Trustpilot Regulatory News (TRST)

Trustpilot Group plc

15th September 2021

RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2021 ("H1 FY21")

Re-acceleration in bookings growth continues with a strong performance across all regions; LTM Net Dollar Retention Rate improved to 97 per cent; total cumulative reviews +44 per cent and active domains +42 per cent YoY

Financial Highlights

• Revenue grew by 31 per cent to USD 62 million in H1 FY21, an increase of 22 per cent at constant currency

• Bookings* growth, which provides visibility of future revenues, continued to re-accelerate, increasing to 28 per cent at constant currency in H1 FY21 (H1 FY20: 16 per cent), driven by a strong performance in all geographic regions

• LTM Net Dollar Retention Rate* rose to 97 per cent, (H1 FY20: 91 per cent), up from 91 per cent for FY20

• The Group reported a loss for the period of USD 17.2 million in the first half (H1 FY20: USD 5.8 million), with adjusted EBITDA** of USD +3.8 million (H1 FY20: USD +1.6 million)

Strategic Highlights

• Number of reviewed domains* rose 41 per cent to 626 thousand (H1 FY20: 445 thousand), with number of active domains* up 42 per cent to 73 thousand (H1 FY20: 51 thousand)

• The cumulative number of reviews* on the Trustpilot platform rose by 44 per cent to 144 million (H1 FY20: 100 million)

Current Trading and Outlook

• We previously provided guidance for high-teens constant currency revenue growth in the current year. On the back of stronger H1 FY21 performance, we now expect to achieve a rate of constant currency revenue growth for the full year consistent with H1 FY21.

* Key performance indicator (KPI) - further detail available on page 12

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

Peter Holten Mühlmann, Founder and Chief Executive Officer, commented:

"This excellent result is a testament to the hard work of all our employees, as well as the strength of our proposition and brand among consumers and businesses. I believe it also demonstrates that our strategy to provide the 'trust layer' for the open commerce ecosystem is working, by giving consumers confidence in their online and offline purchasing decisions, and through providing businesses with an opportunity to build trust, a key factor for their success."

Enquiries

Trustpilot Group plc

Derek Brown, Head of Investor Relations 

Tel: +44 20 4534 5222

Tulchan Communications

James Macey White 

Matt Low

Jordan McCulla

Tel: +44 20 7353 4200

Results webcast and conference call

Trustpilot will host a webcast and conference call for analysts and investors at 09:00 (BST) today.

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 later today.

About Trustpilot

Trustpilot was founded in 2007 with a vision to create an independent currency 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 have to earn the trust of consumers, from all around the world.

Trustpilot has over 750 employees and is headquartered in Copenhagen, with operations in London, Edinburgh, New York, Denver, Melbourne, Berlin and Vilnius. 

Chief Executive's Review

Summary

I am delighted to be reporting our first results as a publicly listed company. Our successful IPO in March marked a significant milestone for Trustpilot, raising our profile as a leading global review platform that brings businesses and consumers together to foster collaboration and trust, helping us to attract and retain the very best talent, and gaining the support of new investors as we focus on the next stages of our development and global expansion.

In line with the trading update we issued in mid-July, the Group delivered first half revenue of USD 62 million, an increase of 31 per cent year-over-year on a reported basis, or up 22 per cent at constant currency. Bookings*, a strong lead indicator of future revenue growth, increased to USD 75 million, up by 28 per cent at constant currency, and we ended June with annual recurring revenue* of USD 134 million, a constant currency increase of 27 per cent.

As a subscription software business, we were encouraged to see an improvement in our LTM Net Dollar Retention Rate*, which rose to 97 per cent in the period, compared to 91 per cent a year ago and 91 per cent for the last full financial year.

We saw strong growth across all geographic regions in the period, as we continued to demonstrate our ability to scale our business efficiently.

This excellent result is a testament to the hard work of all our employees, as well as the strength of our proposition and brand among consumers and businesses. We believe it also demonstrates that our strategy to provide the 'trust layer' for the open commerce ecosystem is working, by giving consumers confidence in their online and offline purchasing decisions, and through providing businesses with an opportunity to build trust, a key factor for their success.

The growth we have achieved also reflects an element of recovery from the impact of the Covid-19 pandemic which affected H1 FY20. The subsequent re-acceleration in our business that we saw in H2 FY20 has continued, as anticipated, into the first half of this financial year.

Our strategy

It is central to our strategy to be the global reviews site most used by consumers, and to be the most trusted. At Trustpilot, we design for trust and transparency so that consumers can use and rely on our reviews platform for reassurance that they are dealing with businesses that are trustworthy. The more that consumers engage with Trustpilot, through reading and posting trusted reviews, the greater the reason for businesses to use Trustpilot. As more businesses engage with their customers on the Trustpilot platform, the more useful it becomes to consumers and businesses. This virality between the consumer and business sides of our platform, where one drives and reinforces the other, lies at the heart of Trustpilot's organic growth opportunity.

Progress against our strategic objectives

There are several performance indicators we track to assess our progress against these strategic aims.

* Key performance indicator (KPI) - further detail available on page 12 

As at the 30 June 2021, the total cumulative number of reviews hosted on the Trustpilot platform exceeded 144 million1, compared to 100 million a year ago and 121 million as of 31 December 2020. As at the 30 June 2021, over 626 thousand domains2 had been reviewed on Trustpilot's platform, compared to 445 thousand a year ago and 529 thousand as of 31 December 2020.

In addition to these core indicators, we also track our progress against various additional usage metrics. These include the number of businesses actively using our platform, either as free active users or as paying business customers, by inviting reviews and, by displaying their TrustBox, showcasing their reviews and redirecting consumers to their business profile on the Trustpilot platform. We also measure the number of review invitations businesses send to their customers. From a consumer perspective, we measure the number of cumulative reviews on the platform, and how these are generated - either through an invitation to leave a review, or unprompted.

