Boozt AB (publ)

Welcome to the Boost Q2 2025 report presentation. For the first part of the presentation, participants will be in listen-only mode. During the questions and answers session, participants are able to ask questions by dialing pound key 5 on their telephone keypad. Now I will hand the conference over to CEO Herman Haraldson and CFO Sandra Gad. Please go ahead.

Thank you and good morning all and welcome to our Q2 2025 call. Let's turn to the first slide. I think it's fair to say that the first half of the year has been challenging to quite difficult market. Despite this, our revenue for the first six months was slightly positive in local currency. While this is below our long-term ambitions, we are satisfied with the performance given the strong consumer headwinds, particularly in Denmark. Looking at Q2, it was flat in local currency, but with a 3% currency headwind, our reported revenue decline by 3% to 1.8 billion sec. This is broadly in line with what we anticipated when we updated our guides in April with the variation that May was significantly worse than we expected and June was stronger than anticipated. In the quarter, Boosled continued its strong performance with revenue growing by 14% or 17% in local currency. The strong growth is a direct result of our inventory clearance strategy. As we have said earlier, our inventory going into the spring-summer season was too high, so we have used Boosled to manage our stock levels, effectively mitigating inventory risk and keeping our offering fresh. As was intended when we launched Boostlet, this channel now is providing its value as a crucial part of our business model. In contrast, Boost.com saw a revenue decline of 6% or 3% in local currency, While this was impacted by a muted demand for fashion, sales were also affected by our strategy to limit promotional activity on Boost.com to protect our brand value. We believe this is the right decision to preserve the long-term health of the Boost.com brand, even though it affects us short-term in a difficult market. Our profitability or adjusted EBIT margin for the quarter was 3.4%, down 1.5 percentage points from last year. The decline was primarily driven by two factors, a lower gross margin due to the clearance sales and a higher marketing cost ratio. was the result of a planned higher spent marketing, mainly focusing on the non-fashion categories. However, with consumers holding back on spending, we did not get the expected returns on those investments in the short term. Partially offsetting the declining margin, we saw a continuous solid trend in our operational costs with significant improvements in both fulfillment and admin. These ratios improved by close to 2.5 percentage points combined compared with last year. A highlight for the quarter was our strong free cash flow, which more than doubled to 186 million SEC up from 90 million last year. The improvement was the result of our disciplined inventory management as well as the repayment of the wrongfully paid customs in Norway related to 2022 to 2024. The strong cash position allows our commitment to shareholders as we repurchased 94 million SEK worth of shares in the quarter. In total, we have now already repurchased shares for 109 million of the 200 million program initiated in April. We are on track to return 800 shareholders from the Danish listing proceeds. To meet this commitment, the board has initiated the process to increase the current share buyback program from 200 million to 300 million SEK. Finally, our financial guidance for 2020 remains unchanged. We expect net revenue growth of 0 to 6% and an adjusted average margin of 4.5 to 5.5%. With the addition that we now also guide for a free cash flow of at least 500 million SEK. in 2025. Provide more detail on the outlook at the end of the presentation. Now turn please to the next slide. We normally do not provide a detailed breakdown of the monthly performance, but given the big swings we have seen in trading, we believe it is important to highlight how sales have developed on a month-by-month basis during the quarter. As you can see from the slide, after a relatively stable Q1, sales started to decline in April and reached a low point during May. The weak performance should be seen in the light of a challenging trading environment, where very low consumer confidence as well as a cold May in the region impacted consumer demand. With consumers' confidence started to see some optimism, trading in June improved significantly, with revenue increasing with double digits for the month. This was driven by all categories women's fashion. This positive trend at the end of the quarter gives us confidence as we move into the second half of the year. Next slide, please. We are strategically fueling our business for future growth by three key areas. Hiring, AI, and inspiration and curation. First, let's talk about our people. We have made new high-profile recruitments in our buying and merchandise teams to significantly strengthen our organization. The move of our