Truecaller: Q3 2022 preview

Research Note

2022-10-10

08:00

Redeye updates its estimates ahead of the Q3 report (due 11 November). We only make minor adjustments, lowering sales by 1% but raising EBIT by 5%. We reiterate our fair value range and Base Case.

JVK

FG

Jesper Von Koch

Forbes Goldman

Revenue comments

Advertising revenues depend on three variables: daily active users (DAUs), daily ad impressions per DAU (DAIDAU), and the cost advertisers pay for these ad impressions (CPM).

The only tweak in our estimates ahead of the Q3 report regards user growth. Historically, we note that Truecaller has grown by ~10m MAUs sequentially. We see no reason to change our perception of this and expect Truecaller to reach 331m MAUs in Q3 2022 (vs 321m in Q2 2022). However, we lowered our DAU estimate by 1% due to a slightly reduced DAU/MAU ratio. This incurs a small negative impact of ~1% on ads and subscription revenues.

We leave our DAIDAU and CPM expectations unchanged. First, DAIDAU has grown considerably recently, from 4.3 in 2020 to 10.2 in 2021 to about 12 in H1 2022. However, this KPI appears to have plateaued this year, and we only expect moderate positive growth in H2 2022 compared to H1 2022. Second, CPM rose >40% in Q2 2022 YoY, amounting to SEK1.49. Partially, this was boosted by the positive timing effects of the Indian cricket season and FX tailwinds. Consequently, we expect CPM to drop QoQ slightly. At the same time, we maintain a positive CPM outlook in the years ahead as Truecaller benefits from the ongoing move from offline to online advertising in growth markets. Thus, we understand that Truecaller is somewhat shielded from macro uncertainties currently hurting ad businesses with high exposure to mature markets. Also, CPM in Q3 will likely benefit from a strong Indian economy, which appears to fare better than the US and the EU.

Other comments

Truecaller has previously guided UA expenses to increase by 2–3x in 2022. However, this was before the current macro uncertainties, and so far this year, we think Truecaller has been rather conservative in spending its marketing budget. We expect Truecaller to maintain a similar strategy this quarter and thus adjust our Opex estimate by -7%. Our updated EBIT estimate amounts to SEK186m, corresponding to a 41% margin.

Essentially, we make minor estimate changes ahead of the Q3 report, lowering sales by 1% but raising EBIT by 5%. We reiterate our fair value range and Base Case of SEK80.

Disclosures and disclaimers

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