eEducation Albert AB (publ)

Hello and welcome to today's webcast with Albert, where CEO Jonas Mortensen and CFO Katarina Strivall will present a report for the third quarter of 2024. After the presentation, there will be a Q&A, so if you have any questions to Albert, you can send them in via the form to the right. And with that said, I hand over the word to you guys.

Thank you so much, Ludvig, for that intro and a warm welcome to everyone. So my name is Jonas Mortensen and I'm the CEO of Albert Group. And with me today, I have Katarina Strivall, who is our CFO. And during today's call, we'll talk about our third quarter in particular. But we will start with giving a little bit of a background talking about Albert for those of you who are new to us. Then we'll talk about the Q3 in specific. And then a few words about what's ahead of us. And then, as Ludvig said, we'll conclude with the Q&A. But before getting started, I'm just going to summarize Albert very quickly and then the third quarter. So Albert started as the Math App Albert some years ago, but has now developed into a leading Nordic edtech group where we have focus on the Nordics, the UK and the US. We sell both into schools B2B and to families B2C. And the benefit of having both those two target groups is that we have dual revenue streams with predictability and stability from selling to schools with the scalability from selling to consumers. Our products and offerings are focused on the core subjects that you learn in school, which means math, science, coding and learning to read and spell. And all our products are based on research and the curriculum. Looking at what makes us unique, then, is the engagement that we combine gamification, creativity and pedagogy to really create good and engaging products. Talking more about the financials, we are on a journey towards profitability. really clear targets to reach positive EBITDA next year in 2025 and then reach positive cash flow in 2026 with the cash at hand. And that also means that we are well funded and with the cash we have we should reach positive cash flow. Summarizing the third quarter, I can say it's been an operationally very good quarter. I mean Q3 is almost a very important quarter for us and then the period, which is up 11%. But so far as we are selling annual subscriptions and longer subscriptions, they have not been recognized. So the net revenue is down with 5%. Thanks to the good momentum in marketing and sales, we've also decided to invest more in marketing to build a good pipeline of leads and free trial customers. That is adding cost now in the short term, but that will benefit us in the longer term. We can also see in the third quarter that we have reduced staff cost. We had a major restructuring in our Swedish operations in the first quarter. Now we can see the full effect of those ones. And we have also now in the third quarter made a restructuring in our French operations, but that we don't see in the result yet and that will come in 2025. So all in all, this means that sort of the delayed revenues in combination with costs that we've already taken now creates a But you will hear much more about this during this upcoming presentation. So let's get going. And I'll start with going back and talk a little bit about Albert and why we exist. And we are playing in the education field. And we are here because there are so many kids who are struggling in school. And especially with subjects like mathematics or science, which many kids think are challenging. And it can be due to motivation or other things. And one of the reasons why kids are struggling is that the lack of equal access to qualified teachers. So in some schools, you get access to good teachers. In some, you don't. And depending on the support you get from school, you get more or less dependent on the support you can get from home. home either. And this has created an issue where the school results in general are declining in many countries, Sweden and our coal markets in particular. And especially the socioeconomics are playing a big role in it. So if you grow up in a socioeconomic poor area, it's typically much more challenging. So this is a problem we want to be part of solving. And it's also a good problem to be part of solving because this is a growing market. And therefore, our mission is to help every child reach their full potential by making learning engaging and personalized. And these two words are so important because that's really where EdTech comes into play. We talk a lot about this one internally and when we see customers and users out there, sort of what makes us unique. And if you look on the one axis here on the horizontal one, There are many players out there who work with different educational products and some are more game-like or some are very deep education products. And then you have the vertical line, which is that sort of how engaging are them? Like typical traditional textbooks are often perceived to be quite boring. And then you have many other things, like especially very game-like games that are engaging and fun that kids really like to use. And in general, you can say that most players out there, they are either down in sort of really strong education products that are perceived to be quite boring for children in school and at home, or they are very fun and engaging to use, but then they're often very game-like and not that educational. And our USP is to combine these things, to have