Trustpilot : Results for the year ended 31 December 2023

Trustpilot Group plc

Results for the year ended 31 December 2023

Trustpilot Group plc

19th March 2024

RESULTS FOR THE YEAR ENDED 31 DECEMBER 2023 ("FY23")

Profitability accelerated, delivering adj. EBITDA ahead of expectations at $16 million Rapid growth in consumer and business adoption driving ARR +22% to $197 million

Financial Highlights - sustained positive momentum

• Revenue +18% year on year ("YoY") to $176 million (FY22: $149 million), (+17% at constant currency ("cc"))
• Annual recurring revenue (ARR*) +22% YoY to $197 million (FY22: $162 million), (+18% cc)
• Bookings* +18% YoY to $195 million (FY22: $165 million), (+16% cc), +22% YoY in Europe & Rest of World (RoW), +17% in the UK, and +12% in North America
• Focus on efficient growth helped deliver strong operating leverage in the year, with adj. EBITDA** of $16 million (FY22: $4 million loss) and a reported profit after tax of $7 million (FY22: $15 million loss)
• Last twelve months ("LTM") net dollar retention rate* was resilient at 99% (FY22: 100%)
• $14 million positive adj. free cash flow in the year (FY22: $13 million outflow), resulting in a closing
  net cash position of $91 million (FY22: $73 million)
• Commenced share buyback programme of c.$25 million (£20 million) in January 2024, reflecting disciplined capital allocation strategy

Strategic Highlights

• Monthly unique users on the Trustpilot platform +30% to over 57 million (FY22: 44 million)
• Total cumulative reviews* +25% to 267 million (FY22: 213 million) with 54 million new reviews
• Number of reviewed domains +22% to 1.1 million (FY22: 0.9 million)
• Resilient retention and strong growth across all regions.

Outlook

We delivered a strong performance in 2023, as we accelerated our move into profitability, delivering adjusted EBITDA ahead of expectations.

The bookings growth we achieved in 2023 and the ongoing momentum in the business underpins our confidence in continuing to deliver mid-teens constant currency revenue growth, and we also expect to achieve further operating leverage in the current financial year. The Board is confident in the Company's ability to deliver sustainable growth and long-term margin improvement, as we expand to capture the significant global opportunity ahead.

Adrian Blair, CEO, commented:

"In my first six months at Trustpilot, I have witnessed first-hand just how powerful our platform is for consumers and businesses worldwide. We made strong strategic progress in 2023, building on robust foundations to grow our network of consumers and businesses and deliver profitability and positive cash flow ahead of expectations. By driving consumer adoption and delivering ever greater value to businesses through innovation, we are confident of delivering sustainable growth and long term margin improvement."

* Key performance indicator (KPI) - further detail available on page 14

** Alternative performance measures (APM) - further detail available in note 3 on page 30

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Trustpilot Group plc

Results for the year ended 31 December 2023

Financial summary

• Alternative performance measures (APM) - further detail available in note 3 on page 30;
• Please see page 11 for the definition of adjusted free cash flow

Constant currency basis

Given the Group operates in multiple currencies, Trustpilot believes illustrating period-to-period comparisons on a constant currency basis is meaningful to see differences before the impact of currency fluctuations. The Group's constant currency calculations are performed by applying the monthly average exchange rates from the last month in the most recent period to prior periods at the entity level. Further adjustment is made in the Danish entity, Trustpilot A/S, to fix the transactional impact of GBP to DKK arising from individual GBP transactions, mainly relating to UK sales. This definition has been updated for the year reflecting sales recorded in GBP transactional currency generating the majority of foreign exchange impact in the Group.

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Trustpilot Group plc

Results for the year ended 31 December 2023

Enquiries

Results webcast and conference call

Trustpilot will host an analyst and investor briefing at 09:00 (GMT) today, which will also be available via webcast and conference call. To register to access the webcast and presentation materials please visit https://investors.trustpilot.com. A replay of the webcast will be made available on the investor website after the event.

About Trustpilot

Trustpilot was founded in 2007 with a vision to be a universal symbol of trust.

A digital platform that brings businesses and consumers together to foster trust and inspire collaboration. We are free to use, open to everybody and built on transparency.

Trustpilot hosts reviews to help consumers shop with confidence and deliver rich insights to help businesses improve the experience they offer. The more consumers use our platform and share their own opinions; the richer the insights we offer businesses; and the more opportunities they must earn the trust of consumers, from all around the world.

