eEducation Albert AB (publ)

Thank you Martin for that introduction and hello everyone and a warm welcome to this webcast from Albert where we will talk about the second quarter report of 2024.

My name is Jonas Mortensson and I'm the CEO of the Albert Group and with me today I have Katarina Strival who is the CFO. And before kicking off the agenda, I would just like to sum up and talk a little bit about Albert and the conclusions from the second quarter. And Albert is a leading Nordic EdTech group who has a plethora of different education products which are aligned with the curriculum. We are a global player. We have six product brands and several sub brands who are together sold on more than 10 different markets across the world. We sell our products both to schools, what we call B2B, and to consumers that we call B2C. And this gives us dual revenue streams, which makes the revenues much more predictable and scalable. If we look at the second quarter in more specific, we're very happy that we're now back to organic growth after a few quarters where it's been declining growth. And this is very much due to very strong momentum in the B2B sales in the US. We also said before that we have a very clear path to profitability. And therefore, we're very happy that this quarter will now land on minus 1 million in EBITDA, which is a strong proof point that we are on track. We're also well funded and with the cash at hand, we should be able to get positive cash flow. So that is that of the conclusions. And during this presentation, we will now start by talking a little bit about the Albert Group and our strategy going forward. Then we'll spend most of the time talking about the second quarter, both from an operational perspective with some highlights and then definitely the financials. And then we conclude by talking a little bit about the future and where we're headed before we open up for all of you to ask questions to us, which we really look forward to. So with that said, let's get started. I think we've talked about this before. I mean, the reason for us existing is really that we want to face the form of challenges that we see in education. There are many kids out there who struggle in school and especially in the mathematics subject. And one reason why they are struggling is that there isn't equal access to qualified teachers. And the second thing is, or the third thing is that if you can't get the support you need from schools, you maybe not even can get the support you need from your parents at home. And therefore, these differences that typically are related to socioeconomic inequalities. So if you're in a socioeconomic weak area, you probably don't have the same opportunities as in a strong area. And what we want to achieve then is to really help every child out there to reach their full potential by making learning fun and personalized. And to do that, we want to really put the learner or the children in the center and then work with them and their learning journey, both at school together with the teachers and at home together with their parents. And in order to achieve this, we want to build an ecosystem of different learning products. But we started, as you probably know if you followed us for a long time, back in 2015, when we just had the product Albert, which was a math product sold to consumers, mainly in Sweden and later on in the Nordic markets. And since 2022, we have expanded a lot. We have added new products, both in B2B and in B2C. We have added new markets. So now we really start to build this ecosystem of different products. But it also means that we've gone from being the math Albert, really being the education ecosystem of Albert Group. So now our portfolio of learning products consists mainly of digital learnings. main products we're working on. We have a few books and physical prints. And then we have the strawberries construction kits, which are the purpose is to really learn about science in a fun way by both doing like physical construction, you can do programming on the computer and so on. And then lastly, we have educational films, which is a very appreciated way for children to learn new things. And these products, they are sold under eight different product brands, which you can see here on the slide, and they're all under the Albert Group umbrella. Our focus markets are the Nordics, the UK and the USA, but we're also present on many other markets. We have our headquarters in Gothenburg, Sweden, but offices also in Stockholm and in England and Scotland. And we know that our products are really loved by teachers, parents, and children out there. So to give a few examples here, I mean, one is from Albert Jr., a very recent quote that was sent to us from a parent to Didi, who is four years old. And she said that my son has autism and ADHD, and your app is so far the only thing that makes him sit still and focus. He is four years old, but has already learned 20 to 22 letters of the alphabet after just four days. So really, thank you so much. Another example is from our construction product, Strawbees, and a science teacher in California, the US. And he says, one of the things that I think is forgotten with coding, and why I like Strawbees so much is the physical computing side, the designing side of the computing. This is really the thing where you can build something physically, and you work with a computer and programming at the same time. So you can get instant feedback on what you're building. And the last quote here is from the math app, Sumdog, which we mainly sell to schools. And here's a quote from a head teacher or principal in Scotland. And she says that using Sumdog as part of our multi-pronged approach to teaching math has been effective in raising math attainment at Junior Perry Green. It has brought the fun back to math and children are motivated and excited to learn. I think this quote is sort of spot on because it really talks about the multi-pronged approach to teaching, which is so much what we believe in. You should have the normal textbook and teacher-led teaching, but then work with other methods as well, like apps, like films, like construction kits, because it's a better way to learn. And therefore, it's fun to hear that the teachers out there really appreciate that as well. And that hopefully gave an introduction to Albert and our products and where we are and so on. the quarter two results. But