Audioboom Group (LSE:BOOM) — Interim Results

0:01 Good morning, and welcome to the AUDIOBOOM GROUP PLC Interim Results Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and can be submitted at any time using the Q and A tab situated on the right hand corner of your screen. Simply type in your questions and press send. The company may not be in a position to answer every question received during the meeting itself. However, the company will review all questions submitted today and publish responses where it is appropriate to do so.

0:30 Before we begin, I would like to submit the following poll. And I would now like to hand you over to CEO, Stuart Last. Good morning to you. Thanks, Alex. Hello, everyone. Thank you for joining us today. This is our trading update, our July trading update looking back at h one twenty twenty three performance and expanding on the trading update that we published this morning. So thank you again for for for joining us. Many of you will kind of recognize that the format that we have here will give a, you know, a few slides as an overview about the business, about our model, about what it is that that we do in our core operations. Then we'll dive a little bit into the in into the h one results, look at the financial performance, breakdown and expand the the business and and how we've been doing, and then look ahead at the the future operations and and and progress that we're seeing.

1:27 So we will get into that, but I think, you know, the first thing and Hi. This is Stuart. We have just lost your connection, if I may just

1:44 request control. Ladies and gentlemen, please do bear with us as we try to reconnect Stuart to the meeting.

2:21 Oh, Stuart has just come back in. Stuart, if I may just turn on your camera. Ladies and gentlemen, please do bear with us as we try to reconnect with Stuart.

2:47 Hi there, Stuart. Can you hear us well?

2:58 Should I should I carry on, Alex? Well Yeah. Yeah. Brad, if you Yeah. If you'd like. Yeah. Yeah. So Thank you. I'll wait for the short to rejoin. Thanks, for joining. I'm Brad, CFO. I've been CFO here at AUDIOBOOM since March 2018. Chartered accountant, various roles at other other companies focused on on on media finance. But let's let's let's get stuck into the to to the presentation. So for those who who are joining for the first time, you know, AUDIOBOOM is it operates in a in a very exciting space. The the total addressable market within within The US sorry. Within the global global revenue of podcasting, expected around 4,000,000,000 this year. Expected to increase to around 16,000,000,000 by 2030.

3:46 So clearly a space which is which is growing very, very quickly. And, you know, AUDIOBOOM is a leading pure play podcast platform that's operating within that space. AUDIOBOOM powers podcasting. So we sit at the center of three of these three different aspects of of what we offer. So AUDIOBOOM has a platform. It distributes all of its content to those different consumption points, Spotify, Apple Podcasts, YouTube, wherever it may be. Our platform distributes all that good podcast content to to those platforms. We have great content on our on our on our platform. Great podcasts there like Formula One, Noticing as a Fish. We have that all that content on our on our network, and we we distribute that accordingly.

4:34 And we link the advertisers there, that that pillar. We link the advertisers to the to the content creators, and we monetize that that podcast content. We typically enter into revenue share agreements with those with those podcast creators, and I will come to that shortly in terms of the different revenue streams and different margins within it. But we sit at the the center of that center of that ecosystem. We have three core beliefs. It's a it's a creator medium, advertising funded, and distributed media as well. So that should give you an overview in terms of in terms of what we do. You can see our historic revenue performance here. We've performed very well over the last few years. We've grown significantly. CAGR there of 6065%, increasing from 6,100,000 to to 75,000,000 last year.

5:25 We have adjusted expectations, you know, I was sort of thinking of adjusted expectations via the, you know, to around $70,000,000 for this year. So that's slightly lower than what we're expecting this year, and that's because of the software ad market that we're working within currently. But still, if you look at the performance over the last few years, that growth has been significant with the transition to EBITDA profitability in 2021. So clearly growing very, very quickly in in the space as well. Thanks, Brad. I think you might be able to to hear me now. It's Stuart again. Can you hear me okay? Yes. Great. Thanks for for picking up, Brad. I think key key for me is that last slide, which is just highlighting how how strong our model is. The fact that we've we've grown 11 x over the the last five years through this model. This model works. This model is is strong, and it will deliver future future growth as well. And not only just revenue growth, but it's this model has allowed us to outperform the wider podcast market. So you see on the left there, that's an AUDIOBOOM versus the industry, The US industry chart there, and it's just showing, you know, average outperformance of of the of of the wider industry every single year for the for the past five years. And in that time, AUDIOBOOM has become the fifth largest podcast publisher in The US. So a a really strong fifth position there. There's only

6:55 four networks of publishers larger than us, and there's a giant broadcaster, SiriusXM, Spotify, iHeart, and and and Amazon. So to be fifth position in amongst this this this group is just a fantastic achievement, and again, all all due to the model that we've we've we've built at at AUDIOBOOM.

7:16 And we continue to to to deliver strongly on that model. In fact, in the past five years, we've delivered more than a $180,000,000 of revenue to to podcast creators. Podcast creators are really at the heart of our business. They they drive our platform forward with our incredible content. We monetize that for them, and we've been able to to bring very, very strong value to our creators over the past five years. And on the other side of the the marketplace, we have delivered more than $230,000,000 of campaigns for advertisers and brands in that time. So the the the model, the platform is is very effective at doing exactly what it should be doing, which is connecting content with advertisers and and monetizing that and bringing value all the way down the chain. So, hopefully, that's a a good look at at the model. The clear messages are that we have a very unique model. We sit at the heart of of the podcast space.

