Truecaller AB (publ) (TRUE-B.ST) Earnings Call Transcript & Summary

Welcome to Truecaller's Press Conference December 2025. [Operator Instructions] Now I will hand the conference over to the CEO, Rishit Jhunjhunwala; and CFO, Odd Bolin. Please go ahead.

Hi, everyone. Welcome to this extra webcast given this morning's update to the market on our ad revenue development. I'm Rishit Jhunjhunwala, the CEO and with me, as always, I have Odd Bolin, our CFO. So today, I'll quickly summarize [this evening]. We have a few bullets to cover, and then we'll get into Q&A. So in summary, since the middle of August, our ad revenues have been impacted by two events. Firstly, the algorithm changed completely out of the blue by our largest demand partner for all publishers like us. This flagged our inventory in their systems, and this reduced revenue. Secondly, the weakening of the ads market in India with the real money gaming sector being banned completely, and a few other external factors. Now the incidence of the issue from this algorithm change that we've spoken about, is now substantially lower and it is now only a fraction of what it was in the middle of August, but it hasn't been completely removed. So our efforts are still on. We're definitely not out of the woods yet, but I will take a moment to describe this a little bit more. When an ad publishers' inventory is flagged in the demand partner's system, it eventually causes less ads to flow through the system to us. This hasn't been the case earlier. And because the algorithm changed suddenly, our inventory was flagged, even though we made no changes. So our primary focus has been to remove the flag entirely, so that the systems are treating our inventory as normal. Numerous experiments have been done during this time. I would say, the last 3, 4 months in war mode, we've been doing experiments on our app inventory some of which failed and some of which succeeded in bringing down the incidents of this flagging. And now we're in a far more stable situation, but we definitely have work to do in the near term. Therefore, this morning, we shared that our expectations for the quarter is that ad revenue will be in the range of SEK 210 million to SEK 230 million which is a decrease of about 30% in constant currencies compared to last year. And like I mentioned earlier, we are seeing a more stable revenue development around ads but we think that during this time, ad revenues will be muted in the short term. Our focus, of course, continues to be on solving this problem fully and building upwards from there, while continuing to aggressively deliver on our long-term strategy for ads that sets us up for a sustained ad revenue growth. Now I want to talk a little bit more about the long-term strategy and reiterate some of the things that we had said in Q3. But our strategy includes firstly, launching more proprietary and premium ad units. We've done that already earlier this year with Masthead and Play, and we continue to do more such inventory. These are sold directly by us. We've already seen some good results, and we will continue down this track. Secondly, using AI on our proprietary first-party data to deliver superior KPIs for the advertiser, where again, we've seen good results already in ROI towards advertisers whenever we have used our AI platform advantage for campaigns that we have run. Thirdly, monetizing our large non-India user base optimally by having salespeople, for example, in the EMEA region using partnership agreements for various markets to be able to increase our reach on direct sales. All of this, we believe, will make us resilient to headwinds which we might face from any single demand partner or even any single region. We're confident that this will set us up for sustained long-term growth and have a flourishing ads business. Q4 also additionally will have a cost of about -- it will have an additional cost of about SEK 30 million on our incentive plan costs. Lastly, it's important to reiterate that the concerns we have in the short term are around ads revenues but we're happy that our efforts on user growth and our efforts on recurring revenues are bearing fruit. We continue to see positive trends from our recurring revenues and our user growth is steady as well. So while we're struggling with ads at the moment, the rest of our business is doing well, and we do have a solid plan, and we are executing on that plan to make our ads business grow as well. Our revenue mix, as you know, we've been transforming our revenue mix. Recurring revenue now is more like 40% to 50% of our revenues. And that's something we've been consciously focused on. So that was a summary of the update and with that, we can open up for questions now.

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

I think first, let's just start with the LTIP. On what grounds has there been a revaluation here in the this LTIP program?

