Earnings Release • Feb 28, 2023
Earnings Release
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Paris, February 28, 2023, 17:45 CET – Deezer (Euronext Paris: DEEZR; ISIN: FR001400AYG6), the global music streaming service, published its consolidated results for the year ended 31 December, 20224 , approved today by its Board of Directors.
1 Year-on-year.
2 A reconciliation of non-IFRS financial indicators is available in the appendices of this press release.
3 Cash flow pre-funding.
4 Audit procedures have been carried out on the financial statements. The Statutory Auditors' report will be issued after examination of the management report and completion of procedures required for the filing of the Universal Registration Document.
"I'm very proud of what we achieved in 2022 and I would like to thank the team for an outstanding execution of our strategy over the past 12 months. Joining Deezer, I had four clear goals; secure funding, increase differentiation, achieve double digit growth and reach profitability. Despite very challenging market conditions in 2022, we were able to secure enough funds to fully execute our plan. We increased revenues by 13% with growth in all segments and geographies, while cutting losses in the core business by €18m and setting a clear path to profitability."
"2022 was also a year of differentiation for Deezer, establishing ourselves as the go-to player for tailored music solutions through exciting partnerships, including RTL+ Musik in Germany and Sonos in the US. Moreover, with a new product vision, we are on our way to transform Deezer from a traditional DSP to a provider of unique music experiences. Our relationship with the labels is stronger than ever and they are key partners in our quest to improve economics in the music ecosystem. We're only at the beginning of a very exciting journey for Deezer and in 2023 we will continue to evolve through differentiation and improved profitability."
| In € million | FY 2022 | FY 2021 | Change (%) | Chg. at constant FX |
|---|---|---|---|---|
| Total revenue | 451.2 | 400.0 | +12.8% | +10.6% |
| B2C | 317.2 | 282.7 | +12.2% | +10.8% |
| B2B | 118.5 | 107.4 | +10.4% | +6.6% |
| Other | 15.5 | 9.9 | +56.0% | +48.8% |
| In € million | FY 2022 | FY 2021 | Change (%) | Chg. at constant FX |
|---|---|---|---|---|
| Total revenue | 451.2 | 400.0 | +12.8% | +10.6% |
| France | 273.2 | 242.6 | +12.6% | +12.6% |
| Rest of World | 178.0 | 157.4 | +13.1% | +7.6% |
| FY 2022 | FY 2021 | Change (%) | |
|---|---|---|---|
| Total subscribers(1) | 9.4 | 9.6 | (2.2)% |
| B2C | 5.6 | 5.7 | (0.1)% |
| o/w France | 3.5 | 3.2 | +8.1% |
| o/w Rest of World | 2.2 | 2.4 | (11.0)% |
| B2B | 3.8 | 4.0 | (5.1)% |
| ARPU (in €) | 4.0 | 3.5 | +14.3% |
| B2C | 4.7 | 4.1 | +13.7% |
| B2B | 2.6 | 2.3 | +11.9% |
(1) As of 31 December, in million
| In € million | FY 2022 | FY 2021 | Change (%) |
|---|---|---|---|
| Total revenue | 451.2 | 400.0 | +12.8% |
| Adjusted gross profit | 98.0 | 84.1 | +16.5% |
| In % of total revenue | 21.7% | 21.0% | +70bps |
| Adjusted EBITDA | (55.7) | (64.6) | n/a |
| In % of total revenue | (12.4)% | (16.2)% | +380bps |
| Operating loss (EBIT) | (166.7) | (120.6) | n/a |
| In % of total revenue | (37.0)% | (30.1)% | - |
| Net loss | (168.5) | (123.3) | n/a |
| Free cash flow | (43.6) | (47.5) | n/a |
In 2022, Deezer continued to successfully execute on its four strategic priorities, directing its efforts towards large, attractive markets, further expanding its profitable B2B business, driving its product and brand differentiation around new music experiences and innovation, and continuing to foster operational excellence to improve profitability.