8:11 We do a very important job of of of bringing together advertisers, content, and listeners, and we've been very successful over the past five years of doing that. We play a a incredibly important role in a medium that is growing very fast and is set to quadruple over the the next seven years. Now we'll focus down a little more on on the performance and look at at h one of of of twenty twenty three and go into a little more detail there. And firstly, we'll walk you through the the the numbers that we announced this morning in that trading update. So revenue of of $31,800,000, during the the first half of of twenty twenty three. And, you know, we we've been very clear that this is down from the the comparable period, in the first half of of twenty twenty two.

8:58 And it's a difficult comparison to make. Yes. The dollar number is down, but there's two clear and very, very impactful changes, across those time periods. So in the first half of twenty twenty two, we worked with a podcast called Morbid that was a, a top five in the world podcast, a very significant contributor to revenue, and and and that contributed a lot to that higher number in in h one of twenty twenty two. And then secondly, we're really comparing very, very different, ad markets. 2021 and then the first half of of twenty twenty two, it was a very, very buoyant advertising market, high pricing, high, high demand from advertisers. The, the advertising market fell away very, very quickly in the second part of of last year, and that has continued in into h one of of of this year. So when we look at, at that h one to h one comparison, we're really comparing very, very different operational environments.

9:58 I think one key number that I wanna pull out and highlight to you is the twenty twenty one h one number of of 22,700,000. So in a two year period, you can see there there is is still very, very strong growth around 50% growth over two years. And by looking, you know, I think across that wider period of time, we're able to just flatten out and smooth out the the peaks and troughs caused by this, changeable advertising market. So, you know, good growth over a two year period of of 5050%, and that's $31,800,000 of of revenue, is our start to, to to 2023. On the EBITDA side, $300,000 of adjusted EBITDA profit, again, down from the h one twenty twenty two number.

10:49 That EBITDA number is impacted by a number of things. Obviously, the ad market impact on revenue, lower revenue, means that that our adjusted EBITDA, number is lower. We have a small number of

11:03 podcasters who have a minimum revenue guarantee attached to their contract with us. So we, are obligated to pay that minimum guarantee to the podcaster, even if the sales against their individual show are lower than projected. So, there's a a level of true ups to to for us to make those, minimum guaranteed payments to the partners, and that again puts that downward pressure on the the, adjusted EBITDA. And then, obviously, we, we're working in a high inflation environment right now. We've had inflationary pressures on our operating costs. I think we've done a really good job of, of combating those inflationary pressures. Brad will talk a little more about those a little later on. But all in all, that that adds up to impact that that EBITDA and bring that down to to $300,000 in in the first half of of this year.

11:58 One point you may have seen, of course, in this morning's trading update was a provision that we have created for one single onerous contract that we have in in in the business. That's a contract that was signed really at the height of the advertising market in in the first half of of last year. That's a contract that we we don't expect to deliver any any profit on over the course of of that contract, and we've created a provision for that. Brad will talk in more detail about that one a little later in the presentation. And then finally, our cash position, it remains, relatively healthy at this point, $5,300,000 of, of of of cash in the bank.

12:44 That's up, $200,000, on on the last quarter of March thirty first twenty twenty three. So we have, we we've generated cash in that last quarter, despite paying advanced payments to some of our podcasters, that we then recoup over the the lifetime of the the contract. Additionally, we have another 1,900,000 available to us, in an overdraft facility. So, at this point, our health, cash is healthy. We have the overdraft facility as well for our current, growth trajectory and and growth plans. We are we are funded for the for the, for the future. Breakdown, that the revenue part of of our business, a little more and to give you, you know, a deeper look at the the model and and what is going into our our revenue here.

13:33 We we've we've drawn out this slide for you, and I think what this is doing at the top is it is highlighting our our three core, revenue, generators. One is our premium advertising model. The second is Showcase. That's our ad tech, an automated ad delivery model. And then thirdly, there is Sonic, and that is our our brand platform. Sonic works directly with advertisers and brands to execute their their campaign spending. So our premium ad model, that's those high value host endorsements where their ad is delivered in the in the voice of the advertiser. That's traditionally and historically been the biggest contributor to our group revenue, and it remains so. Although, because of the growth of the other areas of the business, that has come down in in 2023.

14:19 So historically, that has been delivering around 70% of the group revenue. So far in 2023, the the premium ad product has has been delivering up 59% of the group revenue. That's the the bit of of the business that has been most impacted by the challenging ad market. I will go into more detail on on why that is and what we're doing to combat that in the coming slides. Showcase, the the automated advertising sales. It's an ad tech driven product that continues to to grow quickly. It's a real success story for for AUDIOBOOM. Delivered just 12% of our revenue in 2022, and it's delivering around 21% of our revenue, so far this year. So showcase continues to to grow strongly.

15:07 And then Sonic, is contributing strongly too at 20%, up from 17% last year. The revenue shares that you see underneath each of those, each of those products, that's our contracted revenue share. So that's how much revenue AUDIOBOOM keeps after sharing the the revenue with

15:27 the podcasters, and that's the contracted amount. So, you know, the premium ad product has a 21% revenue share. Showcase, that that revenue share is higher because of the efficiency of of the product and the fact that we are ad we're using that product across 8,000 podcasts. So the smaller podcasts, we we can create more favorable, contracted terms with them to deliver more of the the revenue share to AUDIOBOOM. And then Sonic at at 13%, has the slimmest of the the revenue shares. Sonic works and operates off of a traditional ad agency model in and around the the 12 to to 15% revenue share. But combined and and blended, that, you know, that contracted group revenue share in in 2023 is is 24%, and that compares two years ago to to a 21% contracted revenue share. So we've done a a a big piece of work within the business to improve those revenue shares across the business.