Well, the -- when you set up an LTIP program like the ones we have, you value them based on a probability of them actually exercising either because you look at the share price, if there is an option or a warrant program or because you look at performance criteria in the RSU program or an option program. And we have valued them based on an 80% probability of reaching those performance criteria for 2025. Now we can face the fact that we are reaching the performance criteria, and that means that the valuation has to be based on 100% probability rather than 80% probability. Now when we do this, we have to recalculate every quarter -- previous quarter that we have -- where we have calculated -- used the 80% probability. So we get an accumulated effect in Q4 this year that comes from every quarter since we started the program back in 2022. That's why you have this elevated number in this quarter specifically. You may remember that we had a similar effect from another program at the beginning of this year when we saw that the likelihood of reaching the performance criteria in that program had increased. So we did a recalculation, but that was a smaller effect.

Okay. Okay. And then if the ads impact is dealt with for the most extent, like you said in the introduction, the organic growth in the next few quarters, Q1, Q2, Q3 and so forth in ads should be better than minus 30% on a constant currency basis, correct, are you suggesting?

I think it's important to remember that, first of all, we have 70% of the business that we have from this largest ad partner is still intact and has not been impacted by this algorithmic change in any way. That business continued to do stable -- in a stable manner. And I think there is some growth potential there, too. The impact that we had from the algorithm change, 30% of the total revenue from this partner will be possible to recover to a certain extent. First of all, we need to get to the point where the confirmed click issue is resolved fully. The flags are taken out. Then we can refocus on optimizing revenue from this traffic again. The changes that we are doing and have done in order to insure -- in order to get to the point where this confirm click flag is being lifted, includes making changes to the ad structure, to the ad positioning, et cetera. And if we -- once we get to the point where the flag is being lifted, there will be work needed in order to get back to an equally optimized structure that we had before this issue occurred during the summer. So it is not -- you cannot expect the revenue to bounce back to where it used to be before this issue happened at the beginning or mid-August just because the confirm click flag is being is being resolved. It will take time in order to build back to that point.

I think I just want to add to that, Predrag, it's a very important point that Odd is raising. It's important to note that the flag that we have, we've been working hard to reduce it and the incidents has come down definitely. We are, firstly, working hard to remove that flag. Once we do remove that flag, then the system will actually learn on its own. And we -- in theory, we should get back more advertisers coming our way because the system believes we are not flagged anymore. Once we've reached that normal state, there are a host of optimizations that we'll have to continuously experiment, and we will bring back programmatic revenues to the same levels. All this is, of course, while we're working hard on direct sales and making sure we grow on that front as well.

Sure. I think that makes sense. But I believe in the intro, you said that you have made certain shifts where the impact now is substantially lower than it was at the peak. I'm thinking in terms of all else equal, now considering you've preannounced the Q4 numbers and heading into the next quarter, are you seeing an unchanged growth trend? Or should it have improved based on the work that you've done, not jump back to the level you had pre the change, but at least improve from minus 30% growth? Is that your assessment?

We still have the confirm click flag. We haven't resolved the problem yet. We still -- we have a lot less of it than we had. We used to have a lot -- a very considerable decrease, but we're not out of the woods yet like Rishit said. And that means we cannot start optimizing our revenue again until we have this fully resolved. Whether that is going to be happening in a week or whether it's going to be happening in a quarter, we don't know. The partner that we're working with is not able or willing to give us the information that would be needed in order to make this a quicker process. We have to experiment. Each experiment takes a few days in order for us to get the full result. We have to combine different actions in order to find the solution that actually works. So I think at this point, the best assumption that can be made regarding this particular revenue stream that came from -- that was impacted by the confirm click is -- will continue to be where it is right now until we have fixed the problem. And once we have done that, we will be clear about that.

Okay. And finally, what does robust growth mean in terms of Premium and Business?

It means that there is no change in the trends that you've seen historically for each of these businesses or for them -- for the user growth that we have had.

