Believe: Confirmed 2023 outlook: organic growth of c. +14% and
Adjusted EBITDA margin of at least 5.5% Q3’23 current revenue
growth (+9.1%), Q3'23 in line with Group's expectations
Confirmed 2023 outlook:
organic growth of c. +14% and Adjusted EBITDA margin of at least
5.5%Q3’23 in line with Group’s
expectations
Q3’23 current revenue growth (+9.1%)
affected by strong currency headwinds and soft ad-funded in certain
geographies
Paris, France – October 24,
2023
Q3 and Year-to-date 2023 Key Figures
- Revenue of €215.0 million in Q3’23, up +9.1% at current rate,
with organic growth of +7.5% due to currency headwinds embedded in
Premium solutions digital sales. Quarterly adjusted organic growth1
amounted to +15.4% in Q3’23.
- Revenues of €630.4 million Year-to-Date, up +14.8% at current
rate with organic growth of c. +13.9% due to currency headwinds
embedded in Premium Solutions digital sales in Q2’23 and Q3’23.
Year-to-date adjusted organic growth amounted to +18.1%.
Q3 2023
Highlights
- Healthy paid streaming growth continued. Revenue was, however,
negatively impacted by the accelerated strengthening of the euro
combined with soft ad-funded streaming monetization in certain
geographies (Europe and Asia).
- Sustained improvement in profitability trends leading the Group
to expect Adjusted EBITDA margin to be above 5.5% (c. 5.5%
previously anticipated).
- The Group continued to drive additional market share gain
across all markets and in a wider variety of music genres.
- Confirmed commitment to Shaping Music for Good through
continued investment in education and training.
2023 Outlook
- In Q4’23, Believe anticipates a higher growth rate driven by a
solid increase in paid streaming revenues due to positive impact of
price increases, additional market share gains and slight recovery
in ad-funded streaming by the end of the quarter. The Group also
foresees lower but persistent currency headwinds.
- Advances are expected to be lower in H2’23 and the Group
confirms its expectations of a positive free cash flow for
H2’23.
- Consequently, Believe confirms its FY’23 outlook:
- Organic growth c. +14%.
- Sustained improvement in Adjusted EBITDA margin which is now
anticipated to be at least 5.5% (versus c. 5.5% anticipated
previously).
- Negative free cash flow.
Denis Ladegaillerie, Founder and
CEO said: “Q3’23 has been a challenging quarter, but we
kept delivering a top-notch service to our artists and labels,
enabling artists at various stage of their career to reach the top
of the charts and labels to outperform their local market. During
the quarter, we also furthered our discussions with our top digital
partners to boost Believe’s roster. Our actions remained geared to
further improve the quality of service that we offer.”
Q3 2023 AND YEAR-TO-DATE KEY FIGURES
in € million |
Q3 2022 |
Q3 2023 |
Change YoY |
Organic change2 |
Group Revenues |
197.0 |
215.0 |
+9.1% |
+7.5% |
Premium Solutions |
184.4 |
202.9 |
+10.1% |
+7.9% |
Automated Solutions |
12.6 |
12.1 |
-4.5% |
+0.6% |
in € million |
9M 2022 |
9M 2023 |
Change YoY |
Organic change |
Group Revenues |
549.2 |
630.4 |
+14.8% |
+13.9% |
Premium Solutions |
513.6 |
591.4 |
+15.2% |
+14.4% |
Automated Solutions |
35.6 |
39.0 |
+9.4% |
+6.2% |
Q3 2023 HIGHLIGHTS
Revenue growth affected by challenging
market conditions in line with Group’s expectations
In Q3’23, Believe continued growing despite
challenging market conditions, which affected the overall digital
monetization of the Group.
Paid streaming trends were solid. The Group
expects them to continue in Q4’23 and to benefit in addition from
price increases at some large digital platforms.
Ad-funded streaming monetization remained soft
notably in Europe and Asia Pacific / Africa. This situation was
anticipated by the Group, which expects ad-funded monetization to
start rebuilding in Q4’23.
