A C A S T A N N U A L R E P O R T 2 0 1 9 1

2019 ANNUAL REPORT

Acast is the world’s biggest podcast company and the engine powering creators, advertisers and listeners every-where. Its services are the most sophisticated available and are constantly being updated with innovative new tools and functionality. Acast hosts and monetizes global smash hits around the world, including My Dad Wrote a Porno, The Earios Network, David Tennant Does A Podcast With, The Lady Vanishes, Watch What Crappens, Forever35, JLC and Wahlgren & Wistam, as well as podcasts from publishers such as the BBC, the Guardian, Louie Media, Binge Audio, The Economist, VICE and CONDÉ NAST. Co-founded in Sweden in 2014. Acast’s team of more than 200 audio lovers are creating a sustainable and open pod-cast ecosystem — ensuring the whole industry continues to grow and flourish. The company has sales presence on the ground in 13 markets around the world, including the Nordics, UK, US, Mexico, Australia, France and Germany.

This is Acast’s annual report for the finan-cial year of 2019. The report is primarily aimed at Acast’s owners. The report describes the company’s objectives, strat-egies, market and results for the past year. It concerns the entire company, unless otherwise indicated.

From the year 2019 Acast is commencing to present a complete IFRS report includ-ing notes and disclosures and a restate-ment bridge. The main P&L restatements relate to IFRS 15, IAS 38 and IFRS 2 and have on a combined basis resulted in a minor positive effect on the 2019 result for the year.

This is a translation of the Swedish orig-inal. In the event of any discrepancies between the two versions, the Swedish version shall take precedence.

ABOUT ACAST ABOUT ACAST’S

REPORTING

CONTACT INFORMATION

Ross Adams, CEOTel +44 79 9052 0761Email: ross@acast.com

Emily Villatte, CFOTel +46 76 525 0142Email: emily.villatte@acast.com

www.acast.com

A C A S T A N N U A L R E P O R T 2 0 1 9 2

A C A S T A N N U A L R E P O R T 2 0 1 9 3

THE YEAR IN BRIEF 4

CEO COMMENTS 5

BOARD OF DIRECTORS’ REPORT 6

DECLARATION BY THE BOARD 8

FINANCIAL INFORMATION 9

AUDITOR´S REPORT 41

TABLE OF CONTENTS

4A C A S T A N N U A L R E P O R T 2 0 1 9

• Close to two billion listens worldwide.

• New offices opened in Paris, France, Berlin, Ger-many and Dublin, Ireland.

• Acquisition of US company Pippa, offering hosting, analytics, and monetiza-tion for podcasters.

• Acast Open for inde-pendent podcasters is launched.

• An MEUR 25 quasi- equity financing agreement signed with the EIB.

• Three new board members welcomed to the team.

• Revenues increase 100% year on year totalling MSEK 361 in 2019.

• Gross profit increases 112% from MSEK 61 in 2018 to MSEK 129 in 2019.

• Gross margin improves to 36%.

• OPEX grew 70% year on year illustrat-ing the business ability to scale.

• Profit before income tax margin improved significantly to -34% in 2019 (-46%).

THE YEAR IN BRIEF

PERFORMANCE

100%Revenues increase

112%Gross profit increases

THIS IS ACAST

Podcasting is one of the fastest growing media channels. Its monetization potential is only just beginning to be properly realized, but the industry is beginning to mature. The pattern is clear and follows the same development as most new media channels. First the users arrive, in our case the listeners, thereafter the revenues. The potential is enormous.

Podcasts are perfectly positioned alongside the mega-trend of on-demand entertainment consumption, meaning users can follow audio programs wherever and when-ever they want. Developments in the technology infrastruc-ture in recent years have finally allowed podcasting to establish itself as the next generation of radio, capturing the attention of millions who consume audio content every day.

During the next five years, it’s

estimated that podcasts will reach an audience of more than one billion listeners around the world. Acast is the first podcast system combin-ing best-in-class services for all podcasting stakeholders (listeners, podcasters and advertisers) — and has pio-neered technologies including dynamic ad insertion, an intu-itive interface for all podcast-ers, and an easily searchable podcasts library.At the time of writing, Acast has more than 180 million

monthly listens, has attracted thousands of corporate adver-tisers, and hosts podcasts from well-known international media houses. Acast has developed the cornerstone of its offer-ing for advertisers: its unique dynamic ad insertion technol-ogy, which has enabled the company to generate revenues since its first year of operation in 2014. This technology has revolutionized podcast mon-etization, allowing advertisers to target specific audience segments and change their ads

at any time — across a podcast’s entire back catalog.

Acast is now further improving its platform for listeners and podcasters, continuing to make podcasting a major commu-nication channel produced by the people, for the people. This project enables Acast to fully automate and scale up the key features of its system, setting the company on the right track to become the global leader in the audio-on-demand market.

A C A S T A N N U A L R E P O R T 2 0 1 9

2019 was an exciting and eventful year, both for Acast and for the podcast industry as a whole. It was the year the industry came of age; the year mainstream audiences woke up and realised thepower of podcasts.

Last year there were an esti-mated 750,000 shows and 30million episodes available on Apple Podcasts alone — an increase of around a third in the space of a year. According to our statistics, shows on the Acast network saw a total of 1.9 billion listens in 2019. Trulyamazing numbers.

Acast also sustained its posi-tion as a leading global player in podcasting, seeing revenues grow 100%, from 180 MSEK 2018 to 361 MSEK 2019 and with a gross margin improving from 34% to 36%. From a profitabil-ity perspective we are picking up speed by improving our loss margin from -46% in 2018 to -34% in 2019.

The contribution from all core

COMMENTS FROM THE CEO2019 – YEAR OF THE PODCAST

markets was instrumental to Acast’s growth as the Americas grew by 148% and European operations by 91% and one business unit became profitable after all corporate allocations.There are several factors that explain the market growth. For starters some of the established mediaplayers made significant investments during the year, both in successful productions and in increased competence. At the same time, some of the world ś largest commercial brands decided to move into podcasts for the first time. This was a sure sign they understood that advertising and sponsor-ship in podcasts are innovative and cost-effective ways to reach highly engaged audiences.

Podcasting is being taken more and more seriously by media houses and is proving a timely remedy. English-language content is travelling further than ever with a good third of all listens to US-produced content happening outside of the US, while new formats are also springing up in non-English

speaking markets in Europe and the Americas. At the same time, advertising sponsorships are more profitable than ever for creators. In the US true dynamic ad insertion, which Acast pio-neered and which has already become the norm for podcasts in Europe and Australia, over-took baked-in ads for the first time ever.

Acast was part of the group that helped the Internet Adver-tising Bureau (IAB) create the Podcast Measurement Tech-nical Guidelines 2.0, setting global standards for podcast advertising measurement. That Acast was the first company ever fully certified according to the guidelines, and currently the only business meeting all four compliance metrics, makes things even sweeter.

For Acast, of course, this rapid market development presents both opportunities and chal-lenges. We are growing and becoming more and more global. During 2019 we set up offices in Germany, France and

5

got our boots on the ground in Ireland. We signed several large publishers, including Can-ada ś public broadcaster CBC/Radio Canada.

Acast also acquired the US podcast host Pippa, which has now transformed into our offering Acast Open, launched in November 2019. Acast Open makes our hosting and mone-tization engine available to all podcasters, regardless of size. But this growth must be handled carefully and with full manage-ment attention, from hiring the right people to making sure our processes are watertight.

We have anticipated further financing in order to develop the potential we see. In July 2019, the European Investment Bank (EIB) and Acast signed a financial agreement worth MUSD 25, and before Christmas we declared our intention to seek further financing from a strategic American partner. These sources of financing will safeguard our future development.

2019 was a record 12 months for Acast, the best year for the podcasting world to date. And then, early 2020, along came the corona virus. Right now, it is quite unpredictable what near-term effects the ongoing spread will have on the global business landscape. Surely the publishing houses, as well as the advertisers and the pod creators, will have to adapt.

Podcasts are however a digital medium, which means that our products and services remain unaltered. Also, during the first three months of 2020 the listening figures has continued to climb, in fact reaching record levels during March, so from thataspect there are no signs of things slowing down. There is still a good chance that 2020 will be the ‘year of the podcast’. Again.

I’m looking forward to contin-uing the journey and I’m iim-mensely proud of leading Acast to even bigger and better things.

ROSS ADAMSChief Executive Officer

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The Board of Directors and CEO of Acast AB (publ) 556946-8498 hereby pres-ent the Annual Report for the Group and Parent Company for the financial year 1 January – 31 December 2019.

GENERAL INFORMATION

Acast is a world leading pod-cast company and work with-and for creators, advertisers and listeners all over the world. Acast ś services and products are constantly being updated with innovative new tools and functionality.

Acast was the first to imple-ment the dynamic ad insertion (DAI) technology, which has improved the entire podcast industry’s revenue potential by enabling advertisers to target specific audience segments and continuously change their ads, even in previously broadcast podcasts.

