TrustCo Bank Corp NY Price & Performance (TRST)

On the other side of flywheel, consumer adoption continues to grow strongly. Active reviews on the platform increased 23% to over 300,000,000. This is a slightly different metric to the one we've previously discussed which was review submitted. Trust box impressions, where a consumer sees the trust box brand on a customer website were up 19% to a 40,000,000,000. Strong execution of the strategy results in improved profitability. Adjusted EBITDA margin increased 260 basis points to 11.4% allowing us to deliver a 55% increase in adjusted EBITDA to $24,100,000. This was ahead of consensus expectations as we delivered further operating leverage across all OpEx lines. On an adjusted basis. Let me now go into each region in turn. The UK continues to form well. With bookings up 22% at constant currency, to $97,000,000 for the full year. Annual recurring revenue was up 21% in constant currency to $94,000,000, and total regional revenue was $85,000,000. The growth flywheel inherent in our model is most established in The UK, where prompted brand awareness is now over 85%. Our success in establishing a powerful and trusted consumer brand is helping to drive further b to b market penetration. In 2024, we achieved particularly strong growth with larger enterprise customers when net total retention is well above the group average.

Enterprise share of total bookings rose a hundred basis points versus last year, on a like for like basis. We continue to build on our strong reputation in financial services, winning HSBC UK as an enterprise customer joining Revolut and LSNI among many others in the banking vertical. We also made strong progress in the travel sector, winning easyJet, P and O cruises during the year. Move to Europe and the rest of the world, this region covers all European markets as well as those across Asia. We're growing across all markets in the region, but within it, we're particularly on building our presence in our focus markets of Italy and Germany. We chose these because they're large with huge potential, and we already have strong traction and growing consumer awareness. Overall, we saw book bookings growth of 18%. Germany and Italy grew ahead of the regional average with net retention rates also ahead of the group average. Customers won or expanded across the region include TUI, Whirlpool, and Photobox. Moving on to North America, which comprises The US and Canada. The team here is executing well against our strategy. And you can see the benefits of this in the exceptional performance last year with bookings of $2,000,000, up 26% year on year.

This was driven by an impressive 10 percentage point improvement in the net dollar retention rate, as well as a 34% increase in new business ACV. The buzz in our New York and Denver offices is palpable. Significant customer wins and renewals in the second half of the year included Sonos, Fanatics, and Western Union. Both sides of the flywheel are in robust shape with all metrics trending positively, including prompted brand awareness up by 10 percentage points and Trustpilot impressions by 26%. The US remains a substantial opportunity for Trustpilot and our performance in 2024 shows that our strategy there is working. Let me now hand over to to take you through the financials. [indiscernible] You, and and good morning, everybody. Throughout 2024, we continue to successfully manage our business to deliver top line growth, operating leverage, profitability, and free cash flow. Consistent with our capital allocation strategy, we all returned $43,000,000 in cash back to shareholders. I'm happy to report that bookings growth has reaccelerated to 21% in currency, ahead of our long term mid teens top line guidance. And you've just heard the regional breakdown on that from Adrian. We also achieved the record 3% net dollar retention rate in the twelve months ended December 2024.

We drove operating leverage, which delivered a two point percentage point improvement in adjusted EBITDA margin As a result, adjusted EBITDA is up 55% to $24,100,000, the largest profit we've ever reported. Equally as important, during the year, our adjusted free cash flow that is operating cash flow less leases and CapEx, was $17,000,000, demonstrating our ability to convert profit into cash. Looking in more detail at our retention rate, it is important to note that most of our revenue comes from existing customers many of whom have been with us for years. Our high and resilient retention rates support our visibility into future bookings and underpinning our guidance. We aim to increase retention rates over time by both reducing gross churn and increasing net net account expansion. In 2024, we increased net retention to a 3% the highest ever reported. We saw an improvement in our gross retention rate to 85%, highlighting our compelling value proposition and the return on investment that customers gain from our solutions. Net expansion improved materially partially driven by the implementation of new packages with the launch of innovative product features in q two last year. Regionally, North America saw a material 10 percentage point increase in net dollar retention both as a result of new pricing and packaging the success of our go to market strategy and is now ahead of group average.