The strengthening of the euro accelerated over
the quarter in line with the Group’s anticipations. Subscriptions
and ad-funded streaming are collected in local currencies by
digital service providers, which reversed those royalties to the
Group mostly in euros. Given Believe’s geographical footprint, the
exposure to non-euro digital markets amounts to c. 70%, which leads
the Group to capture significant currency translation effects in
its digital monetization. Digital sales adjusted for estimated
embedded market forex were up +16.8%, leading to an adjusted
organic growth up +15.4%.
Reinforced appeal in a wider variety of music genres
enabling additional market share gains in Q3’23
Believe recorded another quarter of market share
gains. The Group has now deployed its full offering in 15 markets
and succeeded in establishing its Artist Services offer as a
reference for digital artists in those countries.
The Group further advanced its ability to
develop artists to the very top of the market, as illustrated by
the success of Jey Brownie (rap – France) or Das Lumpenpack (rock –
Germany), the entry in the 5 Spotify Global charts of Nadhif
Basalamah (pop - Indonesia) or the rise of Here at last (pop - UK),
among others. Believe also enjoyed great performances in the Latin
music space with the success of emerging Spanish artist Iñigo
Quintero and his song “Si no estás”, which is ranking #1 as of
today on Spotify’s Top 50 Global Charts and currently top charting
across global markets. The new album “El Comienzo” of the
established Regional Mexican Grupo Frontera released early August
is also ranking as of today #14 global album on Spotify Charts and
#37 global album on Apple Music. The band is one of the nominees
for the Best Song of the Year and Best Regional Mexican Song at the
2023 Latin Grammy Awards, bringing to 6 the number of Believe’s
nominees at the Awards (taking place on November 16, 2023).
Further building one of the leading
music companies in Asia and strengthening its appeal to local
actsThe Group further invested in Asia by building
additional capabilities in Greater China or launching Premium
Solutions in Japan in a context of increased digitalization of
music genres locally. The Group was until now mainly present
through its subsidiary TuneCore.
Believe also celebrated its first decade of
presence in India where it has become one of the largest players in
the local music industry. With less than 0.5%3 paid streaming
penetration, India offers a significant growth opportunity. The
Group has been focused on building a strong local team presence
with carefully tailored service offerings best adapted to India’s
unique artist market. Believe has become a leading player in
several market segments, including Punjabi, Bhojpuri, Haryanvi
among others. Top local talents such as Punjabi Pop artists Arjan
Dhillon and Chani Nattan, as well as Maharashtra’s MC Stan who
cumulated +1 billion views on YouTube for his song “Insaan”, and
duo Cheema Y & Gur Sidhu who reached +22 million streams on
Spotify for the track “California Love”. Overall, in India, artists
served directly or through their labels have generated close to 1.9
trillion streams over the past 10 years and Believe has been
contributing to shape a new music market by paying out significant
royalties to an ever growing number of artists and labels.
Focus on artist development driving innovation and
collaboration with digital partners
The quality of service remains a top priority
for Believe to allow each artist to strive in the digital world, at
each stage of their career. During the quarter, the Group developed
and is now deploying AI Guesser, a proprietary tool to detect music
generated by Artificial Intelligence (AI).
The Group has also been actively engaged in
working with digital partners to deploy a new streaming model aimed
at lowering streaming fraud and white noise. Believe expects to
benefit both in terms of market share and revenue from these
initiatives. Believe further expects to benefit from the deployment
of new commercial models aiming at establishing a fair, balanced,
and diverse market.
Confirming commitment to education and
equality in the music industry to further Shape Music for
GoodAs part of its Corporate Social Responsibility
strategy Shaping Music for Good, Believe is committed to support
local communities and young talents, offering its expertise in the
music industry, and accompanying them through educational and
mentorship programs. This is particularly the case in the US where
Believe partners with KeyChange, in India through its BEAMS
program4, and in France where Believe participated in mock
interviews with about twenty young job seekers, supporting the
League of Young Talents during a Sport and Employment bootcamp.
