Deezer H1 2022 results call. My name is Jess, and I'll be your coordinator for today's event. For the duration of the call, your lines will be on listen only. However, there will be the opportunity to ask questions. This can be done by pressing star one on your telephone keypad to register your question at any time. If at any point you require assistance, please press star zero, and you'll be connected to an operator. I will now hand over to your host, Jeronimo Folgueira, CEO, to begin today's call. Thank you. Good morning, everyone, and welcome to Deezer first half 2022 results conference call. I am Jeronimo Folgueira, CEO of Deezer, and I'm joined today by Stéphane Rougeot, Deputy CEO and CFO. Starting on slide three. Our vision is to unlock the full potential of music with technology. This opens many new opportunities for our company, but also for users, artists, and the music ecosystem as a whole. We will provide further insights in our upcoming Investor Day on October 4th. Moving to slide four. Our new strategy is centered around Deezer's key competitive strength with the objective to grow the company's scale and profitability. This strategy relies on four strategic pillars. First, an increased focus on selected large markets, where consumers show a strong willingness to pay for music streaming services and with attractive user economics. Two, replicate the B2B partnership first strategy that we implemented very successfully in our historical markets of France and Brazil to enter and expand into other attractive music streaming markets. The partnership with RTL in Germany is a good example of that. Third, position Deezer as the home of music by bringing our subscribers a unique value proposition with a strong differentiation around music experiences and innovation. Fourth, ensure operational excellence across our organization to drive lifetime value and ultimately profitability. On slide five. Regarding today agenda, I will start with a brief presentation of Deezer's key financial and business highlights for the first half of 2022. Then Stéphane will go through the first half financial performance, and after that, we will discuss our 2022 revenue guidance that we have confirmed. Lastly, we'll be happy to take your questions. Moving on to slide seven. Let me say a few words as a summary of our first half performance. I am very pleased with the results we achieved in the first semester, the first one as a publicly listed company. First, our revenue growth accelerated substantially in the first half of 2022, and we are now back to double-digit growth, showing growth also in every segment and every geography. This demonstrates the strength of our unique B2C, B2B model, as well as our capacity to capture the growth of the global music streaming industry. In addition to our strong top-line growth, our profitability improved significantly year-over-year, reflecting the benefits of Deezer's new strategy as we continue to focus in our business on key markets, increase ARPU, and improve marketing efficiency. In the first half, we also continue implementing initiatives around product innovation and brand differentiation as the home of music. I will discuss this on the next slide. Our successful listing on the Euronext Paris was a major milestone for Deezer in the first half, and we now have the cash we need to execute our business plan until 2025. Lastly, on the back of our first half performance and the plans we have for the second half, we're pleased to confirm our revenue guidance for 2022. Moving on to slide eight. In the first half, we made progress on multiple areas that will support our future growth and reflect the implementation of our strategy. Starting with partnerships, we expanded our integration with Sonos through two major updates, the support of voice control and a revamped Deezer interface on Sonos app with access to Flow. We also roll out RTL+ Musik streaming app in Germany, while entering a new partnership with e-commerce platform Cdiscount in France. On the product front, we became the first music streaming company to offer an in-app lyric translation feature. While we also launched our first large scale in-app live stream with great results. Additionally, we have recently introduced an improved AI-generated mixed functionality that allow users to discover music based on their personal taste. In line with our strategy, we launched a new 360 brand campaign, Deezer: The Power of Music in France, Germany and Brazil to be more appealing to Gen Z. We have also started testing Zen by Deezer, our new wellbeing app focused on sleep and meditation. This is our first diversification project which we plan to roll out in 2023, and we expect this to be a highly profitable cross-sell opportunity for us. Lastly, we strengthened the management team with the appointment of Stéphane as Deputy CEO and CFO in January and Gitte Bendzulla as COO in May. This concludes the introduction, and I'm now turning the call over to Stéphane. Yes, thank you, Jeronimo, and good morning, everyone. Starting with slide 10. As you can see here, we posted double-digit revenue growth in the first half, and that was driven by all segments and all geographies. Our B2C revenues grew by more than 12% year-over-year. Reflecting a strong performance in France, where our subscriber base and the ARPU both increased double-digit in H1. After two years of decline, the B2B segment returned to growth at nearly 8% year-over-year, and that was mainly due to a good performance of recent B2B deals such as SFR in France. Looking at it by geography, as I mentioned, our performance in France was strong, with growth of 11.1% in the first half. This reflected the increase of our B2C subscriber base, which grew by 10.7% to reach 3.3 million subscribers at the end of June 2022, as well as higher B2C ARPU on the back of the price increases we implemented in H1. In the rest of the world, revenues grew by 13.6% year-over-year, benefiting from the good performance of recently launched B2B partnerships in Brazil and in Europe. In B2C, the ARPU improvement more than offset a decline in our subscriber base due to our new strategy to focus our business on key selected markets as well as the exit from Russia. Moving now to slide 11. Our adjusted gross profit amounted to EUR 45.4 million in the first half of 2022. That is an increase of 