Acast hosts more than 10,000 podcasts and derives its revenue primarily from advertising.

BOARD OF DIRECTORS’ REPORT

Acast was founded in Sweden in 2014 and has a team of over 200 employees that builds a sustainable and open ecosystem for podcasts and ensures that the entire industry can continue to grow. The company has sales teams in 11 markets around the world, including the UK, USA, Australia, France and Germany.

IMPORTANT EVENTS DURING THE YEAR• 100% growth in revenues.• US was the fastest growing

core market.• Acquisition of US podcast

hosting company Pippa in April.

• Local subsidiary launches in three markets, France, Ger-many and Ireland.

• EUR 25 million in quasi-equity financing granted by the Euro-pean Investment Bank (EIB).

• Launch of Acast Open in November.

• This financial report is Acast ś first set of consolidated financial statements prepared in accordance with IFRS.

OPERATIONS / CONSOLIDATED REVENUEConsolidated revenue in 2019 amounted to MSEK 361.2 (180.2), representing an increase of 100% compared to 2018. Currency affected the revenue positively, by +8%. Operating expenditure amounted to MSEK 252.4 (148.2). The increase is driven by growth in staff and consulting costs, with the key driver being the development of Acast ś technology plat-form. We continue to invest in core areas of the existing business and in new markets, and the recruitment level of tech competence hit the desired pace. Efforts to further improve processes and compliance prac-tices also remain a cost driver, but with the view to enabling improved scalability of the business and maintaining strong governance and control.

FINANCIAL POSITIONOn 31 December 2019, the Group’s total assets amounted to MSEK 357.4 (419.4). The

equity ratio was 61% (76%). Cash and cash equivalents, including current investments, totalled MSEK 165.9 (307.4). During the year the company saw an increase in accounts receivable to MSEK 109.8 (64.7), related to the increase in revenue. At the end of the period, Acast had access to a financing facil-ity totalling MEUR 25, which reduces the company’s refinanc-ing risk and ensures access to capital.

CASH FLOWCash flow from the operating activities amounted to MSEK -113.0 (-67,2). The increase is driven by growth in staff and consulting cost as Acast is grow-ing its business.

The cash flow from investing activities amounted to MSEK -44.4 (-10.6). The increase related to an increase in invest-ment in capital development as well as the acquisition of the technology company Pippa. For more info se below and Note 23.The cash flow from financing

activities amounted to MSEK 12.0 (282,3). In 2018 the number relates to a new issue that raised MSEK 300 minus issue costs.

Cash flow for the periodamounted to MSEK -141.4 (204.5).

INVESTMENTS AND AQUSITIONSOn 23 April 2019 Acast Stories Inc acquired 100% of the shares in the unlisted company Pippa, a technology company offering hosting, analytics, and monetiza-tion for podcasters.

From the date Pippa was acquired up to December 31, 2019, the subsidiary contrib-uted MSEK 3.5 to the Group’s revenues.

For more information, see Note 23.

RISKS AND UNCERTAINTIES RELATED TO ACAST’S BUSINESSAcast is exposed to numerous risks and opportunities arising from its both own operations and the changing operating

Board of directors report

A C A S T A N N U A L R E P O R T 2 0 1 9 7

environment. The main operational risks for

the Group and the company are:• An economic downturn

affecting the advertising market and thus the Com-pany’s performance and liquidity.

• Attracting and retaining the right talent.

• Failing content acquisition or loss of content.

• Increased competition.• Innovation and product

develop ment falling behind market expectations.

• Not keeping up with pace of change due to lack of agility.

• Failing to prevent and respond to a significant cyber attack.

The Company’s primary finan-cial risks are:• Refinancing risk resulting

from lack of financing facili-ties or unfavourable financing conditions.

• Credit/Counterpart risk i.e. the risk that a counterparty is not able to fulfil its con-tractual obligations including both commercial credit risk and financial credit risk.

• Currency exchange risk resulting from exposure to movements in currency exchange rates for foreign currency revenue transac-tions and the translation of the net assets and profit and loss accounts of overseas subsidiaries.

For more information about the

Company’s financial risks, see Group Note 21.

PARENT COMPANYAcast AB is the parent company of the Group. Revenues of the parent company were MSEK 357.7 in 2019, representing an increase of MSEK 177.5 from the previous year. Operating expenses were MSEK 268.6 for 2019, an increase of MSEK 118.1 compared to 2018. The increase is driven by growth in staff and consulting costs, with the key driver being the development of Acast ś technology platform. Other income, net, was MSEK 2.6 in 2019, compared to MSEK 6.0 in 2018. As a result, the parent company had a loss after tax of MSEK 139.2 in 2019.Risk and uncertanties for the parent company alignes with what has been described for the group.

SIGNIFICANT EVENTS AFTER THE END OF THE FINANCIAL YEAR• Launch of Acast Mexico oper-

ations as part of the interna-tional expansion plan.

• In 2020, the COVID-19 pan-demic will present a new macroeconomic landscape. It’s too early to predict how the virus will impact the entirety of 2020, but podcast-ing is a predominantly digital medium and the products and services of Acast remain unaltered. To date, listening figures have continued to

follow the upward trajectory seen year on year – includ-ing record breaking listens. Creators have also adjusted well, changing show formats, or simply recording remotely. The advertising industry, the primary source of revenue for Acast, has had to adapt. Acast will continue to moni-tor, analyse and adjust to the global shifts that result from COVID-19.

• Acast AB and its subsidiary Acast Stories SAS have an ongoing dispute with Yacast France. Yacast France has sued for trademark infringe-ment and reputation infringe-ment and claims damages totaling EUR 600,000. The court hearing, which would have taken place at the end of March 2020, has been post-poned until further notice due to covid-19.

ALLOCATION OF THE RESULT FOR THE YEARThe company will not pay out any dividend in the foreseeable future.

The following funds are at the disposal of the general meeting (SEK):

Share premium 590 690Retained earnings -248 040Profit/loss for the year -139 159Total 203 491

Board of directors report

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We confirm that the financial state-ments for the period from 1 January to 31 December 2019, to the best of our knowledge, have been prepared in accordance with applicable accounting standards, IFRS, that the accounts give a true picture of the assets, liabilities, financial position and results of oper-ations, and that the information in the report includes a fair review of devel-opment, performance and position of the entity and the group, together with a description of the principal risks and uncertainties the company faces.

DECLARATION BY THE BOARD AND CEO

Stockholm, 5 May 2020Board and CEO of Acast

Andrea Gisle JoosenChair

Jonas von HedenbergBoard member

Björn JeffreyBoard member

Eva LindqvistBoard member

Mattias WedarBoard member

Leemon WuBoard member

Ross AdamsCEO

Our Auditor ś report was submitted on 5 May 2020 KPMG AB

Mattias LötbornAuthorized public accountant

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GROUP

Consolidated statement of profit or loss 10

Consolidated statement of comprehensive income 10

Consolidated balance sheet 1111

Consolidated statement of changes in equity 12

Consolidated statement of cash flows 13

Group notes 1-24 14

PARENT COMPANY

Income statement 29

Balance sheet 30

Changes in equity 31

Statement of cash flows 32

Parent company notes 1-23 33

AUDITOR’S REPORT 41

FINANCIAL INFORMATIONCONTENT

A C A S T A N N U A L R E P O R T 2 0 1 9 10

ACAST GROUP FINANCIAL INFORMATION

CONSOLIDATED STATEMENT OF PROFIT OR LOSS

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Group financial information

Note 2019 2018 2017

Revenue 3 361 175 180 179 85 712

Cost of content -232 377 -119 475 -58 878

Gross profit 128 798 60 704 26 834

Sales and marketing costs 4, 5, 6, 7, 8, 9 -115 021 -72 279 -50 689

Administration expenses 4, 5, 6, 7, 8, 9 -93 240 -57 761 -28 604

Product development costs 4, 5, 6, 7, 8, 9 -44 161 -18 151 -16 213

Other income 2 765 6 012 3 438

Other expenses - - -

Operating profit -120 858 -81 475 -65 233

Financial income 10 833 69 0

Financial costs 10 -2 851 -1 512 -4 244

Profit before income tax -122 876 -82 918 -69 477

Income tax 11 -5 625 -2 850 487

Profit/Loss for the year -128 501 -85 768 -68 990

Note 2019 2018 2017

Profit/Loss for the year -128 501 -85 768 -68 990

Other comprehensive income

Items that may be reclassified subsequently to profit or loss

Foreign currency translation differences 283 112 -67

Total comprehensive income for the period -128 219 -85 656 -69 058

Profit and loss and total comprehensive income for the year is attributable to owners of the parent company since no non-controlling interests exists.