Free active business customer adoption has been accelerating, with the number of total active domains on the Trustpilot platform growing to 73 thousand as of the 30 of June 2021, compared to 51 thousand a year ago, up over 42 per cent year-on-year. We have also seen strong growth in the number of monthly review invitations sent by businesses, which averaged over 44 million per month in the first half of the year, an increase of more than 73 per cent year-on-year. These metrics are significant as they demonstrate the viral network effect in action, and typically act as a good indicator of future growth in subscribing business customers, and ultimately bookings and ARR.

We continually assess our strategic progress with respect to trust and transparency. We measure the number of fake and misleading reviews we detect and remove, as well as our response times in investigating reviews flagged by consumers or businesses as potentially fake, misleading or in breach of our guidelines. In 2020, out of the 39 million reviews posted on Trustpilot, we removed 2.2 million that were determined to be fake or harmful, the majority of which were detected automatically by our proprietary artificial intelligence algorithms, designed to ensure the integrity of the content on the Trustpilot platform. In addition to this, in the first half of the year we published the first Trustpilot Transparency Report, providing hitherto undisclosed data and insight into the actions we are taking to protect and promote trust online.

We strengthened our executive leadership team with the appointment of Tim Hilpert to the newly created position of Chief Operating Officer. Tim has significant previous experience of scaling and leading consumer businesses, and is responsible for overseeing the global day-to-day commercial, marketing, and product development operations, as we continue our expansion in the UK, North America, and Europe.

Our Market

Trustpilot is a leading global review platform that provides businesses with the opportunity to build trust, a key factor for business success. Trustpilot is seeking to establish a 'trust layer' for the open commerce ecosystem, in addition to other 'layers' such as marketing, customer relationship management, payment and e-commerce infrastructure, across a diverse range of industries, as consumers look for ways to establish that businesses are trustworthy. The long-term total addressable global market opportunity, excluding China, has been estimated at USD 50 billion (Q1 2021 study commissioned by Trustpilot), with a current serviceable addressable market of USD 6.3 billion.

Trustpilot provides an open platform, which creates a place where businesses and consumers can gain actionable insights and collaborate. Consumers can share feedback, at any time, about any business with a website and review feedback left by other consumers.

1 Including reviews subsequently removed or deleted

2 Including both claimed and unclaimed domains, and those subsequently removed from the Trustpilot consumer website 

The platform not only facilitates better purchasing decisions, but also gives consumers the opportunity to recommend businesses, products, services, and locations based on their experiences. Businesses can use Trustpilot to actively engage with consumers that are reviewing their products and services. Any business can use Trustpilot's basic services for free, where they can view and respond to consumer reviews.

In addition to this free service, Trustpilot also provides several paid subscription modules for businesses, providing increasing levels of functionality and offered on a software-as-a service ("SaaS") basis. These tools enable Trustpilot's paying business customers to invite more reviews, manage those reviews, to derive high-value, actionable insights from them, and to showcase their TrustScores across their marketing channels. In this way, Trustpilot generates strong returns for businesses in raising their profiles, building and demonstrating their trust credentials, and increasing traffic, conversion, marketing efficiency, and ultimately revenues.

By fostering trust through direct, open, and collaborative engagement between businesses and consumers, Trustpilot's platform helps businesses improve the experience they offer their customers. This self- reinforcing cycle between businesses and consumers creates a powerful viral network effect, which is a key driver of Trustpilot's organic growth. Illustrating this network effect, during the first half of the year an average of 16 thousand new domains were added to the Trustpilot platform per month.

Regional Performance

The United Kingdom contributes approximately 40 per cent of revenue, Rest of World, which is dominated by Europe, contributes 36 per cent of revenue and North America contributes 24 per cent. (H1 FY20: UK contributed approximately 38 per cent, Rest of World 33 per cent, and North America approximately 29 per cent).

In the United Kingdom we saw 27 per cent constant currency revenue growth in the period, reflecting strong prior-year bookings growth, the strength of our Brand, and further improvements in the efficiency of customer acquisition. Bookings in the region continued to grow strongly, increasing by 27 per cent at constant currency in the period.

For the Rest of the World region, we reported a 30 per cent constant currency increase in revenue in the period compared to a year ago, with particular strength in Europe. Bookings accelerated in the region, growing by 36 per cent at constant currency.

North America revenue increased by 6 per cent over the prior year period, this is in line with expectations and reflects the impact of lower bookings growth in FY20 which occurred as a result of Covid-19 and as we transitioned to a product-led go-to-market model and reduced direct sales headcount in the region. We saw a notable acceleration in bookings in the region, which increased by 18 per cent year-on-year.

These results were aided by a significant improvement in our LTM Net Dollar Retention Rate, which rose to 97 per cent in the period (H1 FY20: 91 per cent). Notably, an improvement in LTM net dollar retention was seen across all regions and reflects the measurable return on investment our software tools deliver to business customers, our ongoing focus on enhancing the value we deliver, and our success in capitalizing on the cross-sales opportunity that exists as a result of our modular SaaS product offering.

Innovation

During the first half we continued to invest in innovation and, in line with our strategy, prioritized four key areas: Prioritising Trust, Scaling Channels, Product Adoption, and Consumer Adoption. 

- Prioritising Trust

In the first half, we continued to prioritize our investment in innovation with respect to ensuring trust and transparency on our platform, introducing 'business verification' and further highlighting 'trust signals' around domains on our platform.

