Deezer FY23 Results: Strong performance and momentum; reiterating financial targets for 2024 & 2025

Deezer FY23 Results:

Strong performance and momentum; reiterating financial targets for 2024 & 2025

2023 HIGHLIGHTS: DEEZER STRENGTHENS ITS BUSINESS POSITION WITH MAJOR MILESTONES ACHIEVED

● DEEZER SUBSCRIBER BASE REACHING ALL-TIME HIGH

o      10.5 million subscribers, +1.1 million in 2023, on the back of strengthened market position in France & expansion of our global footprint through partnerships.

●      DRIVING VALUE FOR PARTNERS, ARTISTS & FANS o New, renewed and expanded strategic partnerships across key markets; o Launch of Artist Centric Streaming Model designed to better monetize for artists; o Renewed contracts with key right holders, with improved terms; o Repositioning of Deezer brand plus new features for stronger customer engagement.

2023 FINANCIAL RESULTS: STRONG PERFORMANCE AND MOMENTUM

●      ACCELERATION OF REVENUE GROWTH IN Q4 AT +12.1%; FY REVENUE GROWTH AT +7.4% TO

€484.7 MILLION, IN LINE WITH GUIDANCE o Gaining traction in Q4 due to subscribers growth & ARPU increase across Direct and Partnerships segments.

●      REDUCED ADJUSTED EBITDA LOSS BY ALMOST HALF TO €(29) MILLION, WHILE CONTINUING

STRATEGIC INVESTMENTS o Solid adjusted Gross Margin improvement (+1.0pt) combined with strong impact of strict control of operating expenses lowered by €14.6 million vs 2022;

                 o                                   Efficient marketing investment to support growth and stronger customer engagement.

●      ROBUST CASH POSITION OF €63.6 MILLION, WELL ABOVE RESOURCES REQUIRED FOR 2024/2025 FINANCIAL TARGETS

CONFIRMATION OF FINANCIAL TARGETS FOR 2024/2025

●      POSITIVE FREE CASH FLOW^[1] IN 2024 o Acceleration of revenue growth compared to 2023, to reach 10% in 2024, driven by the development of Partnerships, subscriber growth and the impact of the latest round of price increases;

o Another significant improvement of adjusted EBITDA, expected to be better than €(15) million in 2024, driven by a further increase of the adjusted Gross Margin and the continued strict management of the operating expenses.

●      POSITIVE ADJUSTED EBITDA IN 2025 KEY FINANCIAL INDICATORS

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Paris, 28 February 2024, 17:45 CEST – Deezer (Euronext Paris: DEEZR; ISIN: FR001400AYG6), the global music streaming service, published its consolidated results for the year ended 31 December 2023, approved today by its Board of Directors^[3].

Commenting on the results, Jeronimo Folgueira, CEO of Deezer, said: “2023wasagreatyearfor Deezer,wehavedeliveredrecordresultsandpositionedthecompanywellforastrong2024.Our revenueandsubscribergrowthsubstantiallyacceleratedinQ4andourcontinuedimprovements inprofitabilitypavethewayforustoachievecashflowbreakeventhisyear.Ourpartnership strategyisbearingfruit,drivingouroverallgrowthandhelpinguswinmarketshareoutside France.Additionally,2023wasakeyyearforthemusicindustrythankstotheintroductionof ournewArtistCentricPaymentSystem,thefirstmajorchangetoroyaltypaymentssincethe inceptionofstreaming.It’sachangethathasbeenextremelywellreceivedandthatwillprotect andrewardtheartiststhatcreatevaluablecontent.Andlastbutnotleast,in2023wehavealso embracedournewbrandidentity,fresherandbolder,topositionDeezerastheinnovatorwhere artists,fansandpartnerscanbeandbelong”.