A C A S T A N N U A L R E P O R T 2 0 1 9 11

CONSOLIDATED BALANCE SHEET

Group financial information

NoteDEC 31

2019DEC 31

2018DEC 31

2017JAN 1 2017

ASSETS

Non-current assets

Goodwill 12, 23 27 913 - - -

Intangible assets 12 19 328 6 993 446 597

Tangible assets 13 2 394 2 412 1 364 149

Right-of-use assets 16 544 23 058 8 199 10 837

Financial assets at amoritsed cost 2 272 1 548 274 469

Deferred tax assets 1 859 1 805 1 348 -

Total non-current assets 70 310 35 817 11 631 12 053

Current assets

Accounts receivable 14, 21 109 829 64 650 23 960 15 040

Other receivables 21 2 094 1 459 2 510 2 212

Prepaid expenses and accrued income 15 9 259 10 088 3 710 801

Cash and cash equivalents 16 165 927 307 355 102 883 17 263

Total current assets 287 109 383 552 133 063 35 317

TOTAL ASSETS 357 419 419 368 144 694 47 369

NoteDEC 31

2019DEC 31

2018DEC 31

2017JAN 1 2017

EQUITY

Share capital 18 775 749 617 154

Other paid in capital 590 690 570 042 281 462 128 793

Reserves 16 234 10 346 874 1 058

Retained earnings -389 444 -260 924 -175 157 -106 166

Total equity attributable to owners of the company 218 255 320 212 107 796 23 840

LIABILITIES

Non-current liabilities

Lease liabilities 21, 22 8 477 14 209 3 997 2 473

Deferred tax liabilities 5 390 2 186 - -

Total non-current liabilities 13 867 16 394 3 997 2 473

Current liabilities

Accounts payable 21 28 952 18 332 4 785 4 222

Other payables 20, 21 10 033 7 448 8 956 3 165

Current tax liability 1 807 1 004 970 573

Lease liabilities 21, 22 7 331 7 974 3 488 7 450

Accrued expenses and prepaid income 15 77 174 48 004 14 702 5 647

Total current liabilities 125 297 82 761 32 901 21 057

TOTAL EQUITY AND LIABILITIES 357 419 419 368 144 694 47 369

A C A S T A N N U A L R E P O R T 2 0 1 9 12

Group financial information

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

NoteShare

capital

Other paid in capital Reserves

Retained earnings

including profit for the year

Total equity

Opening balance at 1 January 2017 154 128 793 1 058 -106 165 23 840

Profit for the year -68 990 -68 990

Other comprehensive income - - -67 - -67

Total comprehensive income for the year - - -67 -68 990 -69 058

Transactions with owners

Net issue of ordinary shares 117 153 015 - - 153 132

Bonus issue 346 -346 - - 0

Employee share schemes – value of employee services - - -117 - -117

Total transactions with owners 462 152 670 -117 - 153 015

Closing balance at 31 December 2017 617 281 462 874 -175 156 107 797

Opening balance at 1 January 2018 617 281 462 874 -175 156 107 797

Profit for the year - - - -85 768 -85 768

Other comprehensive income - - 112 - 112

Total comprehensive income for the year - - 112 -85 768 -85 656

NoteShare

capital

Other paid in capital Reserves

Retained earnings

including profit for the year

Total equity

Transactions with owners

Issued warrants 2 1 978 - - 1 980

Repurchased warrants - -28 - - -28

Utilized warrants - 259 - - 259

Net issue of ordinary shares 130 286 369 - - 286 499

Employee share schemes – value of employee services - - 9 360 - 9 360

Total transactions with owners 132 288 578 9 360 - 298 070

Closing balance at 31 December 2018 749 570 040 10 346 -260 923 320 212

Opening balance at 1 January 2019 749 570 040 10 346 -260 923 320 212

Profit for the year - - - -128 501 -128 501

Other comprehensive income - - 283 - 283

Total comprehensive income for the year - - 283 -128 501 -128 219

Transactions with owners

Issued warrants 5 0 - - 5

Utilized warrants 22 20 649 - - 20 671

Employee share schemes - value of employee services - - 5 605 - 5 605

Total transactions with owners 27 20 649 5 605 - 26 281

Closing balance at 31 December 2019 775 590 690 16 234 -389 425 218 274

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CONSOLIDATED STATEMENT OF CASH FLOWS

Group financial information

Note 2019 2018 2017

Operating activities

Operating profit -120 858 -81 475 -65 233

Adjustments for non-cash items 17 14 378 17 367 4 597

Interest received 10 833 69 0

Interest paid 10 -2 851 -1 512 -4 244

Income taxes paid -1 671 -973 -416

Cash flow from operating activities before change in working capital -110 169 -66 524 -65 296

Change in working capital

Current receivables (increase - / decrease +) -44 985 -46 017 -12 126

Current liabilities (increase + / decrease -) 42 143 45 350 15 410

Total change in working capital -2 842 -667 3 283

Cash flow from operating activities -113 011 -67 191 -62 014

Note 2019 2018 2017

Investing activities

Investment of equipment 13 -1 146 -1 789 -1 921

Investment in intagible assets 12 -16 238 -7 529 -

Acquisition of subsidiaries, adjusted for acquired cash 13 -22 333 - -

Long-term asset (increase - / decrease +) -725 -1 273 147

Cash flows from financing activities -40 441 -10 591 -1 774

Financing activities

Lease payments 22 -8 650 -6 456 -3 724

Long term incentive programs 20 675 2 211 -

Issue of new shares 0 286 499 153 132

Cash flows from financing activities 12 025 282 254 149 408

Cash flows for the year -141 428 204 471 85 620

Cash and cash equivalents at the beginning of the period 307 355 102 883 17 263

Cash and cash equivalents at the end of the period 16 165 927 307 355 102 883

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Group notes

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

General informationAcast AB (publ), corporate no. 556946-8498, is a limited liabil-ity company registered in Sweden, headquartered in Stockholm. The address of the head office is Kungsgatan 28, 111 35 Stock-holm. Acast AB and its subsidiaries (“Group”) includes; Acast Stories AS, Acast Stories Gmbh, Acast Stories Inc, Acast Stories Ltd, Acast Stories Pty and Acast Stories SAS.

The board has approved these consolidated financial state-ments for publishing on the 30 april 2020.

All amounts, unless otherwise noted, are in thousands SEK (KSEK).

NOTE 1. SUMMARY OF SIGNIFICANTACCOUNTING PRINCIPLES

The accounting policies set out below have been applied con-sistently to all periods presented in the consolidated financial statements.

Basis of preparationThe consolidated financial statements of the Acast group have been prepared in accordance with the Swedish Annual Accounts Act, International Financial Reporting Standards (IFRS) adopted by the International Accounting Standards Board (IASB) as endorsed by the EU and RFR 1 Supplementary Accounting Rules for Groups, issued by the Swedish Financial Reporting Board.

First-time adoption of international financial reporting standards (IFRS) is applied with the following exemptions to retroactive application of IFRS:

* IAS 21 - to assume that the cumulative transition differences for all foreign operations are deemed to be zero at the date of transition.

* IFRS 9, IFRS 15, IFRS 16 - to apply the specific transition exemptions related to these standards..

This financial report is Acast’s first set of consolidated financial statements and the first financial statements prepared

in accordance with IFRS. Since the consolidated financial state-ments have not previously been prepared, there is no transition information for the Group from previously applied accounting principles.

Judgments and estimates in the financial statementsPreparing financial reports according to IFRS requires that management makes judgements and estimates as well as assumptions that affect the application of the accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual outcomes may differ from these judge-ments and estimates. Estimates and assumptions are reviewed periodically. Changes in estimates are recognised in the period in which the change is made if the change only affects that period, or in the period in which the change is made and future periods if the change affects the period in question and future periods. Judgments made by management in the application of IFRS that have a significant effect on the financial statements and estimates with a significant risk of material adjustment in the next year are further discussed in Note 2.

New standards and interpretations not yet adoptedCertain new accounting standards and interpretations have been published that are not mandatory for reporting periods commencing on or after 1 January 2019 and have not been early adopted by the group. These standards are not expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions.

Valuation methods used in preparing the financial statementsAssets and liabilities are stated on a historical cost basis.

Foreign currency translation i) Functional currency and presentation currency Items included in the financial statements of each of the group’s entities are measured using the currency of the primary economic environ-ment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in Swedish Krona (SEK), which is the parent company’s (Acast AB) func-tional and presentation currency. All amounts are rounded to the nearest thousand, unless otherwise stated.

ii) Transactions and balancesForeign currency transactions are translated into the functional currency using the exchange rate as of the transaction date. Generally, foreign exchange gains and losses are recognised in profit or loss if they are resulting from such transactions. They are also recognised in profit or loss if they derive from the trans-lation of monetary assets and liabilities denominated in foreign currencies based on year end rates.

Foreign exchange gains and losses that relate to borrowings are presented in the statement of profit or loss as finance costs.

All other foreign exchange gains and losses are presented on a net basis in the statement of profit or loss within other income/expenses.

iii) Group companiesThe results and financial position of foreign operations that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

• assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet

• income and expenses for each statement of profit or loss and statement of comprehensive income are translated at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transac-tion dates, in which case income and expenses are translated at the dates of the transactions), and

• all resulting exchange differences are recognised in other comprehensive income.