- Scaling channels

Efficiently scaling our channels is central to our ability to capitalize on our market opportunity and deliver against our long-term strategy. In the first half, we launched our E-Commerce Channel in UK & Europe. Since the period end we have announced integrations into the Shopify App Store, the WooCommerce Marketplace, and WIX. These types of integrations are important as they empower merchants to tap into Trustpilot's automated review invitations while also being able to showcase their reviews without having to leave the platform. We have also extended the use of our powerful data and insights capabilities into our marketing and sales activities, enabling improved efficiency in our cost of customer acquisition.

- Product Adoption

In the period, we streamlined the ability for business customers to automatically invite consumers for reviews and to engage with the power of Trustpilot. Personalization is a key area of focus for us, and we added our first wave of personalized Actionable Insights to help customers increase the return on investment they derive from Trustpilot. We also introduced video in our Product Reviews solution, which allows consumers to upload a visual of the product they have purchased and thus enrich the reviews showcased for a better shopping experience.

- Consumer Adoption

Using machine learning models to automatically categorise domains on our platform, we have increased the value for consumers, helping them to rapidly find relevant businesses on the Trustpilot platform. We also introduced personalised insights for consumers on our engagement emails to help them gain more value from the interaction with Trustpilot.

Trust and Transparency

In the first six months of 2021 we continued to enhance our ability to detect and remove fake and misleading reviews from the platform, adding to the actions we take to help build consumer and business trust in the platform.

In February we published our first Transparency Report, demonstrating the scale of the protective and safeguarding measures we deploy as usage of the Trustpilot platform grows. The report offers an unobstructed view of the most crucial function of our business: ensuring the authenticity and credibility of Trustpilot reviews. Today, the vast majority of the fake and misleading reviews which we encounter are detected and removed automatically using our sophisticated fraud detection software.

We continue to invest in technology and processes to ensure the integrity of the content on the Trustpilot platform. Notably, during the period we deployed automated systems to ensure consistent enforcement actions are taken when fake reviews linked directly to a business are detected, and introduced technology to help us identify and act against the sale of fake and misleading reviews. This latter investment enables us to automatically block user profiles linked to review sellers, remove their reviews, and take appropriate action against businesses that have purchased these reviews.

This innovative technology-based approach sets a strong foundation as we scale our platform, and to take effective measures against the review seller industry going forward.

We have continued to automate the identification and removal of bad-fit businesses from Trustpilot. In the period we released technology to automatically block dark web domains, given the high risk they pose to consumers, and we are using automation to detect and assess other potentially harmful and illegal businesses as individuals add them to the platform. Towards the end of the first half, we released 'business verification' on Trustpilot, highlighting the steps taken by businesses to verify themselves on Trustpilot, with this information displayed on their transparency pages on the platform. This release underpins our commitment to enhancing the integrity of business verification across the platform, and further increasing trust throughout the Trustpilot community.

Sustainability

Trustpilot's Environmental, Social and Governance ("ESG") strategy is a key area of focus for the Group, overseen by a cross-functional steering committee, reporting to the senior management team and the heads of other key functional areas within the Group.

Our sense of purpose lies at the heart of our organisation and strategy, as we seek to provide a 'trust-layer' for the open commerce ecosystem, and our employees are passionate about Trustpilot's mission to become a universal symbol of trust. We recognise our responsibility to engage with all of our stakeholders and we are committed to operating with and promoting sustainable business practices. We believe that there is a correlation between corporate responsibility and our future business success.

With respect to our employees (or "Trusties"), we continue to focus on enriching their experiences both professionally and personally. We recently communicated our plan to permanently move to a hybrid model of work that will embrace the flexibility we are all now looking for, as well as the wonderful magic that happens when we have Trusties collaborating in shared office spaces together.

We also launched several initiatives aimed at improving the mental, physical, and social well-being of our Trusties and continued our investment into professional development. We are focused on building future leadership talent and in accelerating the development of our existing top talent. We also strengthened our team, building organisational capability and capacity in areas such as engineering, product development, user experience, data science and security.

Outlook

We are encouraged by the progress we have made in the first half of the year and the board remains confident in the strategy and outlook for the business. We will continue to focus on driving adoption of the Trustpilot platform by consumers and businesses and believe we can deliver sustainable revenue growth and margin expansion over the long-term.

We previously provided guidance for high-teens constant currency revenue growth in the current year. On the back of stronger H1 FY21 performance, we now expect to achieve a rate of constant currency revenue growth for the full year consistent with H1 FY21.

As noted, the bookings performance in H1 reflected an element of recovery and re-acceleration from the disruption caused by COVID a year ago, hence bookings in H2 will face a tougher comparison and the rate of growth in the period is likely to be a little lower than in H1.

Peter Holten Mühlmann, Founder and Chief Executive Officer, Trustpilot 

15th September 2021

Finance Review 

Overview

The first half results for 2021 saw an acceleration in bookings* growth from 16 per cent in H1 FY20 to 28 per cent in H1 FY21 resulting in a 30 June 2021 ending Annual Recurring Revenue ("ARR")* of USD 134 million. Revenue growth of 31 per cent or 22 per cent on a constant currency basis** was driven largely by Rest of World (RoW) and UK markets. 

Loss for the period grew from USD 6 million (12 per cent of revenue) to USD 17 million (28 per cent of revenue) principally due to non-recurring costs relating to the Company's initial public offering (IPO) in March. Adjusted EBITDA** improved from USD 2 million (3 per cent) to USD 4 million (6 per cent) driven largely by revenue growth.

Revenue

Revenue in H1 FY21 grew to USD 62 million, an increase of 31 per cent over the prior year or 22 per cent on a constant currency basis. The actual growth rate was impacted by a weakening USD relative to the GBP and EUR when compared to the constant currency growth. Revenue continues to consist of over 99 per cent recurring revenue from software subscriptions, amortised over the subscription term.

