eEducation Albert AB (publ)

Good morning and welcome to today's presentation where we have Albert Group presenting the year-end report for 2024. With us presenting we have the CEO Jonas Mortensson and CFO Katarina Strivall. If you have any questions please use the form to the right and we'll take that up during the Q&A. And with that said please go ahead with your presentation.

Thank you Martin for that introduction and a warm welcome everyone to this morning's conference call when we're going to talk about the 2024 and Q4 for the Albert Group. What we will talk about today is first start with a quick summary, then go through some general things about Albert Group. Then we talk about the full year 2024 and the Q4 results, both some operational key points and the financial key points. Then we will elaborate a little bit on what does things look like going forward before we look forward to a Q&A session. So as Martin said, please ask any questions you have in the forum. But before getting started, just a refresher and summary of who we are and the quarter in general. So the Albert Group, we are a leading Nordic edtech group with focus on the Nordics, UK and US. We develop, market and sell different type of learning tools for schools and private persons. These products, they are curriculum based and especially focused on the core subjects of mathematics, literacy and science. And there are many products out there, but our USP is really engagement, which I will come back to later. Financially, we are on a journey to profitability, where we have set the financial target to reach a positive EBITDA this year in 2025 and a positive cash flow in 2026. And that's something we should be able to manage with the cash we have today. So we are well funded. Looking at full year 2024 and Q4 in short, 2024 was very much for us a year with focus on profitability and we've taken many actions to set us up for achieving this in 2025. I think the biggest thing is probably the big restructuring we did in the first quarter and then continued in the fall where we reduced the staff cost, something that we now start to see the effects of and that we will bring with us into 2025. We've also spent a lot of focus in commercial readiness in terms of marketing and the people to really drive sales growth in 2025. So we entered now 2025 with good preparedness and a strong business plan for achieving our goals. Looking at 2024, oh sorry, at the fourth quarter in particular, we have continued to see a good momentum in invoice sales, which is up 15% compared to the fourth quarter last year. Some of it also start to materialize in the recognized revenue, so it's also up. We have continued to see good momentum in customer acquisitions. We have spent more money on marketing to build a pipeline, which has been our biggest change in cost and therefore also resulted in a dip in profitability in the fourth quarter being minus 8 million. But now we'll go forward and talk much more about these things. But let's start with a recap of Albert for those of you who are new to us. I mean, we are here because formal education in the world has a problem. There are many children out there who are struggling with school, especially mathematics. Some of the reasons for that is that there is a lack of equal access to qualified teachers. Typically, if you grew up in socioeconomic strong areas, there's a good access to good teachers. Or if you're in a poorer area, it might be worse access to good teachers. And depending on the support you can get from schools, much more important. But not all the kids can get the support they need from school from home, either because the parents may not have the competence, they don't have the time or the money to support. So therefore, school results are in general declining and the socio economic inequalities are increasing. And this is not something we like. So I mean, as both parents and entrepreneurs, we want to go to work every day with a mission to really help every child reach their full potential through engaging and personalized learning. And what do we then really mean with this? And we think especially the word engaging is so important because for many kids out there in schools, I mean, they do have a negative attitude to school, either because they might be struggling or there's a group pressure that school might be boring or nerdy and so on. And that's something we want to turn around. But then you also have the talented students, which might be ahead of the rest of the class. And then not forget as well, there is a lot of kids out there who have special needs. It can be due to ADHD, autism or other learning disabilities. And for them, traditional teaching can be difficult. But having engaging learning tools really can sort of get all these groups of kids interested in learning. So they actually get into it. So what we really focus on is to take the position of having engaging learning tools, which are strong educationally and really based on the curriculums. And that's something we think is very important because looking at traditional textbooks and other teaching methods, they're typically very high educational value, but perceived as quite dry and not so engaging. And then there are a number of different companies out there who try to provide different solutions. And either they are typically in the lower right corner where they have just digitalized textbooks, or they're more in the upper left corner where it's more games, which are educational. But we see that the very important spot to be in is in the upper right corner where we combine education and engagement. And to do that, some of our lead words are strong pedagogy as the foundation to ensure they are educational, but then add gamification and creativity and storytelling and other things to really make it engaging learning tools. And when working with learning, obviously, we really believe in placing the learner in the center and both work with the learner in school together with the teacher and at home together with the parents or guardians, because children typically learn in everyday life. So we need to work with them in both places. And to do that, I mean, we are and have been during the last couple of years built a portfolio of different