before going into quarter two, I will just start with a quick recap from quarter one and what we said when we met you all a quarter ago. And then we talked a lot about the profitability program that we launched in the end of January with a purpose to really accelerate the journey to profitability. And that profitability program had four focus areas, focus more on B2B because it was more stable and profitable. We wanted to maximize the current business, sort of double down on the areas that work well and reallocate resources there. And then thirdly, improve efficiency and capture synergies. And the main activity here was the big restructuring of the organization to go from like a group organization who work together towards common goals, which will also reduce personnel cost. And lastly, just have a more cost-conscious mindset and save cost in general, like co-locating offices and so on. And we also said back then that in quarter one, we took many of the one-time cost for this program. And in quarter two, we expected to have some minor one-time cost. But now we should start really to see the positive impact of the program from 43 and onwards, just the positive ones. And now we'll talk more about the results of this profitability program. First from a qualitative or operational perspective and then from a financial perspective. And some of the highlights then from the second quarter really start with this restructuring program because it did take a lot of focus for the management and for the organization to create and then start moving into this new organization where we start working To some extent in new teams, with new leaders, with new ways of working and so on. Therefore, I'm really happy now when we concluded the second quarter to really see that we are done with the restructuring. All teams are operational. People really are understanding why we're doing it and are motivated going forward. We can also see in the financials when we concluded the second quarter that we achieved to reduce personnel costs by 10%, which we plan to do. And why is this so important for us? Besides, obviously, the profit improvement, the reducing cost, I mean, this really makes it stronger. Bringing the competences together really make it easier to sort of share best practices and support each other. This is also much simpler structure to manage. Of course, it was on paper before we did it. But now when we have been operational for four months in this structure, we can really see that, I mean, one united management team can operate everything in a successful way. And it's also a very scalable structure that we can use when we acquire new businesses in the future. The second achievement is the breakthrough of the Strawbiz product in the USA. And you can see it on the picture is what the typical Strawbiz product looks like. You build something physical with these colorful straws, and then you can either do just the straws or you can add like the programming unit and the robotics as you see on the picture here. And what has happened now in the second quarter, if I take May here specifically, is that we had 90% more sales this year in May than we had last year. So it was strong overall, but we also saw a real nice thing with three sales records during the quarter where we landed orders of over 100,000 US dollars. to big customers like the Los Angeles United School District, Virginia Beach, and other big players. And just to give a perspective, like the LAUSD, the size of just a district is sort of half the size of all the elementary schools in Sweden. So we have a great opportunity just to grow within those customers. And this is so important because we have been on the U.S. market for 10 years now with the Strawbees product. And I mean, we have been trying out different sales models and we have spent a lot of time in really building relationships with schools, decision makers. And so on. And now it seems to work. And we have typically started with smaller projects together with the customers. They appreciated the Strawbees product. Now they come back and they place much bigger orders. So we see that we can, in a very efficient way, utilize the existing customers to sell more to them. And we've also seen that the brand awareness and reputation have grown so much for Strawbees in the US. People know of us when we go to fairs, we speak to customers and so on. But also the word of mouth of one teacher telling another teacher, or for instance, one school telling the overall district to use strawberries has also made sales much simpler. And of course, this will help us to go to sales in the US. And the last example is a very interesting one from England. And that is that we have entered into a distribution partnership with YPO. And YPU, for those of you who don't know it, it's sort of the biggest distributor to schools in the UK. And they started with selling everything from supplies to computer and hardware and electricity and so on. But now they have been around for 50 years. And as part of their 50 years anniversary, they saw we want to do something new. And they had really seen a need out there. for a bundle of EdTech products because there are so many EdTech products on the market and it's hard for the schools to really find high quality good EdTech products. So YPO scanned the British market for the best EdTech products and they selected three EdTech products to be as part of their core offering whereof Sumdog is one of them. So they will now be offered as part of the learning box EdTech bundle which will be started to be sold to all schools in England from September this year. And for us, we see this as a great opportunity to really complement our own direct sales in England. Because with a white BO who are already selling into all schools in England, we will very quickly build brand awareness. We'll get the visibility to educators. We can do marketing together. We can do sales together, which really both can drive sales for us and grow our market share in a very quick and cost-effective way. So really looking forward to see the results of this later this autumn and especially in the next years. And those were three operational key points. We will now move into the financial section here. But before going into the financial results, I would like to stop here for a minute. Because on the line of sort of continuously improve our financial reporting, create better transparency