Believe Posts $167 Million in Quarterly Revenue, Buys Stake in Indie Label

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French digital music company Believe saw revenue rise 27.1% to 144 million euros ($167 million) in its first full quarter since going public on the Euronext Paris exchange, the firm announced Wednesday (Nov. 3) in an earnings disclosure. Believe’s third quarter exceeded expectations, with a growth rate surpassing those of three music giants that have announced earnings in the past week: Spotify, Universal and Sony.

Believe, the parent of indie distributor TuneCore, had market share gains in Asia, Latin America and Europe, and credits a post-COVID recovery in ad-supported streaming services and a lighter-than-expected fall in physical sales for beating its forecasts.

Having raised 300 million euros in its June 2021 IPO, Believe can aggressively acquire labels, invest in internal services such as its ad-booking platform, and dole out large advances to win clients. To improve its standing in its home country, Believe also announced on Wednesday the purchase of a 25% stake in Play Two, the largest independent label in France, and has options to own the label outright in the next few years. Believe did not reveal specifics of the Play Two deal, but stated it paid a multiple of earnings similar to its previous investments and values the label under 50 million euros ($58 million).

In Believe, investors get exposure to 850,000 artists — and many small labels — not represented by the big three labels. Its business model is broken into three tiers. For the bottom tier, Believe provides automated solutions — such as its digital distributor, TuneCore, which it acquired in 2015 — that “democratizes market access,” explains its earnings presentation. The middle tier contains emerging-to-established artists and labels that require services to manage a high volume of content and data. At the top, established artists “are seeking superior digital expertise.” The company services over 150 digital service providers such as Spotify, YouTube, Apple Music, Deezer and QQ Music. Believe also distributes music to social media platforms including TikTok, Instagram, Snapchat and Facebook.

More acquisitions should help the company achieve its ambitious targets for the next three years. Believe expects acquisitions will add an incremental 110 million euros of revenue starting in the second half of 2022. For the entire company, Believe is targeting a cumulative annual growth rate of 22-25% through 2025 — most of the gain coming from organic growth and acquisitions, the remainder from market share gains. It expects adjusted EBITDA margin to improve to 5-7% of revenue, roughly double the 3% it expects for the full year and rise to about 15% over the long term.

Q3 Financials

Revenue: 144 million euros, up 27.1% y/y
Premium solutions: 135 million euros, up 29% y/y
Automated solutions: 9 million euros, up 2.6% y/y

Nine-Month Financials 

Revenue: 404 million euros, up 30.7% y/y
Premium solutions: 378 million euros, up 32.2% y/y
Automated solutions: 26 million euros, up 11.8% y/y

Geographic Breakdown 

Asia Pacific & Africa: 32 million euros, up 58% y/y
France: 24 million euros, up 15.4% y/y
Germany: 25 million euros, up 2.2% y/y
Americas: 21 million euros, up 35.5% y/y

2021 Guidance

Organic growth “at least” 27%, up from 23% or greater
Adjusted EBITDA margin growth: above 3%, up from “slightly above” 2020 margin

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