our roots in education and pedagogy and the curriculum, but really be engaging and fun for the children. And that we managed to do, to achieve by combination Combining gamification, creativity and storytelling to really create products that the kids love. And at the same time, they are really good from a learning perspective, also the teachers and parents. So what we want to achieve is to put the learners, the children or the teenagers in the center. And then we want to work with them in the school together with the teachers and at home together with the parents because the children, they learn in both of those two arenas. Therefore, it's so important for us to consider both of them, which many others are doing. And to do it, we're working on building a portfolio and have built a portfolio of really good learning products. Our core is really digital learning apps in the core subjects, mathematics, reading, spelling, programming, and so on. But we also have hands-on kits for learning STEM or science and construction and programming. And we also work with educational films because that's very appreciated in schools by kids and teachers to really introduce new concepts before you really talk about the theories behind them. And these products are being sold under eight different product brands and and Nordic markets, the UK and the US, but especially with our B2C products, we are also present in many more markets, especially around in Europe. And that was my quick introduction of Albert, and now we'll put the focus on the third quarter. But before actually starting about the third us for some time, we in the first quarter or actually in the end of January, we launched a profitability program because we were so dedicated to get towards profitability. And I will not go through the details, but in general, it was about focusing more on business to business because that's where we were most profitable and it was most stable. We also wanted to focus on maximizing and optimizing the current business by really doubling down on what's working well and sort of reallocate resources to those areas. And up in the yellow box was very much about sort of ensure that we increase efficiency and we can find synergies in the group. So it's been a lot about like right sizing and putting the resources where it makes sense. And the last one was more about general like cost reductions, like offices and different type of services and so on. Most of these actions were taken back in Q1 and we can now in this quarter start to see the result of some of them. throughout the summer of different markets and products and so on to really take the next step in this one. And we'll come back to that soon. But now I'm going to just mention a few operational key points about the third quarter before handing over to Katarina to talk about the financials. And the first thing I would like to get a little bit more in depth about is sales. The third quarter is typically our most important sales quarter of the year. In B2C, it's summer and summer break. And in B2B, it's about back to school or preparing for a new school year. And both these areas are so important. So succeeding here is super crucial for us for the upcoming year. But starting with the B2C side, having a summer, summer break and so on often means resting for some children. But for a lot of them, it's also about preparing for the next school year. Typically for children who are struggling, it's the time of the year to be able to catch up. So they catch the next school year and get the flying start. And for the more motivated children, they are often sort of generally, they don't want to let go of school. They want to practice also in the summertime. And this is something we've seen for many years as the summer has always been a good customer acquisition period for us. And therefore it was so much fun this year to see that the summer campaign that we were running was the best one in over 80. Typically, if we reach more than 1,000 customers in the customer acquisition in a specific day, it's something we go out and celebrate. But now it was like day after day and week after week, we had more than 1,000 customers signing up. Meaning that when we summarized the campaign, we reached 110% of the volume target we had set up. And that was an aggressive volume target because if we compare to the summer 2023, we doubled the volumes this time. which was super fun. But it also meant that since we had such good momentum in customer acquisition, we also decided to increase the marketing spend to really capture that great momentum out there. So looking at the financial implications of this means that we spent more marketing money during the summer than we did the previous years, but we also managed to build a good portfolio of now paying subscribers. it will benefit us even more in the upcoming quarters. Looking on the business-to-business side or sales to schools, this is a very important period for us, especially for the sundog business in the UK and the US. And sundog is our mass product for schools. And since this is so crucial, we had a lot of focus on preparing this period in the best way possible. Partly we had worked a lot with existing customers because renewals or vacations Avoiding churn stands for the absolute majority of sales. So we had been focusing on improving things in the product, restructured our customer success organization and introduced new ways of working and something to really