5 Lifetime value to subscriber acquisition cost ratio.
6 Website: https://www.deezer-techservices.com/.
7 Artificial Intelligence.
o Soft launch of "Zen by Deezer" in France (December): first holistic wellbeing app bringing users 2,000+ exclusive original audio and video content, with a full commercial launch planned for Q2 2023
***
Consolidated revenue amounted to €451.2 million in FY 2022, representing an increase of 12.8% compared to FY 2021 (+10.6% at constant currency). This strong performance was mainly driven by a further expansion of Deezer's B2C subscriber base in France (+8.1%), combined with a double-digit growth in ARPU (+14.3%) on the back of the price increases implemented throughout the year. The group recorded double-digit revenue growth in its major regions, as well as through its two main sales channels, B2C (+12.2%) and B2B (+10.4%).
B2C revenue amounted to €317.2 million in FY 2022 (c.70% of consolidated revenue), up 12.2% compared to FY 2021 (+10.8% at constant FX). This sustained revenue increase mainly reflected a strong ARPU growth (+13.7%), as a result of price increases and the positive impact of Deezer's strategy to focus on selected key markets. The B2C subscriber base continued to grow at a dynamic pace in France (+8.1%), which allowed for a full offset of the decline recorded in the Rest of World (-11%) in line with the group's focus.
B2B revenue amounted to €118.5 million in FY 2022 (c.26% of consolidated revenue), up 10.4% compared to FY 2021 (+6.6% at constant FX), mainly due to good performance of recent deals with SFR (France), Globo (Brazil) and A1 (Europe) and the progressive ramp up of the RTL partnership launched in Q3 2022, as well as a double-digit growth in ARPU (+11.9%).
Other revenue, which is made up of advertising and ancillary revenue, reached €15.5 million in FY 2022, up by €5.6 million compared to FY 2021, mainly due to a one-off revenue from a hardware company partnership, as well as the consolidation of Driift revenue9 .
In France, revenue reached €273.2 million in FY 2022 (c.61% of consolidated revenue), up 12.6% compared to FY 2021. This strong performance mainly reflected continued expansion of Deezer's B2C subscriber base, as well as a solid growth in ARPU resulting from price increases.
8 Corporate Social Responsibility.
9 Dreamstage revenue has been consolidated since 24 May 2022. Following the completion of the transaction announced on 30 September 2022, Deezer fully consolidates Driift results of operations and balance sheet since that date.
In the Rest of World, revenue amounted to €178.0 million in FY 2022 (c.39% of consolidated revenue), up 13.1% compared to FY 2021 (+7.6% at constant FX). B2B revenue grew double-digits over the period, mainly thanks to increased ARPU and revenue growth from the launch of new deals in Brazil and Europe. In B2C, a stronger ARPU, driven by price increases, allowed to more than offset a decrease of the subscriber base due to the group's focus.
Deezer's number of subscribers stood at 9.4 million as at 31 December 2022, down by 2.2% compared to 31 December 2021. The continued subscriber growth in France, driven by B2C, allowed to partly offset a decrease in the Rest of World due to the group's strategy to focus on selected key markets.
In France, the number of B2C subscribers was 3.5 million as at 31 December 2022, up 8.1% compared to 31 December 2021. This strong performance mainly reflected higher family mix, continued acquisition funnel optimization, as well as improved churn rate despite the price increases. In addition, the B2B subscriber base grew slightly thanks mainly to the addition of new partners.
In the Rest of World, Deezer's strategy led to a significant reduction of unprofitable spend in non-core long tail markets, thus impacting new B2C subscriber acquisitions. The subscriber base was also affected by the group's decision to exit from the Russian market at the end of Q1 2022. Accordingly, the group's number of B2C subscribers decreased to 2.2 million as at 31 December 2022 (-11% vs. 31 December 2021).
| Adjusted gross profit | |||
|---|---|---|---|
| In € million | FY 2022 | FY 2021 | Change (%) |
| Adjusted gross profit | 98.0 | 84.1 | +16.5% |
| In % of total revenue | 21.7% | 21.0% | +70bps |
| B2C | 76.5 | 70.5 | +8.5% |
| In % of B2C revenue | 24.1% | 24.9% | (80)bps |
| B2B | 24.5 | 21.2 | +15.5% |
| In % of B2B revenue | 20.6% | 19.7% | +90bps |
Other (3.0) (7.6) n/a
Adjusted Gross Profit amounted to €98.0 million in FY 2022, up 16.5% compared to FY 2021. This increase mainly reflected the higher level of activity, more favorable B2B customer offer mix and the positive impact of the shutdown by the group of its freemium service in some countries, offset in part by higher publishing rates and increased content expenses related to the development of New Verticals.