2023 BUSINESS HIGHLIGHTS, RESULTS & OUTLOOK FOR 2024

2023 BUSINESS HIGHLIGHTS: DEEZER REINFORCES POSITION AS CATALYST FOR INDUSTRY TRANSFORMATION

In November 2023, Deezer revealed its new brand identity reinventing itself as an experience services platform, with expression and connection as guiding principles to help artists, fans and partners to be and belong through music. To highlight the transformation and recharge people’s emotional connection to the brand, Deezer refreshed its visual identity and launched an updated communication platform around a new tagline “Live the Music”.

Expansion of our global business footprint through Partners

Expansion: Since April 2023, content and key services on Sonos Radio and Sonos Radio HD are delivered by Deezer, and the two companies collaborate to achieve continued innovation for the Sonos music experience. In August, RTL launched its new Multimedia App (including Video and Music empowered by Deezer). Last but not least, also in August, Deezer became the official music streaming partner for Mercado Libre’s new subscription program Meli+, with very strong initial subscriber growth in Brazil and Mexico.

Renewals: The Company renewed several major partnerships, with Orange in July 2023 and with TIM and FNAC Darty in the beginning of 2024, confirming the mutual benefits for both Deezer & Partners.

New CCO: In January 2024, Deezer appointed Ivana Kirkbride as CCO to lead a growth strategy to scale Deezer’s footprint and drive major commercial partnerships across key markets worldwide.

Coming soon: The value of music to engage, build loyalty, and generate recurring revenues are more relevant than ever and will drive an ocean of opportunities in the future, to bring music services to new partners, geography, and verticals, to expand the penetration of music streaming.

Enhance the Value of Artist

Artist-centric model: Deezer announced the launch of the first comprehensive artist-centric music streaming model. Several labels announced their support for the artist-centric approach, as well as Sacem, the world leader in the collective management of creator’s and publisher’s rights.

Price increase: Deezer adjusted prices in several markets (France, UK, Spain, Italy, & the Netherlands) since September 21^st, to better recognize the value of music streaming and to ensure the continuous improvement of product and fan experiences. Since this announcement, the Group has seen minimal churn impact on its subscriber base, in line with prior pricing changes.

Contract renewals: The Company renewed several contracts with key rightsholders, including with Major labels, ahead of the contractual date and with improved terms which strengthened their relationships and will positively impact profitability from 2024.

Coming soon: As a pioneer in the Music industry, Deezer will continue to enhance the value of artists through breakthrough innovations that expand the music industry footprint overall.

New features to enrich experiences for fans

New feature development: During the year, the Group launched breakthrough innovative features, confirming its evolution from a music streaming platform to an experience services platform. The introduction of Shaker, which connects friends on different music apps and the next generation Flow,

the AI-powered music discovery feature, were the highlights of the year. These innovative features

fueled further differentiation and engagement.

2023 RESULTS: RECORD PERFORMANCE, STRONG MOMENTUM

Annual revenue up 7.4%, in line with guidance

Consolidated revenue amounted to €484.7 million in 2023, up 7.4% compared to 2022 (+7.6% at constant currency), reflecting the execution of the Group’s strategy directing efforts towards attractive, large markets, mainly through partnerships. The continuing ramp up of recent Partnerships (including RTL+, Sonos & Mercado Libre) and the contribution of the new wave of price increases and strong subscriber growth in France on the Direct segment were the major factors contributing to Deezer growth in 2023.

The Group recorded a sharp acceleration in growth in Q4 2023 (+12.1% vs Q4 2022) on the back of the ramp-up in Partnerships (revenues +28.6% vs Q4 2022) & first impact of the new price increase on

Direct.

Direct revenue totaled €331.1 million in 2023, up 4.4% compared to 2022 (+4.8% at constant currency). This growth is underpinned by the continued expansion of the Group’s subscriber base in France (+5.9%), offsetting the anticipated decline in the Rest of World (-9.4%), according to the Group’s refocus of its Direct business on selected key markets. At the same time, this improved geographic mix drove ARPU growth of +3.9% to reach €4.9 per subscriber with the addition of the first impact of the second wave of price increases.