ARR and Bookings

Annual Recurring Revenue (ARR) and bookings serve as leading indicators of revenue in subsequent periods. ARR is measured as a value at a point in time while bookings reflect the annual contract value of deals signed within that period. As of 30 June 2021, ARR was USD 134 million, an increase of 27 per cent on a constant currency basis over the prior year value of USD 99 million. H1 FY21 recorded bookings of USD 75 million, an increase of 28 per cent on a constant currency basis over the prior year bookings of USD 55 million.

Regional growth trends

As described above, regional bookings growth serves as a leading indicator of subsequent period revenue growth. For this reason, H1 FY21 regional revenue growth reflected prior year bookings growth. UK and ROW revenue growth remained strong with 27 per cent and 30 per cent growth respectively in H1 FY21 on a constant currency basis, while the 6 per cent growth reported for North America reflects weaker bookings growth in the prior year period.

Bookings growth accelerated on a constant currency basis in all regions in H1 FY21 compared with the prior year period. The acceleration in growth was particularly notable on a constant currency basis in RoW and North America, with RoW growing 36 per cent in H1 FY21 (up from 22 per cent in H1 FY20) and with North America growing 18 per cent in H1 FY21 (up from 4 per cent in H1 FY20) while the UK grew 27 per cent in H1 FY21 (up from 20 per cent in H1 FY20).

* Key performance indicator (KPI) - further detail available on page 12

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

Cost of sales

Cost of sales, which includes network operating costs as well as the costs incurred to onboard, support, retain and upsell customers, was USD 12 million, an increase of 30 per cent on a constant currency basis, driven primarily by investments into the retention and expansion of existing customers ahead of future revenue recognition. These investments, primarily into incremental staff, have been effective at raising the LTM Net Dollar Retention Rate from 91 per cent in H1 FY20 to 97 per cent in H1 FY21. Similar to the bookings and revenue dynamic, improvements in retention bookings in the current period will be reflected in revenue in the subsequent period. As a share of revenue, cost of sales grew from 18 per cent in H1 FY20 to 19 per cent in H1 FY21.

Sales and marketing costs

Sales and marketing costs fell slightly in H1 FY21 to USD 21 million, a reduction of 7 per cent on a constant currency basis compared with the prior year H1 FY20. Sales and marketing costs are lower in H1 FY21 due to an average sales and marketing headcount of 254 when compared to the prior year H1 FY20 of 328. This headcount saving is partially offset by a higher average cost per headcount, higher commissions and higher marketing expenditure. A planned adjustment to sales staff headcount took place in May 2020 in response to the crisis caused by Covid-19. As a share of revenue, sales and marketing costs fell from 45 per cent in H1 FY20 to 34 per cent in H1 FY21.

Technology and content costs

Technology and content costs grew to USD 15 million, an increase of 27 per cent on a constant currency basis over the prior year H1 FY20. Technology and content investment continues both into staff and into purchased software and professional assistance. Average technology and content headcount in H1 FY21 grew to 203 compared with the prior year H1 FY20 of 185. The focus of these efforts remains primarily on product and engineering efforts as well as securing the integrity of our content. As a share of revenue, technology and content costs grew from 23 per cent in H1 FY20 to 24 per cent in H1 FY21.

General and administrative costs

General and administrative costs grew to USD 30 million, an increase of 146 per cent on a constant currency basis over the prior year period. The growth in general and administrative costs was driven primarily by non-recurring IPO related costs of USD 10 million and an increase in share-based compensation to USD 6 million compared with a prior year cost of USD 2 million in H1 FY20. IPO costs consisted primarily of accounting, legal and advisory services to enable the March 2020 listing on the London Stock Exchange. As a share of revenue, general and administrative costs grew from 24 per cent in H1 FY20 to 48 per cent in H1 FY21.

Cash Flow

Cash outflow from operations in H1 FY21 increased to USD -12 million compared with a cash outflow from operations in H1 FY20 of USD -2 million. Non-recurring IPO costs represented the largest driver of the cash outflow increase in addition to outflows related to the annual company bonus payout.

One-off operating cash items in H1 FY21 included negative working capital contribution related to the payout of payroll tax deferral for Covid-19 relief (USD 2.7 million). One-off operating cash items in H1 FY20 included positive working capital contribution related to the shifting of the Group's bonus payout from quarterly to annual frequency (USD 0.6 million) and payroll tax deferral for Covid-19 relief (USD 2.9 million) as well as a negative working capital contribution from London office deposit (USD 1.9 million).

Capex continues to primarily consist of capitalised development costs and in H1 FY21 this increased to USD 2 million.

Cash inflow from financing activities total USD +56 million comprised primarily of equity inflows from the primary proceeds from the IPO new share issuance, as well as exercise price proceeds from employee warrants exercised at IPO. This inflow is partially offset by the equity recorded portion of IPO costs, cash outflows from repayment of term debt and from the principal elements of lease payments.

Balance Sheet

Meaningful movements in the Group balance sheet when compared to 31 December 2020 consisted primarily of the equity raise resulting in USD 91 million of cash as of 30 June 2021 and an increase in net equity to USD 65 million as of 30 June 2021. Non-current liabilities fell to USD 13 million as of 30 June 2021 with the repayment of outstanding term debt. Current liabilities fell to USD 48 million as of 30 June 2021 due in part to the release of labour accruals (USD 3.5 million) related to annual bonus payouts, partially offset by growth in contract liabilities (USD 2.7 million) driven by growth in bookings.

Foreign exchange

The Group does not hedge foreign currency profit and loss translation exposures and the statutory results are therefore impacted by movements in exchange rates. The use of constant currency translation illustrates underlying activity by neutralising the impact of currency fluctuations. Constant currency translation is applied by utilising the monthly average rate from the most recent period then applying that rate to all historical periods being compared.