Goodwill arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate.

Consolidation and business combinations Subsidiaries are entities over which Acast has control. Acast controls an entity where the group is exposed to, or has the right to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully con-solidated from the date on which the control is transferred to Acast and are deconsolidated on the date control is transferred from Acast.

The acquisition method of accounting is used to account för all business combinations. The consideration transferred for the acquisition of a subsidiary comprises the fair values of the assets transferred, liabilities incurred to the former owners of the acquired business, equity interests issued by the group, fair value of any asset or liability resulting from a contingent con-sideration arrangement and fair value of any pre-existing equity interest in the subsidiary.

Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisi-tion date. Acquisition-related costs are expensed as incurred.

Goodwill is initially measured as the amount by which the total consideration and any fair value for non-controlling inter-ests on the acquisition date exceeds the fair value of identifiable acquired net assets. If the total consideration is lower than the fair value of the acquired company’s net assets, the difference is reported directly in profit or loss as other income.

A C A S T A N N U A L R E P O R T 2 0 1 9 15

Intercompany transactions, balances, income and expenses on transactions between group companies are eliminated. Profits and losses resulting from intercompany transactions that are recognised in assets are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the group.

All subsidiaries within the Acast group are fully owned by Acast AB.

Revenue Acast’s revenue is primarily generated through delivering advertising impressions via audio and sponsorships in pod-casts. The main client base is media agencies, but also includes inhouse advertising departments.

The customer contracts include a stated period and/or the number of impressions for Acast to deliver. The price in the con-tracts can be based on the number of impressions to be deliv-ered or fixed for a stated period with a baseline of impressions to deliver. Acast has concluded that the group is, in both types of contracts, bound to a single performance obligation that is satisfied over time as the services are rendered.

For contracts where the price is based on impressions to be delivered, the stage of completion for revenue recognition purposes is measured based on the number of impressions delivered in relation to the contractual number of impressions. For fixed price contracts based on a fixed period, revenue is recognised on a straight-line basis as the performance obliga-tion is satisfied evenly throughout the contracted period.

There are contracts with rebates based on volume. The amount of revenue recognised is reduced for the expected volume rebates, which are estimated based on historical and projected data.

Additional revenues consist of revenues from software as a service products, ie when podcasters purchase a hosting service from Acast or when delivering specific podcasts without advertising to listeners. Acast has concluded that this contract consists of one single performance obligation that is satisfied over time as the services are rendered.

Government grantsGovernment grants are recognised at fair value when there is reasonable assurance that the grant will be received and that Acast will comply with the attached conditions. Grants that have been received before all the criteria have been fulfilled are recognised as a liability until they are met.

Government grants related to the development of an intan-gible asset are deducted from the carrying value of the asset at completion. Government grants that are related to costs that have not been capitalised are recognised in profit or loss for the period in which the costs to be compensated by the grants are also recognised.

Operating expensesOperating expenses are recognised in their respective functions as below.

Cost of contentCost of content corresponds to direct and indirect costs related to production and distribution of content.

Sales and marketing costsSales and marketing expenses comprise expenses incurred in sales and marketing activities including costs for employees and contracted consultants who work with sales and marketing, depreciation, travel, and marketing and PR related activities.

Administration expenses Administrative expenses comprise expenses that are not directly assignable to content, sales and marketing or develop-ment cost. These costs include the finance function, premises, legal affairs, and depreciations of assets that are not attributa-ble to sales or product development.

Product development costsProduct and development expenses include costs for devel-opment of the technical platform that do not meet the criteria for capitalisation. Costs mainly relate to personnel, but also depreciation and impairment of projects, consultants and consumables.

Employee benefitsi) Short-term obligationsShort-term obligations include salaries, benefits (including non-monetary benefits), annual leave, accumulating sick leave, other remunerations and all associated social security contribu-tions. Short-term obligations are liabilities that are expected to be settled in full within 12 months after the end of the period in which the employees render the related service. They are meas-ured at the amounts expected to be paid when settled.

ii) Defined contribution plansThe group pays contributions to publicly or privately adminis-tered pension insurance plans on a mandatory, contractual or voluntary basis. The group has no further obligations once the contributions have been made. The contributions are recog-nised as expenses in the period they relate to. A prepaid contri-bution is recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.

iii) Share-based compensationShare-based compensation benefits are granted selected employees, where services are rendered by the employee in

exchange for equity instruments. The share-based payment arrangements are classified as equity-settled share based pay-ment as the employee can only receive equity instruments.

In addition to the costs incurred as per below descriptions, Acast also incurs expenses in relation to social costs on any benefits arising from either of the instrument types.

Share-based compensation benefits are provided to employ-ees through various employee share schemes. Below follows a description of the plans that were in place for any of the periods covered by these financial statements.

a) Employee long term incentive plan Under all employee long term incentive plan (LTI), Acast has granted selected employees of the group, stock options free of charge. Holders of the employee stock options can buy shares in Acast AB during certain exercise periods, at a predetermined price.

Acast recognises options granted under the employee LTI plans at fair value as an expense with a corresponding increase in equity. The expense is allocated during the period over which all the vesting conditions are to be satisfied or at grant date, for immediately vested options. The fair value of the benefit received by employees are calculated using the Black & Scholes formula and/or Monte Carlo simulation.

Social charges on the benefit are accounted for with the same valuation model as the employee LTI plans. Debt for social charges reflects the fair value of the options at each subsequent period end. At the end of each period, a reassessment of the estimated number of options expected to vest is made. Any impact the reassessment has on the original estimates is recog-nised in profit or loss with a corresponding adjustment to equity.

b) Equity warrantsAcast has historically provided equity warrant programs for employees. At the grant date, employees pay fair value for these equity warrants based on Black & Scholes valuations and/or Monte Carlo simulation. Premiums paid are accounted for directly into equity (other paid in capital). Holder of a warrant can, during the predetermined exercise period, buy a share in Acast AB at a predetermined price.

Almost all of the equity warrant programs have so called reverse vesting conditions. That means that the warrant holder has paid fair value for the warrant, but, if the warrant holder leaves the company, Acast has the right to buy back non-vested warrants.

Financial income and costsFinancial income consists of interest income on bank balances and foreign exchange gains that arise when translating mon-etary assets and monetary liabilities denominated in foreign currencies into SEK.

Group notes

A C A S T A N N U A L R E P O R T 2 0 1 9 16

Financial cost consists of interest expense on lease liability, financial interest expense on committed borrowing facility and foreign exchange losses that arise when translating monetary assets and monetary liabilities denominated in foreign curren-cies into SEK.

Interest costs and expenses are recognised using the effec-tive interest method.

Income taxThe income tax for the year is the tax payable on the current period’s taxable income. This is based on the applicable income tax rate for each jurisdiction, adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to tax losses carried forward from prior periods.

The current income tax charge is calculated based on the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the company and its subsidiaries and associates operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions, where appropriate, on the basis of amounts expected to be paid to the tax authorities.

Deferred income tax is recognised, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consol-idated financial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill. Deferred income tax is also not accounted for if it arises from initial recognition of an asset or liability in a trans-action other than a business combination that, at the time of the transaction, affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

Deferred tax assets are recognised only if it is probable that future taxable amounts will be available to utilise those tempo-rary differences and losses.

Deferred tax assets and liabilities are offset where there is a legally enforceable right to offset current tax assets and lia-bilities and where the deferred tax balances relate to the same taxation authority.

Current tax assets and liabilities are offset where the entity has a legally enforceable right to offset and intends to either settle on a net basis, or to realise the asset and settle the liability simultaneously.

Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items in other compre-hensive income or directly in equity. In this case, the tax is also recognised In the respective statement.

LeasingThe group leases several offices which contract terms stretch from a one-month commitment term to up to five years.

Contracts may contain both lease and non-lease components. Should such a non-lease component be part of a lease contract, the group separates it from the lease component and allocates the consideration based on their relative stand-alone prices.

All lease contracts are recognised as a right-of-use asset and a corresponding liability on the date which the leased asset is available for use by the group. These assets and liabilities are initially measured on a present value basis.

Lease liabilities include the net present value of the following payments:• fixed payments, less any lease incentives receivable• variable lease payments that are based on an index or a rate,

initially measured using the index or rate as at the commence-ment date

• payments of penalties for terminating the lease, if the lease term reflects the group exercising that option, and

• lease payments to be made under reasonably certain exten-sion options.

Right-of-use assets are measured at cost comprising the following:• the initial measurement of the lease liability• any lease payments that are made at or before the com-

mencement date less any lease incentives received• any initial direct costs, and• restoration costs.

Right-of-use assets are generally depreciated over the shorter of the useful life of the asset and the lease term on a straight-line basis. As Acast’s leases are its office spaces, the deprecia-tion period for such assets is over the lease term.