Partnerships revenue amounted to €135.7 million in 2023, up 14.5% compared to 2022 (+14.0% at constant currency), driven by strong subscriber acquisition (+1.1 million or +28.9%), essentially from the success of the first months of the Meli+ offering in Brazil and Mexico, and the ARPU increase of +11.0% mainly due to improved geographical mix. This performance was also backed by the gradual build-up of the RTL partnership, with the launch of the Multimedia App (including Video and Music) at the end of Q3 2023, and the initial contribution of the Sonos partnership launched in Q2 2023.

Other revenue, which is mainly made up of advertising and ancillary revenue, totaled €17.8 million in 2023, with a growth of +15.4% compared to 2022.

Reducing adjusted EBITDA loss by almost half to €(29) million, while continuing strategic investments

Adjusted Gross Profit increased by 12.6% compared to 2022, to reach €110.3 million in 2023, mainly due to a higher level of activity, and the positive impact of the optimization of the Group’s freemium service, partly offset by increased publishing rates.

As a result, Adjusted Gross Margin increased by 100 basis points and reached 22.7% in 2023 compared to 21.7% in 2022.

Adjusted EBITDA improved by €26.9 million to €(28.8) million in 2023, compared to €(55.7) million in 2022, mainly driven by higher adjusted gross profit and optimized marketing expenses as a result of the Group’s strategy to focus on Partnerships and selected key markets for Direct subscription. In addition, staff and G&A costs were kept under strict control in 2023.

Operating loss totaled €(64.4) million in 2023 compared to €(166.7) million in 2022, reflecting the improvement in Adjusted EBITDA as well as some non recurring items that affected the results in 2022.

Net loss totaled €(59.6) million in 2023 compared to €(168.5) million in 2022, mainly reflecting the improvement in Operating Loss.

Robust cash position of €63.6 million, well above resources required for 2024/2025 financial targets

Free cash flow totaled €(44.3) million in 2023 compared to €(43.6) million in 2022. This change mainly reflected the reduction of adjusted EBITDA loss, offset by lower generation of working capital as compared to 2022, as well as higher other cash items (one-off items including the impact of tax regularizations).

Change in Working Capital totaled €12.5 million in 2023, reflecting the higher level of activity, despite the acceleration of our Partnerships growth in Q4 which led to an increase of our Trade Receivables at the end of December 2023.

2024 FINANCIAL OUTLOOK: POSITIVE FREE CASH FLOW THROUGH ACCELERATED REVENUE GROWTH & CONTINUED SIGNIFICANT IMPROVEMENT IN ADJUSTED EBITDA

In 2024, the Group targets to reach 10% revenue growth, driven by the development of Partnerships, subscriber growth and the impact of the latest round of price increases.

The Group aims to achieve an adjusted EBITDA loss better than €(15) million in 2024, another significant reduction compared to €(29) million in 2023. This improvement will be driven by a further increase of the adjusted gross margin, the operating leverage from revenue growth and continued strict cost control, while continuing to invest strategically in our brand.

Finally, given the strong profitability improvements achieved in 2023 and the expected revenue and profitability momentum in 2024, Deezer confirms its ambition to achieve positive free cash flow in 2024 and positive adjusted EBITDA in 2025.

CONFERENCE CALL AND WEBCAST

Jeronimo Folgueira, CEO and Stéphane Rougeot, Deputy CEO and CFO will host a conference call and webcast for analysts and investors, including a Q&A session, on Thursday, 29 February 2024 at 9.30 a.m. CET.

Connect to the live webcast by clicking on the following link: https://channel.royalcast.com/deezer-en/#!/deezer-en/20240229_1

Conference call dial-in details:

-  France: +33 (0) 1 70 37 71 66

-  UK-wide: +44 (0) 33 0551 0200

-  US: +1 786 697 3501

Password: “Deezer” (tobecommunicatedverballytotheoperator)

The related presentation and a replay of the webcast will be made available on www.deezer-investors.com in the Financial Information section after the live event.