Believe is also a partner of the AdaTech school, which aims to
train the new generation of tech talents, encouraging women to join
the industry and supporting career transitions.On the occasion of
its solidarity month ‘Shaping Together’ in October, Believe
mobilized nearly 50% of its teams worldwide to participate in
activities that support the four priorities of Shaping Music for
Good: Gender Equality, Diversity & Inclusion, Well-being and
Talent Development, as well as Planet.
Q3 2023 FINANCIALS
Organic revenue growth would have been
up c. +15% restated from currency headwindsQ3’23 revenue
grew by +9.1% to reach €215.0 million, reflecting organic growth of
+7.5%, a positive perimeter effect related to the acquisition of
Sentric (publishing) of +2.1% and a positive hyperinflation effect.
These positive impacts were mitigated by a negative forex effect
(-1.3%) mostly related to the Turkish lira devaluation and to the
dollar weakening versus the euro which affected TuneCore revenue.
Revenue was also strongly affected by currency headwinds in Q3’23.
As described previously, the Group’s organic growth captures
currency translation effects directly embedded in the royalties
that Believe receives from its digital partners. With the
accelerated strengthening of the euro during the period, currency
translation generated a dragging effect estimated at -8.0% on
organic growth, which would have amounted to +15.4% restated from
this impact.
In Q3’23, paid streaming remained strong even
though it was not yet impacted by the price increases of digital
stores due their deployment calendar in some markets. The absence
of ad-funded streaming recovery in emerging markets and currency
headwinds related to the appreciation of the euro resulted in
digital sales up +7.1% during the quarter. Believe continued to
increase its digital market share, albeit at a slightly slower pace
than last quarters. Non digital sales were up strongly in Premium
Solutions driven by live music activities in France, as well as
branding and other activities in Turkey where revenue was uplifted
by the hyperinflation effect.
Believe kept growing since January with revenues
up +14.8% year-to-date mostly reflecting a +13.9% organic growth
for the period closing at the end of September. The change in
perimeter driven by the integration of Sentric amounted to €11.7
million (or 2.1% to revenue growth year-to-date), but this
contribution was compensated by a negative forex impact mostly
related to the Turkish lira and the dollar weakening versus the
euro which affected TuneCore revenue. Year-to-date digital sales
adjusted for estimated embedded market forex amounted to +19.6%,
leading to an organic growth adjusted for market embedded forex of
+18.1%.
Premium Solutions driving organic
growth, Automated Solutions impacted by challenging comparison
baseIn Premium Solutions, revenues amounted to €202.9
million, up +10.1% at current rate. Currency headwinds accelerated
in Q3’23 with the strengthening of the euro versus local currencies
and affected digital monetization of the segment. Organic growth
adjusted for estimated embedded market FX amounted to +16.5%
resulting in an organic growth amounting to +7.9%. Overall, the
Group continued to build market share in a market which is growing
mostly due to paid streaming, as ad-funded streaming monetization
remained soft notably in emerging markets. The integration of
Sentric contributed about €4.2 million to revenue, adding around 2%
to revenue growth in the segment.
Automated Solutions revenues amounted to €12.1
million, down -4.5% year-over-year, largely due to the weakening of
the dollar versus the euro of around -6%. Organic growth was stable
year-over-year as TuneCore also had a challenging comparison basis.
The Unlimited Pricing offer, which was introduced in July’22,
attracted many new subscribers in the months following the launch.
The ramp up in terms of customers acquisition is still ongoing and
the average revenue per user is consequently still below compared
with last year. In addition, the ‘Discovery’ plan, which is part of
the Unlimited Pricing offer, increased TuneCore’s exposure to
ad-funded streaming, which remained soft during the quarter.