9.1% compared to H1 2021. In B2C, the adjusted gross profit was up 6.7% year-over-year, as the strong revenue growth was partly offset by increased publishing rates, and also a higher family mix. This led to lower B2C adjusted gross margin at 23.9% in H1 2022 compared to 25.1% in H1 2021. In B2B, the adjusted gross profit increased by 6.3% year-over-year as a result of the good revenue growth. The adjusted gross margin for the B2B segment declined very slightly to 20.1% in H1 2022 from 20.9% in H1 2021. Lastly, the other segment recorded an improved adjusted gross profit, benefiting from the one-off revenue from a hardware company partnership, and that was partially offset by the investment that we've made into new verticals in line with our new strategy. Moving now to slide 12. The adjusted EBITDA amounted to EUR -24.6 million in the first half of 2022. This means an improvement of EUR 8.2 million compared to the first half of 2021 before the investment in new verticals that we have made, which cost us an amount of EUR 3.6 million. As you can see on the bridge, the year-on-year change in adjusted EBITDA reflected first the positive impact of our strong top-line growth, which was partially offset by a slightly lower adjusted gross margin. The decrease in marketing expenses, which is the result of our strategy to focus on selected key markets, as well as some phasing for brand-related expenses that are expected to occur in the second half of 2022, as you saw with the launch of our brand campaign. We also had higher staff and G&A costs, including some one-off items such as expenses related to the public listing. Finally, as mentioned, we invested EUR 3.6 million of additional expenses related to the development of new verticals, which we didn't have, of course, in the first half of 2021. As a result, the adjusted EBITDA margin improved to -11.2% in first half 2022 compared to - 5% in the first half of 2021. When you exclude the investment into new verticals, the margin stood at -9.6% in the first half of this year. Let's turn now to slide 13 and talk about the cash position. Our cash position amounted to EUR 40 million at the end of June 2022, up from EUR 35 million at the end of December 2021. This was driven by a positive free cash flow generation over the period. Indeed, we reported a positive free cash flow of EUR 3 million in the first half of 2022 compared to a negative free cash flow of EUR -32.3 million in first half 2021. This mainly reflected a strong generation of working capital in the first half of 2022, and that was largely due to a temporary increase in payment terms. We expect this trend to reverse in the second half of 2022. As a reminder, on the fifth of July 2022, we completed our business combination with I2PO. As part of this transaction, we received EUR 143 million of cash, which will allow us to execute our business plan until 2025. On a pro forma basis, meaning post-business combination, our cash position would have reached EUR 160 million at the end of June 2022. Finally, moving to slide 15. As a conclusion, we are extremely happy with our performance in the first half of 2022. This demonstrate the relevance of our strategy, and it makes us confident that we can continue to grow our business fast and improve our profitability so that we reach breakeven by 2025. With regard to the second half, we expect to benefit from the progressive ramp-up of RTL partnership that was launched on the August 16th, as well as the incremental impact of price increases implemented throughout 2022. Additionally, our business has shown strong resilience to recent macroeconomic uncertainties. Currently, we do not expect any significant negative impact on our activity or financial performance. Accordingly, we are pleased to confirm our full year 2022 revenue guidance. We expect to generate revenues of approximately EUR 455 million for the full year of 2022, representing a growth of approximately 14% compared to the full year 2021. This concludes today's presentation, and Jeronimo and I will be pleased to respond now to your questions. If you would like to ask a question, please press star one on your telephone keypad. Please ensure your line is unmuted locally as you will be advised when to ask your question. Once again, that's star one if you'd like to ask a question. The first question comes from the line of Silvia Cuneo from Deutsche Bank. Please go ahead. Good morning, Jeronimo and Stéphane. Thanks for taking my questions. My first question is on the revenue growth acceleration and what's implied for the rest of the year to meet your guidance. I calculate it's something about 15%. Just wanted to check if you could say any incremental color about the exit growth rate that you saw at the end of the first half that can maybe reassure us that the growth acceleration is coming through. The second question is around the gross margin. You talked about how some of the rates have increased from music publishers. Can you maybe talk a little bit more about this trend? Is it at the industry level, and what should we expect for the rest of the year? Finally, just on the EBITDA in the second half, related to the question above, if you could talk also a little bit more about how we can think about the marketing pacing with the launch of the brand campaign coming up. What sort of margins are you expecting for the rest of the year? Thank you. Yes. Silvia, this is Stéphane. Thanks for your question. Let me start, and maybe Jeronimo will chime in. On the revenue growth acceleration, you're right. For the second half, we are expecting a higher growth than in the first half. You're right around 15%, 15%+. It's on the back of a couple of things which we indicated at the end of August and which we are seeing happening. First, when it comes to B2C, it's related to additional price increases that are happening throughout our territories. Not everything has been done, and this is something we had discussed at the end of August during the call. There are still a number of territories where it's happening as we speak, so in the course of September and also in the fourth quarter. We expect on the B2C side, the acceleration to happen around now and between now and the end of the year, and that's totally in line with our plans. This is also something that will have an effect also in 2023 compared to 2022 because