BHG Group AB (publ)

Thank you, operator, and good morning, everyone. We're happy to share with you that we're off to a good start to 2020 with a Q1 that in many ways was not only a continuation to our strong fourth quarter of last year, but a quarter in which we recorded a further acceleration. Today's agenda is divided into five sections. We will start with the results highlights, followed by a business update. I will then hand it over to our CFO, Jesper Flemmel, who will walk us through the financials in more details. after which we will summarize the quarter and then wrap up with a Q&A session. Slide five, please. As our performance shows, we continued developing the business during the quarter and recorded the highest net sales, EBIT, EBIT margin, and cash generation for first quarter to date. Net sales came in at 1.63 billion SEC, which corresponds to total growth in excess of 33% and organic growth of 22%. We recorded an adjusted EBIT of 80 million SEC, translating to an adjusted EBIT margin of 4.9%, and finally delivered the strongest Q1 cash flow from operating activities to date, amounting to 148 million SEC. It is thus clear that we further strengthened our position as the number one online retailer in the European home improvement space in every regard, both from the market share point of view, as well as from a financial point of view. In other words, we stand strong in a general economic environment with significant uncertainties. More on this in a few slides. Both our segments did well in the quarter, on the back of the acceleration that we saw during last year. Home furnishing delivering solidly across the three months of the quarter, and DIY having started well and then, in fact, accelerating further during the tail end of the quarter. We are also pleased with the performance of our recent acquisitions, all of which to a significant extent are based on proprietary brands. More on this also in a few slides. Moving to slide six, please. With an online penetration in the Nordic countries just shy of 10%, the online market for home improvement is set to continue growing for many years to come. Our strategy from inception has included being the consolidator in this growing but still fragmented market. This has resulted in a CAGR for the group in the past five years of 41%. One aspect that we were particularly pleased with in the delivery of the current quarter was the continued acceleration of the organic component of our goals. We are recording our fourth consecutive quarter-on-quarter increase in organic growth. The 22% number at group level for the quarter was comprised of an organic growth of almost 28% in the home furnishing segment and 18% in the DIY segment. We did not yet have access to overall market data for the first quarter, but judging by preliminary data, the picture that we see is one of a continued increase in online penetration, and in the quarter, especially so for furniture and home furnishings, for which we believe the offline part of the market actually contracted. On the DIY side, there is evidence that the total market, which started turning around already in the fourth quarter of 2019, continued growing well. Under these market conditions and with the performance we recorded, it is clear that we took further steps in strengthening our already leading market share in both segments. Moving to slide seven. Another important aspect of the delivery in the quarter was the fact that the share of net sales from our own brands continues to increase, both as a result of strong organic developments, not least for our own flagship bathroom brand, Bath Life, and also the acquisition strategy within the DIY segment, which has targeted opportunities with strong portfolios of own brands, such as Nordiska Fönster, Outlet, LS Bolagen, and this quarter's acquisition, Hemfint. As a result of this, roughly 50% of Q1 sales was comprised of our own brands, driven by a rapid increase in DIY segments. Moving to slide eight. Our strategy remains focused on four cornerstones. Firstly, a continued expansion of our already leading product range. Our portfolio has now grown to include over 800,000 unique products. Secondly, scale and a high share of own brands in our sales mix. With a strong growth of the quarter, we continued building scale advantages. And as we just saw, a significant share of the growth came from our own brands. Thirdly, creating the most appealing shopping experience and dominating digital, as Jesper will share, We grew our digital footprint significantly in the quarter and saw some 57 million visits to our destinations. And finally, offering the market's best professional guidance, service, and support, including our own installation network, for which we now offer services covering in excess of 100,000 products in the DIY range, as well as our own last-mile delivery on the home furnishing site, which continued expanding its coverage during the quarter. This is our ecosystem. Turning to slide 10. And just a few short comments on this slide. We reported total sales in excess of 6.2 billion SEC for 2019 and are now at an LTM sales level of 6.6 billion SEC with an EBIT margin that continues to expand, up 10 points on an LTM basis from the previous quarter. Moving to the right-hand side, in addition to being the largest listed consumer online retailer in the