The lease payments are discounted using Acast’s incremental borrowing rate. To determine the incremental borrowing rate the group uses market rates in terms of swap rates as start-ing point in order to reflect the term, economic environment and currency for each lease. To reflect the creditworthiness of Acast, spreads over the base rate of which the Group would be able to borrow to in each currency are estimated by studying yields and spreads of traded bonds which hold similar char-acteristics to Acast. In order to reflect 100% leverage when calculating the incremental borrowing rate the yield spread between junior and senior rates is taken into consideration, the yield spread is assessed on a general level at 3.0% based on observable market data.

Each lease payment is allocated between amortisation of the lease liability and the financial cost corresponding to the inter-est payment on the liability for the respective period. Payments

associated with short-term leases (a lease term of 12 months or less) and all leases of low-value assets are recognised on a straight-line basis as an expense in profit or loss. Leases of low-value assets comprise of office furniture.

Intangible assetsi) GoodwillGoodwill is measured as according to the principles described in Note 23. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill is not amortised but is tested for impairment on an annual basis, or more frequently if events or changes in circumstances creates an indication that impairment may be required, and is carried at cost less accumulated impair-ment losses.

For the purpose of impairment testing, goodwill is allocated to the relevant cash-generating unit. The allocation is made to the cash-generating unit that is expected to draw economic benefit from the business combination that created the good-will. The unit is identified at the lowest level at which goodwill is monitored for internal management purposes.

ii) Licenses, patents and trademarksSeparately acquired licenses, patents and trademarks are ini-tially measured at historical cost. Such assets that are acquired in a business combination are recognised at fair value at the acquisition date. They have been determined to have a finite useful life and are subsequently carried at cost less accumulated amortisation and impairment losses.

iii) SoftwareDevelopment costs that are directly attributable to the design and testing of identifiable and unique software products con-trolled by the group are recognised as intangible assets where the following criteria are met:• it is technically feasible to complete the software so that it will

be available for use• management intends to complete the software and use or sell it• there is an ability to use or sell the software• it can be demonstrated how the software will generate proba-

ble future economic benefits• adequate technical, financial and other resources to complete

the development and to use or sell• the software are available, and• the expenditure attributable to the software during its

develop ment can be reliably measured.

Directly attributable costs that are capitalised as part of the software include employee costs and an appropriate portion of relevant overheads.

Capitalised development costs are recorded as intangible assets and amortised from the point at which the asset is ready for use.

Group notes

A C A S T A N N U A L R E P O R T 2 0 1 9 17

Research expenditure, as well as development expendi-ture that do not meet the criteria above, are recognised as an expense when incurred. Development costs previously recog-nised as expenses are not capitalised in a subsequent period, even if the above criteria are met.

iv) Amortisation methods and periodsThe group amortise intangible assets with a limited useful life, using the straight-line method over the following periods:Licenses, patents and trademarks 5 yearsIntangible development asset 3 years

Impairment of assetsWhenever events or changes in circumstances create an indication that the carrying amount of an asset may not be recoverable, the asset is tested for impairment. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its deemed recoverable amount. The recov-erable amount is the higher of an asset’s fair value, less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units).

Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested for impair-ment annually, or more frequently if events or changes in circumstances indicate that they might be impaired.

Property, plant and equipmentProperty, plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure directly attributable to the acquisition of the items.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other repair and maintenance costs are charged to profit or loss during the reporting period in which they are incurred.

Depreciation is calculated using the straight-line method to allocate the cost of the assets over their estimated useful lives or as follows:Equipment 5 years

Financial instrumentsi) ClassificationA financial asset is, after initial recognition, to be measured at either fair value (through other comprehensive income or profit or loss) or at amortised cost. The classification depends on the entity’s business model for managing the financial assets and

the contractual terms of the cash flows.As all financial assets that are debt instruments are held with

the objective to collect the contractual cash flows and, given the terms of the contracts, those cash flows are solely pay-ments of principal amounts and associated interest (the ‘SPPI criterion’), they are measured at amortised cost.

All financial liabilities within the Acast group, are to be meas-ured at amortised cost.

ii) Recognition and derecognitionA financial asset or liability is recognised in the statement of financial position when Acast becomes a party to the contrac-tual provisions of the instrument.

A financial asset is derecognised from the statement of finan-cial position when the rights to receive cash flows from the financial assets have expired or have been transferred and the group has transferred substantially all the risks and rewards of ownership.

Derecognition of financial liabilities from the statement of financial position occurs when it is extinguished, meaning when the obligation specified in the contract is discharged, cancelled or expires.

iii) Cash and cash equivalentsCash and cash equivalents include cash on hand. Investments are included as cash equivalents when their original maturities are three months or less and they are readily convertible to known amounts of cash and subject to an insignificant risk of changes in value.

iv) Trade receivablesTrade receivables are amounts due from customers for services performed in the ordinary course of business. They are gen-erally due for settlement within 30 days and are therefore all classified as current. Trade receivables are recognised initially at the amount of consideration that is unconditional, unless they contain significant financing components when they are recognised at fair value. The group holds the trade receivables with the objective of collecting the contractual cash flows and therefore measures them subsequently at amortised cost using the effective interest method, less loss allowance.

v) Trade and other payablesThese amounts represent liabilities for goods and services provided to the group prior to the end of the financial year which are unsettled. The amounts are unsecured and usually paid within 30 days of recognition. Trade and other payables are presented as current liabilities unless payment is not due within 12 months after the reporting period. They are recog-nised initially at their fair value and subsequently measured at

amortised cost using the effective interest method.

vi) MeasurementAs all of Acast’s assets are determined to be held for collection of contractual cash flows, they are measured at amortised cost. Interest income from these financial assets is included in finance income using the effective interest rate method. Any gain or loss arising on derecognition is recognised directly in profit or loss and presented in other gains/(losses) together with foreign exchange gains and losses.

At initial recognition, Acast measures a financial asset at its fair value plus transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through profit or loss are expensed in profit or loss.

vii) ImpairmentAcast applies the simplified approach stipulated by IFRS 9 for measuring expected credit losses (ECL) for trade receivables. This means that the allowance always equates to the expected loss from all possible default events over the expected life of the trade receivables. ECLs are probability weighted credit losses and deducted from the gross carrying amount of the asset. Cash and cash equivalents are also subject to the impairment requirements of IFRS 9, the identified impairment loss was immaterial. For information regarding Acast’s financial risk man-agement, please see Note 21,

Share capitalOrdinary shares are classified as equity.

Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

NOTE 2. USE OF JUDGEMENTS AND ESTIMATES

The management of the Group makes estimates and assump-tions concerning the future as well as exercises judgment in applying the accounting principles when preparing financial statements. Estimates and judgments are continually evaluated, and they are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The resulting accounting estimates will, by definition, seldom equal the related actual results. The sources of uncertainty in the assessments given below refer to those that entail a risk that the value of assets or liabilities may have to be adjusted in the next financial year.

Impairment of goodwillValuation of goodwill through impairment testing include

Group notes

A C A S T A N N U A L R E P O R T 2 0 1 9 18

assumptions and judgements of cash flow projections based on financial budgets covering a 5 year period. Cash flows beyond the 5 year period are extrapolated using the estimated growth rate of 2%.

Capitalised development expensesAccording to accounting policies applied before transition to IFRS, the Group has applied the cost model and has expensed all development expenditures.

According to IFRS 1 First-time Adoption of IFRS, the require-ments for capitalisation of internally generated intangible assets in IAS 38 should be applied retrospectively. However, in accord-ance with IAS 38 expenditure is capitalised only from the date the recognition criteria are met. The Group has concluded that reliable measurement can be made for expenditure incurred from 1 January 2018 and subsequent to that date. Accordingly, no development expenditures arising before 1 January 2018 have been capitalised.

Costs incurred in the development phase of an internal pro-ject are capitalised as intangible assets if a number of criteria are met. Management has made judgments and assumptions when assessing whether a project meets these criteria including estimates of expected outflow and inflow of cash and con-tinuously makes assessments of the projects’ expected net cash generation both under the development phase and after project finalisation and commercial use. These estimates involve uncertainties and risks for impairment losses. The capitalised develop ment cost amounts to KSEK 13 817 on 31 December 2019 and to KSEK 10 611 on 31 December 2018.

Determination of the useful life involves assumptions related to future economic and technological development and changes in market behaviour. Development costs are amortised from the point in time each project is finalised for commercial use. The useful life is three years.

Lease agreementsThe basis for the assessment of the lease terms is the actual terms in each individual lease agreement. Information has been assessed retrospectively for comparative periods.

Individual assessments of the lease term for each lease agreements has been made and management continuously assess whether it is reasonably certain to exercise one or more extension options on the basis of economic incentives.

Group notes

NOTE 3. REVENUE

REVENUE BY REGION

2019 2018

Europe 270 749 141 960

Americas 67 036 26 997

Other 23 390 11 222

Total 361 175 180 179

Acast revenue are mainly generated from advertising revenue recognised over time. Less than 10% of Acast revenues are gen-erated by non-ad revenue streams.