Retention rates in all of four focused markets are now over 100%. Let's take a look at the income statement from a management view down to a EBITDA excluding stock based comp and D and A. An IFRS statement and reconciliations can be found in the appendix this presentation. We delivered revenue of $211,000,000 and a gross margin of 81%. Is a slight decrease in margin on last year, reflecting higher retention sales commission, especially in North America. The customer success teams here really exceeded their targets as just discussed. And have been rewarded accordingly. Customer acquisition cost or the cost to acquire new customers reduced as a share of revenue. That's despite a lower benefit from capitalization of sales commissions the net impact of which was $3,000,000 versus $4,000,000 last year. The absolute increase in CAC to $57,000,000 was driven by higher sales costs and marketing spend, but the relative reduction while increasing new customer acquisition cost shows better operating efficiency. We're continuing to invest into tech, product, and trust. And are bringing new people on board in this area, so costs increased to $53,000,000. We also had a higher capitalization of product development costs as we develop and launch more new product features.

At the same time, we saw operating efficiency in the trust and content areas thanks to the deployment of better technology. G and a is where we expect to continue to gain more operating leverage in the short term. Total expenses were $34,000,000, excluding stock comp and DNA, which is down as a percent of revenue. We drove this via good cost control and operating leverage, resulting from strong revenue growth in the period. [indiscernible] business model. The long term margin potential of this business is significant. Given the massive market opportunity in front of us, our top line guidance remains for sustained mid teens growth each year for the foreseeable future. With incremental improvement in operating leverage. As we have previously outlined, at maturity, we can achieve adjusted EBITDA margins over 30%. In the near term, we expect g and a to reduce as a percent of revenue as we cover our group costs more efficiently. The next area we'd expect to generate leverage from is our tech and content spend. We don't expect progress here to be linear, and we've already that we can achieve operating leverage through the better use of technology. Innovation for our customers, drives retention and expansion and so remains a crucial part of the business.

However, product features will be developed for a growing customer base allowing us to generate leverage in time. Finally, we do anticipate an improvement in sales and marketing efficiency. Near term, though, this spend is driving new customer acquisition delivering the mid teens growth rate we have discussed and allowing us to capture the tremendous market opportunity ahead. Take a look at the movements in cash over the year. We generated $29,500,000 of adjusted operating cash flow net of tax in the period, on the backs of 20 on the back of 24,100,000.0 in adjusted EBITDA. We invested $9,600,000 into CapEx, largely capitalized product development costs, and our London office refurbishment. Taking into account principal elements of lease payments for our offices, and a 1,700,000.0 landlord contribution to the office build out, we generated adjusted free cash flow of $17,100,000. Our effective adjusted cash balance before equity transaction was hundred and $8,600,000. After employee stock option exercise proceeds of $5,200,000, we spend $43,000,000 buying back 16,000,000 shares, about 3.8% of shares outstanding prior to the start of our first buyback. Capital allocation policy prioritizes investments in the business first. This includes innovation to drive growth and investing in our people.

While we also retain the flexibility to engage in targeted m and a, there is currently no active m and a agenda. And so after satisfying these priorities, we remain committed to return excess cash to shareholders. Today, we announced that we're continuing our buyback program by a further £20,000,000. On taxes, 2024, we paid cash taxes of $3,600,000 versus $1,300,000 in 2023. We also had a meaningful credit of $9,100,000 mainly from activating our deferred tax assets in '23, while in 2024, we recorded a smaller credit of $1,100,000 which impacted EPS year over year. We have now recognized the deferred tax assets associated with our Danish and UK entities on the balance sheet. These amount to $18,000,000 of cash tax shield remaining, having used some in '23 and '24. As always, there are limitations on how these losses can be used, so you should expect some cash tax payable each year. Note that our US tax losses have not yet been activated. There are reconciliation slides in the appendix for adjusted EBITDA, EBIT EPS, and free cash flow. Given how much the business has evolved since we listed four years ago, and with Adrian's strategic clarification and focus on data, we have taken the opportunity to ensure that our publicly reported KPIs remain aligned with our strategy.

