Boozt AB (publ)

Thank you and good morning all and welcome to our Q3 2024 financial presentation. Let's go to the first slide or highlights. The market trends observed in the first half of the year have as expected continued into the second half where consumers are cost conscious as well as holding back. That said, revenue growth in the third quarter was 6%, and excluding currency effects, growth was 3% higher at 9%, and in line with what we delivered in the first six months of 2024. The quarter was quite bumpy with regards to consumer demand, especially August, which was impacted by the very warm weather. September compensated somewhat for a poor August with a return to double-digit growth. Even though we don't like to talk too much about weather, we saw an immediate effect in September when it got colder in the region and customers started to buy into the autumn-winter collection. Overall growth was driven by a solid increase in active customers across region, while average order value was slightly down due to currency. And as in prior quarters, limited access to campaign goods once again had an adverse effect on our growth. Our department store model remains a key selling point and more than 100,000 new customers are now shopping from more than one category. And to illustrate the importance of the shift, sales to these plus 100,000 customers in the last 12 months has more than tripled compared to when they were buying from only one category. Customer satisfaction remains high with an NPS of 73 and a Trustpilot score of 4.4. They remain well above industry average and an important differentiator versus competition. The adjusted EBIT margin was 3.3%, down from 4.3% in Q3 last year. First of all, FX had a negative impact on the margin of around 1 percentage point in the quarter. Underlying there are of course other moving parts, but in theory our margin would have been unchanged assuming constant currency. Sandra will go through the different building blocks later in the presentation, but I would like to highlight one thing. During the quarter, we have introduced more competitive prices on Boostlet. This has been done to clear some of the older products from prior seasons to keep our inventory fresh. As you know, the most important thing for us is always to make sure that we do not carry old stock forward. Boostlet now has the size to be able to handle excess stock, which has always been our ambition. So basically the intention with Boostlet was always to be able to hedge our inventory risk when doing the upfront buying for Boost.com. This has come into play during the quarter as consumers sentiment has not come back to positive territory as we had expected. The additional markdowns are temporary and something that we're able to do without compromising the Boost.com brand due to Boosted being a separate sales channel. We also do this to some degree in Q4. In the quarter, we continued our share buyback program. So far this year, we have repurchased shares equal to almost 1.5% of the share capital. Despite this and the fact that we have increased our inventories ahead of the holiday season, we still ended the quarter with a cash position of 641 million SEK. Based on the performance so far in the year, we maintain our guidance, which I will come back to later in the presentation. Last but not least, we were notified yesterday that the High Court in Norway has rejected the appeal from the Norwegian tax authorities. And we have now officially won the case we had with the authorities. This means that we can now apply for a simplified registration in Norway, which in turn means that we will not be paying import duties in Norway looking ahead. This is great news, not least because we will save some 50 million SEK in duties each year as this was the customs paid in 2023. But also because we will now allow ourselves to be more active in Norway, giving the improved profitability. It is too early to say exactly how it will impact our business in Norway, both operationally and profitability-wise, but we can say that a fair share of the saved amount will find its way to the bottom line. Now please turn to the next slide. As in the previous quarter, we had a very solid quarter in terms of new active customers. In the quarter, we welcomed around 250,000 new customers and in total, the number of active customers during the last 12 months increased by 12%. The growth was 10% for Boost.com and 17% for Boost.com. In the Nordics, which is where we are most established, the number of active customers in the two shops increased by 7% for Boost.com and 12% for Boostlet. And in an environment with a quite muted consumer sentiment, it is quite encouraging for us to see that the consumers that are in the market continue to go online and continue go to our two shops active customers increased by more than 40 percent in rest of europe this was mainly driven by germany and the netherlands these are both markets where we are being a bit opportunistic while keeping focus on being profitable on every order as i've mentioned on previous calls we have for example introduced return fees in germany for boost.com Finally, the Baltics continue to perform well and active customers in the region were up 35% and 49% for the two sites in the quarter. This is obviously still from low levels, but with a continued high average order value on par with the group, we see decent profitability as well as strong growth opportunities in the Baltics. Let's go to the next slide. As mentioned earlier, we continue to see a healthy increase in the number of customers shopping from more than one product category on Boost.com. This is one of the most strategically important goals of our department store model and is also one that is easily measured in our financial performance. As I have mentioned on more than one occasion, the customers that shop from more than one category, they spend more on their sites, they stay more loyal to a brand and they return less. In other words, the more categories a customer buys, the higher the customer lifetime value. In the quarter, and as illustrated in the slide, we saw an increase of between 5% and 15% on all group of customers shopping from two to six categories on Boost.com. This amounts to a total of just above 100,000 customers. The share of customers shopping from more than one category is now at 51% for the last 12 months. This is slightly down compared with the previous 12 months where it was 52%. It is important to note, though, that this is a number which continues to be impacted by the fact that new customers typically suffer from one category to begin with. And in the last 12 months, we have gained close to 200,000 new customers on Boost.com. This is very good. Even though we put a lot of effort into getting our customers to buy into more categories, we still want to increase our customer base. We know that we're able to make customers come back and we know that we're able to get them to try new categories. And we believe that when consumers' propensity to spend goes up again, we will be able to get them to use some of their spending on our categories. So please turn to the next slide on our Club Boost. Before heading over to Sandra for the financials, I would like to give you a few highlights on our Members Club, Club Boost. Club Boost has now been live for a bit more than a year, and in the quarter it reached 1.7 million members. This means that more than 50% of our active customers are now Club members. This makes the customers easier to reach and to engage with, and while it is too early to make any solid conclusions, initial data on how our members shop indicate a quite encouraging shopping behavior by our Club Boost members. For starters, even though the customers that joined the club are already some of the better customers, we see that they increased the shopping frequency after joining the club. On average, club members buy from Boost.com around six times a year, compared with around four times before they joined the club. On top of that, initial data shows that average order value for members is roughly 15% higher than for non-members. And finally, we can see that members on average spend roughly twice the amount on our site compared with non-members. So Club Boost provides us with more tools in our toolbox where we can use clever tactics to get them to try our categories as well as use our markdowns spent more efficiently. So while it's still early days, the club was launched in June last year, I believe that we're off to a really good start and it's clearly something that will benefit Boost as we look ahead. So with this, I would like to hand it over to you, Sandra.