As a result, adjusted gross margin improved to 21.7% in FY 2022 from 21.0% in FY 2021.
B2C adjusted gross profit amounted to €76.5 million in FY 2022, up 8.5% compared to FY 2021. The strong revenue growth was partly offset by increased publishing rates. This led to a slightly lower B2C adjusted gross margin at 24.1% in FY 2022 compared to 24.9% in FY 2021.
B2B adjusted gross profit amounted to €24.5 million in FY 2022, up 15.5% compared to FY 2021, driven by higher level of activity and more favorable B2B customer offer mix. B2B adjusted gross margin stood at 20.6% in FY 2022, up from 19.7% in FY 2021.
Lastly, adjusted gross profit of the Other segment was €(3.0) million in FY 2022, improving from €(7.6) million in FY 2021, reflecting the positive impact of the shutdown of the group's freemium service in some countries and a one-off revenue from a hardware company partnership, partly offset by investments in New Verticals.
During the year, Deezer focused on driving B2C marketing efficiencies, which led to a significant reduction of spend in non-core markets. As a result, marketing expenses were down by approximately €17 million (- 23%) in FY 2022 compared to FY 2021. The Group refocused its B2C marketing spend on its core markets, with France, Brazil and Germany representing c.84% of B2C marketing expenses vs. c.66% last year.
As a result of lower marketing expenses, combined with higher adjusted gross profit, the group generated a very strong increase in adjusted gross profit after marketing costs, at €41.5 million in FY 2022 compared to €10.8 million in FY 2021. Accordingly, adjusted gross margin after marketing costs improved to 9.2% from 2.7% in FY 2021.
Adjusted EBITDA amounted to €(55.7) million in FY 2022, recording a significant improvement of €8.9 million compared to €(64.6) million in FY 2021, driven by higher adjusted gross profit and lower marketing expenses as a result of the group's strategy to focus on selected key markets, partly offset by higher employee and G&A10 costs (including additional expenses related to the development of New Verticals and the impact of the consolidation of Driift).
As a result, adjusted EBITDA margin improved to (12.4)% in FY 2022 from (16.2)% in FY 2021.
Excluding additional investments totaling c.€9 million in New Verticals and Driift, adjusted EBITDA improved by approximately €18 million compared to FY 2021.
Operating loss totaled €(166.7) million in FY 2022 compared to €(120.6) million in FY 2022, mainly reflecting a €54.9 million non-cash listing service charge recognized in 2022 as part of the business combination of Deezer S.A. with I2PO S.A..
Net loss amounted to €(168.5) million in FY 2022 compared to €(123.3) million in FY 2021, mostly as a result of the increase in operating loss (impact of a non-cash listing service charge recognized in 2022 as part of the business combination of Deezer S.A. with I2PO S.A.) and a loss from equity affiliates due to the consolidation of Driift.
| In € million | FY 2022 | FY 2021 |
|---|---|---|
| Adjusted EBITDA | (55.7) | (64.6) |
| Change in working capital requirement | 24.4 | 36.6 |
| Capital expenditure | (3.0) | (2.0) |
| Leases11 | (6.1) | (6.3) |
| Others | (3.1) | (11.1) |
| Free cash flow | (43.6) | (47.5) |
10 General and administrative expenses.
11 Including repayment of lease liabilities and net interest paid (including finance leases).
The group recorded a negative free cash flow of €(43.6) million in FY 2022 compared to €(47.5) million in FY 2021. This change reflected the improvement in adjusted EBITDA loss, slightly offset by lower generation of working capital as compared to FY 2021.