headquarters to Copenhagen has been instrumental in attracting very experienced and talented buyers and merchandisers. They bring strong fashion backgrounds and valuable industry relationships that will complement our data-driven approach in a powerful way. Second, we are making a pre-AI across all parts of our value chain. We are leveraging AI to generate content for banners, campaign images, and also product descriptions, which allows us to scale our creative output. We're also building AI assistance to support our technical engineering, financial tasks, as well as customer service teams, making our operations more efficient. Crucially, we can now deliver highly personalized recommendations to our customers. Based on the order and behavioral data, we can do it more efficiently and with greater precision. Finally is inspiration and curation. All these initiatives, particularly those driven by AI, are designed to increase customer loyalty through tailored content. By offering product descriptions through better curation and styling tips, we are confident that we can make the shopping experience more engaging and inspirational for our customers. To further support the business, we are also enhancing our engagement and focusing more on social media. These strategic initiatives are all focused on making us more agile agile and responsibly equipped to succeed in a rapidly changing market. We are confident that these actions are the right steps to build a strong foundation for future growth. Please turn to the next slide. Going back to the performance in the quarter, we continue to see an improvement in the share of our customers who buy from more than one category on Boost.com. As most of you know, moving customers to buy from more categories is a key priority for us. Customers buying from more than one category are more loyal and they buy exponentially more than customers buying from just one. In the last 12 months, 53% of customers bought from more than one category, which is an increase from 51% in the same period last year. As mentioned in the beginning, we have invested in offline media to increase the awareness of the non-fashion categories. It has had some effects, but it has not been as effective as we had hoped for. With this, I will hand over to Sandra for a more detailed run-through of the numbers for the second quarter. Please, Sandra.

Thank you. So let's start with a look at our revenue for the quarter. Revenue declined 3% and it was flat currency. The decline was driven by Denmark, which was down 8% or 4% in local currency, while Sweden continues to perform above par, delivering 4% growth in the quarter. Looking outside of the Nordics, revenue was down by 3%. While the Baltics are still performing well for us, Germany and the Netherlands saw a decline. This is mainly because we're holding back on marketing here as we remain focused on being profitable on every single order in these countries. The gross margin was 39.1% in the quarter and down 2.7 percentage points compared to last year. This was mainly the gross margin on Boostlet, where we are clearing inventory at higher discounts. Additionally, the gross margin was impacted by currency, resulting in a headwind of close to 1 percentage point. The adjusted EBIT margin was 3.5%, down from 4.9%. This was largely the progress margin as well as the increased marketing spend in the quarter. These negative impacts were partially offset by a continued solid progression in fulfillment costs as well as administrative costs, which I will come back to in a minute. Turning to our two platforms, Boost.com saw a revenue decline of 6% for the quarter, which translates to a 3% decline in local currency. While the difficult market conditions had an impact, it's also important to note that our strategy of maintaining a more premium pricing on Boost.com, which we do to protect our brand equity, is likely impacting short-term sales in the current environment. Despite this, we onboarded close to 200,000 new customers on Boost.com. However, as consumers remain hesitant to spend across the Nordics, we also see that they're buying on average less frequently. The number of active customers in the last 12 months was flat compared to last year, while the average order value increased 2% to 934 kronor. In the Nordics, Boost.com revenue was down 6% or 3% in local currency, and this was driven by a 10% decline in Denmark, which translates to a negative 5% in local currency, while Sweden was down 3% in the quarter. Consumer confidence in the Nordics continued to decline in the quarter, though we have seen a slight improvement towards the end, and especially in Sweden, which was also reflected in the strong performance in June. Sales outside of the Nordics declined 8%. As mentioned earlier, this was impacted by lower sales, mainly in Germany and the Netherlands. The adjusted EBIT margin for Boost.com declined 0.8 percentage points to 3.8%. The decline was mainly driven by a lower gross margin impacted by currency as well as a higher marketing spend. This