16:30 That's been through recontracting, renegotiating contracts, improving the the terms that we create for for for AUDIOBOOM. And so we've done a a good job there. But what you are seeing in the the results that we put out today is the pressure on that that revenue share. So from the the contracted group revenue share of 24%, in reality, we've moved to a a 20% gross margin because of the impact of those minimum guarantee obligations that I spoke to on the last slide. So we continue to pay out those minimum guarantees that we have with our larger podcasters, and that has brought down the the the gross margin, to 20% during the the first half of last year. But I think the key message here is when the advertising market returns and improves, we'll be working on that improved twenty four percent, group revenue share. So we've made big steps and big strides, I think, to to to to getting into that position.

17:30 So the next couple of slides do break down the the revenue operations and the revenue performance during the the first half of the year. The first the first chart here on the left hand side is is our global downloads number. The second chart is our ECPM. So these are two of our KPIs. You'll have seen these over the the the past few years. We update these on on a quarterly basis. And the key point here is that revenue is a combination of of of these two data points. So, revenue is really a combination of of downloads and then ECPM, with ECPM being the value that we extract from each 1,000 of those downloads. So those two things combined very clearly and very simply to create a a revenue number.

18:16 Our downloads performance has has been very strong, and that's been the story of this first half of the year is that operationally, we've made great progress. So we've moved our, you know, our monthly download average download number to a 126,000,000 in q three of last year. That number was just a 108,000,000, and in q four, that was a 110,000,000. So we've seen very strong growth in that monthly downloads number, in in 2023. And in May of this year, we hit a record number of a 135,000,000 downloads. So great great, consumption metrics there on the download side. You'll see from the ECPM part that that's where we've we've fallen behind in the first half of of this year. The ECPM dropped to $41.

19:01 That's $41 extracted from every thousand of those down downloads, and then an improvement in q two to to $43. Now in a buoyant and healthy advertising market, you'll see consistently that eCPM number is above $50, between 50 and and $56. In the weak advertising market that we're currently experiencing that e c p ECPM has now dropped into the the lower forties. ECPM is really a a combination of of pricing and and demand. So, you know, higher pricing that we can charge and the higher demand to buy advertising in our podcasts leads to that higher ECPM number. That ECPM number is around 25% lower in this weak ad market versus strong ad market of of last year.

19:52 But what I think is is is the, the key point here is really the improvement that we've made in q two. So we are increasing that eCPM. That means we are improving the pricing and and improving the fill rates on our advertising, and we will see a further ECPM improvement in in the second half of the year. So that ECPM is heading in the right way, albeit it's been weak in the first half of the year because of of the challenging advertising market. The second part of this, analysis here, on the the revenue performance, looks at customers, and and I think that's the key area of of of why the ECPM has been impacted in in the first half of the year. So overall, our our brand count, the number of brands that advertise with AUDIOBOOM, that that number keeps going up. That's up to 8,000 brands per month

20:48 advertising and buying advertising space on AUDIOBOOM podcast. So we've seen a a very strong growth on the overall brand brand count AUDIOBOOM. So brands are very interested in podcasting. Podcasting is still healthy. Podcasting is still performing for them. But the second chart here really breaks down, the the the impact on on the ad market here. This breaks out the the change in brand count between our premium advertising products. So there's high value host endorsements, the the product that has been delivering the highest and and the biggest contribution to our revenue over the past five years, and then showcase the automated ad ad product that that we've built over the past two years. So on the premium ad product, we have lost 26% of of the brands that we're advertising on AUDIOBOOM a year ago. Whereas in Showcase, we're seeing fantastic growth, 62% more brands advertising through, through showcase than than than a year ago.

21:53 So it's clear that it's the it's the premium, the high priced advertising, that that is, is suffering in this advertising market, and that low premium demand is impacting the the ECPM on the last slide. But then to break that down even further, we can take a look at at why that's happening. The the clear the thing that we're seeing here is that those, historically strong brands for podcasting, they are performance advertisers or direct response advertisers. They are often, direct to consumer brands. They are disruptor brands. They're in startup phase. They are selling their products directly through their podcast advertising. They are looking for an immediate ROI on their, on their podcast advertising. Now those brands have been impacted the most by global economic conditions and and and high inflation, and they are pulling back their budgets. And many of them, as you've seen, 26% fewer on audio, many of them are stepping away from from from podcasting, in entirely at this point. So those smaller brands, that have, have historically and traditionally been working in podcasting, are cutting their advertising budgets.

23:09 Our goal is to, grow our awareness brands business. So these are much bigger brands. These are brands that don't need that direct return on investment through their podcast advertising. They are building strong sentiment and awareness of their brands, brands like Ford and Pepsi and Procter and Gamble. And in May, we launched a a new team that will focus directly on opening up that wider customer base. That bigger customer base will will improve the eCPM, will improve the demand, and these brands are less less impacted by, by by global economic conditions too. So that that unit launched in May, and I'll give you an update, later on in this this presentation, as to to as to the progress there.