| In € million | 31 Dec. 2022 | 31 Dec. 2021 |
|---|---|---|
| Cash and cash equivalents | 113.6 | 35.1 |
| Financial debt | (28.3) | (25.1) |
| Net cash | 85.3 | 10.0 |
Cash and cash equivalents amounted to €113.6 million as at 31 December 2022 compared to €35.1 million as at 31 December 2021, driven by funds raised as part of Deezer's public listing. In July 2022, Deezer S.A. completed a business combination with I2PO S.A.. The group received €143 million of cash allowing it to execute on its business plan until 2025.
Financial debt totaled €28.3 million as at 31 December 2022 compared to €25.1 million as at 31 December 2021, reflecting state-guaranteed loans and related accrued interests.
As a result, the Group's net cash was €85.3 million as at 31 December 2022 compared to €10.0 million as at 31 December 2021.
***
With respect to 2023, in order to mitigate execution risks in the current market conditions and secure its path to profitability by 2025, Deezer has decided to prioritize profitability, while still delivering double-digit revenue growth compared to 2022.
In 2023, the group will continue to execute on its profitable growth strategy with the following priorities:
Consequently, Deezer expects for 2023:
Given its focus on profitable growth, Deezer confirms it remains on a path to generate a positive cash flow12 in 2024 and achieve a positive adjusted EBITDA in 2025, while delivering double-digit annual revenue growth over the period.
12 Cash flow pre-funding.
Jeronimo Folgueira, CEO and Stéphane Rougeot, Deputy CEO and CFO will host a live conference call and webcast for analysts and investors, including a Q&A session, on Wednesday, 1 March 2023 at 9.30 am (Paris time, CET) / 8.30 am (London time, GMT).
Connect to the live webcast by clicking on the following link: https://channel.royalcast.com/landingpage/deezer-en/20230301_1/
Password: "Deezer" (to be communicated verbally to the operator)
The presentation slides and a replay of the webcast will be made available to the public after the live event and can be consulted in the "Financial information" section on Deezer's IR website at www.deezerinvestors.com.
This press release contains certain forward-looking statements, which shall not be considered as historical facts. These statements include projections and estimates, as well as their underlying assumptions, statements regarding plans, objectives, intentions and expectations with respect to future financial results, events, operations, future services, product development and potential, or future performance.
In some cases, you can identify forward-looking statements by words such as "could," "should," "may," "expects," "anticipates," "believes," "intends," "estimates," "aims," "targets," or similar words. Although the management of Deezer believes that these forward-looking statements are reasonably made, investors should be aware that these forward-looking statements are subject to numerous risks and uncertainties, many of which are difficult to predict and generally beyond Deezer's control that may cause actual results, performance or achievements to be materially different from any future results, performance or achievement expressed or implied by these forward-looking statements. In particular, the expectations of Deezer could be affected by, among other things, risks and uncertainties developed or identified in any public documents filed by Deezer with the French financial market authority (the Autorité des marchés financiers – the "AMF"), included those listed in the prospectus approved by the AMF on June 15, 2022 under number 22-216. Deezer undertakes no obligation to publicly update any forwardlooking information or statements, subject however to applicable regulations, in particular articles 223-1 et seq. of the AMF General Regulation.
***
Deezer is one of the largest independent music streaming platforms in the world, with more than 90 million tracks available in 180 countries, providing access to lossless HiFi audio, innovative recommendation technology and industry defining features. As the home of music, Deezer brings artists and fans together on a scalable and global platform, to unlock the full potential of music through technology. Founded in 2007 in Paris, Deezer is now a global company with a team of over 600 people based in France, Germany, UK, Brazil and the US, all brought together by their passion for music, technology and innovation. Deezer is listed on the professional segment of the Euronext Paris regulated market (Ticker: DEEZR. ISIN: FR001400AYG6) and is also part of the newly created Euronext Tech Leaders segment, dedicated to European high-growth tech companies, and its associated index.