The actual media investment is made by many advertisers. There is no dependency of one individual customer.

Reveneue recognised during the period ending 31 December 2019 have satisfied the performance obligations in the year.

NOTE 4. EXPENSES BY NATURE

2019 2018

Cost of content 232 377 119 475

Personell expenses 141 807 85 910

Depreciation and amortisation 13 760 8 699

Other operating expenses 96 854 53 582

Total 484 798 267 667

NOTE 5. OTHER OPERATING EXPENSES

2019 2018

Rent and office expenses 3 851 2 269

Computers and software 11 879 3 490

Marketing and reseller expenses 31 805 20 621

External services 45 771 21 605

Other expenses 3 548 5 597

Total 96 854 53 582

External services refer to costs for consulting services.

NOTE 6. EMPLOYEES

EXPENSES DUE TO REMUNERATIONS TO EMPLOYEES

2019 2018

Salaries and remunerations 114 447 67 393

(whereof bonuses, etc.) 16 522 7 544

Termination benefits 683 337

Pension expenses 4 036 1 290

Social expenses 21 314 12 390

Other employee costs 19 006 15 937

Total 159 486 97 347

AVERAGE NUMBER OF FULL TIME EMPLOYEES

2019 2018

Sweden 64 47

United States 24 17

Great Britain 39 25

Australia 6 5

France 3 –

Germany 2 –

Norway 1 –

Total 139 94

GENDER DISTRIBUTION IN THE GROUP COMPANY’S MANAGEMENT

2019% women

2018% women

Board of Directors 50% 50%

Other senior management 27% 27%

A C A S T A N N U A L R E P O R T 2 0 1 9 19

Group notes

Benefits to senior executives

Principles for remunerationThe Remuneration Committee is tasked by the Board to prepare Remuneration guidelines for the senior executive mangemet team. The Remuneration guidelines are approved by the Annual General Meeting. The main principle is to offer the senior executive team market-based remuneration. Remuneration for the senior executive team comprises of fixed base salary, cash based variable remuneration, pension and other benefits. In addition, Acast has long-term incentive programs (se Note 7 for information regarding outstanding long-term incentive pro-grams). Remueration shall be indivudually determined for each senior executive, and be based on factors such as responsibility, expereince and performance.

Remuneration and benefitsBoard fees are presented in the table to the right. Board mem-bers are also incentivised through the participation in long-term incentive programs. No other remuneration was paid to the Board. Remuneration to CEO and other senior executives is shown in the table below. No variable remuneration is paid to the CEO. Variable remuneration is linked to performance during the year and may not exceed 150 percent of annual base salary. Variable remuneration for 2019 performance was primarily based on revenue, net-contribution, and gross margin. The period of notice for the CEO and the other senior executives is maximum twelve months. At the end of the fiscal year the senior executive management team had 6 members (including the CEO) and the Board had 6 members.

SALARIES AND OTHER REMUNERATION OF THE BOARD AND SENIOR EXECUTIVES

2019Basic salary Board fees

Variable remuneration

Sharebased remuneration

Pension costs

Other remuneration

2019 Total

Andrea Gisle Joosen (Chair) 229 - - - - 229

Jonas von Hedenberg - - - - - –

Björn Jeffrey 58 - - - - 58

Eva Lindqvist 58 - - - 23 83

Mattias Wedar 58 - - - - 58

Leemon Wu - - - - - –

Total board 429 – – – – 429

Ross Adams (CEO) 2 349 – 4 366 – 9 6 724

Group management (9 individuals)* 11 461 1 187 890 768 31 14 337

Total senior executives 13 810 1 187 5 256 768 40 21 061

Total 14 239 1 187 5 256 768 40 21 490

2018Basic salary Board fees

Variable remuneration

Sharebased remuneration

Pension costs

Other remuneration

2018 Total

Kerstin Cooley - - - - - –

Jonas von Hedenberg - - - - - –

Mattias Wedar ** 8 - - - - 8

Andrea Gisle Joosen (Chair) 117 - - - - 117

Total board 125 – – – – 125

Ross Adams (CEO) 2 136 377 5 541 7 5 8 066

Group management (7 individuals)*** 11 073 398 3 307 193 50 15 021

Total senior executives 13 209 775 8 848 200 55 23 087

Total 13 334 775 8 848 200 55 23 212

* In year 2019 Group management consisted on average of 11 individuals, of which on average 2 were consultants. The table above only includes employees.** Elected EGM 2018-11-28*** In year 2018 Group management consisted on average of 8,5 individuals, of which on average 1,5 were consultants. The table above only includes employees.

A C A S T A N N U A L R E P O R T 2 0 1 9 20

Group notes

NOTE 7. LONG TERM INCENTIVE PROGRAM

Description of programs and conditions

Employee stock option programs (ESOP)Acast had issued the following employee stock option programs that were live during the year: 2016/2019:12018/2021 2019/2022

Under all employee stock option programs, Acast has granted selected employees of the group, stock options free of charge. Holders of the employee stock options can buy shares in Acast AB during certain exercise periods at a predetermined price.

Equity warrants (EW)Acast had issued the following equity warrant programs to employees of the Acast group that were live during the year:2016/2019:12016/2019:1:12016/2019:2 2018/20212019/2022

The Equity warrants in all above programs were purchased by the employees at fair value calculated in accordance with the Black and Scholes formula and/or Monte Carlo simulation. Holder of an equity warrant can, during the predetermined exercise period, buy a share in Acast AB at a predetermined price. Almost all the equity warrant programs have so called reverse vesting conditions. That means that the warrant holder has paid fair value for the warrant, but, if the warrant holder leaves the company, Acast has the right to buy back non-vested warrants. Vesting conditions are the same as for the employee stock option programs above for each programme. The price for the warrants in a buy-back situation is either fair value at termination date, or price paid for the warrants by the employee + 5% interest yearly.

Total expenses arising from share-based payment trans-actions recognised during the period amounts to MSEK 5,6 (9,6). The expenses are attributable to the employee stock option programs, no cost arises for the Equity warrants when the market value has been paid.

Grant date (volume-weighted)

Number of warrants

Term (years)

Strike price per option

(SEK) Vesting conditions Program

Employee stock option program (ESOP)/Equity warrants (EW)

June 30, 2016 31 100 3 106,10Service condition with reverse

vesting over 3 years 2016/2019:1 EW

July 1, 2016 16 300 3 106,10Service condition with graded

vesting until June 1, 2019 2016/2019:1 ESOP

October 1, 2016 4 200 3 106,10Service condition with reverse

vesting over 3 years 2016/2019:1:1 EW

October 28, 2016 31 000 3 431,09 Immediate vesting 2016/2019:2 EW

April 6, 2018 7 572 3 0,33 Immediate vesting 2018/2021 ESOP

April 6, 2018 37 814 3 400,00Service condition with graded

vesting until January 1, 2021 2018/2021 ESOP

May 30, 2018 63 513 3 661,50Service condition with graded

vesting until January 1, 2021 2018/2021 ESOP

July 2, 2018 66 986 3 661,50Service condition with reverse

vesting over 3 years 2018/2021 EW

July 29, 2019 3 000 3 1 125,00 Immediate vesting 2019/2022 EW

August 12, 2019 47 190 3 1 125,00Service condition with reverse

vesting over 3 years 2019/2022 EW

July 23, 2019 45 496 3 1 125,00Service condition with graded

vesting until May 1, 2022 2019/2022 ESOP

Total number of options granted 354 171

(equity settled)

A C A S T A N N U A L R E P O R T 2 0 1 9 21

NUMBER OF OPTIONS AND WEIGHTED AVERAGE STRIKE PRICES

Options in thousands

Weighted average

strike price 2019

Number of options

2019

Weighted average

strike price 2018

Number of options

2018

Outstanding at 1 January 485 227 525 248 71 022

Granted 1 125 95 686 577 175 885

Forfeited 662 -4 769 630 -12 431

Repurchased – – 456 -2 165

Exercised 251 -69 522 0 -4 786

Outstanding at December 31 793 248 920 485 227 525

Exercisable at 31 December - -

The weighted average share price at exercise, for warrants exer-cised under the period, amounted to SEK 750.

Outstanding options as at December 31, 2019 have an exer-cise price in the range SEK 0.33 to SEK 1 125 and a weighted average remaining contractual term of 1.8 years.

The fair value of services received from employees in return for awarded options is based on the fair value of the options. The fair value of the options has been estimated by using the Black-Scholes formula and the Monte Carlo simulation method.

Group notes

FAIR VALUE AND ASSUMPTIONS REGARDING OPTIONS GRANTED DURING THE PERIOD

2019 2018

Fair value at grant date 77 102

Share price (expressed as weighted average)

750 478

Strike price (expressed as weighted average)

1 125 577

Expected volatility (expressed as weighted average in %)

35% 38%

Term (expressed as weighted average term in years)

3 3

Expected dividend – –

Risk free rate (based on Swedish Government Bond)

-0,3% -0,1%

The input data presented in the table above relates to the valuation at grant date. The expected volatility is based on his-torical volatility for listed peer companies, taking into account company specific factors and expected future development of the volatility.