As a result, we have slightly revised the KPIs we report to represent how we manage the business internally demonstrate value creation over time. We have provided any metrics we will no longer be reporting on one final time, and these can be found in the statement. The metrics outlined here are our new official KPIs, but we will, of course, also continue to disclose annual recurring revenue and average annual contract value of bookings. Most of the metrics are unchanged, but there are a few things to note. Trust metric is the average star rating of reviews received in the period rather than our trust score on the platform, which takes into account all reviews received over time. The definition of number of reviews has slightly changed, It is now the number of active reviews on the platform. Historically, we reported the number of submitted reviews which include reviews subsequently removed, for example, by our automations, or those that consumers mistakenly left on Trustpilot's profile page intended for other businesses on the platform. Our data clarification exercise is now complete, giving us better insight into both consumers and businesses. Coming to the outlook for this year. Given the strong bookings growth we achieved in 2024, we expect constant currency revenue growth to be ahead of our long term mid teens guidance.

However, reported revenue may be adversely impacted by FX, given we saw some softness in the euro and sterling versus the dollar going into 2025, increasing volatility. The appendix of this presentation includes a breakdown of the 2024 rates, to help you estimate the FX impact throughout the year. Whilst no business is immune to macroeconomic pressure, we have proven in prior years that we have a strong and resilient model and can continue to deliver solid growth and strong retention in times of macro uncertainty. We're managing the business to deliver further operating leverage this year, which we expect to result in a two percentage point improvement in our adjusted EBITDA margin. Therefore, we expect adjusted EBITDA to be slightly ahead of current consensus The most recent consensus range was between 26 and $31,000,000, with a mean of $30,000,000. And with that, I'll hand you back to Adrian for a strategic update, Jan.

Thanks. Hello?

As I mentioned earlier, when I started out as CEO, I said, I aim to drive strategic clarity, rigorous execution, and improving profitability. We did exactly that in 2024.

Our strategy is clear. We're the world's largest independent platform for customer feed. People help each other make the right choices, and businesses build trust, grow, and improve. By listening to their customers, by going deep in focused markets and verticals, we maximize the inherent network effects of the platform. Our SaaS business model reinforces this delivering customer expansion through product innovation. This is all underpinned by an ongoing focus on trust in the platform, and none of this, of course, would be possible without great people and a strong collaborative culture. Taken together, all this delivers efficient growth. The growth flywheel, I'm sure, is familiar to you by now. It starts with people who trust us enough to read and write reviews. That motivates more businesses to engage with the platform, actively inviting customers to share their feedback, and publicly showcasing Trustpilot. That in turn leads to more people finding out about us. Are also real network effects. The platform is more useful to customers if more business engage with it. And more valuable to businesses when more people pay attention to it. This network effect, combined with our 300,000,000 strong review history and trust in the brand gives us a very real competitive moat.

To strengthen this, as I've mentioned today, within industries and countries, we go deep and [indiscernible] And we work on both sides of the growth the growth flywheel. In 2024, we delivered a 23% improvement in the number of reviews on the platform. The number of 19% to a 40,000,000,000. Businesses use power of our brands to drive their own growth, and we, in turn, benefit from their use of the Trustpilot logo in their assets which vastly multiplies the reach of Trustpilot. In addition to our trust boxes, our brand continues to get tens of billions of impressions every month from appearances across all media channels. Including TV and Google search impressions. It's this whole hive of activity around our platform rather than any one particular metric that gives Trustpilot so much influence and such rich potential for monetization. Pilot, we believe trust in the age of AI will be achieved by technology amplifying real human experiences. Trust is our foundation. And it's essential that we maintain the integrity of the platform. We do this in three main ways, technology, collaboration with allies across our reviewer community, and proactive enforcement against malicious actors. We continuously improve our detection technology leveraging machine learning and more recently generative AI with a number of new models introduced last year.