was partially offset by the increased efficiency in fulfillment and distribution supported by the transfer sales that we introduced in 2024. Additionally, margins were positively impacted by Boost no longer being subject to customs payments in Norway, as well as the staff reduction. If we move on to Boostlet, revenue increased 14% supported by the ongoing clearance sales introduced last year. in the quarter, we successfully continued to clear out all the products from prior seasons to keep our inventory fresh. This has been well received by customers, particularly in Sweden, where sales increased 30%. Active customers during the last 12 months increased 19% to more than a million, while the average order value increased 2% to 933 kronor. This was achieved despite the lower prices offered on Boothlet and was due to an increase in number of items per basket. The adjusted EBIT margin for the quarter was 1.9%, down from 5.9% last year, and the decline was mainly due to the current clearance sales on the site. So if we move to the cost ratios, starting with fulfillment, we're very pleased to see the continued good development in our fulfillment cost ratio, which was down to 10.5% for the quarter compared to 11.4% last year. This is a direct result of the operational efficiencies that we've been working on. The transfer sales we installed last year are now fully up to speed and combined with better distribution deals, they are generating meaningful savings for our business. Our marketing cost ratio increased to 11.5% from 10.8% last year, and there are two main reasons for this. First, we continued, as Herman mentioned, with a planned offline marketing spend to build awareness for our non-fashion category. The second reason is that we did not see the expected return on these investments due to the challenging environment, and particularly with women holding back on spending, also somewhat impacting other categories. we do not plan to spend the same level on offline marketing in the second half. If with admin and other costs, the ratio continues to improve and decrease by 1.5 percentage points to 9.7%. This improvement was driven by two significant factors. First, our administrative costs benefited from no longer having to pay customs in Norway. The other major driver was the positive effects of the restructuring that we completed in February, which reduced our permanent positions by approximately 10%. We're very pleased with the increased efficiency that this has delivered. This is now projected to have a positive impact on our adjusted EBIT margin of up to zero point points in 2025, an increase from our earlier projection of around 0.3%. Our depreciation cost ratio increased to 4.1% from 3.6%. And this was also due to two factors, the new depreciation cost associated with the lease of a new bulk store home and the installation of the transfer sales at the fulfillment center last year. These are strategic investments and we expect to grow into these costs as our business expands. Finally, it is worth noting that costs related to share-based payments resulted in a positive adjustment this quarter. This was due to lower share price and lower projected performance than initially anticipated. Consequently, the non-adjusted EBIT margin for the quarter increased to 5.8% from 4.2% last year. The next slide, please. Cash development. So we ended the quarter with networking capital of 1.3 billion kronor, corresponding to 15.5% of revenue. And this is to be compared to 12.2% last year. The increase was mainly related to decline in accounts payables, which was primarily due to reduced inbound deliveries during the second quarter. Inbound deliveries are anticipated to pick up during Q3 ahead of the autumn-winter season. Inventories, they are on par with last year, but significantly down compared to the last couple of quarters, supported by the ongoing clearance sales and boosted. CapEx was slightly down compared with last year in the quarter versus 48 million last year. The decline was mainly related to intangible investments. Investments in tangible assets was at 12 million and among other things relates to investments at the fulfillment center for a new semi-automatic system for garments on hangers which will include end productivity even further. Free cash flow in the quarter was 186 million compared to 90 million last year. The improved cash flow was mainly due to the effective inventory clearance during the quarter, as well as more cautious buying behavior given the difficult trading conditions. Furthermore, cash flow was positively impacted by the repayment of customs duties, which were incorrectly paid in Norway in 2022 to 2024. These two factors were partially offset by decline in our accounts payable. Our net cash position was 75... at the end of the quarter, down from 297 million last year. And our cash position continues to be impacted by our share buyback program. In the last 12 months, we repurchased own shares for 292 million. So this ends the financial overview. So back to you, Herman.