NOTE 8. RELATED PARTIES

Identification of related partiesRelated party transactions involves transactions between the parent company: Acast AB and its subsidiaries. Concerning Acast AB´s receivables from and liabilities to Group companies, see Parent company Note 20.

Shares in Group companies are described in detail in Note 19. Physical persons who are related parties are defined as executive officer (CEO and members of the management team), Board members and immediate family members of such per-sons. For information about remuneration to executive officers and Board members, see Note 6.

Transactions / balances with related partiesRelated party transaction within the Group consists of internal trading of services and is carried out on market terms based on transfer pricing agreement. In addition, Acast has identified two related parties where transactions have taken place.

Both transactions consisted of purchasing services and the transaction has been taking place on market terms.

TRANSACTIONS WITH RELATED PARTIES

2019 2018

Purchases of services

Related parties 1 202 403

Total purchases of service 1 202 403

A C A S T A N N U A L R E P O R T 2 0 1 9 22

NOTE 9. AUDIT FEES AND EXPENSES

2019 2018

KPMG

Audit service 1 848 542

Audit services in excess of the audit engagement

Tax consultancy 565 95

Other services 4 163 222

Total KPMG 6 576 859

Others

PWC - other services 3 126

Kreston Reeves – audit 181 116

BDO – other services 840 557

Total others 4 147 673

Total audit fee 10 723 1 532

KPMG is the auditor for Acast AB and all subsidiaries except Acast Stories Ltd who has Kreston Reeves.

Other services refers to the conversion to IFRS and improve-ment of the overall risk management framework of the company.

NOTE 10. NET FINANCE COST

2019 2018

Interest income - -

Other financial income 833 69

Dividends – –

Finance income 833 69

Interest expenses on lease agreement -1 279 -1 205

Other interest expenses -1 572 -307

Finance costs -2 851 -1 512

Net finance costs -2 018 -1 444

Group notes

NOTE 11. TAXES

RECOGNISED IN THE STATEMENT OF PROFIT OR LOSS

2019 2018

Current tax expense for the year -2 471 -1 118

Deferred tax related to temporary diffferences -3 154 -1 732

Total reported tax expense for the group -5 625 -2 850

RECONCILIATION OF EFFECTIVE TAX RATE

2019 2018

Profit before income tax -122 876 -82 918

Tax according to current tax rate of the parent company 21,4% 26 295 22,0% 18 242

Non-deductible expenses -0,6% -774 -0,5% -446

Effect of tax rate in foreign jurisdictions 0,7% 799 0,4% 337

Unrecognised loss carried forward -26,0% -31 945 -25,3% -20 982

Reported effective tax -4,6% -5 625 -3,4% -2 850

CHANGE IN DEFERRED TAX IN TEMPORARY DIFFERENCES

Balance 1 January

Recognised in profit or loss

Recognised in other comprehensive

incomeBalance 31 December

2019

Lease agreements 159 50 - 209

EU grant 1 643 -357 - 1 286

Other intangible assets -2 186 -2 846 - -5 032

Net deferred tax liability -384 -3 153 – -3 537

2018

Lease agreements 48 111 – 159

EU grant 1 300 343 - 1 643

Other intangible assets – -2 186 – -2 186

Net deferred ta liabilty 2018 1 348 -1 732 – -384

The amount of unused tax losses for which no deferred tax asset is recognized in the statement of the financial position is 415 678 ksek including the loss for 2019.

The unused tax losses are attributable to the negative earnings in the parent company, with no expiry date.

A C A S T A N N U A L R E P O R T 2 0 1 9 23

Group notes

NOTE 12. INTANGIBLE ASSETS

Concessions, patents,

trademarks and similar rights

Capitalised development

costs Goodwill Total

Accumulated cost

Opening balance 1.1.2018 790 - - 790

Investments 215 7 312 - 7 527

Closing balance 31.12.2018 1 005 7 312 - 8 317

Opening balance 1.1.2019 1 005 7 312 - 8 317

Investments 269 16 129 44 311

Acqusition of operations 27 761

Exchange differencies 152

Closing balance 31.12.2019 1 275 23 441 27 913 52 629

Accumulated amortisation and impairment

Opening balance 1.1.2018 -344 - - -344

Amortisation -154 -826 - -980

Closing balance 31.12.2018 -498 -826 - -1 324

Opening balance 1.1.2019 -498 -826 - -1 324

Amortisation -202 -3 862 - -4 064

Closing balance 31.12.2019 -700 -4 687 - -5 388

Carrying amount

Opening balance 1.1.2018 446 - - 446

Closing balance 31.12.2018 507 6 486 - 6 993

Opening balance 1.1.2019 507 6 486 - 6 993

Closing balance 31.12.2019 575 18 753 27 913 47 241

Intangible assetsIntangible assets contain capitalised development costs and goodwill. Capital development costs are entirety related to internally generated intangible assets. The amortisation of intangible assets is included in the line item product develop-ment costs in the consolidated statement of profit and loss. Capitalised development costs are amortised over 3 years.

Impairment testing of goodwillThe recoverable amount is established based on calculations of the asset’s value. The impairment test is based on a 5-year busi-ness plan. Cash flows beyond this period are extrapolated. The goodwill is tested by estimating the future cash flows generated by the cash generating unit connected to the acquisition.

The Group’s goodwill amount is allocated to the future cash flows generated by the non-ad part of the business. The recoverable amount is established based on calculations of the asset’s value in use, which means that expected future cash flows of the business are discounted with its weighted average cost of capital. The pre-tax discount rate used was 25 %, which was deemed conservative. The impairment test is based on a 5-year business plan. Cash flows beyond this period are extrap-olated with a growth rate of 2%. The company management has made the judgement that there are no relevant changes that will lead to an impairment.

The assumption of sales growth in the 5-year business plan is based on previous experiences and external estimates. Costs are based on previous experience and extrapolated, so is the development of the working capital.

A C A S T A N N U A L R E P O R T 2 0 1 9 24

Group notes

NOTE 13. EQUIPMENT

Equipment

Lease hold

improve-ment Total

Accumulated cost

Opening balance 1.1.2018 1 787 – 1 787

Acquisitions 1 789 – 1 789

Disposals -529 – -529

Closing balance 31.12.2018 3 047 – 3 047

Opening balance 1.1.2019 3 047 3 047

Acquisitions 771 148 919

Exchange translation effect -126 -126

Closing balance 31.12.2019 3 692 148 3 840

Accumulated amortisation and impairment

Opening balance 1.1.2018 -424 – -424

Exchange translation effect -6 – -6

Disposals 303 303

Depreciation -507 – -507

Closing balance 31.12.2018 -635 – -635

Opening balance 1.1.2019 -635 – -635

Exchange translation effect -26 – -26

Depreciation -785 – -785

Closing balance 31.12.2019 -1 446 – -1 446

Carrying amount

Opening balance 1.1.2018 1 364 – 1 364

Closing balance 31.12.2018 2 412 – 2 412

Opening balance 1.1.2019 2 412 – 2 412

Closing balance 31.12.2019 2 246 148 2 394

NOTE 14. ACCOUNTS RECEIVABLE

31.12.2019 31.12.2018

Accounts receivable 116 058 69 333

Provision for expected credit loss -6 229 -4 684

Net accounts receivable 109 829 64 650

Carrying amount Not due

Number of days past due date

1

A C A S T A N N U A L R E P O R T 2 0 1 9 25

NOTE 15. PREPAID AND ACCRUALS

PREPAID EXPENSES AND ACCRUED INCOME

31.12.2019 31.12.2018

Other prepaid expenses 3 263 3 592

Accrued income 5 995 6 496

Total 9 259 10 088

ACCRUED EXPENSES AND PREPAID INCOME

31.12.2019 31.12.2018

Accrued payroll related expenses 12 013 4 494

Prepaid income 3 551 1 653

Accrued production costs 53 496 27 567

Other accrued expenses 8 115 14 290

Total 77 174 48 004

Accrued production cost relates to cost for podcasters.

NOTE 16. CASH AND CASH EQUIVALENTS

31.12.2019 31.12.2018

Cash and cash equivalent 165 927 307 355

Total 165 927 307 355

Cash and cash equivalent refer to bank accounts in Acast AB and all subsidiaries as well as the Swedish tax account.

NOTE 17. ADJUSTMENT FOR NON-CASH ITEMS

2019 2018

Depreciation 13 760 8 699

Long term incentive plan, no cash consideration 5 605 9 360

New lease agreement, no cash consideration -122 -692

Other items -4 865 0

Total 14 378 17 367

Revaluation acquired liabilities refers to debt converted to group liabilities at the date of the acquisition.