learning tools because we really believe in blended learning, which is using books, using apps, using construction kits, films and different type of learning methods. Although I mean that our definite core is digital learning apps, we also have construction kits and educational films really catered to different interests and learning styles for the kids. And these different learning tools we sell under eight different brands. Sandbox Robies, Håli Auli, Albert Junior & Teen, Swedish Film, Film & Skola and Jaramba. And each brand has their unique identity and positioning for the different tools. But they're all collected under the Albert Group name, which stands for Trust and Quality in Higher Educational Standards. We are mainly focused in the Nordics, the UK and the US. And we have headquarters in Gothenburg, Sweden, with another office in the UK. we're also present in a number of markets especially across Europe and a new market on the map here today is Czechia that where we just launched a couple of weeks ago but I will come back more to that later. Well that's it about Soledad, Albert and who we are and now we want to go more into depth and talk about 2024 and Q4. And I'll start with some operational key points before handing over to Catharina to take us through the financials. But trying to sum up 2024 in general, obviously a lot of things have happened. But I think it can be grouped in four different areas. We have spent a lot of time in restructuring the organization. We have refocused the company on really our high-performing areas. We have started to grow sales again and improve user engagement. But to go... bit more in depth and starting with end restructuring the organization after a couple of years now with rapid growth both organically and having acquired a number of different companies we were in a state where we were a group of different companies who were quite operating quite independently without many synergies so during the year now we focused a lot on getting this group together into a united organization but also making that organization more functional so we have like a sales, selling or products or a product development organization working with all different products. And that has made it much easier both to sort of identify and extract synergies and also reallocate resources much more quicker. But this organization is also flatter and required less people to work efficiently. So that made it possible for us to lower staff cost and reduce the size. And we have also right-sized the B2C organization. It was designed initially for very rapid growth, but as we switched to profitability, we also redesigned the B2C organization to match with the ambitions and revenues that we had. Then we have spent a lot of time on focus on high performers. We quite early in the year set up the model of we want to identify the high performers and double down on them and reallocate resources there. So we conducted a number of strategic reviews and so on, and really set now focus on Albert Jr., Strawbees, Sundog and Swedish Film, and also decided to really focus on the Nordics, UK and the US. And then we allocate resources there. And by doing this, we get more resources in the areas where we have a good return on those resource investments. But it also gives them a better conditions to really succeed with those brands. And also for those brands, there is a very clear road to profitability. So now we have a laser focus on achieving those ones. Moving on to growth and growth sales, which during 2023 and 2024 hasn't really been our focus since we're mainly focused on the cost side. But as we're preparing for 2025 and 2026, it was about getting growth again. And back in last summer, we started to see a nice trend shift, especially on the B2C side, where it became much cheaper to acquire customers again. And the acquisition volumes that we got were back to sort of pre-recession levels. So we decided to increase more marketing during the fall, especially in B2C, but also in B2B to really build the pipeline. But we've also grown the rev ops or commercial organizations. So we have more people who can work with marketing, with sales and customer success to really convert those leads to sales and then ensure they stay and they see the full value of the product. This has resulted in increased marketing costs during the second half year and increased staff costs. That's just a little fraction compared to the savings we had on the big restructurings. But we have, of course, which is the end goal, increase the number of leads, invoice sales and ARR, which was really what we look for. But then once the customers are there, it's really about keeping those customers and engaging them in the product so they stay as paying subscribers for as long as possible. And this will be addressed by both restructuring our customer success team so we can provide better customer service and really focus on the customers that matter. but we've also worked a lot in the interface between the user experience, the product and the communication. So ensure that all new customers to get a much better onboarding and we can help them in building a habit of using the products in their everyday life in schools or at home. And this has resulted in better product usage and lower churn. And these things that we did now historically obviously remain important going forward as well. So that summarizes 2024 as a whole. Zooming in now on the fourth quarter, it has been a lot about sort of pegging up for more sales in 2025. But we have actually seen, I would say, surprisingly good sales in the fourth quarter as well. Because normally this is quite a slow quarter for us where parents are getting ready for Christmas and schools are also getting ready for the Christmas breaks. It's not much activity. But this year it has been it. So we had 14% more invoice sales than in the fourth quarter the year before. So the strong momentum in B2C continued from the summer. The quarter four campaign that we were running during October, November and December also continued to perform very strong with high volumes, good CAC and initial low churn. Now we've just monitored those customers for two months after year end, but it looks promising so far. As a result of the