Strong growth in Europe excluding France
and Germany but softer performance in other
geographies
in €
million |
Q3 2022 |
Q3 2023 |
Change YoY |
Europe (excl. France &
Germany) |
53.1 |
66.9 |
+25.9% |
Americas |
28.6 |
31.0 |
+8.4% |
Asia Pacific /
Africa |
52.3 |
55.8 |
+6.6% |
France |
34.1 |
34.4 |
+0.7% |
Germany |
28.8 |
27.0 |
-6.4% |
Total |
197.0 |
215.0 |
+9.1% |
Revenue growth amounted to +25.9% in
Europe (excluding France and Germany) and
represented 31.1% of total revenues in Q3’23. Revenue growth was
particularly sustained in Southern Europe, Eastern Europe and
Turkey. In addition, the performance was enhanced by the
integration of Sentric in Q3’23, which positively impacted revenue
in the UK. Americas grew by +8.4% and represented
14.4% of Group revenues. The level of activity in Brazil and Mexico
remained very strong in Q3’23, illustrating solid success in the
Latin music space. TuneCore was impacted by an unfavorable
comparison as revenues significantly increased in Q3’22 after the
introduction of the Unlimited Pricing offer in July’22 and by the
weakening of the dollar versus the euro.
In Q3’23, revenue growth reached +6.6%
in Asia Pacific and Africa, which represented
25.9% of Group revenues. Believe further benefited from paid
streaming penetration increase and consolidated its leading
positions across the region, but ad-funded streaming revenues
remained soft. Digital monetization was also affected by negative
currency headwinds due to the euro strengthening versus local
currencies directly embedded, affecting the overall performance.
Consequently, India and Southeast Asia grew only single digit.
Revenue growth remained, however, very strong in Greater China, as
well as in Japan where the Group expanded its presence by deploying
its Premium offering.
In France, revenues were
slightly up in Q3’23 and represented 16.0% of Group revenues.
Commercial dynamics remained solid throughout the quarter despite
the lower growth rate. The comparison base was challenging as the
Group grew by more than 40% in Q3’22. Over the past years, the
Group has built a strong position in its domestic market and is now
established among the top 3 players for local acts. This strong
presence also resulted in higher live music activities during the
quarter, which will be even higher in Q4 given the current
pipeline. The Group also managed to re-sign numerous key acts in
long-term deals both for catalogues and new releases.
In Germany, revenues were down
-6.4% in Q3’23 and represented 12.5% of Group revenues. Digital
sales remained less dynamic during the quarter in line with the end
of Q2’23, but the Group continued diversifying the roster in terms
of music genres. The pursuit of the roll-out of Madizin (Schlager
genre) resulted in additional promising signings. Non-digital sales
were strongly down as the Group was still moving away from
contracts that were too heavy in physical sales and
merchandising.
FY 2023 OUTLOOK AND MID-TERM OBJECTIVES
Believe grew organically by c. +14%
year-to-date, reflecting a strong start to the year followed by a
deceleration of the growth rate in Q2’23 and even more in Q3’23,
which combined no recovery in ad-funded monetization and a peak in
currency headwinds affecting its digital monetization. The Group
anticipates organic growth rate to recover in Q4’23 thanks to solid
paid streaming trends enhanced by price increases by some large
digital partners, a slight recovery in ad-funded streaming expected
at the end of the quarter and additional market share gains.
Currency headwinds are expected to remain persistent but to lose in
intensity. Consequently, Believe confirmed its FY’23 organic growth
outlook, which has been revised around +14% as announced on H1’23
earnings release early August.
Believe kept investing in the Central Platform
in Q3’23 at the same controlled level as in H1’23 and will continue
to manage similarly until year end, further driving improved
amortization of associated costs over revenues. The Group
maintained its focus on improving efficiency across the
organization throughout the last quarter. Consequently, Believe
further improved profitability and is now expecting an Adjusted
EBITDA margin above 5.5% in FY’23 (versus c. 5.5% anticipated
previously as announced in H1’23 release).