Going Concern

The Group incurred a loss of USD 17 million in H1 FY21 compared with a loss of USD 6 million in H1 FY20. The Group has cash and cash equivalents of USD 91 million as of 30 June 2021 compared with a balance of USD 41 million as of 30 June 2020. The increase in cash and cash equivalents is driven primarily by primary proceeds of USD 64 million raised in connection with the IPO in March 2021. The Group has access to undrawn revolving credit facility of up to USD 30 million. The Group has not breached any associated covenants and does not forecast a breach in future periods.

In consideration of going concern, management prepares forecasts of revenue growth with associated costs and cash requirements. In addition to forecasting expectations, management prepares downside scenarios meant to illustrate the impact of reasonable worst case performance and the resulting impact to the financials, with and without mitigating actions. Even under these downside scenarios there is sufficient liquidity to finance Group operations, management does not believe there to be any reasonable downside scenario which would cause the Group to have insufficient liquidity to be considered a going concern in the forecast periods.

Hanno Damm

CFO, Trustpilot Group plc 

15th September 2021

Operating metrics

Trustpilot utilises a range of key performance indicators ("KPIs") to assess its performance, and this document contains certain operating measures that are not defined or recognised under IFRS. Trustpilot considers bookings, LTM Net Dollar Retention Rate, annual recurring revenue, number of reviewed domains, number of claimed domains, number of active domains, number of subscribing customers and number of reviews to be the KPIs used by Trustpilot to help evaluate growth trends, establish budgets and assess operational performance and efficiencies.

Trustpilot believes that these KPIs provide alternative measures by which to assess the operating performance of the Group and, together with IFRS measures, are useful in evaluating the Group's operating performance. The KPIs used in this Financial Statements should not be considered superior to, or a substitute for, measures calculated in accordance with IFRS. The following table presents Trustpilot's KPIs for H1 FY21 and H1 FY20.

1 Bookings is defined as the annual contract value of contracts signed in a given period. Nearly all of Trustpilot's contracts with customers have a duration of 12 months, and in the event a contract length exceeds 12 months the value is adjusted to the 12-month equivalent for the purpose of calculating bookings. Bookings are a leading indicator of future revenue.

2 LTM Net Dollar Retention Rate is defined as the annual contract value of all subscription renewals in the last twelve months divided by the annual contract value of subscriptions expiring in the last twelve months. LTM Net dollar retention includes the total value of subscriptions with existing Subscribing Customers, and includes any expansion of contract value with existing Subscribing Customers through upsell, cross-sell, price expansion or winback. Twelve months of data is used as nearly all subscriptions are twelve months in duration, ensuring the appropriate alignment of renewal activities.

3 Annual recurring revenue is defined as the annual value of subscription contracts measured on the final day of a reporting period. 

4 Number of reviewed domains that have been reviewed on Trustpilot's platform as at 30 June (including domains subsequently removed from the Trustpilot consumer website).

5 Number of claimed domains that have been reviewed on Trustpilot's platform as at 30 June (including domains subsequently removed from the Trustpilot consumer website) and have been claimed by the domain owner.

6 Number of domains, in the months of June, that received an invited review or were the subject of a TrustBox impression during the month.

7 Number of customers with a paid subscription for services on Trustpilot's platform as at 30 June.

8 Number of reviews hosted on Trustpilot's platform as at 30 June (including reviews subsequently removed or deleted). 

Principal risks and uncertainties

At Trustpilot, we adopt a robust approach to risk management to ensure that we can achieve our mission of becoming a universal symbol of trust and grow our business in a sustainable way.

We have a dedicated risk management function that is responsible for maintaining the integrity of our platform and promoting a risk conscious culture across all levels of our organisation.

Our Board of Directors ("Board") is responsible for setting the tone in relation to our approach to risk and guides our risk management behaviours. The Board ultimately sets expectations in relation to conduct, trust and integrity, defines our risk appetite, approves material decisions around our risk profile and assesses potential risks which may impact our strategy, reputation, operations or business model.

The Board is supported by our Audit Committee, which is responsible for reviewing, reporting and managing risk. The Audit Committee reviews our internal controls and risk management systems and is accountable for the review, maintenance and updating of our risk register. The Audit Committee reports to our Board on matters within its duties and responsibilities.

Operational management of risk is the responsibility of our Executive Leadership Team ("ELT") who report to the Audit Committee and the Board.

On a day to day basis, we consider all of our employees to be risk managers and we operate a 'three lines of defence' model. The first line of defence sits with our function heads within the organisation and their teams, who are responsible for identifying and managing risks relevant to their respective areas of responsibility. The second line of defence provides an independent review and challenge to our internal controls and the first line's approach to risk management to ensure adherence to our risk appetite and policies, which is managed by our dedicated Risk function. The third line of defence provides independent assurance on the effectiveness of, and compliance with, our internal controls, which is managed by our Internal Audit team in conjunction with the Audit Committee.

Identified risks and mitigants

We monitor, review and manage existing and emerging risks to our business, which are recorded in our risk register and reported to the Audit Committee and the Board.

The Board does not consider that the risk factors relating to the Trustpilot group and its business set out in pages 7-20 the Prospectus have changed materially since it was published on 23 March 2021. These risks are expected to apply for the remaining half of the financial year and the principal risks and uncertainties are summarised as follows with a description of how we seek to mitigate them: 

Condensed consolidated statement of changes in equity

*Warrants in Trustpilot A/S which are fully vested, have been granted to the lenders for the credit and term debt facility and the value of which is considered to be part of the effective interest rate for that facility.

Condensed consolidated statement of changes in equity

*Warrants in Trustpilot A/S which are fully vested, have been granted to the lenders for the credit and term debt facility and the value of which is considered to be part of the effective interest rate for that facility.