Our large datasets allow us to continually refine and optimize our approach. In 2024, we removed 4,500,000 fabricated reviews, 90% of which were removed automatically, freeing up people to deal with more complicated cases. Our legal team continues to tackle misuse, and we won an important case against review sellers in November. Following proceedings issued by Trustpilot in The UK. Finally, our public affairs team engages with regulators across The UK, US, and Europe to educate them on what we're doing. And how regulation can help consumers. As I mentioned last year, The US, we were pleased with the Federal Trade Commission's rule banning fake reviews. We're helping businesses to comply with the FTC. And welcome regulation regulatory action like this which promises fairness, transparency, and openness. In general, price at Trustpilot is driven by product innovation. Greater greater influence of the brand, and evolving customer mix. As we've already said, 2024 saw a significant increase in the activity on our platform. And our customer mix continues to evolve to support higher annual contract values. Last year, we introduced a number of new products, such as market insights and review spotlight designed to appeal to enterprise customers by focusing on the improved part of our value proposition.

Helping businesses get better by understanding what their customers are saying. In 2024, pricing was also supported by an additional one off factor of repackaging. As part of the go to market review I conducted when I arrived Trustpilot, we reduced the number of paid packages down to four and migrated all of our customers onto one of these. This better differentiates plans and demonstrates clear value with additional features as you move up through the plans. You can see the change in account plans that we saw as a result in the chart on the slide. We've moved from a lot of complexity in different modules to all customers moving on to one of the four plans as they renew. Migrating all customers to new plans is obviously not something we plan to do every year. But we'll continue the basic approach of delivering product innovation to support greater monetization. This chart shows in a bit more detail how we think about creating value for businesses. Can see that it's all interconnected, whether it's inviting customers to review a business, empowering them to engage and connect with feedback, enabling them to grow by accelerating online conversions with social proof, and using insights to improve their customer experience strategy.

We're building our b to b road map around this, and we find the real match happens when many of our features are used together. For example, the more reviews you attract, more useful the insights products become. Social proof accelerates our customers' growth and improves their marketing ROI. While better customer experience improves their retention rate and efficiency of growth. Our product team's already working further features, large and small, for businesses and consumers. They'll be supported by the arrival of our new chief product officer, who starts on Monday. Kieran Dines joins us from Matillion, a data and AI SaaS business where he was chief product officer. He has an extraordinary pedigree leading product teams internationally. We recently rolled out a new company profile page This is the page you'll have seen that contains all of the company's reviews, and so it's the most viewed on our platform. The new profile page surfaces content people find most useful while retaining all the previous information. Giving a quick overview of a business. Just last week, we announced Trustlayer, at the Humanx AI Conference in Las Vegas. This provides businesses with trust signals and insights from across our 300,000,000 plus library of reviews.

We're initially working with Advent International and Felix Capital to help them across the investment cycle, and we're further developing our offering in this area, targeting businesses across a number of sectors, including investment, looking at you, which may not naturally have thought about using Trustpilot. This product will amplify customers' voices even further and make businesses' trust score matter even more. In 2025, our gold releases are focused on the grow part of the business value proposition. Helping customers to grow their business by engaging the feedback, and better using social proof. We're currently beta testing the new features, which will be released in q two. And I look forward to sharing more about them later in the year. So in summary, Trustpilot were fortunate to operate in a vast addressable market with a robust network driven business model and a completely unique approach. Twenty twenty four has shown we're delivering against this immense potential. What's clear on our strategy We've executed well across technology and go to market. Our profitability is improving. There's still plenty to do as we capitalize on the powerful network effects inherent in our model. In 2025, we will double down on trust in the age of AI, drive more product innovation to fuel the growth flywheel, and, of course, continue to improve profitability.

Finally, I'd just like to thank all thousand or so trustees around the world. It's your determination, focus, and hard work that delivered these results and I'm deeply grateful. Now let's Hannah and I will take you through We'll take your questions both in the room and online. Thank you. [indiscernible] Hi. Hello? Yep.