Trustpilot had over 900 employees as of December 2023 and is headquartered in Copenhagen, with operations in Amsterdam, Berlin, Denver, Edinburgh, London, Melbourne, Milan and New York.

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Trustpilot Group plc

Results for the year ended 31 December 2023

Chief Executive's review

Summary

We help businesses build trust, grow, and improve their services. Through the Trustpilot platform, trusted by millions, businesses can reach more consumers, earn their trust and use insights from customer reviews to get better.

Growth in the adoption and usage of our platform highlights this strong B2B and B2C value proposition, with 267 million total cumulative reviews** (+25 per cent YoY), 57 million average monthly unique users (+30 per cent YoY), more than 1.1 million reviewed domains** (+22 per cent YoY) and the annualised run-rate of TrustBox impressions** now exceeding 117 billion (+13 per cent YoY).

We are pleased with our performance as we continued to manage our business to focus on efficiently supporting top-line growth. We accelerated our move to into profitability, despite an uncertain macroeconomic backdrop, delivering adjusted EBITDA* ahead of expectations and adjusted positive free cash flow***.

This reflects the value we deliver to businesses and consumers during challenging times and is demonstrated by our resilient retention rates. We see first-hand the role our platform plays in helping consumers and businesses navigate the unpredictable economic environment.

We operate a subscription software business model whereby we invest to drive bookings growth in the near term, which leads to revenue growth in subsequent periods. Due to the growth of prior-period bookings, we enjoy good visibility over future revenue at the beginning of each trading period.

Financial highlights

Bookings** increased 16 per cent at constant currency, 18 per cent on a reported basis, to $194.6 million. Reported Group revenue of $176.4 million increased 17 per cent at constant currency, or by 18 per cent YoY on a reported basis. We ended the year with annual recurring revenue (ARR*) of $197.3 million, an increase of 18 per cent at constant currency, or 22 per cent YoY on a reported basis. Profit after tax was $7.1 million as reported, including the benefit of capitalising $3.9 million of sales commissions under IFRS 15 and beginning to use our deferred tax assets with benefit of $12.3 million.

Adjusted EBITDA was $15.5 million (FY22: loss of $4.4 million), we generated positive adjusted free cash flow*** of $13.8 million, and our balance sheet strengthened to end the period with a closing net cash balance of $91.5 million on 31 December 2023 (FY22: $73.5 million).

• Alternative performance measure (APM) - further detail available in note 3 on page 30 ** Key performance indicator (KPI) - further detail available on page 14
  *** Please see page 11 for the definition of adjusted free cash flow

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Trustpilot Group plc

Results for the year ended 31 December 2023

Our markets & regional performance

United Kingdom

The UK generated bookings of $77.4 million, +17 per cent at constant currency, or +17 per cent on a reported basis YoY. UK revenue grew to $70.0 million (FY22: $59.8 million), +16 per cent at constant currency, or +17 per cent reported YoY. This revenue growth reflected prior-year bookings growth and a positive foreign exchange impact on translation.

In the UK, we continued to see net dollar retention rates above the Group average and a further improvement in profitability. We have established a powerful UK consumer brand, which supports further market penetration and expansion, and we see a significant opportunity for long-term, profitable growth.

Europe & Rest of World (RoW)

Europe & RoW generated bookings of $76.3 million, +18 per cent at constant currency, or +22 per cent on a reported basis YoY. Europe & RoW revenue grew to $69.1 million (FY22: $55.1 million), +22 per cent at constant currency, or +25 per cent reported YoY. Revenue growth reflected a strong prior-year bookings performance and a positive foreign exchange impact on translation.

In Europe & RoW, we continued to see a range of net dollar retention rates in the various countries in which we operate, depending on each market's stage of development, and saw a further encouraging improvement in the overall contribution margin for the region. Our key European markets include Germany, Netherlands, France, and Italy.

North America

North America generated bookings of $40.9 million, +12 per cent on a reported basis YoY. North America revenue grew to $37.3 million (FY22: $34.0 million), +10 per cent reported YoY.

In North America, we successfully increased the net dollar retention rate throughout the year, supporting booking growth and future revenue, and saw an improvement in the contribution margin for the region.

Our go-to-market strategy in the US focuses on high customer lifetime value (HCLV) vertical market segments, such as financial services, healthcare, and legal services. This strategy has supported an acceleration in bookings growth and improved customer retention through the period. We achieved greater sales effectiveness, shorter sales cycles, and increased productivity.