23:56 But I think that the clear message here is that we, very much recognize the areas of the, advertising space that are most effective, and we've already put it most effective, I should say, but we've and we've already put in, plans and new teams to to combat that and to grow a new customer base that is less impacted by the current economic circumstances.

24:22 I'll throw here to Brad to pick up for the next couple of slides. Thanks, Stuart. Hi again, everyone. So, yeah, we've got a couple of finance slides here. So, you know, we've given further insight into OpEx trends, what we've done to reduce it in the first half of this year,

24:40 give you more detail on that on that contract provision as well because there's been quite a few questions about that this morning. So we'll have some information on that. And then we've got some good updates on the working capital cycle and how that continues to perform well. So, yeah, we can see here our progression in terms of revenue and OpEx over the last couple of years. And we can see that OpEx continues to be relatively flat. This is adjusted OpEx before any depreciation, interest, share based payments, or any restructuring costs. This is it shows how the, you know, how the business is operating before these before these other costs. Stuart's given you the the good overview of revenue, the the contributions, and the and the and the margins, but it's pleasing to see that q two is 6.5% up on q one.

25:28 Q2 is also higher than Q3 last year and was 90% of the revenue reported in Q4. OpEx continues to be, as you expect, very well controlled despite those wider inflationary pressures that we're all experiencing. And we've done very well, I think, to to lower our OpEx cost by 11%, reducing it from 6,200,000 to 5,500,000 in the first half of this year. Have we done that? Well, main reduction has come from our material cost category, staffing, commission costs. At this point last year, we had 47 heads. We're now at 39, so we've reduced staff by 17%. The sales operation has been restructured. We've moved production heads and the associated marking marketing costs from AUDIOBOOM Studios.

26:14 And, you know, as we move to focus on offering production as a service, and we also removed a couple of heads from Sonic as well to make that more efficient. Staff costs and commissions have decreased by 1,100,000, with 500,000 coming from the reduced headcount and 600 k from the lower commissions due to the lower revenue and the slight restructuring of that commission program. So that's you know, that that that's we we worked well to to restrict that cost. Other cost reducing initiatives, we focused on that technology cost bucket, which is the second biggest cost category in the main cost reduction there or the saving that we've achieved is is on the the rates that we pay for bandwidth and ad impression costs from our supplier.

27:02 As we're delivering a higher volume of those things, downloads of ad impressions, we've secured more favorable rates. Had we not done this, then the cost would have been around a $100,000 higher than than the more we've recognized. So, we've done a good job to to restrict that to restrict that cost back in. We we remain, you know, with 30 sorry, 39 heads extremely lean, prime for further growth when the when the ad market is strengthened. You know, no major investment is needed into the technology stack that we have or significantly higher number of staff. So when the when the markets do return, we'll see that impact flow through through both top and and bottom line, obviously.

27:39 In terms of the provision, so we've today, we've announced that provision for the onerous contracts that Stuart mentioned mentioned briefly earlier. That was an individual contract that was signed during that buoyant part of the podcast industry, first part of twenty twenty two. So in line with accounting standard IS 37, we're required to provide any contract which is deemed to be loss making. And I've I've detailed this further in note nine of today's announcement. So if you would like, you know, to to read that and ask any follow-up questions, then please do so. But it's note nine in today's announcement. Provision of 7,100,000 created in relation to that individual partner contract. Despite downloads for that contract continuing to increase as other shows have, the downloads continue to increase on that show. The ad rates have been commanded historically in the future. Ad rates are likely to be lower than those modeled when the contract was signed due to advertising markets being more challenging as as as we as we've said. So in light of those revenue growth projections being lower, it's unavoidable that the, yeah, the contract will generate a a net loss through to its conclusion in July 2025.

28:50 The contract recorded a net loss of 1,800,000 in the first half of this year. And if you see the the income statement, what I've done is treated that and the provision as an exceptional cost. So you will see a a number of 8,900,000 on there, which is the loss in the first half of this year plus the provision. And I've done that because I want to treat this contract separately and display the rest of the business in terms of how that's operating. So that's why that's been treated as an exceptional cost, so we provide a more accurate reflection of the performance in the period for the rest of the business. It's right that that provision is created now. There are no other loss making contracts in the company. And it's been created because we're incurring that loss on the contract by truing up to that minimum guarantee level.

29:36 Creating a provision means that any future true ups will not impact gross margin. That will be unwound against the provision. We've used different growth assumptions in terms of high, medium, low growth assumptions to calculate that provision, which has led to the provision of 7,100,000 being created today. Looking forward to the end of the year, what we'll see on the end of year financial statement is that that provision number will decrease between now and the end of the year because we've got six months there where the minimum guarantee true ups will be unwound against that provision. So my estimate is that provision number will be around $5,000,000 by by the end of the year because we've got six months of unwinding to go there. So, yes, it's obviously quite complicated. But look. There's there's a note in the today's announcement, note nine. If you've got any other questions, then [email protected].

30:27 Please contact me, and I can I can talk you through it? In terms of the working capital cycle, headline is that cash increased by naught 200,000 in q two over q one. So we end on 5,300,000. We've collected another 2,700,000 from our customers in July. Good good good statistics through the first half of the year. So we collected just under 33,000,000, average of 5,500,000 a month. We collected a 103 a 103% of revenue versus our three year historic average of 94%. So collection is still good within within the company. We're performing very, very well, which is fed through to the debt a day of 72, which is comparable to the 68 that we had at the end of December and at the end of June. So settling there around that that 70 mark. We try and get it below 90 because we work with collect from advertising agencies, which typically pay on ninety day terms.