Nordics, we are also the European leader in the online home improvement space. Our geographic composition is well balanced, with Sweden remaining our single most important market, but with even stronger growth in the geographies in which we have more recently established ourselves. Turning to slide 11. As we realize the gravity of the coronavirus pandemic and its associated uncertainties, our first focus areas have revolved around protecting our people and supply chain and securing the demand picture, as well as our financial position. very briefly on each of these parameters, starting with people. We have adapted the measures to the specific circumstances of our various office and warehouse environments, with the primary objective of ensuring safety and the secondary objective of securing business continuity. With these measures, we have managed to stay fully operational throughout all our geographies and sites, providing a safe work environment for our colleagues and a continued high service level to our customers. Moving on to supply, we very quickly took steps to secure product availability. These steps have included staying in close contact with our suppliers, as well as selectively increasing inventory and securing alternative sourcing wherever possible. Furthermore, the breadth of our portfolio, among other things, secures that there is almost always a substitute product that we can offer our customers in the case of shortages. Next, demand. We did not see any negative short-term impact on our business in the first quarter and have not done so in the start of the second either, as consumers in our markets have continued investing in their homes, particularly through the online channel, which we dominate. We also believe that online retail in general and our categories in particular are well placed in a world in which the nesting or cocooning trend leads to a higher interest in and budget for home improvement projects. The underlying shift from offline to online continues, and I believe will accelerate as more and more consumers experience the benefits of shopping online. And finally, cash is always king, and our already strong financial position from the end of 2019 was further solidified in the quarter on the back of an excellent cash flow and with continued strong support from our financial partners. With that, I hand it over to Jesper, our CFO, who will walk us through the financials in more detail. Thank you, Adam.

We are very pleased with our performance in the quarter, and not least the fact that we saw a fourth consecutive quarter of accelerating organic growth. As Adam mentioned, net sales increased 33.5% to reach 1.628.6 million, and organic growth reached 22.1%. The strong growth from the fourth quarter of last year carried into the start of the new year, and in fact accelerated at the end of the quarter, putting us in a good position as we enter the second quarter. The top line development coupled with gross margin improvement and discipline on the SG&A line resulted in the highest first quarter EBIT and EBIT margin to date. EBIT grew by 44.7% in the quarter to reach 80 million SEK. Key factors contributing to the strong EBIT included, one, operating leverage as a result of strong growth and disciplined SG&A. the private label share of sales in the do-it-yourself segment, and three, strong operational focus in both segments on curation and purchasing to optimize unit economics. Both segments grew rapidly and so strengthened their respective market positions, and both segments contributed significantly to the bottom line. Finally, just as in the past two quarters of last year, we did not treat any items as affecting comparability in the first quarter. Next slide, please. Turning to some of the sales drivers in the quarter, the number of visits to the group's destinations increased by 63% to 57 million, primarily driven by a sharp increase in the Eastern European business within the home furnishing segment. Orders rose by 35%, and the group's mix trended well also from an AOV point of view. We saw levels in the range we're aiming for, especially for bulky items, given the advantage this provides on a direct selling cost line. The decrease in conversion rates is a direct mixed result of the rapid growth of the Eastern European business, which has lower conversion rates than the rest of the group. The overall AOV level remained essentially unchanged through a combination of an increase in the do-it-yourself segment and a slight decrease in the home furnishing segment, resulting from a higher share of small parcels in its Nordic business, as well as continued rapid expansion in Eastern Europe, where AOVs are structurally somewhat lower than in the Nordics. Next slide, please. We again enjoyed a quarter which saw a leveraged P&L. The significant top-line growth at 33.5% translated into an even higher gross margin increase at 40%, and a further boosted EBIT increase at 44.7%. The strong performance in both segments contributed to lifting the gross margin by 1.2 percentage points to reach 25.8%, our highest gross margin to date. The pure product margin, which is the measure most commonly used by our listed peers, amounted to 37.6%. As you can see on the right-hand side of the slide, The improved gross margin trajectory from 2018 and 2019 continues also into this year. The main