Driving new business and retention through innovation

We continued to invest in innovation to improve our platform. By doing so, we drove retention, new business, upsell, and further consumer engagement. For example, during the period, we introduced single sign-on for enterprise, which allows customers to use their existing corporate login (O365, Apple and Google) to access their Trustpilot account, improving user experience, reducing support requests, and increasing cybersecurity.

We introduced a new relevance sorting algorithm that includes text length, readability, and information richness to determine the quality of a review to aid prioritisation when sorting by relevance. Users of Isendu, an all-in-one shipping management platform used by eCommerce businesses to automate and manage shipping, can now send automated Trustpilot review invitations by email and WhatsApp through a new integration launched in 2023.

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Trustpilot Group plc

Results for the year ended 31 December 2023

Our Review Insights customers can now input different parameters to forecast the range of potential outcomes for their TrustScores, based on their planned activities. We also updated our Abusive Reporting Model and introduced sentiment breakdown by topic for consumers on our iOS App. We launched a Salesforce integration during Q3 2023, now available on the Salesforce app exchange and enabling seamless review management, including consumer insights and reporting, for customers using the Salesforce platform.

Strong strategic progress

The more consumers engage with our platform through reading and posting trusted reviews, the greater the reason for businesses to use Trustpilot to engage with their customers. In this way, each side of our platform reinforces the other, supporting our strong organic growth over the long term.

We track several strategic data points that help us assess our progress in driving adoption and ensuring trust and transparency. Concerning adoption and usage, these metrics include:

• The total number of cumulative reviews
• The number of active businesses on the platform
• The number of paying customers
• The average monthly number of review invitations and TrustBox impressions

Rapid business and consumer adoption

For us to achieve our mission of 'Trustpilot everywhere', we need to succeed in being the most trusted and most used online review brand globally.

We were pleased to see consumer and business adoption of the Trustpilot platform continue to grow across all regions in 2023. By the end of the year, Trustpilot had exceeded 267 million total cumulative reviews*, an increase of 25 per cent YoY, with an average of 57 million monthly unique users and close to 20 million consumers leaving their first review on Trustpilot in the year.

We closed 2023 with 1.1 million reviewed domains* and 116 thousand active domains* on our platform, up 22 per cent and 16 per cent YoY, respectively. Active businesses help promote the Trustpilot brand, whether paying customers or users of the free tools we provide, by actively collecting reviews and displaying their TrustBox. Of these active businesses, 26 thousand are paying customers, subscribing to our software tools to help them get, manage, and derive insights from reviews.

Importantly, our strategy is to increase the revenue opportunity within our installed base, principally by focusing our direct selling into the enterprise market, typified by larger deal sizes and lower churn, whilst addressing the smaller business market via self-service channels. Therefore, we do not see growth in the absolute number of paying customers as a critical data point per se; instead, we believe we should focus on increasing average contract values and increasing retention over time.

During the year, our business customers sent 780 million review invitations (FY22: 697 million), an average

of 65 million per month (FY22: 58 million). The Trustpilot brand continued to gain in strength, with 9.8 billion monthly TrustBox impressions, up 13 per cent YoY to 117.4 billion for the year.

Trust & transparency

We also look at a series of strategic data points to help us assess our success in ensuring the integrity of the content on our platform. These include:

• Consumer and business verification
• Our speed and accuracy in detecting fake reviews
• How many fake reviews are flagged by our community

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Trustpilot Group plc

Results for the year ended 31 December 2023

* Key performance indicator (KPI) - further detail available on page 14

During 2023, Trustpilot removed over 3.3 million fake reviews from its platform (FY22: 2.6 million) equating to 6% of reviews posted in the year - our fraud detection systems automatically eliminated approximately 79 per cent of these. 68 per cent of the fake or fraudulent reviews removed in 2023 were either 5-star or 4- star reviews (FY22: 65 per cent). In addition to those removed automatically, consumers and businesses validly flagged over 545 thousand reviews, an increase of 19 per cent YoY, of which approximately 98 per cent were flagged by businesses. We ended the year with 490 thousand verified reviewers globally (FY22: 198 thousand), a valuable additional step in promoting trust online.

In 2023, we made further progress in tackling misuse through proactive litigation and scam prevention. For example, as part of our enforcement strategy, we successfully secured our first two court orders, banning a property firm and a dental practice from buying and submitting fake reviews on our platform. We initiated legal proceedings after issuing formal cease and desist notices and placing consumer warnings on the profile pages of the businesses involved. The courts ordered both firms to pay damages and in December 2023 we donated these funds to the Citizens Advice Bureaux, as an organisation that champions consumer rights.