31:18 Bad debt expense in the period, 127 k, naught point 3% of revenue. So continue to have a very minimal level of any any kind of write offs or provision despite that challenging macro environment. So you're obviously concerned about the ability of customers to pay, but, you know, we we we're still collecting very, very well. But we have had that cash reduction in the first half of the year from the 8.1 down down to 5.3. We have paid 1,200,000 advances to retain talent in in the first half of this year. We've also had that that loss making contract of of 1,800,000 in the first half of the year, plus we've also settled everything in relation to the seasonally stronger q four as well. So we have had some expected reductions in cash, but obviously, to step up from q one to q two, albeit marginally, is is encouraging.

32:08 In terms of future cash utilization, we've got a further 1,200,000 contract for advanced payments in the second half of this year, and, obviously, we've got to facilitate that that onerous contract as well. We've recently renewed that one that 1,900,000 overdraft with with HSBC, which is a good endorsement for us. So that's there should should it be needed as as well. So look. In in conclusion, business continues to do a good job on controlling the costs that are incurred. There's a cost base that flexes there as we start to see things, you know, revenue increase. There'll be more commissions incurred as the downloads increase. That that line will increase as well, but we're doing a good job in terms of controlling those. And once this ad market strengthen, we'll see that go through to top and top and bottom line. We provided for that onerous contract, which is the correct thing to do and allows the business moving forward to report its underlying performance, and that working capital cycle continues to operate as as as expected, delivering some some good consistent metrics there across the last eighteen months or so.

33:11 So yeah. Any other questions on any of that finance information, put put them in the question box or email me afterwards. But, yeah, back to you, Stuart. Thank you, Brad. Just a reminder, we will try and get to as many of your questions as possible at the end. I think we have three or four more slides before we get to those, so you can go and submit your questions. Now before we get into that, I think this this this final stage of the presentation really is showing how how our operational progress is is is coming together. We've made very good operational progress over the first half of the year that hasn't been necessarily seen in the financial results, which is obviously frustrating to us. But in a handful or more of of key areas, we are demonstrating good progress. And I'll walk you through those now, and I'll walk you through the the future focus of of the business as well.

34:07 So the first one really is something that I touched upon earlier and this is the improvement in our advertising revenue shares. This is creating more favorable contracts, for for AUDIOBOOM, so we retain more of the the revenue from each of those advertising campaigns that that runs on the network. So network wide, our contracted advertising revenue share is now at 24%, up from twenty one percent two years ago. We are increasing that that, that network wide revenue share because of the increased revenue contribution from showcase that has a a higher 41%, revenue share attached to it. We're improving our contracts with podcast creators when we are reviewing those. We are doing those on more favorable terms, to to AUDIOBOOM.

34:55 And also, there's an enhanced sonic, contribution there from from clients on on the Sonic side that is improving the the Sonic revenue share also. So that's a a big step for us. And what that really means, as I said before, is is that gives us a clear pathway to improve our gross margin and then our profit, obviously, when the advertising market improves. So you're not seeing necessarily that come through today because of that weak advertising market and that that pressure on the gross margin because of those minimum guarantee payments that we make. But as we clear that, we will then go in into a into a place where we are working on a a higher gross margin because of this improvement in the advertising revenue shares that that we have. So I think that's that's good progress. The second part of the progress is is around audience. I've already kind of highlighted the the download growth, you know, to get to a 135,000,000 downloads in May, from a 103,000,000 in the month of December, is is is fantastic.

35:56 We've we we're doing that by adding more shows, by driving audience, by marketing across the the platform using our our large megaphone to to cross promote to to to audiences, and that's really highlighting, I think, the the the marketing platform that is sitting within AUDIOBOOM. We don't necessarily talk about it too much. We don't use it and highlight it as as much as we should, but it's a very powerful marketing platform that can really drive drive audience and increase download numbers from from within. And the same with the unique list of the numbers. So we now, as of of March 2023, reach a record 38,000,000 unique listeners on a monthly basis. Again, big progress there from December 2022 when that number was just 28,000,000.

36:44 So in the matter of months, we added 10,000,000 unique listeners. So great consumption levels, great reach levels. The strength and the size of the network is is in a really good place as we move into the the second half of of of the year. And we are doing that much of of that growth in in consumption and and listening is is because of the expansion and the consolidation of our creator network. I said at the top here that creators are really the heartbeat of of of this business. We look to sign and to work with the biggest and most creative podcasting talent out there. And already this year, we've signed a number of tier one podcasts to to the network. We've renewed some of our our larger show partnerships as well, like the Formula One part partnership. Tiny Meat Gang is is a very cool and very big group of of podcasts out of The US, and we will continue to to grow that creative network.

37:41 We'll continue to to expand that, which will increase the the audience levels, which will then in turn increase the the inventory and the advertising availability on on audio groups. So all of these fundamentals moving in the right direction. Inventory, I just talked about, but that's a a key point for us as well is how we expand the the level of in inventory that that that we're getting here. This isn't a kind of an operational leverage point of view. We are creating now more than seven available advertising impressions from each download on on the platform. So from each of those 135,000,000 monthly downloads, we now create seven advertising impressions from each of those versus 5.3 per download a year ago. So that's that's a that's a big change. We create more, available impressions per download. That's more, advertising for for for for us to sell. And, again, as we move, out out of this challenging ad environment, that will, that will lead to to greater performance in the future.