of the time where all those price increases were implemented across our subscriber base. That's on the B2C side, and everything is happening as planned. On the B2B side, yes, we are also seeing an acceleration of the revenue growth, and we expect that for sure in the second half. It's on the back of some of the new partnerships that were implemented and started towards the end of 2021 or in the course of the first half 2022 when we spoke about SFR and Globo as well and a few others. Of course RTL, which has started in the second part of August and is ramping up. All this is leading in the third quarter and of course also in the fourth quarter to an acceleration of the revenue growth for B2B. That's what we have, that's what we are seeing. This is why we are comfortable there will be a higher level of revenue growth in the second half compared to the first half. On your question regarding the adjusted gross profit, yes, overall, it's about 60 basis points lower than the first half. The main reason behind the drop is twofold. The first one, as mentioned, there is a higher publishing rate that is happening across the industry, and that's something that we have seen now since the end of 2021. T hat will continue to impact us to some extent in the second half as well. Also, we have invested in new verticals, and as part of the investment in new verticals, we are producing content. Of course, these are not high amount for content production, but still, this is something that is booked in the gross margin and is affecting the gross margin. If you look at our gross margin without those incremental expenses for new verticals, it's also very slightly declining, but it's very limited. Of course, we are working and doing everything we can to improve the gross profit. There is also some favorable mix effect, so a number of things that we can do. I can't comment, of course, on what will happen in the second half, but this is really what we can say on the trends for the first half on the gross profit. Finally, well, same comment on EBITDA. Not much I can comment. We are not giving a guidance for the profitability for the year. Now of course, when we meet in London and during our capital market day on the fourth of October, we will give you a much better and more accurate understanding of the business model of the company and our perspectives and what we are doing. In that context also we'll give you some indications about how we see our financials evolving. Stay tuned and let's meet and talk during the capital market day. Thanks a lot. The next question comes from the line of Christophe Cherblanc from Société Générale. Please go ahead. Hello, good morning. Thanks for taking my question. I had two. First one is on gross profit. You indicate that you have non-recurring expenses related to license agreements. Can you be a bit more specific on, you know, what is behind this? I was a bit surprised to see the amount going up year-over-year. I would have expected that to go down if it's a fixed amount, so any color there would be super interesting. The second one is on the investment in new verticals. You mentioned EUR 3.6 million of investment in H1. Can you give us an order of magnitude on the full year investments over 12 months, please? Yeah. Maybe a couple of comments here, Christophe. On the new vertical, starting with your last questions, probably in the second half we'll incur an amount of expenses that's a bit higher than what we have in the first half when it comes to new verticals. Now we don't expect those amounts to continue in order to set up and launch, for example, Zen, which is the app which we are now testing in Belgium and which we plan to launch at the very beginning of 2023, ideally earlier. Of course, there is quite a bit of cost to set up and launch the whole application and develop all the content that is needed. This is why we're having all these launch costs. So far, of course, there is no revenue. We expect that as of 2023, this will generate revenues, and also we will lower the amount of cost. That's the model, and this is why the first year is impacted both in H1 but also in H2. Yes. Of course, all those costs are in the P&L, and there is no capitalization. Everything has been expensed. Finally on the gross profit. What we communicate on is the adjusted gross profit. The overall gross profit is impacted by some elements that are mentioned as part of the adjustments. Some of them are related to MGs that we have and the evolution of the provisions related to these MGs. There was also in 2021 an amount regarding an onerous contract provision, which was a charge which we didn't have in H2. A number of things that can go one way or the other. Now the approach we have as we disclosed in the prospectus, and I think we mentioned that also in the last call, is that when those expenses or when those non-expenses, which means a benefit, are non-recurring and do not reflect the fundamental performance or cost structure of the company, they are treated as adjusted. Of course, this is disclosed in the overall financial statements, but this is really our policy when it comes to adjusted versus non-adjusted. The comment I made on the gross profit was for the adjusted gross profit, so the amount that is expected to be recurring, and that is the one that has been slightly declining, mainly because of publishing rates and a little bit of investment in content for new verticals. Just on the unused MG, does it mean that if and when you can strike a new contract, we can expect those costs to drop off at some stage, meaning the MG would be, you know, reset at a better level? That's all part of discussions and negotiations. Of course we cannot be specific on that, but that's part of what we discuss with the majors. It's applying to all majors. It's not one specific major. You're right. Okay. Thank you. There are currently no questions in the queue. As a reminder, please press star one if you'd like to ask a question. There are no further questions in the queue, so I will hand the call back to your host for some closing remarks. Thank you for attending this call. If you have any further questions, feel free to reach out, either to myself or to Laurent Sfaxi, who joined us as Head of Investor Relations. Thank you and have a good day. Thank you for joining today's call. You may now disconnect your lines.