| Investor Relations | ||
|---|---|---|
| Laurent Sfaxi | +33 6 72 06 23 05 | [email protected] |
| Media | ||
| Jesper Wendel | +33 6 79 35 37 17 | [email protected] |
| In € million | Q4 2022 | Q4 2021 | Change (%) | Chg. at constant FX |
|---|---|---|---|---|
| Total revenue | 116.6 | 103.0 | +13.2% | +11.3% |
| B2C | 82.4 | 73.0 | +12.8% | +11.7% |
| B2B | 30.4 | 27.1 | +12.3% | +8.4% |
| Other | 3.7 | 2.8 | +31.3% | +27.1% |
| In € million | Q4 2022 | Q4 2021 | Change (%) | Chg. at constant FX |
|---|---|---|---|---|
| Total revenue | 116.6 | 103.0 | +13.2% | +11.3% |
| France | 71.1 | 61.8 | +15.1% | +15.1% |
| Rest of World | 45.4 | 41.2 | +10.3% | +5.5% |
| Q4 2022 | Q4 2021 | Change (%) | |
|---|---|---|---|
| Total subscribers(1) | 9.4 | 9.6 | (2.2)% |
| B2C | 5.6 | 5.7 | (0.1)% |
| o/w France | 3.5 | 3.2 | +8.1% |
| o/w Rest of World | 2.2 | 2.4 | (11.0)% |
| B2B | 3.8 | 4.0 | (5.1)% |
| ARPU (in €) | 4.1 | 3.6 | +16.0% |
| B2C | 4.9 | 4.3 | +14.2% |
| B2B | 2.7 | 2.3 | +17.2% |
(1) As of 31 December, in million
| In € million | FY 2022 | FY 2021 |
|---|---|---|
| Gross profit | 65.1 | 48.5 |
| Onerous contract depreciation | - | 7.6 |
| License agreements non-recurring expenses | 32.9 | 28.0 |
| Adjusted gross profit | 98.0 | 84.1 |
| In € million | FY 2022 | FY 2021 |
|---|---|---|
| Operating loss | (166.7) | (120.6) |
| Gross profit adjustments | 32.9 | 35.6 |
| Depreciation and amortization | 8.7 | 11.9 |
| Share-based expenses | 68.6 | 10.2 |
| Other non-recurring expenses | 0.9 | (1.6) |
| Adjusted EBITDA | (55.7) | (64.6) |
| Twelve months ended 31 December | ||
|---|---|---|
| (in thousands of euros) | 2022 | 2021 |
| Revenue | 451,199 | 400,019 |
| Cost of revenue | (386,103) | (351,490) |
| Gross Profit | 65,095 | 48,529 |
| Product and development | (34,025) | (25,620) |
| Sales and marketing | (75,973) | (94,702) |
| General and administrative | (121,843) | (48,761) |
| Operating loss | (166,746) | (120,554) |
| Finance income | 4,319 | 1,526 |
| Finance costs | (3,685) | (2,304) |
| Financial result - Net | 634 | (778) |
| Loss before income tax | (166,112) | (121,332) |
| Income tax expense | (997) | (72) |
| Share of loss of equity affiliates | (1,368) | (1,854) |
| Net loss for the period | (168,477) | (123,258) |
| Of which attributable to owners of the parent | (167,702) | (123,258) |
| Non-controlling interests | (775) | 0 |
| Net loss per share attributable to owners of the parent | ||
| Basic | (1.55) | (1.33) |
| Diluted | (1.55) | (1.33) |
| Weighted-average ordinary shares | ||
| Basic | 108,475,324 | 92,929,080 |
| Diluted | 108,475,324 | 92,929,080 |
| (in thousands of euros) | 31 December 2022 | 31 December 2021 |
|---|---|---|
| Assets | ||
| Goodwill | 15,070 | 7,487 |
| Intangible assets | 524 | 1,427 |
| Property and equipment | 5,881 | 5,838 |
| Right-of-use assets | 21,061 | 24,663 |
| Investments in equity affiliates | - | 5,500 |
| Non-current financial assets | 5,440 | 5,321 |
| Other non-current assets | 1,705 | 2,284 |
| Total non-current assets | 49,681 | 52,520 |
| Trade and other receivables | 47,713 | 33,986 |
| Other current assets | 23,051 | 12,877 |
| Cash and cash equivalents | 113,610 | 35,097 |
| Total current assets | 184,374 | 81,960 |
| Total assets | 234,055 | 134,480 |
| Equity and liabilities | ||
