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Good day and welcome to SHRIPSET ASA Q2 2020 conference call and Q&A. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Jan Bajot, MINECA Head of IOR. Please go ahead, sir.

Good afternoon. Thank you for joining us today for the Q&A session for our Q2 results. On the call with me today is our CEO, Kristin Skogenlund, our CFO, Ragnar Korhuis, and our EVP for Nordic Marketplaces and CEO for Finn, Kristian Plintsel-Halvorsen. This morning, we held our webcast presentation for the Q2 results, and the recording is available on our IA website. And with that, I would like to hand over to Kristin.

Thank you, Jan Boye, and welcome, everyone. I am pleased to report that we, despite the COVID-19, delivered solid financial results this quarter, and our measures enable us to safeguard our employees and continue to deliver fully functional and relevant services to our customers through this time. During the second quarter, revenues have improved, and EBTA for Shipstead, excluding Aravinta, was knocked down. 498 million, which is significantly better than the first quarter. Furthermore, I'm excited that we have come to an agreement with Sanoma to acquire their Finnish multivertical online marketplace Oikotie. And with this acquisition, we strengthen our position in jobs and real estate in Finland, and we are confident that this acquisition will help us create more value for all our stakeholders going forward. During the second quarter, our Nordic marketplaces have seen a revenue decline driven by lower volumes, specifically in April and May, while temporary cost savings secured still solid margins. In June, volumes have continued to recover in all verticals, and motor seems to be rather resilient, actually, showing year-on-year volume growth for June in both Norway and Sweden. If we look at news media, revenues from digital subscriptions showed strong growth. Advertising revenues declined significantly year-on-year, driven by COVID, but yes, performance was strong given the market environment, and this is due to focused product development and high sales activity. I think this again was enabled by our decision to not do group-wide temporary layoffs back in March, but rather focus on the possibilities for the mid-term. EBTA is down year on year, but improved significantly compared to the first quarter with a strong margin of 8%. The announced cost program is on track and implementation has started. If you look at lender, we have seen an underlying revenue decline this quarter, but trends have also here improved in June. And finally, our e-commerce businesses distribution in Prisjakt had had a tailwind from the changes in consumer behavior during the COVID pandemic and recorded strong revenue growth in the second quarter. So with that, operator, I'll turn back to you, and I hope you can organize our Q&A session, please.

Thank you.

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Once again, if you would like to ask a question, please press star one. We will now take our first question.

Please go ahead. Your line is now open.

Yes, good afternoon, everyone. I hope you can hear me well. This is Adrian from Bank of America. So I've got a couple of questions, please, two in the short term, the one for the long term. First of all, you made this morning some comments around the margin outlook for Swedish classifieds. I'm just wondering if you could clarify for us what you meant by margin decline in H2. Is it year-on-year? Is it compared to the first half? And if you could provide maybe some quantum, that would be great. That's the first question. The second question is, can you discuss perhaps some advertising trends that you see in Q3 2020 for the news media business? And the third question, more for the long run, I'm just wondering if you could discuss the economics of the transactional model in classifieds from an ABDA margin perspective. How long does it take to break even in this activity, and what sort of long-term potential can you achieve with the transactional model? Thank you very much.

All right. Christian here from Nordic Marketplaces.

I'll try to answer the first question about margin development in Sweden. So we had a good margin development now in Q2, which was stable compared to Q1, and a slight decline from Q2 last year. And we see that there will be most likely a slight decline also in the second half of 2020. But we are not being more specific than that, I think.

I can then comment on the advertising trends in news. There's been an improvement during the quarter. That trend continues into July, but we are two weeks into July, and July is a special month anyway. I think it's very difficult to predict the advertising market because it's even more unstable and unpredictable than it normally is. We have, however, seen that some of the product innovations that we did during this quarter, launching new advertising products, has had success. We also see that, for example, content marketing works really well and we see good growth in that. We also see that it's the national sort of more classic FMCG, et cetera, customers that still buy a lot of advertising, while it's typically the more retail-oriented, regional, smaller customers that suffer. So I don't know if that answered your question fully, but I believe it's hard to give visibility on the advertising market going forward. You want to do a transactional?