Thank you, Herman. So please turn to the next slide. As we talked about, revenue increased 6% in the quarter. But as Herman mentioned, FX had a negative impact of 3 percentage points. So underlying, we continued the momentum from the first half, growing top line with 9%. The development through the quarter was mixed, with a decent July, followed by a weak August, and finally a solid September, probably driven by the weather shift, which led to a good start for the autumn-winter collection. Growth was driven by an improvement in all markets. Revenue in Sweden continued the solid development from Q2, growing 8% in the quarter, while Denmark grew only 1%, however significantly impacted by currency. Growth in local currency was 4%. Rest of Europe increased 46%. In the quarter, most categories continued the good development seen in the first half of 24, with sports and kids being the best performers. Across markets, consumers remain very price sensitive and promotional levels are still very high. However, we have decided to be a little bit more aggressive on prices on boostlets compared with earlier, mainly to clear inventory ahead of the busy season. On the other hand, we have been a bit less promotional on Boost.com, mainly to protect our margin, which, as I will come back to later, is impacted by currency. For the first nine months of 24, net revenue growth was 8% or 9% in local currencies. The gross margin was 38.6% in the third quarter and decreased 1.2 percentage points compared to last year. The decline was driven by the lower level of campaign stock as well as the just mentioned decision to lower prices on Boostlet. Finally, currency fluctuations had a negative impact of roughly 0.5 percentage points. The adjusted EBIT margin was 3.3%, down from 4.3%. This was driven mainly by the lower gross margin, as well as a slight increase in the fulfillment cost ratio. Both, of course, impacted by currency in the quarter. And I will come back to the underlying development in a minute. So if we turn to the next slide, please. If we look at the segments, we see that the revenue in the quarter on Boost.com increased 5% or 8% in local currency. As in the first half, we saw a significant increase in active customers on Boost, and in the quarter isolated, close to 200,000 new customers shopped on Boost. Active customers in the last 12 months increased by 10%, which was a broad-based improvement. Actually, we saw an increase in active customers in each and every market that we operate in. In the Nordics, revenue on Boost.com increased with 2%, which was held back by negative growth in Denmark. However, in local currency, revenue from Denmark increased 2%. Growth outside of the Nordics was 52%, driven by Germany and the Netherlands, but we also saw continued good development in the Baltics. The adjusted EBIT margin for Boost.com decreased with 0.4 percentage points to 3.5%. The decline was mainly related to currency, as the underlying development was encouraging and supported by operational leverage on costs. If we look at Boostlet, revenue increased 13% in line with the development we saw in the first half of the year. Growth in local currency was 15% in the quarter. Just as in the first half, growth was held back by a lower level of campaign stock, while the number of new customers fueled growth. The number of active customers on Boostlet was up 17% in the Revenue from the Nordics increased 9% while the rest of Europe was up 33%. Growth in all markets was of course supported by the previously mentioned price initiatives that we launched on the site. The average order value was down 2% on Boostlet, which was all due to currency. Finally, the adjusted EBIT margin for the quarter was 2.6% compared to 6.3% last year. The decline was mainly due to the temporarily lower prices on the site as well as the limited access to campaign goods. So if we move on to the next page, we see the development of the cost ratios in the third quarter. Initially, it is worth highlighting that all cost lines in the quarter were impacted by currency. Our operational costs are tilted towards the Swedish kronor, where our top line, as you know, is primarily in foreign currencies. Consequently, the operational cost ratios were negatively affected by FX with around 0.5 percentage points in total. That said, let's go through the different cost lines. So if we start with the fulfillment cost, we continue to see an impact from the installment of transfer sales at our warehouse and the fulfillment cost ratio in the quarter, therefore increased to 11% versus 10.7% in the third quarter last year. The transfer sales are now fully operational and we expect this to bring material productivity improvements already from Q4. So you should expect to see a lower fulfillment cost ratio in the next quarter. The marketing cost ratio for the quarter was 10.2% and slightly down compared to last year. While we still experience high competition for cost per click, we continue to gain benefits from a large base of loyal customers, of which many are joining our members club that Herman talked about, Club Boost. The loyal customers tend to come as direct traffic to a higher degree than prior periods where our new customers are recruited through performance media. The adjusted admin and other cost ratio was 9.9% in the quarter, down from 10.2%. The