As anticipated, the Group’s track record and
quality of service further attracted top artists and Tier-1 labels
in a wider variety of music genres and in more geographies in
Q3’23, leading to a solid level of new signings and additional
advances. There was however a deceleration compared to the peak
reached in Q2’23 as anticipated. Believe therefore confirms its
expectations of a positive free cash flow in H2’23. but free cash
flow will remain negative on a full year basis.
In an uncertain environment the Group is
actively managing its investments policy, between new hirings, new
advances and M&A. As announced in H1’23, the Group has
allocated more capital to label advances because of their high
returns versus M&A opportunities. After the acquisition of
Sentric in March’23, which is now expected to add around 2% of
revenue growth on a full year basis with a neutral impact on
Adjusted EBITDA margin after accounting for integration costs, the
Group identifies interesting acquisition targets but remains highly
selective. Acquisitions investments will therefore slowdown in
H2’23.
Notwithstanding the current environment, the
Group is on track to deliver on its medium-term trajectory
communicated at the IPO, including a 2021-2025 CAGR of between +22%
and +25% and a Group Adjusted EBITDA of 5%-7% by 2025, implying a
segment Adjusted EBITDA margin of 15%-16% (which is a "high growth
period" margin, as the revenue growth is partially reinvested).
Believe reiterates its confidence in its ability to achieve its
long-term target of at least 15% Group Adjusted EBITDA margin.
Webcast:
We will host a webcast
https://edge.media-server.com/mmc/p/bsgibgnn and
conference call starting at 6:30 p.m. CET (5:30 p.m. GMT) today.
Denis Ladegaillerie, our Founder and CEO, and Xavier Dumont, our
Chief Financial and Strategy Officer, will present Q3’23 revenue
and answer questions addressed in the call or submitted through the
webcast. All information related to Q3’23 revenue is available on
our investor website.
Conference call details:France, Paris: +33
(0) 1 70 91 87 04 // United Kingdom, London: +44 1 212
818 004 // United States, New York: +1 718 705 87
96Conference ID: 88365
Investor
Relations & Financial Media Emilie
MEGELinvestors@believe.comTel: +33 1 53 09 33
91 Cell: + 33 6 07 09 98
60 |
Press
Relations Manon
JESSUAmanon.jessua@believe.comAnass BENDAFI :
+33 6 80 42 51 84anass.bendafi@agenceproches.com |
Financial agenda Believe (Ticker: BLV, ISIN:
FR0014003FE9):13 March 2024: FY 2023 earnings – Press
release to be issued after market close.
24 April 2024: Q1 2024 revenue – Press release to be issued
after market close.
1st August 2024: H1 2024 earnings – Press release to be issued
after market close.
23 October 2024: Q3 2024 revenue – Press release to be issued
after market close.
Appendix
- Quarterly revenue by division
in € million |
Q1 2022 |
Q1 2023 |
Change |
Organic change |
Premium solutions |
151.1 |
186.0 |
+23.0% |
+23.8% |
Automated solutions |
11.4 |
12.7 |
+11.2% |
+9.8% |
Total revenues |
162.5 |
198.6 |
+22.2% |
+22.8% |
in € million |
Q2 2022 |
Q2 2023 |
Change |
Organic change |
Premium solutions |
178.1 |
202.5 |
+13.7% |
+13.2% |
Automated solutions |
11.6 |
14.3 |
+22.9% |
+8.6% |
Total revenues |
189.7 |
216.8 |
+14.3% |
+12.9% |
- Revenue breakdown between digital and
non-digital sales (as reported)
|
Q1’22 |
Q2’22 |
Q3’22 |
Q1’23 |
Q2’23 |
Q3’23 |
YTD’22 |
YTD’23 |
Digital sales |
93% |
92% |
94% |
93% |
90% |
92% |
93% |
92% |
Non-digital sales |
7% |
8% |
6% |
7% |
10% |
8% |
7% |
8% |
- Digital and non-digital sales growth (as
reported)
|
Q1’23 |
Q2’23 |
H1’23 |
Q3’23 |
YTD’23 |
Digital sales |
+ 22.2% |
+ 11.9% |
+ 16.7% |
+ 7.1% |
+ 13.2% |
Non-digital sales |
+ 21.8% |
+ 42.1% |
+ 32.9% |
+ 39.6% |
+ 35.0% |
- Digital and non-digital sales organic
growth
|
Q1’23 |
Q2’23 |
H1’23 |
Q3’23 |