Yeah, and then I can try to respond to the last question around transactional models. We have said that the transformation to transactional models will be a key growth driver for Nordic marketplaces going forward. So it's an area of a lot of interest and effort from our side. And we are already doing quite a lot here. Some examples is Casa, which is a transactional model for rentals in real estate. We have Netbil, which is then the consumer to business side of car transactions. And we are also doing C2C transactions. And with regards to the economics of it, we see that when we transform from an advertised ad oriented model to a transactional model we may increase revenues as much as 10 15 even 20 or 25 times in some areas so that that is really interesting even though the whole volume will not transform that way ebda margin wise we think that some of these models will have a lower margin because there are costs related to performing the transaction. So there may, over time, but I think it will take some time, be some margin contraction as a result, but of course then with the higher absolute EBITDA.

That's extremely clear, Christian. Yes, very, very clear. And just very sorry to be picky on my first question. When you say a slight decline, you are referring to the 42% you have achieved in the first half of the Swedish classified provident.

Okay, very clear. Thank you so much.

We will take our next question. Please go ahead. Your line is now open.

Good afternoon, it's Silvia Cuno from Deutsche Bank.

My first questions are related to the acquisition in Finland. You mentioned this morning that you are planning to implement the marketplace playbook to leverage the generalist traffic with the vertical penetration. So can you please share some operational metrics to point to the benefits of operating both generalist and vertical models? For example, in terms of what sort of traffic typically also visits at least a vertical trade over time. And I'm just wondering if this will be applicable in the same way to Tory and Oikoti, even if you maintain the brands separate. And also, can you please discuss the market share position of Oikoti in terms of customer penetration for the jobs and real estate verticals? And finally, Can you share some details on the positive performance in the car vertical? Both Norway and Sweden returned to growth already thanks to the new product. Can you please talk more of what that gives to car dealers and what was the underlying performance of the listings? And also any detail on the local car markets there would be great. Thank you.

All right, those were a lot of questions, but let me try to answer them. Yes, you are right. We are going to leverage the playbook that we've used before where we try to combine a generalist with very high traffic and broad reach, but maybe not the best monetization mechanisms with then verticals that have Usually lower traffic, but better monetization. I showed some examples of that in the presentation today, where you could see the difference between Torri and Oikoti. We are planning to use the traffic of Torri to drive more users than to Oikoti, or even use some of the ads on Oikoti and distribute them through Torri. I can also just mention that the Tory has 33 million visits per month, while Oikoti has 11 million visits per month, just so you can compare. And we can do this even with the separate brands. We have done that in many other countries. Spain is a good example where this is used successfully in that way. Then the question was around the market shares in Finland. I don't have the exact numbers of market share, but what I can say is that in jobs, Oikottie is a clear winner. a clear leader, especially in the white collar segment. In real estate, we are a strong number two, just slightly behind the number one, which is Eto'ovi from Alma Media. And we are in a quite strong position in the Helsinki region, but I don't have the absolute market share numbers. Then finally the question was about the motor vertical and I took it as that question was related to Norway and Sweden. Yes, you are right. The car or motor market is actually the market that has normalized the most and which is in positive territory. both for Norway and for Sweden, where we have seen a positive growth, particularly towards the end of the quarter.

Thanks.

Just on the last question, on the motor vertical, also the question was if you could maybe share some detail on the underlying performance of the listings, given that I understood this morning that the growth was driven by the new product you introduced in CAR. So if you could talk about the trends underlying.

What I can say is that traffic has been growing very solidly in all the sites. And that also means that the underlying performance of the products that we have in the market has also been very good. Yeah.