**In H2 FY20, 3,681 warrants have been exercised into 3,681 common shares with a nominal value of 1 DKK per share.

**\* The reduction of share capital, USD 5 thousand is due to cancellation of treasury shares.

1. General Information and basis of the preparation of the half year report

The activity of Trustpilot Group plc (the Company) and its subsidiaries (the Group), consists of developing and hosting an online review platform that helps consumers make purchasing decisions and businesses showcase and improve their service. Revenue is generated from selling its software as a service (SaaS).

Trustpilot Group plc is a listed public company on the London Stock Exchange, headquartered in Denmark. The registered office is 5th Floor The Minster Building, 21 Mincing Lane, London, United Kingdom, EC3R 7AG.

On 20 February 2021, The Trustpilot Group established a new corporate structure of the Trustpilot Group (the "Restructuring"). As part of the initial public offering (IPO) process to become a listed company on the London Stock Exchange in March 2021, a restructuring was performed. The restructuring involved a tax free merger and the insertion of a UK parent company, Trustpilot Group plc, where former shareholders of Trustpilot A/S exchanged their shares in Trustpilot A/S with shares in Trustpilot Group plc followed by a listing on London Stock Exchange of Trustpilot Group plc. The restructuring is accounted for as a group restructuring, where the assets and liabilities of Trustpilot A/S and its subsidiaries are accounted for using predecessor accounting at their carrying values and not revalued to fair value at the transaction date.

As the restructuring is accounted for as a group restructuring thus predecessor accounting is applied to show the results of the group as a continuance of the former Trustpilot A/S group and the consolidated financial statements for the Trustpilot Group is presented in the legal name of Trustpilot Group plc.

Due to the nature of the horizontal merger, the 31 December 2020 consolidation was only prepared at Trustpilot A/S level because of the way the structuring was performed and the 31 December 2020 figures remains therefore the comparatives of the Trustpilot Group plc UK listed group. 

This interim financial report for the first half year of 2021 comprises the interim financial statements of Trustpilot Group plc and subsidiaries controlled by Trustpilot Group plc.

The interim financial report for the first half year of 2021 follows the same accounting policies as the annual report for 2020. This interim financial report does not include all of the notes of the type normally included in an annual financial report and should therefore be read in conjunction with the Trustpilot A/S annual report for 2020 that can be accessed via the Danish Business Authority.

Basis of preparation

The interim financial report has been prepared in accordance with Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority and UK adopted International Accounting Standard 34 'Interim Financial Reporting' and the requirements in Companies Act 2006 for the presentation of half year interim reports by listed companies. These interim financial statements do not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Most recent statutory accounts for the year ended 31 December 2020 for Trustpilot A/S were dated 1 March 2021, and adopted by the annual general meeting of shareholders on 17 March 2021 and subsequently delivered to the Danish Business Authority. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the Companies Act 2006.

The condensed financial statements have been prepared on a historical cost basis. 

The condensed financial statements have been rounded to the nearest thousand. 

The condensed financial statements are presented in US Dollars (USD).

The financial statements aren't materially impacted by seasonality due to revenue recognition amortisation over subscription term.

The condensed financials disclosed for H1 FY21, H1 FY20 and FY20 are unaudited by PWC UK. FY20 consolidated financials were prepared for the Trustpilot A/S Group prior to establishment of the Trustpilot Group plc. Trustpilot A/S group financials had been prepared in accordance with international accounting standards in conformity with the requirements of the Danish Companies Act and audited by PWC Denmark. 

Going Concern

The Board of Directors of Trustpilot Group plc (Directors), in their detailed consideration of going concern, have reviewed the Group's future revenue projections and cash requirements, which they believe are based on prudent interpretations of market data and past experience. The Directors have also considered the Group's level of available liquidity under its undrawn credit facility which was renewed in April 2021 for a three year period. The Group has not breached any associated covenants and does not forecast a breach in future periods. The Directors have carried out a robust assessment of the potential implications from the Covid-19 outbreak. In 2020, active measures were taken to reduce the cost base of the Group, including reducing headcount, hiring and marketing spend, ensuring the Group to perform in line with expectations for 2020.

The directors have updated forecasts for a period of at least 12 months from the date of approval of this financial information, which are based on their best assessment of the current trading outlook, including considering the ongoing impact of Covid-19.

A number of downside sensitivities have been considered and the Directors are of the view that in the most severe but plausible downside scenario they can continue to meet their obligations as they fall due and the severe but plausible downside scenarios modelled do not indicate any material uncertainty over going concern. As a result, the financial statements have been prepared on a going concern basis.

Basis of consolidation

The consolidated financial statements include the parent company, Trustpilot Group plc, and its subsidiaries. Subsidiaries are all entities over which the Group has control. The Group controls an entity when the group is exposed to, or has rights 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 consolidated from the date on which control is transferred to the Group.

Intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset.

Presentation of profit or loss

In accordance with IAS 1.99, management believes the presentation of the statement of profit or loss best represents the activities of the Group and is best aligned with similar firms in our sector. Below is a further description of the activities within the functions disclosed:

• Cost of sales consists of the cost to deliver the Group's software service. Cost of sales includes the hosting and related technologies to deliver the software service as well as the ongoing customer success and customer support efforts that continue to be aligned with customers over the term of their subscription. Cost of sales primarily consists of the labour costs associated with customer success and customer support efforts. 

• Sales and marketing consists of the efforts primarily directed at new customer acquisition. Sales costs include direct sales support functions such as sales operations and partnerships while marketing costs consist of both marketing staff labour costs as well as marketing program expenditures. 

• Technology and content includes research and development costs incurred by the work of the product and engineering teams directly on the platform, whether expensed in the period or recognised as amortisation of internally developed intangible assets due to these efforts supporting revenue in many periods. Also included are the content costs critical to securing the integrity and trust in our product. 