38:44 How are we doing that? Well, a number of ways. One is, the renegotiation and the reworking of the contracts with our podcasters. We we contract them to deliver a higher level of advertising within their shows, albeit with the, the mindset of making sure that the product for the audience, is is is not too full of ads. You if any of you have heard radio in The US, it's a pretty horrible product. It has around twenty three to twenty eight minutes of ads per hour. As you'll see really from our seven advertising impressions per download, that's that's a much, much, much lower level of advertising. It makes the product still very strong for the consumer and for the listener. So we contract shows to deliver high ad loads. We've also further rolled out our ad rep inventory creation tool. This is a very unique tool.

39:36 No one else in the podcast industry has this. This allows ads, those those host endorsement ads that are baked into the fabric of the the podcast and delivered within the podcast. It allows those to be ripped out automatically with no effort from the podcast at a later date and then replaced with brand new advertising through showcase. So the ad group tool is very powerful and it's leading to higher inventory numbers. And then, of course, we we are always talking to our podcast as well as educating them about the new tools that we have about the the the ways that they can improve their monetization. And because of that, we will create more than 11,000,000,000 total ad impressions this this year, which is tremendous scale and and really fun fantastic progress to to go from that that five per download to more than seven in in in in just a year.

40:27 I talked earlier about us recognizing that the the core group of direct to consumer brand awareness start up disrupt the brands that had been advertising and podcasting. They were suffering because of the economic environment, and we moved relatively quickly, I think, to launch a new team within AUDIOBOOM that is dedicated on finding those new customers, finding those bigger brands, those blue chip brands, those brand awareness advertisers who are less impacted by current economics to become to expand our customer base effectively, and and that that piece of work is underway. First of all, you know, the first step in there was restructuring all of our revenue operations to enable that to happen, and I was really pleased to bring Jenny Skog, who was leading Sonic at the time, into a more expanded role as chief growth officer back in in in in January. She's now responsible for all of AUDIOBOOM and and Sonic revenue and is doing a fantastic job in in pretty challenging conditions.

41:30 Jenny oversees all of that revenue operation. And in May of this year, to launch that new unit, we hired a really fantastic operator called Jim Lally. Jim is a very experienced salesperson previously at the New York Times, New York Public Radio, and a podcast platform called Market Ingenuity. He will he will lead the the growth of our brand awareness revenue unit, and we're already seeing some some good traction. It's a it's a a long project, and it takes a lot of education to to get into those, bigger advertising agencies, those traditional advertising agencies, and, educate them about why podcasting is so good for for the the those their brands. But but progress is happening there. We're seeing traction, and I look forward to, updating you on the, on how that is going, in the second half of this year.

42:22 And then finally, we we talked about it many times in in in this presentation and previously, but showcase our automated ad product, our ad tech marketplace. That just continues to to to to grow strongly, up 35% in terms of revenue from the same period a a year ago. The contribution to the group revenue is is is almost double what it was a year ago. I think the key parts there with Showcase is this is a you know, it's a two sided marketplace, and AUDIOBOOM is building out both sides. We're building out the supply side. Those those record download numbers, those record advertising inventory numbers, that's that's leading to some really strong supply in that marketplace. 660,000,000 advertising impressions were made available to showcase it in in in the month of May, which is just some fantastic scale for for brands to come in and to to explore.

43:15 And then on the the demand side, the monetization side, we we continue to build our our partnerships on on that side. Recently launched partnerships there with BOOM, a big media company, BOOM Nordics. ICON, Intravision is a a Latin American media company. Audio hook, audio on programmatic or ad networks that all bring advertiser demand to that marketplace, and we match that up, through the ad tech, with the, with the downloads, with the supply side, and that will continue to to lead to strong, showcase growth over over the the coming years. So really pleased with the continuation there in showcase. And, yeah, I think you'll see from these from these improvements that we're making and the progress that we're making on the the operational side the return to growth is is really not far away at this point. And even if the, advertising market doesn't roll back and and and is takes longer than than expected to, to to improve, we are still in a position of growth in in the second half of the year.

44:23 And this slide really sums that up. All the things that we're doing at the top, we're improving and have improved our our download metrics across the business 20% at least download growth versus versus last year. So we have more downloads. We're then creating more inventory from those downloads. So we're now creating seven available advertising impressions per download. Then we add more customers through that brand awareness launch in in May. So we have more downloads, more available inventory, and more customers to to to buy that inventory. Showcase continues to to grow on both sides, so more monetization across Showcase. And then we're getting into, the strong period of of seasonal demand as well. We're very strong around the NFL season in in The US, the, the the football season in Europe, the the holidays from Thanksgiving through to the end of the year. So those parts, that progress all kind of comes together.

45:19 That leads to, you know, increases in pricing, increases in in in demand because of the inventory and the customer levels that we're creating here. That will increase our eCPM in the second half of the year, that that key number for for how we extract value from from our network. And that in turn will lead to to h two growth on a on an annual basis. So we will return to meaningful growth in the the second half of of this year as we put all these pieces together. So I think to sum up, and this is the last slide for us before we get into in in into those questions. Frustrating financial progress in this first half of of the year that the advertising market has is is really stopping that operational improvement really being crystallized, but we continue with those operational improvements. We continue to to build our model. Our model works. It's delivered, 11 x growth in the last five years.