And just a comment from my side, I think Silvia also relates to maybe to the effect in Sweden from the change of the pricing model which we had last June and also in addition then we introduced like bump as features so before we had a slot based model you could basically just repost your car to come on top in the listing. Now with the new pricing model, you basically have to buy a bump to come on top. So this also has an effect basically on the revenues in Blockit, which then leads to this 11% underlying revenue growth in the motor vertical in Q2.

Okay, very clear. Thanks.

Once again, if you would like to ask a question, please press star 1. We'll now take our next question. Please go ahead. Your line is now open.

Good afternoon. It's Lisa Young from Goldman. I have a question on Finland. Would you be able to elaborate on the timeline for running out new products and services once you consolidate Oikoti and Do you think it could require further investments in the near term? And when do you think we should start to see the benefits? And also curious why you don't want to integrate the two platforms because that could have potential results in potential cost savings. So just curious to hear your thoughts around that. The second question is on Lendo. I think you mentioned you've received a PSD2 license. I'm just wondering if you can explain sort of what that means and how should we think about the potential opportunity, expansion opportunity there now that you have this license. The first question then is on news media. I mean, clearly very, very strong cost in Q2. I'm just wondering if you could maybe give some color in terms of how much of this 100 million cost saving program you're expecting for the year was already done in Q2 and whether it could be upside to that 100 million number for this year and potentially to the 500 million number that you were talking before by the end of next year. And the very last one, if I may, obviously jobs is a clear and I think an area of concern for the investors given it's more cyclical. Is it possible to have an exit rate for jobs at the end of June for Fin? and how should we think about the lag between the listings and revenue?

Thanks.

Okay, I can begin with the first question around Finland and the timeline for launching new products and services. I think it's fair to say that Particularly in the real estate area, we are going to invest in the time going forward to really strengthen the offering in the market and to be able to move from this strong number two position to a winning position in the market. So that will take some time. We're not going out with a set timeline for that, but you can expect that there will be investments for some time to really capture that number one position. Then when it comes to combining the platforms and synergies, I think first of all, I want to say that I think the... The main rationale behind the acquisition in Finland is not cost synergies, but it's about scale and presence in Finland. That said, we are going to combine the two organizations into one integrated organization, one integrated technology team, for example. And therefore, I think it's probably likely that we, over time, will find that some things will be developed together and hence be a more efficient organization from that point of view, also on the technical side.

All right, I can try to do the one on the license. So in June, we were granted that license by the Norwegian Financial Supervisory Authority. And basically, it makes it possible for us to expand our service offering into payment and account services, and that will open up opportunities for serving both our users and the bank partners better than today. It will also enable us to create new types of services, and we will get back to you when we have those specific services ready for the market. I can also add that the license is granted in Norway, but it can be utilized in all markets through this global setup that we have established in Norway now. And then when it comes to the cost savings in news media, we haven't quantified how much of the new savings are taking place in the second quarter, but it's just an indication to say that some of it is already being implemented and showing. But I think it wouldn't be correct to try to specify too much. However, I think it's fair to say that we expect this year's savings to be north of the 100 million. I would be careful to try to be too specific as of how much beyond the 100 million.

And then there was the question around the jobs market and the exit rate. And I don't think we will give concrete numbers on that. But we can just reiterate to say that there has been an improvement throughout the quarter.

Okay, thanks very much. Can I ask us actually another question, please? On M&A, now that you've done Oikoti, and I think your leverage is going to end up over two times at the end of Q3, do you think that means an opportunity in Sweden is probably less imminent? How do you think about future M&A opportunities for Shipstead?

No, I think, first of all, I mean, you know, In the not too distant future, I mean, this will again be leveraged. And then I also believe if the right opportunities occur, it should be possible for us with our very good bank relations to manage to finance, have a bridge finance in the shorter term if that should be necessary. But, you know, we feel we are in a solid financial situation and we will keep pursuing interesting opportunities.

Okay, thanks very much.

We will now take our next question. Please go ahead. Your line is now open.