We also proactively engaged with regulators in our different markets to prepare for the changing regulatory landscape to help shape public policy. This activity included engaging with the UK government concerning the forthcoming Digital Markets, Consumer and Competition Bill. In the US, we contributed to the Federal Trade Commission's report on proposed new rules to prevent the use of fake and misleading reviews. We also further developed our roadmap for compliance with the EU Data and Digital Services Acts.

We are encouraged by these new regulations as they seek to support open and transparent platforms, and strengthen ability to deter bad actors through legal enforcement.

We must also ensure legitimate reviews are accessible. Hence, we prioritise our investment to enable us to protect great businesses and showcase genuine consumer experiences. This investment includes our focus on business and consumer verification, automated review collection methods and our extensive use of automated fraud detection systems, employing data science techniques to improve the speed and accuracy with which we identify suspicious activity and fake reviews.

We also actively remove or do not accept business customers that are unsuitable for our platform. For example, businesses that promote hatred or facilitate criminal activities. The steps we can take include displaying consumer warnings on business profiles, removing profiles that offer illegal or harmful services and ensuring that our sales teams do not communicate with unsuitable businesses.

Sustainability

We aim to help consumers and businesses to help each other - because when they do, people benefit, businesses benefit, and society benefits too. We know that this purpose is ambitious and challenging, but also that it is inherently worthwhile. We believe our sustainability strategy supports this purpose over the long term.

We focus on three strategic areas of sustainability with clear priorities where we can have a positive impact: being a partner for the planet, promoting trust online, and empowering everyone.

Partner for the planet

At Trustpilot, we are not in the business of manufacturing anything physical, but that does not mean we do not cause emissions. We are determined to hold ourselves accountable and work towards positive change.

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Trustpilot Group plc

Results for the year ended 31 December 2023

We have committed to setting science-based, independently verified emissions reduction targets. We need to understand how climate change may affect our business in the future and how we can reduce any negative environmental impact we have. We are committed to driving continual improvement in our climate reporting and sustainability going forward.

In 2023, we enhanced the role of the ESG steering group, conducted a detailed review of our schedule of potential climate risks and opportunities, assessed the impact of these risks on our business and across Trustpilot's value chain, and examined how these may affect our platform, customers, consumers, employees, and broader society.

We also undertook a detailed analysis of our carbon footprint across scopes 1, 2, and 3 identifying areas where we could immediately begin work towards reducing our emissions, for example, by creating specific work streams to support the introduction of sustainable procurement and travel policies. We have introduced carbon-reduction targets in this year's annual report, and we shall submit these to the Science Based Targets initiative (SBTi) for validation during 2024.

Promoting trust online

We do all we can to ensure Trustpilot reviews are trusted. Our guidelines encourage responsible behaviour among the Trustpilot review community. Both consumers and businesses sign up and must adhere to these guidelines when using our platform. We treat all reviews on the platform equally, regardless of who wrote them or which businesses they concern. In addition to working with regulators, we also collaborate with other leading internet businesses to tackle fake reviews and protect consumers online. In 2023, we became a founding member of the newly created Coalition for Trusted Reviews. We aim to set consistent standards, share best practices, take collective action, and work closely to inform public policy.

Empower everyone

We continue to acquire the critical skills and capabilities needed to achieve our goals. We embedded the High Performance Way, a performance management approach to give Trusties greater meaning, clarity, and accountability. We invested in training for leaders and launched the development hub, offering all Trusties support with their development needs.

In 2023, we continued to strive for an environment where Trusties feel they can belong, championed by our seven employee resource groups (ERGs), and we launched workshops to help Trusties understand their impact on diversity, equity and inclusion to ensure Trustpilot is a place where everyone feels they can be themselves.

We also published our diversity, equity and inclusion policy for the first time, detailing our responsibilities as a business, presenting our expectations of our Trusties to uphold fairness and respect, and highlighting our shared responsibility to treat everyone with respect and ensure that equal opportunities exist for all.

Outlook

We delivered a strong performance in 2023, as we accelerated our move into profitability, delivering adjusted EBITDA ahead of expectations.

The bookings growth we achieved in 2023 and the ongoing momentum in the business underpins our confidence in continuing to deliver mid-teens constant currency revenue growth, and we also expect to achieve further operating leverage in the current financial year. The Board is confident in the Company's ability to deliver sustainable growth and long-term margin improvement, as we expand to capture the significant global opportunity ahead.