good momentum, we continued to increase marketing, which added costs during the fourth quarter, but we'll pay also during 2025, as we ended the year with more paying subscribers than we had really planned for initially. On the B2B side, as I said before, it's typically a slow quarter, but this year we had surprisingly good work in especially Sweden in selling educational films on a title by title basis. But it was also a very good quarter because that was the quarter where both Strawbees and the Swedish film brands, they hit their all time high sales on an annual level. So it felt like we really ended the year in a strong momentum. On the product development side, we had also really spent a lot of time in focusing on what are the key areas to develop the products into really drive business in the future. We haven't made any big launches in quarter four, but we were in the final stages of finalizing product development that is or has already been launched now in the first quarter or will be launched. So, for instance, for Albert Junior, it was another localization to a new market, the Czech Republic, which was launched a few weeks ago. It's Albertine for children between the middle stage and higher stages in Sweden to really turn it into the national exam preparation tool. In Swedish film, we have invested a lot of work in developing a new streaming site, which makes it possible to sell films on a title-by-title basis. We have released the first beta version of that already to existing customers, and we release it to the wall customers here during the spring. In Strawbees, where we especially focus on the US, we have had a laser focus on technology. which was also launched a few weeks ago in connection to a trade show in Texas and showed that it really helped in sort of selling it into the Texas customers. And Sumdog is our fluency math practice tool. And to really like emphasize and strengthen this position, we have now worked for a long time in developing something we call the fluency booster, which is a feature to really in an adaptive way, make fluency practicing both fun and engaging. And that was something we have also launched here this quarter. So that was it on the operational side where a lot of exciting things have happened. Katarina, please take us through the numbers.

Thank you, Jonas. During the year, we have focused on setting the stage for enabling future profitability. And as a part of this work, we have reviewing our cost structure to ensure that we have the right cost base to drive profitability. This has involved a restructuring in Q1, affecting personal costs, followed by an additional restructuring in the autumn, which was communicated in October and concerned our French subsidiary Kids MBA. Also, this affected personal costs as well as revenue. And as a result, we have significantly reduced our personal costs, as Jonas mentioned, And the restructuring of the French subsidiary also expects to contribute with a positive impact on EBITDA with approximately 8 million SEK. And personal costs are now about 1 million SEK lower month, year on year as we enter 2025. In parallel, we have significantly increased our focus on sales and sales processes. As we mentioned, and as well as refining and developing our customer success strategy and work, and this has already yielded results during the second half of 2024 with increased invoice sales, which have exceeded last year's figures for the same period as mentioned. And marketing costs have increased due to the strategic efforts that we have made, capitalizing on strong market momentum. And these efforts have delivered strong revenue in B2C and are expected to continue having a positive impact as we move forward. And if we look at the graph to the right, last year's adjusted result, excluding one of effects, was minus 16.1 million SEK, and this is compared to minus 30 million SEK this year. And this development is primarily driven by our increased marketing efforts, as we have mentioned, and as well as a lower proportion of capitalized costs this year. And net revenue has improved by 2% quarter over quarter. And this is in line with our plan to maintain stable revenue levels in line with the previous year. And as we mentioned, there is a strong focus on sale and sales process to increase revenue and sales. And we have increased invoice sales by 13%, as Jonas mentioned, compared to the previous years. And this will have a positive impact on the future net revenue since a significant portion of our invoice sales is recognized over time and this is due to our subscription-based business model. And we did have a strong Q4 with B2B sales reaching an all-time high for the quarter and B2B also had a strong quarter towards the end of the year as school sales resulted in full-year all-time high revenue for the Swedish films. Looking at the composition of our revenue, we see a continued increase focus on B2B with a larger volume compared to B2C. This aligns with our strategic plan. And as mentioned, B2B sales through Swedish film were particularly strong in Q4 driven by the digital non-subscription sales where Swedish schools purchased educational films on a title-by-title basis. And we can also conclude that we continue to follow our expected seasonal patterns. And EBITDA for the quarter was minus 8 million SEC, which is 2 million SEC lower compared to last year's adjusted EBITDA. Last year's adjusted EBITDA is due to adjustments connected to the earn-out reversal from acquisition that was not materialized. The change is driven by slightly higher net revenue, increased marketing costs due to our B2C efforts, and lower personal costs following the restructurings. However, we also had a lower proportion of capitalized costs. And the effects of our cost reduction initiatives have started to materialize in the second half of 2024 and are expected to contribute to profitability as we end 2025. And then cash flow for the quarter was minus 15 million SEK, and this is primarily due to the lower result. And at the year end, our cash balance stood at 44 million SEK. And this is as a proportion of late year's sales will be paid in the coming period. And our plan remains to become cash flow positive in 2026 with cash at hand. And then gymnastics will continue.