• General and administrative expenses comprise costs incurred by the back-office functions such as finance, legal and human resources, including wages, costs under share-based programmes and other office costs. General and administrative expenses include a proportion of depreciation and amortisation, primarily consisting of right-of-use asset depreciation. 

Share-based payments

Share-based compensation benefits are provided to employees and board members under two separate warrant programs and two restricted share schemes.

The warrant programs and restricted share schemes are classified as equity arrangements. As such, the fair value of the warrants and restricted shares granted under the programs are recognised as an expense with a corresponding increase in equity. The total amount to be expensed is determined by reference to the fair value of the warrants and restricted shares granted including the impact of any non-vesting conditions.

The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each period, the Group revises its estimates of the number of options or restricted shares that are expected to vest based on the respective market vesting, non-market vesting and service conditions. It recognises the impact of the revision to original estimates, if any, in profit or loss, with a corresponding adjustment to equity.

Further information about the warrant and restricted share programs are disclosed in note 5.

New standards and interpretations

Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2021 reporting periods and have not been early adopted by the Group.

It concerns the following standards:

• Amendments to IAS 1 presentation of financial statements on classification of liabilities to be effective for the annual period beginning on or after 1 January 2022

• Amendments to IFRS 3, IAS 16, IAS 17 to be effective for the annual period beginning on or after 1 January 2022

• Annual improvements on IFRS 1, IFRS 9, IAS 41, and IFRS 16 to be effective for the annual period beginning on or after 1 January 2022

• IFRS 17 insurance contracts to be effective for the annual period beginning on or after 1 January 2023

These standards are not expected to have a material impact on the Group in the current or future reporting periods and on foreseeable future transactions.

Earnings per share

Following the IPO, the Group will begin publishing earnings per share (EPS) figures previously unpublished. EPS for the Group is calculated in accordance with IAS 33. The following types of EPS are reported:

(i) - Basic earnings per share

Group earnings or losses after taxes, divided by the weighted average number of ordinary shares outstanding for the period.

(i) - Diluted earnings per share 

Group earnings or losses after taxes, divided by the weighted average number of ordinary shares outstanding for the period as well as all potentially convertible securities. The impact of potentially dilutive ordinary shares is excluded when they would be anti-dilutive. 

Details for any alternative measures of earnings per share can be found in note 3. 

2. Critical accounting estimates and judgements

The preparation of financial statements requires the use of accounting estimates which, by definition, will seldom equal the actual results. Management also needs to exercise judgement in applying the Group's accounting policies.

The judgements, estimates as well as the related assumptions made are based on historical experience and other factors that Management considers to be reliable, but which by their very nature are associated with uncertainty and unpredictability. These assumptions may prove incomplete or incorrect, and unexpected events or circumstances may arise. The critical judgements and estimates, including the assumptions are consistent with the those described in the year ended 31 December 2020 financial statements and, should be read together with the 31 December 2020 publicised accounts. 31 December 2020 financial statements for Trustpilot A/S can be accessed via the Danish Business Authority.

Critical accounting estimates

Critical accounting estimates are expectations of the future based on assumptions, that to the extent possible are supported by historical trends or reasonable expectations. The assumptions may change to adapt to the market conditions and changes in economic factors etc. The Group believe that the estimates are the most likely outcome of future events.

3. Alternative performance measures

Trustpilot utilises a range of alternative performance measures ("APMs") to assess its performance and this document contains certain measures that are not defined or recognised under IFRS. Trustpilot considers EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted profit, Adjusted EPS and constant currency basis to be APMs that provide meaningful, additional measures of Group performance.

Trustpilot believes these APMs provide alternative measures by which to assess the operating performance of the Group and, together with IFRS measures, are useful in evaluating the Group's operating performance. The APMs used in this Financial Statements should not be considered superior to, or a substitute for, measures calculated in accordance with IFRS.

EBITDA

EBITDA is defined as earnings before interest, tax, depreciation, amortisation. Trustpilot believes EBITDA is meaningful as a profitability measure before non-cash activity, financing and tax impacts.

Adjusted EBITDA

Trustpilot measures the overall performance of the Group by reference to Adjusted EBITDA which is a non- IFRS measure. Trustpilot believes Adjusted EBITDA is a meaningful representation of core operating profit as it adjusts for certain non-recurring or non-cash items with associated taxes. The following definition of Adjusted EBITDA was also determined based on what management believes provides the best comparability to the same metric provided by similar firms in our sector.

Adjusted EBITDA is defined as EBITDA (earnings before interest, tax, depreciation, amortisation) adjusted to exclude share-based compensation, including associated social security costs, non-recurring transaction costs such as those related to IPO preparation and restructuring costs, which relate to one-time costs associated with a material organisational change such as severance payments.

Adjusted EBITDA improved from USD 1,610 thousand in H1 FY20 to USD 3,769 thousand in H1 FY21. Adjusted EBITDA margin improved from 3 per cent in H1 FY20 to 6 per cent in H1 FY21. Improvements in Adjusted EBITDA and Adjusted EBITDA margin are driven primarily by growth in revenue partially offset by staff cost growth. Included in the H1 FY21 share-based payments is a non-cash charge of USD 4,091 thousand (H1 FY20 of USD 1,324 thousand) and associated social security costs of USD 1,424 thousand (H1 FY20 of USD 556 thousand).

Non-recurring transaction costs relate to professional and legal fees associated with corporate financing activities, in H1 FY21 this consisted exclusively of IPO related costs. IPO costs consisted primarily of accounting, legal and advisory services that were expensed as the services were provided, largely between the fourth quarter of 2020 and the first quarter of 2021. H1 FY20 non-recurring transaction costs consisted of early preparation costs for the IPO before the efforts accelerated in the forth quarter of 2020.

Restructuring costs relate to redundancies and cost reduction measures undertaken in H1 FY20 as a response to the uncertainty caused by the Covid-19 pandemic.

