Adtraction Group AB

Hello and welcome to the presentation of Attraction's first quarter results. Today's presenters are Andreas Hagström, CFO, and myself, Simon Gustafsson, CEO. So if you have any questions, please post them online and Andreas and I will be happy to answer them. So let's look at the short story of the first quarter. We are happy to report that growth continues in the first quarter. Sales grows by... Hello and welcome to the presentation of Attraction's first quarter results. Today's presenters are Andreas Hagström, CFO, and myself, Simon Gustafsson, CEO. So if you have any questions, please post them online and Andreas and I will be happy to answer the questions after today's presentation. So let's look at the short story of the first quarter. We are happy to report that growth continues in the first quarter. Sales grows by close to 12%. So does gross profit. We have both organic and acquired growth. And of course, Affiliate Future helps drive the acquired growth. Both finance and e-commerce are growing, which is, of course, very satisfying. And we have said this many times before. When gross profit grows, we expect EBITDA to grow even more thanks to our operating leverage. And this happens again in the first quarter. So EBITDA grows by close to 30%. Cash flow was also reasonably strong for a first quarter. When it comes to cash flow, I think it's important to look at a longer period. And if you do that, it will be very clear that we have done a good job in terms of generating cash at attraction. We report something called other, and if you look at that, you may be tempted to think that Bundler is growing by 274%. Actually, Bundler is growing by more, which I will come back to in a minute, because there's some other things in that other reporting, which is small and not growing. The important thing here is Bundler. We don't see the same picture across all markets. So I thought it'd be useful to give sort of a macro view of what's going on in the different market. And I've looked at three different categories here, good growth, growth and not growth or negative growth. So by good growth, we mean that we are reaching our goal or very close to our growth target of 20%. That happens in the established markets of Sweden and Finland. And also that happens in our European markets, Italy, Poland, Germany and the UK. We have growth, which means growth in excess of 0% in Denmark, France, the Netherlands and Norway. Then we have negative growth in Switzerland and Spain. In Spain, it's the same story as before. Markets are changing in the finance vertical and we are working to adapt to that. Eventually we will, but we're still seeing negative growth in the finance vertical. On the other hand, we have very strong momentum in the e-commerce vertical in Spain. So things are looking good there. In Switzerland, we see negative growth and have done that for a couple of months. And the reason here is that a couple of traffic sources are not what they used to be. And our response to that is to broaden our traffic acquisition and try to add more partners. And eventually we will see a recovery also in Switzerland. The finance markets are very different in different countries. So we see positive growth in many markets. In Sweden, Finland, Germany, we see very strong growth. And then we also have growth in Poland, Italy and the Netherlands. On the other hand, we are not growing. We are seeing negative growth in Denmark, Norway, Spain and France. I would say that in Denmark, Norway and Spain, we have a little bit of headwind in terms of market. And in France, we're still trying to establish our position in that vertical. So let's talk about Bundler. There's a little graph down on the right here indicating that Bundler actually grew by 350% in the quarter. That's pretty good. Obviously, Bundler is still small, but Bundler has a very good momentum. They've made great integrations. They have attractive merchants and attractive resellers. So at Attraction, we're very excited about Bundler. And we have decided to slightly increase our ownership in Bundler. We can do that because we have an option to acquire shares under the terms of the shareholders agreement. We will present more details about that transaction a little bit later on. Then other stuff is happening. We have a board member called or had the board member called Arash Hakimi at the attraction. He's been with us. for a year he's been a much appreciated board board member but at the annual general meeting which we had earlier this week he declined to be re-elected and the reason is that he is joining bundler and will work with business development and what's happened here is that uh Arash has been very interested in our business throughout this year. And of course, he's looked at Bundler for a long time and is very excited about the opportunities. So at Attraction, you cannot both have an operating role and be a board member. So Arash, I think, is more important to work at Bundler than it is to be a director. So that's that about bundler. Again, we're very excited about this. Now you're getting a little bit of sense for the growth rates that we're talking about here. We expect to talk more about bundler later this year. I will also talk about some other things here that are important to us. We are currently going through some organizational changes at Attraction. In practice, that means that there are redundancies and There are good people involved and I'm not really in a position to talk too much about this at this stage because this is an ongoing process. What I would like to do is refer to the comments in the report and then we will get back to describe the situation more in detail later on. On a more positive note, the fair tracking project is working out as we expected. Obviously, this is good for partners, but it turns out that it's also good for brands. And in quite a few markets, we've actually seen growth as a result of fair tracking initiatives. So fair tracking is contributing to growth, which is what we wanted all along. Because Arash is leaving the board of directors, we need to find one or two new directors. We are not in a hurry to do this. We have a well-functioning board of directors, but we need probably to be more than three people over time. So this is another project that we will look at. We did decide that the shareholders decided to pay the dividend according to the proposal by the board of directors. So the first tranche of the dividend will be paid on Monday. That's 1.1 krona per share. And the share has already traded X. I think that was on April 21st. Then we will have the same. as we did last year, and paid the second part of the dividend in October. So I will now say something about AI. And I think the reason that I want to comment here is that there's a lot of things happening and we see a bigger impact on our organization and the way that we