Yes, hi, this is Iric from Carnegie and Oslo. Thanks for taking my questions. Many have been answered, but I have a couple. So the first is on FINN. Just wondering how you're working with your jobs customers there to re-boost the listings. Are you solely dependent on the return of the job market? Or are you considering other short-term actions, for instance price or payment deferrals to boost listings? My second question is on your targets. You stick to the 8-12% revenue growth in Nordic marketplaces. Based on historical growth rates in Olkotia and the potential you see now, will this asset come in and contribute to 8% to 12% revenue growth from day one, correcting for COVID, of course, or should we expect that it will take some time before growth really ramps up to the 8% to 12% level? I'm just trying to get a picture of what the market should expect in form of P&L impact going forward. And my final question is that you seem to be doing a lot of things right in distribution with your new businesses there. There has surfaced rumors in the Nordic that Amazon is close to entering the market from a central warehouse in southern Sweden. Could you please share your thoughts on how a potential Amazon entry would affect your new businesses in distribution? And do you see this mainly as a threat or a potential companion? Thanks.

I can begin by commenting on the jobs market in Norway. It is right, as you said, we are to a large degree dependent on the underlying jobs market because we are so strong in Norway that we will follow the underlying market. That said, there are things we can do and the sales team that we have, they have worked quite a lot now. to work with customers to sell upsell products and so on that has actually increased the revenue in that vertical. We have not done anything in terms of reduced prices or deferred payments and so on as we have not seen that to be required in the jobs market. And then with regards to the long-term targets of 8-12% growth, we are not commenting on individual sites or assets with regards to that and also not in the short term. This is a medium to long-term target.

Okay, I'll do the one on distribution. I'm happy you say that because I am personally extremely excited about it. And I think you might be right. We also have reasons to believe that Amazon is on its way. And for now, we have the distribution business only running in Norway. And as you know, we are a rather dispersed, populated country with a difficult geography. So for Amazon to build up a separate distribution distribution network to serve Norway is very unlikely. So they will seek partnership with existing players. And beyond that, I can't really comment because it's hard for me to predict what they will do. But it would surprise me if they establish their own network.

Okay, perfect. That is very clear. Thanks.

We will now take our next question. Please go ahead. Your line is now open.

Thank you.

Actually, I just have two questions left here. Especially on the UBITDA margin guidance for Norway, the guide for being in the high end of the 30-45 All I can see that implies quite sharp margin contraction in the second half of 2020. So just wondering if you could talk a bit about the drivers behind that assumption. And then secondly, I think I read something about your net deal transaction being under investigation or coming under investigation of the Norwegian competition authorities. I'm just wondering if you could talk a bit about that as well, what their main concern is, and what do you believe the main possible consequences could be of this?

Okay. It was a little bit difficult to hear you, but I think I got the question. First, it was about EBITDA margins for Norway, and we indicated that we will be in the 40% to 45% range, and if the positive trend of the market recovery continues, we will end up in the upper end of that range. I think then it's important to note a couple of things. One is that usually Q2, for example, is usually the strongest quarter that we have in Finn, while Q4 is actually the weakest quarter of the year. So that's also kind of a normal thing in any year and then in addition I also said that we have now done quite significant temporary cost reductions and as I indicated in today's presentation we are now seeing the market to recover and we will increase our investments in growth again in Finland that will also potentially contribute with some softer margins in the second half compared to what you have seen in this quarter for example. And then the second question was around Netbil and it is correct that the competition authority is reviewing the deal and we are in dialogue with the authorities and we hope that that will resolve itself, but we are not commenting on the details of that review as it is ongoing.

Once again, if you would like to ask a question, please press star 1. It appears there are no more questions at this time. I'd like to turn the conference back over to Mr. Jeanne Baioa-Maineka. Thank you.

Great. That wraps up the Q&A for our earnings call today. Thank you so much for joining us, and myself and the whole management team is looking forward to speaking to you soon. Thank you so much.

Thank you.

Thank you.

That concludes today's call. Thank you for your participation. You may now disconnect.