Adrian Blair

Chief Executive Officer, Trustpilot Group plc

18 March 2024

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Trustpilot Group plc

Results for the year ended 31 December 2023

Finance review

Overview

In 2023, we generated total bookings* of $194.6 million, +18 per cent YoY (+16 per cent at constant currency (cc)). Revenue increased to $176.4 million, +18 per cent YoY (+17 per cent cc). On 31 December, annual recurring revenue* ("ARR") had increased to $197.3 million, +22 per cent (+18 per cent cc). The Group reported a loss before tax of $1.9 million and, by beginning to recognise deferred tax assets with the benefit of $12.3 million, reported a profit for the year of $7.1 million, compared to a loss of $14.6 million a year ago.

Adjusted EBITDA** of $15.5 million was ahead of expectations even after the impact of capitalising sales commissions of $3.9 million, compared with an adjusted EBITDA loss of $4.4 million a year ago. Operating cash inflow was $20.9 million compared to an outflow of $2.7 million a year ago. At 31 December 2023, we had net cash of $91.5 million and no debt, generating $13.8 million of adjusted free cash flow1 in the year.

Regional growth trends

The UK generated bookings of $77.4 million, +17 per cent at constant currency, or +17 per cent on a reported basis YoY. UK revenue grew to $70.0 million (FY22: $59.8 million), +16 per cent at constant currency, or +17 per cent reported YoY. This revenue growth reflected prior-year bookings growth and a positive foreign exchange impact on translation.

Europe & RoW generated bookings of $76.3 million, +18 per cent at constant currency, or +22 per cent on a reported basis YoY. Europe & RoW revenue grew to $69.1 million (FY22: $55.1 million), +22 per cent at constant currency, or +25 per cent reported YoY. Revenue growth reflected a strong prior-year bookings performance and a positive foreign exchange impact on translation.

North America generated bookings of $40.9 million, +12 per cent on a reported basis YoY. North America revenue grew to $37.3 million (FY22: $34.0 million), +10 per cent reported YoY.

* Key performance indicator (KPI)- further detail available on page 14

• Alternative performance measure (APM)- further detail available in note 3 on page 30

• Please see page 11 for the definition of adjusted free cash flow

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Trustpilot Group plc

Results for the year ended 31 December 2023

Net dollar retention rate

Importantly, our FY23 LTM net dollar retention rate was 99 per cent (FY22: 100 per cent), a resilient performance given the weaker economic climate, underpinned by good gross retention, the improvement in the retention rate in North America, new pricing packages and general price increases, which helped to grow the average annual contract value.

Forward visibility

We operate a subscription software business model, typically with 12 month rolling contracts. Hence, the revenue outcome in any given period primarily reflects prior-period bookings (the annual contract value of deals signed within that period) and ARR (which measures the annualised value of all subscription contracts on the final day of a reporting period).

Cost of sales

The cost of sales was $30.9 million (FY22: $26.9 million) and includes network operating costs as well as the costs incurred to onboard, support, retain and upsell customers. Cost of sales remained flat as a proportion of revenue to 18 per cent (FY22: 18 per cent) in FY23, and the gross margin also remained at 82 per cent (FY22: 82 per cent).

Sales and marketing costs

Capitalised commission

Under IFRS 15 - "Revenue from Contracts with Customers" - the Group must assess the recoverability of the incremental costs of obtaining a contract when incurred, based on the anticipated contribution from revenue to be earned under the associated contract. Incremental costs for the Group relate primarily to sales commissions paid to employees on new business.

In previous periods where we assessed recoverability, our forecasts in our respective markets did not indicate the costs incurred would be recoverable, and thus they were expensed immediately. In FY23, as a result of the Group forecasting improved profitability and operating leverage in all markets globally, our forecast supports the recovery of these costs, which has led to sales commissions being capitalised and amortised over the customer's expected useful life.

This accounting treatment is a consistent application of our policies under IFRS 15. We have not revised any previous estimates, but for 2023, the capitalisation of costs resulted in reduced sales and marketing expenses by 3.9 million.

Before the impact of capitalising sales commissions of $3.9 million, sales and marketing costs decreased YoY to $54.8 million (FY22: $58.5 million), falling to 31 per cent of revenue, versus 39 per cent in FY22. This reduction was largely driven by the absence of non-recurring consulting services fees and other expenses that were incurred in FY22, a reduced pace of hiring given the uncertain macroeconomic environment, and operating leverage due to the strong revenue growth in the year.

Technology and content costs

Technology and content costs grew to $50 million (FY22: $41 million) but remained flat as a proportion of

revenue to 28 per cent (FY22: 28 per cent). We continued our investment in content integrity and expanding our technology and product teams.

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