and make it easier for you as shareholders or analysts and investors to really follow Albert, we have decided to do some changes and updates to the financial reporting. And we have done three ones now for this quarter. And the first one here is about that we're going to provide more detailed reporting of sales. And the reason for why we do this is that, as I mentioned in the beginning of this presentation, we have gone from being the Math App Albert, which was only sold B2C in subscriptions, to now having multiple business models. We're selling to target groups, being both families and schools, and into many different markets. And therefore, the purpose is really to increase the transparency and facilitate understanding of our business. And therefore, we will start reporting, and we already did now with this quarter, the revenues really split by target group, B2B, B2C, business model, which is the product sold through a subscription or a non-subscription. Is it a physical product or a digital product? Is it B2B or B2C? We will also segment the sales on based on the country or market and then go for Nordics, US and UK, which are the three main markets and also rest the world. And of course, as before, talking about organic and acquired sales. The second update is to make it clearer with annual revenues and a little bit similar to what I talked about before. from B2C source or subscription revenues to now both being subscriptions and non-subscriptions. And I mean, ARR was originally designed to really work for subscription businesses and not really suitable for non-subscription businesses. Although, I mean, our non-subscription business is very much repeat sales to existing customers with high predictability and so on, why we think that it could fit as an ARR metric as well. But to make it even clearer to follow us, we're now going to divide these two. So we will report ARR, but that will only be for the pure subscriptions from B2C and B2B. And for the non subscriptions, they will not be be included in the ARR. Instead, we will sort of do like show what is the revenue that we generated from that non subscription in the last four quarters, which then become an annual value. And if someone who follows us would like to get an estimate, what is our annual revenues, you can then sum up the ARR from the subscription business, and the revenues from the last four quarters from the non subscription business. And the last area and update here is more accurate measure for operational profit. As you probably know, if you followed us for our time, for some time, I mean, our core focus right now is to make our operations profitable. The profit metric that we have been mainly reporting before is EBITDA. But the issue with that metric is that it also includes the depreciation of capitalized R&D and therefore not fully reflect operations. And in our case, we do have quite a lot of capitalized R&D, so that those depreciations make it hard to understand, is the operations going towards profitability? And therefore, we think EBITDA is the better measure to really track how that is going. So in the reporting, we now much more clearer add EBITDA as a reported metric in addition to EBITDA. So we will still have EBITDA there so you can follow that. But we will mainly talk about EBITDA because it's more related than to the operational profit. So with that said, let's now move into the actual numbers. And as I mentioned before, we know to just keep in mind when we look at the numbers is that we should now start seeing the effects of the profitability program. Let's start with sales. And as I mentioned in the introduction, we're very happy now that sales is back to organic growth. We had net sales of 49.5 million SEK in this quarter, which is then a 3% organic growth compared to the same quarter last year. And all this growth is then organic. I mean, still, like all the subscription revenues are very stable and recurring. And so, I mean, the main difference really driving the growth in this quarter is this breakthrough sales in the US of the straw beach product that I talked about before. And then looking at how this sales is split by the different segments and so on. Looking first on the target group segmentation here, we can now see that sales to schools, school groups and the education sector of B2B has grown from 57% to 62%. And the driver of this is really the growth in strawberries, which is B2B sales in the US. But to some extent also that B2C has declined due to slower customer acquisition. If we go to the mid one here, which is the business model, we can see that the biggest business model is still B2C digital subscriptions, which stands for 38%. Second is B2B digital products subscriptions, which stands for 33%. And here we, for instance, have the songbook product, we have the film and school, educational film subscriptions, and so on, which is the second segment, which is B2B digital products that are non-subscriptions. and I guess the easiest way to really explain this is that if you're like a via play or Netflix customer privately you typically get access to a lot of films and series on your subscription but sometimes you want to watch a film typically a recently released film but that one is not included in your subscription so then you need to pay like a one-time rental fee to get access to that film This is a little bit similar, like some of our rental films are provided on a paper usage business model instead of a subscription. And that amounts to roughly 5%. And the last category is B2B physical products, non-subscription. Here, the strawberry sales is the vast majority, but we also have some B2B sales of physical and rentals of physical movies that are sold to places which don't have internet access. And the last segmentation here is by market. As you can see here, the Nordics is our biggest region with 54% of sales. US is number two with 24% and then UK comes third with 14%. And the rest of the world stands for eight. So really our three core focus markets make up 93% of sales. U.S. is the one that has grown the most lately, which is then much thanks to the strawberries breakthrough in the U.S. market. The Nordics has declined a bit, which is then due to the lower Albert sales. And now that was it about the revenues, and now we'll talk a little bit more about the profitability and the cash flows. I will hand over to Katarina to talk more about this.