have them be close to our customers. And this proved to be really successful as we managed to reduce churn during this period with one third. And also the new customer acquisition was successful thanks to marketing and sales. So together, we increased the invoice sales for 17.17% compared to the same period last year. But the contracts we sell in Sumdog, all of them are annual subscriptions or multi-year subscriptions, meaning that they will be periodized for the upcoming contract period. So we just see a little share of that in the revenues this quarter. So all in all, it feels very good that we had a good Q3 in terms of customer acquisition and sales. The other area I would like to focus on is, I mean, the theme that we've had for the full year, which is really about optimizing the current business and sort of doubling down on areas that are performing well. We knew when we entered the year a number of actions that we wanted to take, but we also knew that we had to do a strategic review during the summer to really look into all our different markets, all our different products and organizations to see Are they right sized? Do we have the right level of resources in relation to the value that you are creating from them? And when we could summarize that review, I mean, we concluded that we have a few areas which are really key for us. And if we translate to products, that's Albert Jr., Strawbees, Sun Dog, and Filmen Skola. And from a market perspective, it's the Nordics with Sweden in particular. It's the US and the UK. So we've now decided to really focus on these products and these markets and doubling down on them and reallocate resources to those areas. But that meant we also had to choose some areas where we wanted to focus less on. And then our review concluded that then it's looking outside those markets and especially some bigger markets, which we have started to invest in to really capture. And one of them was France. It was also the products of Jaramba and Holy Owly. which both have profitable unit economics. And we have started to build organizations to really scale them and so on. But now we decided we will not focus as much on them. For instance, then we took the decision to restructure our French operations, which mainly work with growing on the French market and expanding the Holy Auli product. So with this restructuring, we are now right-sizing that organization to more maintain the current business that we have there. which are well-performing and profitable today. And that was it about operations for now. So Katarina, please take us through the numbers.

Thank you, Jonas. As a part of our Q3 reporting, we have introduced a new KPI, Invoiced Sales. Before, we only reported net revenues, which recognize all long-term contracts over their full contract period. This periodization creates a significant delay, making it more difficult to see how sales perform in the reported quarter. Invoiced sales as a new KPI is a more forward-looking indicator of our sales performance, and together with the net revenue, it gives a clearer and more accurate picture of how the business is doing. For the quarter, net revenue is 5% lower compared to the same quarter last year. However, invoice sales are up 11% quarter to quarter, and the decrease in net revenue reflects the sales we had earlier this year. If we look at the difference here between the net revenue and invoice sales, we can clearly see the impact. The lower sales earlier in the year are visible, but what stands out is that all units showed strong sales growth in Q3. Invoice sales in Q3 are higher compared to the same period last year. And all sales in the end of the year is organic. And if we look at this picture, we can see the different areas like B2C and B2B, the different products in our business model and our different markets. And we can see that all the different segments are following the usual seasonal patterns, actually. And for example, like strawberries have a strong performance in Q2 and digital subscription in the business model dominates this quarter by B2C due to the strong Albert sales that Jonas mentioned before. And going forward, EBTA for the quarter is minus 8 million SEK. And this lower EBTA compared to last year comes from different factors like lower sales. For example, subscription sales earlier this year also as we talked about earlier in the presentation and it is also a portion of the strong sales we had this quarter is tied to subscriptions these are periodized and will contribute to revenue in the coming quarters and all costs linked to the good sales this quarter and we had particularly high costs in marketing spend as we have heard before here and we invested more in marketing during the quarter because we had a strong momentum and very good customer acquisition opportunities. And also on the cost side, saving side, personal costs have decreased as planned. And that is thanks to the restructuring program we carried out in the first quarter this year. Operating cash flow for the quarter was minus 6 million SEK, which represents an improvement compared to last year. And the main driver in these changes are in working capital, which contributed approximately with 4.2 million SEK to the improved cash flow this quarter. And this came primarily from increased short-term liabilities, mostly from advanced invoicing opportunities. for annual subscriptions in several of our entities. And now we go back to Jonas. Thank you.