46:22 It will continue to work. We're now just amending it, adjusting it, improving that model so that it delivers us us growth in the future. Stuart, Brad, thank you very much indeed for your presentation. Ladies and gentlemen, please do continue to submit your questions using the q and a tab situated on the top right corner of your screen. While the company take a few moments to review those questions submitted today, I would like to remind you that a recording of this presentation along with a copy of the slides and the published q and a can be accessed via investor dashboard. Stuart, Brad, as you can see, we have received a number of questions throughout today's presentation. And if I may hand back to you and kindly ask you to read out the questions and give responses where appropriate to do so, and I'll pick up from you both at the end.

47:08 Thanks, Alex. There's been a number of questions on, I think, the health of podcasting. First one from Peter was around, negative press about podcasting. Is it is it no longer as healthy as it once was? Is podcasting still a growing sector? I mean, the the answer is is is yes. It is still healthy. It's still a growing sector. The first slide here addressed some of that. The total addressable market is expected to quadruple over the the the next seven years, So no change there. There was a recent study. It was it was published around a month ago by Edison Research, in The US, and they found that 42% of Americans now listen to podcasts on a weekly basis.

47:53 That's up from 38% a year ago. So just in the last year in The US market, there's around 15,000,000 new regular listeners to to podcast. So audience continues to to to grow. And although we're in a weak advertising market, it's it's more what we need here is a is a is advertising demand and rates to return because the audience growth is still there. So that's that's the the key. That's what we're continuing to to look for signs that the advertising market will will will improve and when those improvements will will take place. As with AUDIOBOOM, the wider industry is is is healthy from a listening and a consumption point of view. We just need the the the ad markets to, to to come back.

48:40 And I think a similar question here, which is about, Spotify, having spent nearly $1,000,000,000. Much of it is on celebrity podcasts that have not worked out for them. Is this specific to to Spotify? Yeah. They they spend a lot of money, tens of millions of dollars on, signing, wellness celebrities to deliver podcasts for them. That's Harry and Meghan. I think the Kardashians, the Obama's, several celebrities that are not podcasters, and that strategy hasn't worked out to them for for, at this point. I think back on a on on an earlier slide that that Brad was looking at when we when we broke down that AUDIOBOOM model, I I highlighted, I think, three key beliefs to the AUDIOBOOM model on on that slide.

49:32 One of those was really around our belief that this is an independent creator medium. So that's authentic voices from creative talent, who have the ability to deeply engage with their listeners. And and that belief kind of continues to be proven out. This is a great example of of that. You cannot turn a celebrity necessarily into a a podcaster that that, you know, they need to be an authentic creator. They need to be an authentic, podcaster. So, podcasting, you know, I think it's a it's it's a it's a hits business at this point. You know, those those tiny percentage of of large shows are continuing to to drive high high revenue, or the biggest chunk of of the revenue in the space, much like the the music industry. And so we're all, you know, we're all very much focused on finding those next hits and and being the publisher that delivers those those next hits be because of that. And for Spotify, they look to do that and to deliver those hits through giant celebrities, and that didn't work out for them. For us, the way we do it, to to find those hits, it's through recognizing and and cultivating independent creators. And I believe that that is the most efficient and most, you know, most likely to succeed, route to to find those hits, from from authentic creators.

51:00 Next question I have here is from Sarah. It was pre submitted. It says, how is AI impacting podcasting, and how is is AUDIOBOOM using it? Yeah. It's it's a good question. And there's a in May, it was a a big podcasting event in London, and this was one of the the key questions that was was floating around leadership at at that podcasting event. I kinda picked this question next actually because it it kind of relates to many of the points I I just made about creators and authenticity. And I think I one of the the things that I don't believe in is that AI will play or should play a part in the content creation process. That's an art form that's best left to, you know, the best creative talent in in the world.

51:47 But no doubt, AI does have a a part to play in podcasting. You know, we've built this business through a lot of automation in the platform, and that's been a a key factor in why we've been able to scale with, you know, low headcount, low cost base. That automation has been key, and I think AI will support those processes, those automation processes for us. And I think one early example of how we're experimenting with in our is in our advertising business. You know, previously, the process to create ads was fairly time consuming. It required access to recording studios, a turnaround time to to get ads recorded, and delivered back to us ready for, for for kind of publication or for for campaign execution.

52:36 But through AI, what we're able to do is, receive a script from an advertiser, and then within moments, we can have an AI generated voice create that thirty second ad that's ready to be used in showcase. So I think the the key part here is that AI can improve our processes. It can remove cost from the business. And I'm pretty sure that this time next year, I'll have some some other examples for you too of of how we're we're using AI at at AUDIOBOOM. We've had a a few questions on on this one, and I'll throw it to to Brad here. This is an example of of one they came in today. Previously, we've been told shareholders will be getting a dividend. Is this still going ahead?

53:22 Yep. So, yeah, to take that one, Stuart. So, you know, board previously indicated in January, earlier on this year, the intention to introduce a progressive dividend policy with a maiden dividend in respect of the current financial year, I e 2023, being declared and paid in 2024. Now, given given what we've published this morning and given what we've gone through in this presentation here today in terms of that more challenging advertising market, you know, going beyond what we expected at at when we announced that in the first part of this year. It's right that we say that, you know, we we it's the intention to review that progressive dividend policy for the 2024 financial year and onwards. Obviously, that's disappointing to to say that, but I'm sure it's come across in the numbers today the reality of what we're experiencing this year. So it's right that that that process goes goes forward, and we we review that from 2024 onwards.