drivers for the gross margin improvement included roughly equal contributions from the two segments, do-it-yourself primarily driven by a higher share of sales from our own brands, and home furnishing primarily driven by continued scale improvements and inventory management translating to lower fulfillment and postage costs in relation to sales. Before turning to the segments, a note on currency effects. We have had continued margin headwinds from a depreciating SEC and NOC. However, we have been able to essentially fully compensate these adverse effects by price increases. Let us now turn to our do-it-yourself segment. Next slide, please. Net sales in the do-it-yourself segment at just above 940 million SEC grew by 36.7% in the quarter. and organic growth accelerated to 17.9%. Overall market conditions were quite strong throughout the quarter and, in fact, improved further in the month of March. Under these market conditions, the do-it-yourself segment expanded rapidly and the numerous sales-related records were broken, including the strongest first quarter sales to date. The do-it-yourself segment continued to consolidate its position as the leading online player in the Nordics through rapid assortment expansion, extending the range of installation services, and expanding its share of own brands. The P&L in the due to sales segment was nicely leveraged, with the top line growth of 37%, translating to an EBIT increase of more than 115%, reaching 39.2 million SEK, which corresponded to an EBIT margin of 4.2%. Next slide, please. Net sales in the home furnishing segment grew by 30% in the quarter, reaching 694.6 million SEK, of which organic growth amounted to 27.6%. All geographies grew in the period, but growth was the highest in Norway, as well as our Eastern European business. Overall market conditions for home furnishing was less favorable than for duty sales. Preliminary data indicates that the total market decreased during the first quarter. This was seemingly driven by an offline contraction and online penetration likely increased significantly. Two developments affected performance negatively. The tough measures initiated in Denmark to counter the spread of the coronavirus and the rapid depreciation of the SEC and NOC. The latter development was countered by price increases, which limited the adverse margin impact. Just as within do-it-yourself, assortment expansion is an important growth driver, and the segment's range now extends to over 300,000 SKUs. The rollout of the last mile logistics operations in Sweden is progressing according to plan, and we are now live in southern Sweden. As a result of these developments, adjusted EBIT increased by 8% and reached 44.6 million SEC in the quarter, corresponding to an EBIT margin of 6.4%. Let us turn to cash flow. Next slide, please. Cash flow from operating activities amounted to 148.3 million SEC, the strongest contribution for a first quarter to date. This corresponds to a cash conversion in relation to adjusted EBIT DA, of more than 100%. Cash flow from operating activities was mainly driven by the group's EDTA during the period, as well as the favorable working capital trend as a result of an improvement in current receivables and accounts payable in the quarter. The right-hand graph showing the development in liquidity walks us through the started period position of 270.3 million SEK, adding the strong cash flow from operations deducting the impact of investing activities, a majority of which is M&A related. And finally, the financing activities, which consists of a mix of amortization of leasing liabilities while funding the ongoing M&A agenda through an exorcism facility, bringing us to the period end, 366.3 million sq of liquidity at hand. Next slide, please. The group's net debt amounted to 499.6 million SEK at the end of the quarter. Our strong operating performance meant that net debt in relation to LTM adjusted EBITDA ended at 1.3 times, an outperformance of the medium-term financial target range. Our financial position thus remains solid. The cash flow from operations reflects a strong business model, on top of which we had unutilized credit facilities at the end of the period of 529.6 million. Handing it back over to you, Adam, to summarize and conclude.

Thank you, Jesper. So summarizing on slide 21, our position is strong also in these turbulent times. We confirm that the four key parameters we discussed earlier of people, supply, demand, and financial position are all in good stead. Our growth in the quarter was the strongest on recent record, including organic growth of 22%. Our gross and bottom line margins are at good levels and continue moving higher on the back of a sound mixed development and the culture of cost efficiency. Our financial position is strong with ample cash on hand, available on drone credit facilities, and a net debt EBITDA that is currently outperforming our midterm financial target. Our strategy is in place and execution is ongoing, revolving around our four strategy pillars, which make up the BHG ecosystem. And finally, with strong total and organic growth as well as expanding margins, we are on the path to reaching our mid-term financial targets, including reaching 10 billion second net sales. This concludes our presentation, and we will now open it up for questions. Over to you, operator.