Morning. It's Jessica Pop from Peel Hunt. Three questions, please. The first is just on the product launches some of the kind of gold star products that you've mentioned. I'm How are we going about launching them? Are they going into the top tiers? To encourage people to upgrade, or is it a matter of they're spread across the tiers? That combines with price rises across the year? How are you launching them and and the strategy around that? The second is just on, enterprise clients. I mean, you've won some nice enterprise clients, including HSBC this year. In terms of your enterprise client strategy, are you going out and winning new enterprise clients? Actually, do enterprise clients tend to come in through a more standard tier and you're cross selling them up into the enterprise tier? The final question is there's obviously a lot of noise macro wise, Have you seen any impact in certain categories or regions Any color on that would be helpful. Thank you. Sure.

Maybe let let me deal with the first two, and then I'll hand to Hanno for the the macro ones. Let's start with the products features. We, as I said, are are introducing our gold releases for 2025 shortly in in q two. The plan with those is to, is to put them into the existing packages at at different levels so they won't all go into the the top tier plan. But, obviously, we're planning it to motivate upgrades to customers to take advantage of the new features. And and we're, of course, particularly focusing on the top tier plan, which is our enterprise plan. Many of these features are designed with enterprise customers in mind. On your question about enterprise clients and and how we bring them in, how we cross sell, It's a bit of both. To be honest, we do see some very large companies, who are not yet on our top tier plan, obviously. We need to show them the value, show them the reasons why they should upgrade. And we bring many onboard initially right on the top plan where where obviously they should be. And just to to recap on sort of why that's important, if you look across our whole business value proposition, build trust, grow, and improve, If you really wanna get the most out of that, then the sort of products that you'll find in our plan are really, really useful for doing that.

Particularly at the moment when it comes to the improved part of the value proposition. You know, you want to turn the customer feedback into insights that actually make you a better And, you know, to give you one example, I was sitting recently with the boss of the car leasing business, He has 500 different branches. He uses Trustpilot. Pilot across his 500 branches to evaluate his managers in different branches, and tell them how they can get better. So that's, you know, an example of the customer who's really digging into the data using our using our insights features to manage his business day to day.

Okay. And on the on the macro question, I think probably on many people's minds. So let me just start with saying no. We're not seeing anything in current trading yet, but we're also early in the year, and we obviously have a business with long term contracts which come up for renewal on an on a monthly basis, staggered throughout the year. But so far, this point in the year, we were kinda pretty much exactly where we wanted to be and expected to be. [indiscernible] I think, particularly, there have been some ructions in The US, and I won't ask you guys to predict exactly where that all ends up. Today. You give us a little a bit of a sense for how you might think about any short term downside risk set against sort of the long term opportunity if things do worsen out there and and what what what that could mean for book bookings growth this year. And then just a quick follow-up to that. You more or less SME exposed in The US versus the group average? And then secondly, if I could jump just off a couple on gross dollar retention. You give us a bit more of an idea of as to how this splits between enterprise and SMEs?

And are there any major reasons for some of some of the churn particularly SME? And I can imagine, for example, that it's much more likely that certain SMEs go out of business and so on, that would bring churn down and so on. Is is it that sort of thing that you you're seeing that leads to churn at 85 oh, sorry. Retention at 85%, or is or is there something else?

Okay. Let me try to take them in order. So you what we've seen in, I think, in '22 and '23, when there was more macro uncertainty, inflation, etcetera, I the business has proved to be really resilient, and that gives us a lot of confidence We have annual contracts that renew at pretty predictable rates. You saw in '22, '23 that the gross retention rate didn't materially move. And it's it's testament to the value that we're delivering to our customers. And also, keep in mind, the average contract value is less than $10,000, so it's actually pretty small ticket item for most of our customers, and it delivers real tangible value. So if you are trying to acquire customers, especially on the smaller end, and you know that having Trustpilot helps you with that. It efficient it it drives the efficiency of your marketing spend, for example. It's not something you'd necessarily cut first. And so that gives us a lot of confidence sort of to manage through whatever MAC uncertainty there will be coming. And I I'm I'm not in a position to predict anything. It's sort of changes every day. The mix of customers between SMEs and mid market is not materially different in The US.

And the gross retention rate and and, in fact, the net retention rates between those three segments are pretty much what you would expect if you sort of looked at what is a typical enterprise retention rate across the net, what's a mid market, and what's a small distance retention rate. But we're we're not sort of just building it in more detail.