Functional distribution of adjustments

Adjusted profit/(loss)

Trustpilot introduced a new APM for adjusted profit/(loss) since filing the IPO prospectus. Adjusted profit/ (loss) was introduced to enable an adjusted earnings per share (adjusted EPS) figure to be reported.

Adjusted profit/(loss) and adjusted EPS serve to illustrate performance without the impact of certain non- recurring or non-cash items with associated taxes. Additional detail for adjusted EPS can be found in note 8.

Adjusted earnings per share (adjusted EPS) was introduced to illustrate earnings per share adjusted for certain non-recurring or non-cash items with associated taxes.

Adjusted basic earnings per share is defined as earnings or losses after taxes adjusted to exclude share- based compensation, including associated social security costs, non-recurring transaction costs related to the one- time IPO preparation costs and restructuring costs, divided by the weighted average number of ordinary shares outstanding for the period.

Adjusted diluted earnings per share is defined as earnings or losses after taxes adjusted to exclude share- based compensation, including associated social security costs, non-recurring transaction costs related to the one- time IPO preparation costs and restructuring costs, divided by the weighted average number of ordinary shares outstanding for the period as well as all potentially convertible securities. The impact of potentially dilutive ordinary shares is excluded when they would be anti-dilutive.

*Given the Group incurred losses in H1 FY21, H1 FY20 and FY20, the impact of potentially dilutive ordinary shares have been excluded as they would otherwise be anti-dilutive in accordance with IAS 33. 

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, which provides a like-for-like comparison excluding the effect of exchange rate fluctuations. 

4. Operating segments

For management purposes and based on internal reporting information, the Group is organised in only one operating segment, as the information reported includes operating results at a consolidated group level only. The costs related to the main nature of the business, being the Group´s online review platform which serves the Group customers, are not attributable to any specific revenue stream or customer type and are therefore borne centrally. The results of the single reporting segment, comprising the entire Group, are shown in the consolidated statement of comprehensive income.

The Executive Leadership Team is the Chief Operating Decision Maker (CODM), which is made up of the senior leadership across the respective functional areas, responsible for the strategic decision making and for the monitoring of the operating results of the single operating segment for the purpose of performance assessment.

Whilst Group operations are distributed globally with a large presence in Denmark and shares are listed on the London Stock Exchange, the UK and North America are the Group's primary markets where revenue generated consists of approximately 40 per cent and 24 per cent (H1 FY20: UK: approx. 38 per cent and North America: approx. 29 per cent), respectively. Other geographical locations besides the UK and North America are defined as 'Rest of the world' where no individual country exceeded more than 6 per cent of the consolidated revenue in H1 FY21 (H1 FY20: 7 per cent).

Trustpilot has customers in many regions around the world but is organised globally from an operation perspective. For this reason, while operating assets may be recorded in Denmark for example, they will be supporting customers around the world. Therefore, a single operating segment is reported with revenue disclosed by region based on the location of the customer. Non-current operating assets are similarly based on geographic location. The measurement of liabilities by geographic location is not included in this disclosure as this information is not regularly reviewed by the CODM for decision making purposes.

The following table displays external revenue and non-current operating assets by geographic area:

Non-current assets consist of intangible assets, property, plant and equipment, right-of-use assets and deposits. 

5. Share-based payment plans

Prior to completion of the IPO on 26 March 2021, Trustpilot A/S had two group-wide equity-settled warrant programmes with the vesting and exercise conditions summarised below:

• For the "Employee Programme", vested warrants could only be exercised in the event of an exit event (including an IPO of Trustpilot A/S) during the exercise period. Upon an exit event, the board of Trustpilot A/S could decide to continue or replace the unvested warrants (or accelerate vesting). Any vested warrants not exercised at the exit event would lapse, unless otherwise decided by the board.

• For the "Selected Employees and Board Members Program", vested warrants could be exercised at any time during the exercise period. On an IPO of Trustpilot A/S or non-IPO exit event, the board of Trustpilot A/S could decide to continue or replace the unvested warrants (or accelerate vesting). Vested warrants not exercised at an IPO exit event would continue or be replaced. Vested warrants not exercised at a non-IPO exit event would lapse, unless otherwise decided by the board.

In connection with the IPO, Trustpilot has restructured its warrant programmes:

A. All outstanding warrants in Trustpilot A/S (as of 26 March 2021: 818,784) have been cancelled and replaced on 26 March 2021 by new warrants in Trustpilot Group plc in the proportion 1 to 78. This exchange was part of an overall restructuring of Trustpilot, whereby the new ultimate parent company is now Trustpilot Group plc. This transaction was evaluated as having no impact on the programme itself - i.e. it is considered a non-vesting event as the employees under the programmes have equivalent rights and benefits after the exchange as before.

B. The new warrants in Trustpilot Group plc were intended to operate as the previous warrants in Trustpilot A/S would have done if an IPO of Trustpilot A/S had occurred. As permitted under the previous warrant terms, the warrant holders under the Employee Programme were not required to exercise their vested warrants upon the IPO of Trustpilot Group plc, but could retain their vested warrants and exercise them (and any unvested warrants that subsequently vest) at any time until the expiry of the exercise period.

As a result, only an equivalent of 124,638 out of 323,737 warrants under the restructured Employee Programme were exercised at the IPO.

The increase in fair value of the Employee Programme right after the modification compared to the fair value just before the modification has been accounted for as follows:

• For vested warrants, the increase in the fair value is recognised as an expense immediately as a one-off adjustment, when the modification has been agreed.

• For not vested warrants, the increase in the fair value is expensed over the remaining vesting period together with the remaining unrecognised original fair value of the outstanding warrants prior to the adjustment

The impact of the fair value adjustment on the 26th of March 2021 is summarised below: