate these price hikes? Is this a more-for-more type structure where you're adding more value and enriching the proposition for customers to facilitate the price hike? Or is it purely you think you've been underpricing and there's just an opportunity to close the gap?

[Alan Mamedi, executive]

Well, I think the, sort of, short answer is that we've been building a lot of value in the last couple of quarters that our customers have been enjoying and that they appreciate. But our pricing plans haven't really reflected that, meaning there has been one single package where it's based on volumes, but our plan is to repackage it based on volume and based on the type of features that U.S. and enterprise actually enjoy. So that's sort of our thinking process around it. And when we've been testing the water, we've received very good response from our customers basically. Keep also in mind that today, we have a lot of customers from different verticals with different needs, some of them with -- which are much larger than others. So this makes a lot of sense for us, like it's -- in the end, this product, the Truecaller for Business is just 3, 4 years old. So this is a good phase to enter once the product has become more mature.

[Akhil Dattani, analyst]

And just one clarification on that. How do the mechanics of this work? Are customers typically locked into contracts or the price hikes only apply once they roll off? Or is this an immediate mechanism that all customers would be impacted as and when you introduce the change?

[Alan Mamedi, executive]

Yes. So most of our customers, I would say, almost all of them are on 12 months contracts. This contract or this price change or price plan change will be effective immediately.

[Operator]

The next question comes from Jesper Von Koch from Red Eye.

[Jesper Henrikson, analyst]

Thanks for the presentation and also congrats on the great results. So starting off with the question about cookies, I mean, cookies in Google Chrome are expected to be phased out next year and [indiscernible] it is expected to make like similar changes to the app on Google Play, like perhaps later that same year. Do you have any views on this and the possible impact on Truecaller?

[Alan Mamedi, executive]

Yes. Our view is that cookies are -- it's an old standard, which no one really understands. And the new standard, which everyone is moving towards is actually the phone number being the unique identifier for advertisers and so forth. And that actually makes our advertisement platform even stronger for advertisers because we -- this is the identity that you sign in to use Truecaller on. So I would say we're already well prepared for this shift that is happening in the industry.

[Jesper Henrikson, analyst]

So perhaps on a, like a competitor basis, you would probably be a bit better off than many of competitors that would not have the telephone number as the identifier, is that correct?

[Alan Mamedi, executive]

Yes, I would say probably all, like, ad businesses are based on standard identification or unique identifiers set by Google in the past. But this is now shifting. So it's not just an ads platform like us but also other players who work on the distribution side, for example, who needs to make this shift. So we actually come in with a much stronger foot.

[Jesper Henrikson, analyst]

And then just on your new, like, partner composition in Truecaller for Business, do you see any, like, geographical or product-specific differences in what you can expect from your different partners? And possibly also like the magnitude now when you release like other than Tanla on it?

[Alan Mamedi, executive]

Other partners -- well, so this partnership that we have with Tanla, the renewed one is based on that Tanla will act as a sort of -- they take on the customers for us. So everything for us goes through Tanla, which makes life much easier for us. And also Tandla already has all of these connections and partnerships with other CPaaS providers. So it's more of like an agreement where we drive the, sort of, end-user experience, and they drive in the customers. So it's a win-win for both as we see it.

[Operator]

The next question comes from John Karidis from Deutsche Numis.

[John Karidis, analyst]

Firstly, can I ask, should we expect the ratio of DOWs to MOWs to start or to continue to increase going forward given what you've said about app engagement and the fact now that now you've had a few periods where that ratio of Dow's to mow's has been 100% or more?

[Alan Mamedi, executive]

That's a very good question, John. So we should not expect it to go up because almost all of our users have been engaging on a daily basis, multiple times in the product. Now our goal has been how do we make multiples like 2x or 3x that? So we should expect the DOW to MOW ratio to be more or less the same.

[John Karidis, analyst]

Secondly, what I want to think that you actually started seeing some ad market sentiment recovering in some of your relatively small markets at least?

[Odd Bolin, executive]

Yes. We have had some improvement in smaller markets like you indicated. But as you know, most of our revenue, the lion's share comes from India. And in India, we haven't seen anything that is material enough for us to conclude that there is a trend shift in the market as of yet.

[John Karidis, analyst]

Right. But does it look promising? Can you say anything about that, please? I'm trying to get the -- sort of take the temperature of the ad market in India just now. So anything you can say would be useful, please.

[Odd Bolin, executive]

I can just say what I just said that there is nothing material enough for us to conclude that there is a trend change in the market. Now visibility is low, and that's not just for us, visibility is low for everyone right now in the market, which is natural in a market that is depressed in there -- where many people expect a change to happen. But the fact is that visibility is low, and we cannot say confidently at this point that we see signals that clearly show that there is a trend shift happening or about to happen not yet.

[Alan Mamedi, executive]

I also want to add on this. Last year -- early last year, we did mention that -- our partners and the industry were saying that they expect the second half of '23 to be much more positive than the first half, which we sort of communicated to the shareholders. That turned out to be wrong. So this time, whatever we're hearing from the market, we're trying to be a bit more cautious and not oversell anything.

[John Karidis, analyst]

Then -- I'm sorry to come back to that. I'm trying to understand how much -- well, essentially, what I'm trying to understand is whether the other operating costs in Q1 are likely to be -- if you annualize them, whether they are a fair indication of what you're likely to have for the full year? But I guess a simpler question would be, am I right to think that the extra investment you made in Q1 was around SEK 20 million?

[Odd Bolin, executive]

That's a fair estimate.

[John Karidis, analyst]

And then lastly -- I suspect I'm not going to get much joy from you today, Odd. You said it's tough to understand, to, sort of, figure out what the negative FX impact is on revenue. I'm trying to -- would the best guess be closer to SEK 5 million or closer to SEK 10 million? Anything you can say there?

[Odd Bolin, executive]

On revenue, slightly more than that.

[John Karidis, analyst]

Slightly more than 10?

[Odd Bolin, executive]

Yes.

[John Karidis, analyst]

Or 5? Okay.

[Odd Bolin, executive]

But we are doing our best -- the best possible estimates we can internally. But we are not communicating those externally because there is a degree of uncertainty due to the indirect nature of the FX exposure we have. So the numbers that we do calculate every quarter or every month has a degree of uncertainty that makes them unsuitable for external communication. That's why we're expressing ourselves in this somewhat maybe unclear way that we are. I'm sorry about that, but that's the nature of the business, unfortunately.

[John Karidis, analyst]

If I may, lastly, just to push my luck in a big way, Alan, just going back to the DOWs versus MOWs, I hear you about the engagement, sir, but it has been the case that if you divide period growth in DOWs by MOWs, it has been 100% or more for a number of quarters to date. Doesn't that mean anything positive about the 80-or-so percent rate of the ratio of total DOWs divided by total MOWs?

[Alan Mamedi, executive]

I'm not sure I understood your calculation there.

[John Karidis, analyst]

Well, in your statement, you said 9 million extra DOWs, 9 million extra MOWs.

[Alan Mamedi, executive]

Yes. You're absolutely correct. There are probably some users that we've been able to, sort of, activate to become more engaged. Yes, you're probably right about that. Because normally, it's around -- you're right. Normally, it's around 80% DOW of MOW growth on a quarterly basis.

[Odd Bolin, executive]

But of course, remember that the DOWS and the MOWs that we win or add every quarter or are not necessarily the same users, of course.

[Alan Mamedi, executive]

Another contributing factor to DOW growth has also been the fact that our IOS product has become better. We get them too.

[Operator]

The next question comes from Bharath Nagaraj from Cantor Fitzgerald

[Bharath Nagaraj, analyst]

Can you just quantify the churn in your consumer subscription business, if possible? And if possible, just split it out across India and outside as well, that will be helpful. And the consumers who are churning, what are they saying as to the reason they're churning?

[Odd Bolin, executive]

We haven't quantified that churn externally. But we have said and we continue to say that churn is very, very low. We lose very few subscribers.

[Bharath Nagaraj, analyst]

The next question I have is, can you speak about the increased supply in the digital ads in a year that you mentioned -- I think you mentioned this last time as well. Who is it actually coming from? And are you worried at all about the risk that the supply keeps increasing the coming years as well, and therefore, CPMs remain structurally depressed in India?

[Alan Mamedi, executive]

Yes. I mean there are a few or maybe a handful or more consumer products with -- outside of Google and Facebook apps that have a few hundred million users on their platforms. Some of them are performing pretty good. Some of them are performing less good. But I think this is natural in a market where you have 1.5 billion people and more and more people are going to come online. There is around 550 million to 600 million people in India with a smartphone that has a data connectivity, and that number is expected to grow to 700 million or 800 million just in a very short period of time. So I think over time, this will even itself out. But in the end, it's all about who can provide the best, sort of, return of investment on the advertisement. And on that part, I think we're outperforming all our competitors if I exclude Facebook and Google. So I think we have a really, really good shot here. And looking at some of our large advertisers that keeps coming back every year, they continue to spend more every year as well. So I think that says a lot about. But sure, there will be some noise in the market from other consumer apps, but I'm not worried at all about that type of inventory.

[Bharath Nagaraj, analyst]

Are there any KPIs that you can provide in terms of the returns you're making for advertisers, comparison to others?

[Alan Mamedi, executive]

No, unfortunately not.

[Operator]

There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.

[Alan Mamedi, executive]

Thank you all for listening to yet another quarterly report by me and Odd, and we're looking forward to hear you all listening into next quarterly report. Thank you.