I think just a a couple of things maybe to add, on the macro picture. I think what one is Trustpilot has shown itself historically, to be pretty resilient through, through tough times. And then remember how diversified our model is. You know, we have business across all sizes, across all verticals, across pretty much all geographies. So we're about as diversified as it gets when it comes to to exposure to the macro three please. Just just first of all, on the benefit from switching customers on to new plans in '24. Could you give us an order of magnitude of what that was given you're not expecting a kind of big deceleration in growth this year. Do you think you can compensate for that falling away in terms of the pricing you can get from upselling within those four bands? The first one, Secondly, just on Trustpilot. Could you just give us a little bit more insight into how that's different to the insights you're already giving customers? Maybe talk about monetization. And then is there any risk of defocusing and and kind of taking attention away from the core business when you move into selling to people who are just interested in this maybe from an investment point of view.

Rather than from getting the insights from the actual reviews for their own business. And the third one. Macro. No.

I think we've done the macro. That's easy.

Some of those.

Yes.

So so I can take with this. So firstly, you were asking about moving on to the new plans and how much that accounts for versus everything else. So we don't break it down in that way. Obviously, it all led to the improvements in net dollar retention from 99 to a 3%. But as I mentioned earlier, there are sort of three ongoing factors that support our monetization at Trustpilot. One is product innovation, The other is the like, activity on the network itself and just Trustpilot growing more and more influential as a platform. And the third is the movement in in customer mix. So all of those things continue. But, obviously, we are not gonna do an annual massive repackaging and migration. I'm sure you can all understand why we wouldn't wanna do that As I say, the product innovation cycle is absolutely continuing. I think, you know, one of the best things about these results in 2024 is that we've done it in the right way. You know, we have delivered emphatically product innovation both on the b two b side and, in fact, on the b two b p c side with the rollout of the new customer profile page, which is the most important page of the our consumers our consumers look at.

So we've really done product innovation in in, I think, a a fantastic way in 2024. And the reason we've been flagging, you know, things coming up in the next few weeks in terms of the gold releases for 2025 is just to say, look. That wasn't a one off. We this is our strategy. We are going to continue to to deliver on it. And there's a very long road map of things we can do to to improve how we deliver on on on our value proposition. You asked about Trustpilot and what extent it could be a distraction, how different it is from what we've already got. So the idea is there'll be a couple of things. One will be an API that gives customers access to the full tech of reviews right across our platform. That helped those consumers who've written the reviews to get their voices heard. You know, no one wants to shout into a vacuum. And we think it has many, many use cases you know, be it investments, consulting, social listening, there's huge amounts of we've had in the past huge amounts of interest in in what folks are saying on the platform, and this is just an easy way to access it.

We'll also have a web UI so that folks who don't want to use an API can just you know, log in and and navigate around and get insights from the data that way. Some of that is already available, in our top product So, for example, with market insights, you can see something about how you compare to to a competitive set in your market. This is a feature set that's fully fully designed for that use case. And can be bought on a standalone basis from five businesses who might not be using the rest of of what we do. In terms of it being a distraction, I mean, it's really continuity. You know? Our strategy, we've always said, is product innovation to, to support growth. And this is just, you know, another feature. It's another example of of us doing that. More. That's good to see.

Thank you. From again. Just a very quick one. Are you seeing any change in the ratio of inbound versus outbound contract sort of interest? Are you seeing more inbound in in certain markets versus outbound sales calls?

Nothing that would materially change. I mean, we're constantly working on our marketing campaigns and refining those, and so they should drive more inbound over time as we invest more. And I think, especially last year, we've been very successful in in certain campaigns towards especially on the enterprise side. More targeted across multiple channels. And those those have driven really a good acceleration of the enterprise business in the back half of the year.

Hey. I think we're done. So, I mean, just to to recap some of the some of the key points, I think as as we said earlier, it's been it's been an excellent year. Delivered, we delivered very strong top line growth with the 21% bookings growth, great improvements in net revenue retention, supported by product innovation, and we've improved profitability as well. I'm really looking forward to getting more product innovation out in the coming weeks, but thank you all for your for your questions.