FINANCIAL CALENDAR

-  29 April 2024: Q1 2024 Revenue (press release to be published after market close)

-  30 July 2024: H1 2024 Results (press release to be published after market close)

-  30 October 2024: Q3 2024 Revenue (press release to be published after market close)

FORWARD LOOKING STATEMENTS

Thispressreleasecontainscertainforward-lookingstatementsrelatingtothebusinessofDeezer,which shall not be considered per se as historical facts, including the ability to manufacture, market, commercializeandachievemarketacceptanceforspecificprojectsdevelopedbyDeezer,estimatesfor future performance and estimates regarding anticipated operating losses, future revenues, capital requirements,needsforadditionalfinancing.Inaddition,eveniftheactualresultsordevelopmentof Deezerareconsistentwiththeforward-lookingstatementscontainedinthispressrelease,thoseresultsor developmentsofDeezermaynotbeindicativeoftheirfuture.

Insomecases,youcanidentifyforward-lookingstatementsbywordssuchas"could,""should,""may," "expects,""anticipates,""believes,""intends,""estimates,""aims,""targets,"orsimilarwords.Althoughthe managementofDeezerbelievesthattheseforward-lookingstatementsarereasonablymade,theyare basedlargelyonthecurrentexpectationsofDeezerasofthedateofthispressreleaseandaresubjectto anumberofknownandunknownrisksanduncertaintiesandotherfactorsthatmaycauseactualresults, performance or achievements to be materially different from any future results, performance or achievementexpressedorimpliedbytheseforward-lookingstatements.Inparticular,theexpectationsof Deezercouldbeaffectedby,amongotherthings,risksanduncertaintiesdevelopedoridentifiedinany publicdocumentsfiledbyDeezerwiththeFrenchfinancialmarketauthority(theAutoritédesmarchés financiers–the“AMF”),includedthoselistedintheuniversalregistrationdocumentapprovedbytheAMF on28April2023undernumberR.23-023.Inlightoftheserisksanduncertainties,therecanbeno assurance that the forward‑lookingstatementsmadeinthispressreleasewillinfactberealized. Notwithstandingthecompliancewitharticle223‑1oftheGeneralRegulationoftheAMF(theinformation disclosedmustbe“accurate,preciseandfairlypresented“),Deezerisprovidingtheinformationinthis pressreleaseasof2August2023,anddisclaimsanyintentionorobligationtopubliclyupdateorrevise anyforward-lookingstatements,whetherasaresultofnewinformation,futureevents,orotherwise.

*** END ***

Press Contact Deezer

Jesper Wendel – jwendel@deezer.com

Investor Relation Contact Deezer

Grégoire Saint-Marc – deezer@actus.fr

ABOUTDEEZER

Deezer is one of the world’s largest independent music experiences platforms, connecting fans with artists and creating ways for people to Livethemusic. The company provides access to a full-range catalog of high-quality music, lossless HiFi audio and industry-defining features on a scalable platform available in 180+ countries. Founded in 2007 in Paris, Deezer is now a global company with over 600 people based in France, Germany, UK, Brazil and the US, all brought together by their passion for music, technology and innovation. By building strategic partnerships in key markets across Europe and the Americas, Deezer keeps delivering brand value and end-user engagement across a wide variety of industries, including telecommunications, media, audio hardware and e-retail. As an industry thought leader, Deezer was the first platform to introduce a new monetization model since the inception of music streaming, designed to better reward the artists, and the music that fans value the most. Deezer is listed on Euronext Paris (Ticker: DEEZR. ISIN: FR001400AYG6) and is also part of the Euronext Tech Leaders segment, dedicated to European high-growth tech companies, and its associated index.

Deezer – Live the music

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APPENDICES

Free cash flow

Adjusted gross profit

RECONCILIATION OF NON-IFRS FINANCIAL INDICATORS

Adjusted gross profit

INCOME

Non-controlling interests                                                                                                             (1,920)                             (775)

Diluted                                                                                                                                            (0.47)                            (1.55)

Diluted                                                                                                                                 121,508,524                 108,475,324

FINANCIAL POSITION

CASH FLOWS