work than we have before. So I just wanted to comment a little bit on that. Of course, the people most affected by AI in general, is the development. They're really using a lot of these tools, and especially in the last three to four months, an increase in the share of source code that's AI-generated. So we're actually talking about 90% to 99% for essentially all new code. This means that each developer can be much more efficient and produce much more code, so we expect to be more productive going forward. The other thing that we're excited about is business intelligence. So maybe a year ago or so, we started working with MCP servers and we tried to extract data from the platform in order to find useful reports for our account managers. To be honest, that didn't work out so well. We had a lot of hallucinations. Now we're trying a slightly different setup and we're getting very good results. So we see that account managers can really get useful data from our platform using this tool. And they can now pull reports that were simply too difficult to pull a couple of months back. We haven't scaled this yet. We're still in the testing phase, but we're very, very excited. excited and encouraged by the results so far. Then finally, we're also using agents. I will not dig too deep into this. What I will say is that there are a number of repetitive, well-defined tasks that can easily be performed by agents. And we're actually deploying this. This is not only for the tech team. This is actually that we're doing in our CFO office. And whenever there's a chance to do something like that, we will, of course, do it. I don't want to say that this is a big thing at Attraction, but we are excited about the opportunities and we're clearly finding these agents useful. So finally, on the AI side, I want to say something about traffic. There's obviously some uncertainty in our industry and traffic acquisition in general about what will happen with the AI tools. And here's a few observations that I would like to share. So first of all, we have not seen a drop in traffic as a result of the emergence of the which I think is encouraging. I also think it's very encouraging that there are actually quite a few options if you want to work within LLM. We have OpenAI, we have Anthropic, we have Google, we have XAI. And we have a couple of Chinese models. So there's a lot of competition going on here. There's no doubt that these tools over time will be, you know, attractive place to buy ads. That's what we think is. Anyway, but I also think that our partners will be very skilled at acquiring traffic from these engines and to our partners attraction is a monetization engine and we still have an important role to play in that regard. I also think it's very important that that brands try to diversify their traffic, and then it's good to have different models to choose from, and it's still great to work with partner marketing in order to diversify your traffic acquisition. I think brands are more and more aware of this, actually. It's a message that we talk about all the time, and I think that most brands believe that it's not been a good situation with the monopolies in search and social media. So that's that about AI. Let's go back to sort of our core business here and look at the verticals. So finance, we had huge years back in 23 and then we've been struggling a little bit. And what we can see now in this quarter is year on year growth versus the first quarter, 25. But we can also see sequential growth. For e-commerce, we see year-on-year growth. Sorry, I'm on the wrong picture here. Let's go back here. So for e-commerce, we have the best Q1 ever, and obviously that means that we see year-on-year growth. It's also encouraging to see that we see growth across most markets. So let us take a look at the combined picture and we get the same impression here that this is actually our best Q1 ever. And to me, this is very encouraging. To me, it's a testament that our business model is strong and works and that we provide value to partners and brands and that there truly is an opportunity to grow here and that there's an important place for attraction and other partner marketing companies in the value chain. All right, so that's that. Sorry, one more picture. So this is an illustration of our cost base. We like to say that our... cost is fairly stable. And if you look at this cost base in the last couple of years, I think stable still is a good word to describe it. With that said, costs have increased a little bit in the last few quarters. And of course, there's going to be some general cost increases and there's going to be some more team members and that's going to impact costs. That's simply going to going to happen. But in general, I think it's fair to say that over time, it's fairly stable. All right. We like to talk about growth, profitability and cash flow. And for the past, you know, eight quarters or so, this graph has been fairly depressing. We want to be a growth company. In fact, we have not grown for 24, many quarters in 24 and 25. And then finally now in Q4 and Q1, we actually see growth, which is encouraging. Obviously, we're not happy here. We want to keep growing and we want to keep building gross profit. EBITDA margin. Please remember here, I think that most people listening to this know that EBITDA in relation to sale will be low. EBITDA in relation to gross profit, which is the money that belongs to attraction, will always look better. But let's stick to the EBITDA to sales margin here, we can see a slight increase in Q1 versus Q1 25 and 24 and 23. So something good is happening here from our point of view. And I would like to attribute this to some sort of operating leverage here. So with that, I will hand over to Andreas, who will do his part.

Thank you. And then we start by looking at net sales. We have 314.7 million in the quarter. That's a 12% growth. With fixed exchange rates, we would have seen a higher growth of 15%. And looking at gross profit, 60.2 million. Also that 12% growth. The same goes for exchange rates here. We also add 3 million in gross profit from the acquisition of Affiliate Future. And if we were to break down the quarter, we can see a positive in-trend growth. trend as well, and we can see that March is also the strongest month in the quarter. EBITDA, 13.5 million, and that's a 28% increase. Like Simon mentioned, we have a good operating leverage, and we also add 1.5 million to EBITDA from the acquisition. We also mentioned that we can see a slight increase in cost base, and that is more of a general increase. And there's also a one-off expected to be seen in the second quarter that Simon mentioned that you can read more about in the report. The adjusted net result per share is at 0.66 Swedish kronor, and that is a 36% increase.

Then looking at the verticals and starting with e-commerce, we have 36.6% organic growth.