Thank you, Jonas. Well, here we can see that in the quarter compared to previous year, we had a 2 million sec better in EBITDA result We almost made black figures this quarter with the EBITDA of minus 1 million SEK. And this improvement is due to higher net sales and lower personal costs. And that is according to the restructuring program plan that we have talked about earlier. And it's according to the plan. In accumulated in the June result, we have a slightly worse result than in 2023, the same period. However, adjusted for items affecting comparability, it is more similar to last year's EBTA. And We had a negative cash flow in Q2 of 21 million SEK, of which 80 million SEK came from operations changes in working capital. And this is mainly due to larger payments of royalty liabilities in Q2. And this had a negative impact on the cash flow compared to Q2 previous year. These payments also includes royalty payments that were invoiced and paid in 2024, but should have been invoiced and paid in the end of 2023. So the result in Q2 contributed to a positive cash flow, while the result accumulated in June had a negative impact on it. And as we can see here, it fluctuates between the period. And it's important to also look at the total half year. This is because Swedish Film invoiced its large volumes in January this year instead of February, as they have used to do in previous years. And this means that the payments this year are in Q1 instead of Q2. And this is the main reason for these fluctuations, as we can see here. Here we can see the cash flow for the first half year compared year over year. And the total cash flow from the first half of this year is minus 15 million SEK. And this is compared to 1 million SEK plus last year. And this is a difference of 17 million worse than last year. And the difference between the years is because capital was injected during this period in 2023 in connection with acquisitions. we had then, and this affected cash flow last year by approximately plus 21 million SEK. And this means that the change compared with the previous year is rather positive when we compare the first half year without these acquisition effects. We can mention that a lower result in this period also contributed to a lower cash flow, as we can see here. And here we can see the second quarter year over year. And cash flow in the second quarter was minus 21 million SEK compared to last year's 10 million SEK, minus 10 million SEK. And this is a decrease from the previous year of 10 million SEK. However, the result is slightly better and contributes positively with 3 million SEK this period. The decrease compared to last year is mainly due to working capital. This gives a negative cash flow in this period of 17 million SEK. This was mainly due to reduced current liabilities- related to the payment of these royalties I mentioned before- and payments from the restructuring programme. Increased current account receivables in B2B have also resulted in a negative cash flow in the quarter, as they have increased due to increased sales, as Jonas mentioned before. And this sales has not been paid for yet. It hasn't due yet. And then we can see the cash flow changes here during the second quarter. And it's the main reason for the negative cash flow changes during the second quarter this year is then due to the changes in working capital on 17 million. And this is, as I mentioned, also operating liabilities decreased by 12.7 million, mainly due to these royalty relate the liabilities within Swedish FIILM. And as we mentioned in Q2 this year, there have been more payment this year compared to last year. And some of this is invoiced this year and should have been invoiced in 2023, basically. And reservations of reserved restructuring program costs had also a negative impact while they have been paid out during the second quarter. The increased accounts receivable in the B2B sector- also increased the cash flow. Yes. And then I'll leave the word to you, Jimmie.