improvement was driven mostly by leverage on cost. It is worth highlighting that the lower cost ratio was achieved despite last year being positively impacted with roughly 50 basis points related to a re-evaluation of accounts payables in foreign currencies. The non-adjusted admin ratio increased from 11.1 to 11.6%, and this was all driven by an increase in the share-based payments. Finally, the depreciation cost was 4.2% compared to 4.1% last year. So if we move on to the next one, we have an overview of cash-related KPIs for the quarter. Networking capital as a percentage of revenue increased slightly to 13.2% from 12.9%, mainly driven by the higher inventory levels. Inventory as a percentage of revenue increased to 43.2% versus 42.7% last year. This was driven by a decision to build up additional inventory ahead of the busy holiday season, as well as for Q1 next year. We were hugely successful with the decision to increase the inventory ahead of the busy season last year. And also, we found ourselves slightly undersupplied in the first quarter this year, which we tried to avoid for next year. Free cash flow in the quarter improved to a negative 17 million compared to a negative 94 million last year. The improvement was mainly driven by a more favorable development in operating working capital compared to Q3 23. For the first nine months of 24, free cash flow was a negative 612 million compared to a negative 829 million last year. Cashflow from investing activities was 41 million in the quarter versus 33 last year. The increase is mainly related to the investment in transfer sales at our fulfillment center. Our net cash position was 237 million at the end of the quarter, down 20 million compared to last year. Our cash position continues to be impacted by our share buyback program. And in the last 12 months, we have repurchased own shares for 147 million. So this ends the financial overview and back to you, Hermann.

Thank you, Sandra. And going to the outlook for 2024. As mentioned initially, we maintain our guidance for the full year. This means that we aim for revenue growth between 7 and 11% and an adjusted even margin of 5.2 to 5.7%. For the top line, this indicates growth in the fourth quarter of 6 to 16%. This is a broad span, but given the current consumer sentiment, we believe it makes sense to be cautious and maintain the range. Our best estimate is still the midpoint of 9%. We are quite certain that consumers will come to our store in huge numbers, both for the Black Friday events as well as to buy Christmas presents later in the quarter. November and December are by far the biggest months of the year and close to 30% of our full year revenue. So if the consumers have been holding back, waiting for Black Friday deals and Christmas for them to spend, or if they will hold back in November and December as before, that will have a significant impact on our final full year revenue growth numbers. The same goes with the margin. To reach our margin target we have to deliver a margin of around 8.5% in the last quarter and this will then be our highest quarterly margin to date. We do expect a tailwind from an increasing top line as well as the now finalized installment of our transfer sales. Additionally, the currency headwind that we saw in Q3 this year is not expected in the fourth quarter. However, there is a risk that we will need to clear excess inventory through increased markdowns if the consumer is holding back, potentially putting a pressure on the margin. Finally, we changed our CAPES guidance to around 225 million SEK from previously 150 to 250 million SEK. Now please turn to my next and last slide. It has been some turbulent years for online retail following COVID. After a significant increase in online penetration during the pandemic, we have seen a modest, if any, increase in online penetration. Some have even claimed that what we have seen is the return of the physical store, a kind of a big comeback for the physical store. To be honest, we've been somewhat skeptical of the claim that fiscal stores are getting grounds at the expense of online. And therefore, in times like these, it can be good to take a step back and look at the bigger picture. We are very pleased to see that we again have a double digital growth in our active customer base. The graph shows that despite tough times, we've been able to continuously attract new customers to Boost.com while successfully retaining most of our loyal customers. Following many years with double-digit growth in active customers, we experienced a slowdown in 2022 and 2023, I guess kind of expected, since the surge during COVID. However, since the fourth quarter last year, we've seen an acceleration of growth. We believe this is driven by a combination of a gradual increase in the online penetration, but likely also a starting consolidation in the online retail market. The online market has been and still is very fragmented, but difficult times tend to shake the tree and make the stronger market participants even stronger. In the last 12 months, we have increased our active customer base on Boost.com with 10% and we find it likely that these trends will continue, that we will continue to drive further increases in our customer base. This concludes our presentation so operator, please will you open up for questions, thank you.