Truecaller shares took a significant hit, plummeting by 35% from $35.95 to $24.47, before experiencing a modest recovery on Friday. This sharp decline followed the release of disappointing revenue results by the Switzerland-based company, renowned for its caller ID app.
Truecaller, a publicly traded entity on the Stockholm stock exchange, disclosed a quarterly revenue of SEK 399 million ($35.88 million) for the period ending in September, marking an 11% decrease compared to the previous year. This underperformance starkly contrasted with the SEK 469 million Q3 revenue projection put forth by JP Morgan just the week prior.
Truecaller, primarily recognized for its caller ID and spam prevention mobile application, has extended its service offerings over time. Since its inception in 2009, the company has amassed approximately 368 million monthly active users across the globe, with a significant portion, around 75%, residing in India. On a daily basis, Truecaller manages an impressive volume of over 3.2 billion calls. The majority of its revenue, approximately 80%, is derived from in-app advertising.
JP Morgan analysts provided an assessment of the situation, stating, “Contracted revenues SEK 398.7 million represent an 11% year-on-year decline (following a 7.9% increase in Q2) and fall notably short of the company’s consensus estimates by 13.3%. Within this, advertising revenues suffered a significant setback, dropping by 19.9% compared to a consensus expectation of a 3.7% decline. In contrast, consumer revenues increased by 19.4% (compared to a consensus of 18.4%), and other revenues expanded by 43.8% (versus a consensus of 48.9%), which aligns more closely with expectations. Examining the advertising revenues, it is worth noting that the average Monthly Active User (MAU) growth remains robust, with a user base of 368 million, implying an addition of 12 million users (compared to a consensus of 10 million). However, the Cost Per Mille (CPM) declined to SEK 0.96 (similar to the Q1 figure of 0.94), while the consensus estimate was at 1.03. The management explained that year-to-date CPM has remained stable if we exclude the Q2 IPL boost.”
The analysts further observed, “The challenge lies in the scenario where CPM remains stable throughout FY24, rather than rebounding, as this would imply a 10% risk to consensus FY24 revenues, and presumably even more concerning EBITDA. Truecaller acknowledged that it has conducted tests to evaluate the potential impact on user retention in case it needs to make adjustments related to specific data, in compliance with the new Digital Personal Data Protection Act in India. These tests involved presenting varying search results to distinct user groups on a large scale, facilitated by AI identity technology. Truecaller expressed optimism in the initial results, as they did not observe any significant alterations in user retention rates.”