YTD’23 |
Digital sales |
+ 22.6% |
+ 14.0% |
+ 18.0% |
+ 7.1% |
+ 14.1% |
Non-digital sales |
+ 24.9% |
- 0.5% |
+ 11.0% |
+ 12.4% |
+ 11.4% |
- Premium Solutions revenue growth adjusted for
estimated embedded market forex effects
|
Q1’23 |
Q2’23 |
H1’23 |
Q3’23 |
YTD’23 |
Digital sales |
+24.1% |
+20.4% |
+22.0% |
+16.8% |
+19.6% |
Non-digital sales |
+27.0% |
-2.4% |
+10.5% |
+11.2% |
+10.7% |
- Revenue breakdown by geographies Year-to-date
(January-September 2023)
in €
million |
YTD 2022 |
YTD 2023 |
Change YoY |
Europe (excl. France &
Germany) |
151.5 |
188.8 |
+24.6% |
APAC / Africa |
143.1 |
168.0 |
+17.4% |
Americas |
78.4 |
91.6 |
+16.9% |
France |
93.5 |
100.9 |
+7.9% |
Germany |
82.7 |
81.1 |
-1.9% |
Total |
549.2 |
630.4 |
+14.8% |
About BelieveBelieve is one of
the world’s leading digital music companies. Believe’s mission is
to develop independent artists and labels in the digital world by
providing them the solutions they need to grow their audience at
each stage of their career and development. Believe’s passionate
team of digital music experts around the world leverages the
Group’s global technology platform to advise artists and labels,
distribute and promote their music. Its 1,720 employees in more
than 50 countries aim to support independent artists and labels
with a unique digital expertise, respect, fairness and
transparency. Believe offers its various solutions through a
portfolio of brands including Believe, TuneCore, Nuclear Blast,
Naïve, Groove Attack, AllPoints, Ishtar and Byond. Believe is
listed on compartment B of the regulated market of Euronext Paris
(Ticker: BLV, ISIN: FR0014003FE9). www.believe.com
Forward Looking statement This
press release contains forward-looking statements regarding the
prospects and growth strategies of Believe and its subsidiaries
(the “Group”). These statements include statements relating to the
Group’s intentions, strategies, growth prospects, and trends in its
results of operations, financial situation and liquidity. Although
such statements are based on data, assumptions and estimates that
the Group considers reasonable, they are subject to numerous risks
and uncertainties and actual results could differ from those
anticipated in such statements due to a variety of factors,
including those discussed in the Group’s filings with the French
Autorité des Marchés Financiers (AMF) which are available on the
website of Believe (Investors | Believe). Prospective information
contained in this press release is given only as of the date
hereof. Other than as required by law, the Group expressly
disclaims any obligation to update its forward-looking statements
in light of new information or future developments. Some of the
financial information contained in this press release is not IFRS
(International Financial Reporting Standards) accounting
measures.
1 Adjusted organic growth aims at providing a
view on Believe’s organic revenue growth after neutralizing
embedded market forex impact: Believe assesses the forex impact on
each digital market served by the Group to estimate the market
forex embedded into its digital revenues collected from its digital
partners. Digital sales embed currency translation effects as the
amounts collected from Subscriptions and Ad-funded by digital
stores are in local currencies and perceived by Believe mainly in
euros.
2 Organic growth accounts for revenue at constant perimeter and
constant exchange reports
3 Sources: industry experts and internal estimates
4. “Believe for Education Advancement through Music Scholarship"
program, in partnership with the Manzil Mystics association,
enables young musicians to receive a two-year scholarship, as well
as training and mentorship, to help them launch their careers in
the music industry.
- 2023-10-24-Believe-Q3 2023 revenue-ENG
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