Group notes

NOTE 18. EQUITY

NUMBER OF SHARES ISSUED

2019 2018

At the beginning of the year 2 308 970 1 890 686

Issued during the year 82 487 418 284

Shares issued fully paid 2 391 457 2 308 970

2019 2018

Ordinary share

In Issue at 1 January – –

Issued for cash 82 487 418 284

In issue at 31 December – fully paid 82 487 418 284

Share capitalIn 2019, the company converted preference shares to ordinary shares with forfeited right to the cumulative preferentialright to dividend.

As of 31 December 2019, the total number of shares was 2 391 457 (2 308 970) and share capital was SEK 775 341 (748 567). All shares are ordinary shares and carry equal voting rights. The shares have a quotient value of SEK 0.33. According to the Arti-cles of Association, share capital shall amount to not less than SEK 500,000 and not more than SEK 2,000,000. The company has issued warrants, which may increase the number of shares. For more information, see Note 7.

NOTE 19. SUBSIDIARIES

GROUP COMPANIES

Name, registered officeCorporate

reg. noPlace of

BusinessOwnership 31.12.2019

Ownership 12.31.2018

Ownership 31.12.2017

Acast Stories AS 922 061 084 Norway 100% n/a n/a

Acast Stories Gmbh HRB 205265B Germany 100% n/a n/a

Acast Storeies Ireland Ltd 661 047 Ireland 100% n/a n/a

Acast Stories Inc 36-4813086 USA 100% 100% 100%

Pippa Inc 81-3113790 USA 100% n/a n/a

Acast Stories Ltd 9040006 Great Britain 100% 100% 100%

Acast Stories Pty ABN 30 619 624 823 Australia 100% 100% 100%

Acast Stories SAS 848 766 663 France 100% n/a n/a

NOTE 20. OTHER PAYABLES

31.12.2019 31.12.2018

Taxes and social charges 6 533 1 895

Allocation of EU grant 563 5 372

Other external liabilities 2 937 181

Total 10 033 7 448

A C A S T A N N U A L R E P O R T 2 0 1 9 26

Group notes

NOTE 21. FINANCIAL INSTRUMENTS

Risk management frameworkAcast’s board of directors has the overall responsibility for the establishment and oversight of the Group’s risk management. The Group’s risk management policies are established to iden-tify and analyse the risks faced by the Group, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Acast is exposed to credit risk, counterparty risk, liquidity and refinancing risk, interest risk and currency risk.

Credit and counterparty riskCredit risk is the risk of financial loss to Acast if a customer or another counterparty to a financial instrument fails to meet its contractual obligations to the group. The exposure from credit risk arises mainly from the group’s trade receivables, accrued income and from the group’s holdings of cash and cash equivalents.

The carrying amounts of financial assets represent the maxi-mum credit exposure.

Impairment losses on financial assets recognised in profit or loss during the fiscal year were as follows:

31.12.2019 31.12.2018

Accounts receivable 3 685 4 687

Accrued income - -

Other receivables - -

Cash and cash equivalents - -

Total 3 685 4 687

Credit risk in trade receivables and accrued incomeOverall Acast had credit losses of 1% of revenues in 2019, improving from 2.7% of revenues in 2018. Checks are routinely performed to ascertain that sales are made to customers with an appropriate credit background and that credit risk is closely managed.

The following table shows the past due status of trade receivables:

2019 2018

Gross carrying amounts

% of gross total carrying

amountGross carrying

amounts% of gross total

carrying amount

Not due 42 194 36,4% 19 714 28,4%

1 - 30 days past due 34 627 29,8% 21 396 30,9%

31 - 90 days past due 25 878 22,3% 15 939 23,0%

More than 90 days past due 13 359 11,5% 12 284 17,7%

Total gross 116 058 100,0% 69 333 100,0%

Loss allowance -6 229 -5,4% -4 684 -6,8%

Total net 109 829 94,6% 64 650 93,2%

The loss allowance is based on a provisioning matrix where an allowance for the expected credit losses are made based on the past due status of the receivables.

The table below shows the movements in the allowance for impairment in respect of trade receivables:

2019 2018

Balance 1.1. 4 684 100

Amounts written off -2 139 -103

Net remeasurement of loss allowance 3 685 4 687

Balance 31.12. 6 229 4 684

The Group does not have any material concentration of credit risks in trade receivables. No individual customer (group) repre-sents more than 10% of total sales.

Credit risk in other receivablesOther receivables mainly consist of short-term phasing of staff costs and VAT settlement accounts. The associated credit risk is deemed immaterial.

Credit risk in cash and cash equivalents and in short term investmentsAccording to Acast policy, excess cash may only be placed as cash or in short term ( 90% was placed in deposits with Swedish commercial banks.

The table below shows deposits grouped by the credit rating of the counterparties from Moody’s.

Cash and cash equivalents

Counterparty credit rating (Moody’s)

31.12.2019 31.12.2018 Short term Long term

P1 / A1 113 450 12 814 P-1 A1

P-1 / Aa2 42 421 292 793 P-1 Aa2

Other 10 056 1 748 - -

Total 165 927 307 355

A C A S T A N N U A L R E P O R T 2 0 1 9 27

Group notes

Liquidity riskAs is stated above, the Group’s cash and cash equivalents con-sisted entirely of bank deposits as at 31 Dec 2019.

The table below shows a maturity analysis for the remaining contractual maturities of the Group’s financial liabilities.

Carrying amount 2020 2021 2022 After 2022

Accounts payables 28 952 28 952 - - -

Lease liabilities 15 808 7 331 4 922 3 555 –

Other liabilities 11 840 11 840 - - -

Accrued expenses 77 174 77 174 - - -

Total 133 774 125 297 4 922 3 555 –

Refinancing riskThe Group’s cash and cash equivalents amounted at year end 2019 to MSEK 166 (307). Taking into account the undrawn quasi equity/loan facility from the European Investment Bank of MSEK 261 (MEUR 25) Acast has access to a total of MSEK 427. The available liquid assets and access to additional facilities noted above secure the Company’s liquidity at least throughout the year 2020. In addition, the Group announced in Q1 2020 an additional equity financing round.

Interest rate risk As the Group does not have any external loans, the interest rate risk linked to liability is deemed immaterial.

Due to conservative liquidity management and a stable cen-tral bank interest rate outlook in Sweden there is equally very limited interest rate risk linked to assets.

Currency riskThe Group has both transactional and translational foreign currency exposures across its key foreign currencies GBP, USD, AUD, EUR, NOK, CAD and NZD. The Group is exposed to move-ments in currency exchange rates for foreign currency revenue transactions and the translation of the net assets and profit and loss accounts of overseas subsidiaries.

At present time the net outflow is not hedged, and the cur-rencies are bought at Spot and sent to the subsidiaries monthly.

The main transactional FX risk that the Group is exposed to relates to the intercompany and accounts receivable balances of Acast AB vis-á-vis customers and subsidiaries. The carrying amount as at 2019-12-31 and a sensitivity analysis illustrating the impact of the SEK gaining or losing 10% in value against the GBP and USD has been included herein.

As at 2019-12-31

GBP USD

Acast AB

Accounts receivables carrying amount 5 392 2 796

Intercompany carrying amount -346 -838

Total 5 046 1 958

GBP USD

Impact on Profit & Loss

SEK 10% gain -6 088 -1 852

SEK 10% loss 6 088 1 852

Impact on Equity

SEK 10% gain -6 163 -1 824

SEK 10% loss 6 163 1 824

Carrying amounts and fair value of financial instruments All financial assets and financial liabilities within the Group are measured at amortised cost.

The table below shows the carrying amounts of financial assets and financial liabilities.

Financial assets measured at

amortised cost

Financial liabilities measured at

amortised cost

Total carrying amount

31 dec

Financial assets

Account receivables 109 829 – 109 829

Other receivables 2 094 – 2 094

Accrued income 5 995 5 995

Cash and cash equivalents 165 927 – 165 927

Total 2019 283 845 – 283 845

Financial liabilities

Accounts payables – 28 952 28 952

Accrued production cost 53 495 53 495

Other liabilities – 11 840 11 840

Total 2019 - 94 287 94 287

Financial assets

Account receivables 64 650 64 650

Other receivables 1 459 – 1 459

Accrued income 6 496 6 496

Cash and cash equivalents 307 355 – 307 355

Total 2018 379 960 – 379 960

Financial liabilities

Accounts payables – 18 332 18 332

Accrued production cost 27 567 27 567

Other liabilities – 8 452 8 452

Total 2018 – 54 351 54 351

All financial assets are short term and Acast therefore considers their carrying amounts to be reasonable approximations of their fair values. This also applies for accounts payables, other liabili-ties and accrued expenses as those items are also short term.

Capital managementThe Group has defined “Total equity” as managed capital. Total equity for the Group amounted to KSEK 218 254 as per 31 Decem-ber 2019. The Group was as at 31 December 2019 solely funded by equity and had not drawn down on any external facilit