CDON Ab

Hello, everybody, and welcome to the second earnings call for Cityon Group. Today, it's myself and our CFO, Carl. Good to be here. Yeah. The second, third time we're doing this together now, and we will get back to the numbers led by you in a moment. To summarize, this quarter, we continue to have near-term challenges, but we are making the right investments for the long-term success. We had no top-line growth, but we could see an improvement month over month within the quarter. We have an EBITDA loss of minus three and a half million SEK adjusted for Malmö closing and foreign exchange costs. But we are really improving our operational implements to work towards our long-term objective to become the leading marketplace in the Nordics. We're not happy with the results. On average, we grew with minus 16% versus last year. We had a tough start with April, minus 22%, but we had an improvement, improving in May to minus 14%, and then ending with June with minus 11%. This yielded a negative EBITDA. Adjusting for Malmö closing costs of 4 million SEK, and foreign exchange cost of 1.9 million SEK. All in all, minus 3.5 million SEK in losses on EBITDA. We're not happy with this, and we really hope that this is the last time we have a negative EBITDA quarter. Our gigantic migration work are now closing to the deadline. We are now moving the CEDAWN platform into Findix platform, making ourselves having one IT platform managing two different marketplaces on all the different markets. We are ahead or we are on our time plan with the deadline in September. This will enable future cost savings as we have communicated before. And we are still confident in the 40 million SEC in cost savings in total for 2025. However, we see also that there is a slightly increase of risk in Q3 sales due to this big migration. Bugs and hiccups always happens when we're doing big migrations like this, and the risk is a little bit increased due to the migration. During this quarter, we have put a lot of time and brains into the supplier acquisition. We have reworked our strategies to make sure that we improving our supply. We have redone our processes on how to identify what supplier to have and also finding the merchants that have this supply. Our main focus is now non Nordic merchants and we have ramped up the teams that are working with acquiring new supply. And now. the supply acquisition is the main focus for the whole company. Looking at the as important customer satisfaction, we see that we are still trailing on really positive high trend. We are still compared to last year, we have a customer review score of 4.2 compared to 3.8 last year. We have implemented two big changes that will even improve our customer satisfaction even more. The first one is that we have now finally implemented a new merchant agreement. This will enable us to act more and harder on merchants that aren't performing and also bad supply in favor for the customer. The second part is that we during the quarter now have finalized the whole migration of in-house customer service to an outsourced customer service. We can already see now that we are on the same high levels as we were before when we had it in-house. We remain committed to the long-term goal of becoming the leading marketplace in the Nordics and continue to believe in the core elements of the marketplace model. The massively improved supply, and to greatly improve customer satisfaction. The latter is on good trend, and we are all focusing now on improving the supply. The supply will be the enabler to come back to GMB growth, and will also be the base of continuous improving our customer satisfaction. With that said, we will dig into the numbers led by Carl.

Thank you, Fredrik. Let's look into the reported figures. And in the quarter of 24, Findic is naturally included, but still in 2023, Findic is only included from April 12th. We report a lower GMV, minus 14% versus last year, despite the addition of Findic. We have a lower net sales, minus 7% versus last year, as we have seen higher commissions driving higher net sales from the GMV. Lower gross profit, only minus 3%, and that is thanks to a higher take rate on average. Our gross profit after marketing decreased by 7%, while it increased as percentage over GMV, the GPM margin is up to 10.5. All in all, this sums to a negative EBITDA of 9.4 million in the quarter. And as mentioned, the 4 million SEC related to the Malmö closing and 1.9 to foreign exchange costs in the quarter would take us to minus 3.5 adjusted. Segment-wise, looking and starting with GMV, it is another tough quarter for CDON, minus 21% versus last year. But as mentioned, we do see sequential improvements month over month when comparing to last year. We also had a higher than usual non-fulfilled volume at month end, suggesting that we are carrying 5 to 10 million of GMV into Q3, which should have materialized in Q2. Fyndik, on the other hand, is steady and we're performing in line with last year, minus 1% to be exact. We've seen positive momentum in our non-Swedish markets, even though from low levels, we still see the effect of adding supply and the GMV effect that follows. Our take rate remains strong with the steadiness in them over the quarter, across both segments really. We haven't done any changes to our commission model, and we see quite little mix effect affecting our take rate in the quarter. We have a lower gross profit after marketing in CDO, but we continue along a positive trend in Fyndik. GPAM is down 23% in CD-ON in line with the GMV development, but we are now lapping comparables with similar profitability. So we would see a tightness between GMV and GPAM going forward. A slight decline in our GPAM margin to 7.8% down from 8.1. Findic, on the other hand, grew by 13%. And in that case, we're still seeing the annualized effects. of a selling feed that we increased in Q3 last year. Gross profit after marketing over GMV remains steady over 18%. We did see higher marketing costs in the quarter, primarily in our CD-ON segments. We're continuously looking to experiment and maximize the returns of our marketing strategies, which explains the slightly higher marketing cost as percentage of GMB. There is also a small timing effect related to the non-fulfilled volumes, as we mentioned. Findex segment is steady. We have a marketing cost around 11% and see solid profit on ad spend in the quarter as well. When summing this up, we are back to the negative EBITDA of minus 9.4. And it does really reflect the challenging demand that we have seen, the Malmö office closing, as well as the ongoing platform migration. But despite all of this, I and the rest of the company is really committed and we do have a positive long-term view on our business model and on our business. The poor EBITDA is explained and starting from the top effectively with a weak GMV, some higher marketing cost as the primary factor, the lower G-Pen, but we have also the higher OPEX, which is inflated in the quarter. Let's come back to that in a minute. As mentioned, adjusting for Malmö closing and FX, we would have underlying EBITDA of minus 3.5, closer to the one in Q1. And OPEX is higher, but my work with the platform migration is really reaching its peak during Q2 with the planned completion end of Q3. We have consultants as well as dual systems in our cost base. And those are costs that will come out once the migration is completed. And this is why we're still confident that our underlying cost base will decline in 2024 already. And we will reach a lower run rate in 2025, minus 40 million as previously communicated and committed to. Lastly, a few words on our cash. We had a negative cash flow before changes in working capital, minus eight, but changes to our working capital led to a higher cash position end of quarter, actually 3.5 million sec higher than the end of Q1. Also bearing in mind that we are now heading into a seasonally stronger second half of the year, with Q4 being the peak, we should have higher cash position quarter over quarter for the rest of the year. To sum this up, Fredrik.

Yes. We had some near-term challenges in the business, especially when it came to the top line. We are working on it. But at the same time, as Kalle just were addressing, we really see improvements in the long-term focus that we have. We have full focus on supply acquisition. We are migrating a huge platform into one platform, and we are centralizing a whole organization and pretty much creating a new organization here from Stockholm. And we are maintaining our long-term objective to become the leading marketplace in the Nordics. That ends this presentation, and now we open up for the Q&A.