The next question comes from John Karidis from Deutsche Bank.

Can I ask regarding the algo issue? So this happened in the middle of August. If you adjust for the fact that it happened in the middle of August, was September worse than August in terms of the effect of this and was October worse than September?

So September had the full effect of the algorithm change because in August, we had only half the effect, right? So in that sense, September was worse.

But I think, John, if you think about it on a day-to-day basis, the effect was very quick when it happened on August 13. And it has stayed at pretty much the same level ever seen. So it hasn't improved very much, and it hasn't gotten any worse.

Okay. That's useful. And then excuse me, in my brain, I try -- I'm sort of having difficulty reconciling the fact that you're still flagged which I think is a sort of binary thing, either you are or you're not. And then the fact that you said that you've substantially improved the situation. So if you're still flagged, how can you say that you've substantially improved the situation?

That's a good question. So there are -- while we are flagged in the system, for the -- due to the algorithm change, we were flagged in the system. The system does tell us how much of our total inventory is currently flagged. So on August 13, when it came about, almost our entire inventory, almost our entire inventory was flagged. When we started doing the experiments. Some of it succeeded, some of which failed. We've managed to bring down the extent of these issues shown on the system to a much, much smaller number. So we have learned over all the experiments that we've done, what could have been causing the issue and we have brought it down to far less than it used to be. But we still have some quantity left, and we still have to run some experiments in order to get the flag completely removed. So it's binary, but there is quantity that is displayed to us, and that's the quantity we measure -- we look at very closely.

Okay. And I will try and ask you, even though you haven't disclosed it. So if 100% of your inventory was affected on the 13th of August, what's the percentage today, please? Is it 10% or 30% or roughly what is it? I'm trying to understand what substantially means.

So firstly, it wasn't 100% of our inventory, it was almost 100%. And the reason why we haven't disclosed a percent of what we've reached now is because this number actually evolves every week as we run experiments and we make tweaks and we speak to the demand partner that it actually changes every week. So I can give you an example. There have been weeks when it was less than 1% of the magnitude that we've seen. There have been weeks when it was more like 20% of the magnitude we've seen. And they have -- most of the last few weeks, we've seen it to be a smaller number than that. So that's what we mean by making progress that we've reduced it and we've learned a lot over time.

Okay. I'm sorry, so the implication is that sometimes it goes down, but sometimes it goes up again. It must be driving you crazy, not sort of knowing what the sort of the rules of the game are. I mean how can your partners stay there with a sort of straight face and not help? I mean, what's the story behind this? It just feels completely irrational.

Story is pretty simple. It's a monopoly that we're dealing with, right? For all practical purposes, it is a monopoly and they use their monopoly position to do these sort of things. You can always speculate on whether they have active drivers that makes them do this or which is a passive effect of the system. Doesn't really matter. From our point of view, the clear conclusion is that we need this partner who is always going to be an important player in the market we're in, is going to be the grease in the system but we have to be at a point where they're not the system. And we have come far away from that point now, but we still have definitely a way to go. And what happened last summer just reinforces us in our belief that we need to do other things such that we can use this partner and the traffic going through this partner as filling up the holes that maybe we may have from other traffic partners and direct sales, et cetera. We're not there yet, but we are going in that direction, and we are very well aware of the fact that, that needs to be done. What happened last summer was, of course, very unfortunate, it was very -- nothing we could plan for. But it strengthened us in our general belief that this is the way we're going to go because we are aware of the fact that this particular partner treats their partners like they treat us sometimes.

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

All right. Thank you very much once again for attending this webcast. We -- like we've said in the isolated issue that we're having around the ad revenues is something we're dealing with and we have a good plan in the long term to eliminate problems like this arising again. It will take us some time, but we'll definitely get there. While the rest of our business continues to be on a steady track, that's how we are working at the moment. So thank you very much for joining, and thanks for listening in.