| Share capital | 1,211 | 944 |
| Share premium | 483,976 | 368,471 |
| Consolidated reserves | (320) | - |
| Treasury shares | (501,852) | (463,490) |
| Net loss | (167,702) | (123,258) |
| Equity attributable to owners of the parent | (184,687) | (217,333) |
| Non-controlling interest reserves | 2,866 | - |
| Total equity | (181,821) | (217,333) |
| Provision for employee benefits | 692 | 1,043 |
| Lease liabilities | 19,040 | 21,454 |
| Financial liabilities | 23,288 | 25,000 |
| Total non-current liabilities | 43,020 | 47,497 |
| Provisions | 16,018 | 11,585 |
| Lease liabilities | 4,060 | 5,001 |
| Financial liabilities | 4,988 | 112 |
| Trade payables and related accrued expenses | 283,373 | 235,552 |
| Tax and employee-related liabilities | 37,990 | 32,870 |
| Deferred revenue | 23,193 | 16,960 |
| Other liabilities | 3,234 | 2,236 |
| Total current liabilities | 372,856 | 304,316 |
| Total liabilities | 415,876 | 351,813 |
| Total equity and liabilities | 234,055 | 134,480 |
| Twelve months ended 31 December | ||
|---|---|---|
| (in thousands of euros) | 2022 | 2021 |
| Operating activities | ||
| Net loss | (168,477) | (123,258) |
| Adjustments for: | - | |
| - Depreciation and amortization (excluding those related to current assets) |
8,780 | 11,854 |
| - Provisions | 4,649 | 6,933 |
| - Share-based compensation expense | 88,235 | 32,165 |
| - Gains and losses on disposals | (7,449) | 1,493 |
| - Share of loss of equity affiliates (net of dividends distributed) | 360 | 1,854 |
| - Discounting profits and losses | (1,821) | 7 |
| - Net debt costs (including interest on lease liabilities) | 1,543 | 631 |
| - Income tax paid | 997 | 72 |
| Changes in working capital: | - | |
| - (Increase)/decrease in trade receivables and other assets | (20,711) | (263) |
| - Increase/(decrease) in trade and other liabilities | 45,122 | 36,925 |
| Income tax paid | (6) | (52) |
| Net cash flows from/(used in) operating activities | (48,778) | (31,639) |
| Investing activities | ||
| Purchases of property and equipment and intangible assets | (3,053) | (2,054) |
| Release of the escrow account and other | 274,875 | (543) |
| Proceeds from the disposal of intangible and tangible assets | 22 | 28 |
| Proceeds from the disposal of non-current financial assets | 12 | 240 |
| Impact of changes in the scope of consolidation | 7,220 | (7,297) |
| Net cash flows from/(used) in investing activities | 279,076 | (9,626) |
| Financing activities | ||
| Increase in share capital and share premium (net of costs) | 105,165 | 5,125 |
| Repayments on short-term debt | (251,569) | - |
| Repurchases of ordinary shares | (390) | - |
| Proceeds from issuance of long-term debt | 422 | 25,000 |
| Repayment of lease liabilities | (4,512) | (5,773) |
| Net interest paid (including finance leases) | (1,617) | (519) |
| Net cash flows from/(used in) financing activities | (152,501) | 23,833 |
| Effect of foreign exchange rate changes on cash and cash equivalents | 716 | 89 |
| Change in net cash position | 78,513 | (17,343) |
| Cash and cash equivalents at the beginning of the period | 35,097 | 52,440 |
| Cash and cash equivalents at the end of the period | 113,610 | 35,097 |
| Change in net cash position | 78,513 | (17,343) |
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