54:23 Thanks, Brad. One more here. There's a there's a few that's similar, one from Murray Jay, another one that was that was pre submitted. What's the probability of of more, onerous contracts if the ad market doesn't improve? And similarly, can you give more details of of how you've adjusted the approach taken to calculating minimum guarantee offers to podcast partners? Yeah. I think two parts here. First one is that is that we're not expecting any further onerous contracts. Really, the one that we do have just relates to a very specific moment at the height of of a very strong advertising market.

55:11 And also with that, it was a it was a three year contract that that that was signed. It was a very competitive process to to sign that show, and and it was a three year contract. Within those podcasts that I mentioned where the minimum guarantees were were not being achieved and we were we were truing up, they were not loss making contracts, but we're truing up on those minimum guarantees, and and and therefore that's impacting the gross margin. Those are and, you know, we're not signed fully at the height of the the previous ad market. And also, are on they are shorter term contracts. They have less time left on those contracts at this point. So they will be up for renegotiating, over the the coming months, in which case they can be pulled back into, into, you know, to to less risky terms for for AUDIOBOOM. So I don't see a a time or a place where there are further onerous contracts within this business. And then in terms of how we look to to create minimum guarantees going forward, well, you know, I I think the the way we we calculate and and and look at those minimum guarantees is really based on on, the advertising market in the buoyant ad market of 2021 and then the the first half of of twenty twenty two. Advertiser demand was so high.

56:33 It was high enough that we were, you know, we would be confident of filling more than 90% of the available advertising slots in in in a top tier podcast. And so when we go through the the process to sign those bigger shows, those those tier one shows, we will create a strong deal with a kind of a punchy minimum guarantee attached to it based on advertising. We wouldn't do that at 90%, of course, course, but but but we would do it at a high enough level to to to win those deals. Once we saw the ad market decline, and I think I I pointed it out earlier in this presentation, we saw a 25% reduction in demand levels. So that's a big a big change. So, you know, now we're operating under very different conditions.

57:20 We obviously calculate those potential minimum guarantees that we can offer to to podcast as in in a very different way. Demand is 25% lower, so it's, you know, simplistically, we're just using a a much more conservative level of advertiser demand and pricing when we are when we are calculating what those minimum guarantees can look like. But, you know, I think the the key part is that we are also thinking beyond more and more, we are thinking beyond those minimum guarantees. We're thinking about what we can offer those big podcasts purely beyond the the the financial guarantee. So that's our technology and distribution that many of our competitors don't own and operate. So we that's a it's a really really fantastic standpoint for us as the technology and distribution that we have that we can offer those podcasters.

58:10 Our marketing, I I kinda talked about that megaphone that we have of of 38,000,000 unique listeners on our platform, so we can we can enable our big podcast to to utilize that, that marketing megaphone. And then our production services as well through AUDIOBOOM Studios. That's that's what we do for Formula One. We have a very strong partnership with with Formula One, and we coproduce their their podcast and and, enabling and helping support those big tier tier one podcasters through AUDIOBOOM Studios on the production side, will also add value to to what we're able to to offer. So that I I think, you know, our offers will be lower to to podcasters moving forward. You know, we're not in the same market that we were eighteen months or or or two years ago, so those offers will be lower.

59:02 But we'll also be able to offer further value because of the model that we have, because of the technology that that that we have. And I would say here right now, our our new business pipeline is actually stronger than it has been at any time in the past three three years. So I don't believe that the the the lower minimum guarantee offers will impact the the growth of the network and and the growth in our in a in in a business and the partnership deals that that that we bring to to the platform. And then we have one minute left. So, Alex, I'll, I'll throw back to you. Thanks. Thank you, Stuart and Brad. And I think you have addressed those questions you can from investors today. And, of course, the company will review all questions submitted today, and we will publish those responses on the investor meet company platform.

59:48 But perhaps before redirecting investors to provide you with their feedback, which one is particularly important to the company, Stuart, could I please ask you for a few closing comments? Yeah. I think the key thing today is that, you know, we we all all frustrated that the financial progress doesn't reflect the the operational progress in in the businesses. I think you've seen we've made strong operational progress in a number of areas over the the past year and over the particularly, over the the the last, last six months, and that progress is is setting us up, to emerge in a in a very strong place. It's setting us up to, get back to a growth phase in the second half of of this year. Our model, the AUDIOBOOM model has, delivered, 11 x growth in five years. That model still works. That model, is strong. We're adding to it. We're improving it. We're adapting it for this tricky and challenging, marketplace that we're in. But the model works, and that model will continue to work in the future. It'll continue to to keep AUDIOBOOM growing.

1:00:54 And as I think we've shown today, we will get back to that growth in in h two of twenty twenty three. That's great, Stuart, Brad. Thank you once again for updating investors today. Could I please ask investors not to close this session as you will now be automatically redirected to to provide your feedback in order that the Board can better understand your views and expectations. This will only take a few moments to complete, and I'm sure will be greatly valued by the company. On behalf of the management team of AUDIOBOOM GROUP PLC, we'd like to thank you for attending today's presentation, and good morning to you all.