CDON Ab

Hello, everybody, and welcome to CEDAWN Group's earnings call for the fourth quarter. Next to me, as usual, I have our CFO, Carl Andersson. And you will, in a moment, get your prime time and digging into the numbers. Thank you. All right. To summarize this quarter, this was really a foundational year for CEDAWN Group. we have rebuilt pretty much a new organization we have migrated two platforms into one platform but we also had quite disappointing sales for the years and also with the week ending looking into the numbers sales numbers what i'm showing here is the gross profit after marketing meaning the gross profit is what we keep from the sales, and then we deduct the marketing cost. And as you can see here, we had a quite good start of the year, but then we didn't really level up throughout the year and ended a little bit weaker than we really hoped for. The weakest category was media, which is mainly our 1P business, including movies, music, and games. This is mainly due to the organizational changes that we have done, but also due to the platform migration. And this is due to the fact that these categories were really deeply integrated in the old platform and ways of working. We have increased our dependency on paid traffic, and this mix of the marketing mix really have increased the marketing cost for us. Looking only at the gross profit, we actually report a increase for the full year. But when we deduct a higher marketing cost, we get these lower gross profit after marketing numbers. We also saw towards the end of the year a tough price competition starting with the Black Week and going into the December as well. And looking into the countries, we saw that Sweden was the weakest countries for both segments. As I mentioned, this has been a foundational year for us, and here I try to visualize how this looked from the organizational standpoint. We started the year, and here we have the green dotted line, which is my way of, in a subjective way, try to show the output of the organization. We didn't start at top on this year. And the reason for that was due to us not being able to really integrate the two organizations. As of last year, almost exactly on this day, one year ago, we announced that we were to close the Malmö office and centralize the whole organization to Stockholm. And this you can see in February. And what happens, of course, with output that it got totally drained. I've seen this many times before, and it's totally natural, but this is just a fact. This is what happened. And then the coming months, it continued to lose the output. And this is due to the fact that we were losing people, capacity, but also competence and experience. And back, everything needed to be handled by the remaining staff, pretty much doubling their effort. After that, we started to recruit new people. That also drains the output. Taking interviews takes a lot of time and energy. And then onboarding new people also takes time and energy. And then when new employees are onboarded, it takes some time to get really positive output. It can take weeks and sometimes months. And this is what we see now towards the end of the year is an increase in the output of the organization. And if we look into the trajectory into 2025, I'm very confident that we will pass the output compared to previously, but almost with half of the staff. So we are really getting more leaner, but also more meaner. In parallel to these big changes, we also did our platform migration. Looking to the left, I try to visualize our focus and also capacity for the different parts in our development. In the bottom, we have maintenance, which is pretty much ensuring the platform stability and security. We have fundamentals, which are the basic flows in our business model, such as financial flows, payment providers, search, and so on. Maybe not what you see directly in the shop and affecting the shopping experience, but it's really the fundamentals of running a marketplace model. On top of that, we have the new features, improving our customer experience, improving our merchant experience, and maybe improving our marketing efficiency. And this was pretty much the ratio we had 22 when we were two separate companies, Sirion and Fyndik. Looking into 23, we already increased the fundamental part, being focused on preparing for the migration that were supposed to happen the year after. This was at the cost of new features. Looking into 24, you can see that new features are at really a bare minimum. And the majority, absolute majority of our focus and capacity for the full year was on the migration. And this migration, as we announced last earnings call, were perfectly executed on time in September last year. Now, looking forward into the coming year, now 25, we see that we will be able to improve, increase the new features velocity, but we still have some fundamentals left. And it's some basic flows like aligning the financial flows, but also taking the merchant integration to next levels that we need to also fix and focus this year. Looking into 26, which I see is more of a standardized normal year, you can see what happens here is that the maintenance is being halved. And the reason for that is that at that point, we have one platform, not two platforms, and one platform that is highly efficient. And as you can see, it's quite visual. We really can improve our velocity when it comes to new features and getting back in innovating and becoming a front runner in the industry. So we're really looking forward for the coming years now. With that said, time to dig into some numbers. Welcome. Thank you, Fredrik.

Let's dive straight into reported figures. So we report both lower GMV and EBITDA following that very transformational year that Fredrik was talking about. We report 11% lower GMV in the quarter. And looking at full year, and now we need to remember that Findic was only included from April 12th in 2023. We report 9% lower GMV. Net sales was down 13% in the quarter and 7% full year. That was impacted by the 1P business, which primarily or heavily impacts net sales rather than GMV. GPAM, gross profit after marketing, declined 16% in the quarter, as the higher take rate that we experienced was more than offset by the higher marketing costs. More on that later. EBITDA amounted to 10.5 million in the quarter and 4.5 million full year. Note that Full year numbers includes 10 million of one-off costs associated with closing of the Malmö office. So an adjusted EBITDA would amount closer to 15, 16 million SEK. In the quarter, we also included a write-down of 18 million SEC relating to intangible assets on our legacy CDOM platform that are no longer used once we have migrated to the shared backend environment. Looking at our two segments, trying to break down and understand performance a little bit better. Starting with CDON, it was definitely a tough and disappointing quarter. An important, but also very campaign-intensive period. All in all, this led to minus 17% year over year. Full year for CDON segment, roughly 1.3 billion SEC, but down 19% year over year. On the contrary, on Findic, we are happy that we are growing, and in the quarter we grew by 6%, fueled by continued momentum in markets outside of Sweden. Full year GMV of 501 million SEK, equal to a 2% growth for the year. Organic GMV for the group declined by 11% in the quarter and 14% full year. So slightly different from the previous page and the reported numbers. Continued strong take rate as we continue to prove consistency. And we can see an increase in the CDON segment. That was positively impacted by There was also a lower average order value and some mix effect, which contributed to the higher take rate in the quarter. Full year take rate for CDON increased to 14.2%, and in the case of Findic, it reached 29%. There is some seasonality at play for Findic with a higher average order value during that period, which has a small negative impact on the take rate during the quarter. But over time, we continue to see consistency and we saw similar impact in Q4 in 2023 as well. Lower gross profit after marketing and pressure on our margin. And despite that higher take rate in the quarter, Japan decreased or declined for CDON by 25%. Higher marketing costs are really driving this. I will get back to that on the next page. Full year gross profit after marketing declined by 20%. Our GPAM margin in the quarter fell to 8.3%, almost down one percentage point. But on a full year basis, we are relatively flat compared to the previous year and ended at 8.1%. Findix GPAM declined by 2% in the quarter, so slightly off and higher marketing costs But on a full year basis, we increased GPAN by 2%, similar to that of the GMV growth. Higher marketing costs stems from a more expensive traffic mix. And it is true across both segments that we see an increased share of paid traffic over organic and direct traffic. It's important that we get back to a higher share of organic and direct traffic, and this will be a combination of effects, including technical SEO fixes, content and brand awareness building, but it takes time. Marketing costs increased in the quarter, reaching almost 7% for CDON, but on a full year basis, it's closer to 6%. Marketing costs for Findic were relatively stable to the previous quarter, And on a full year basis, we reached 11.6%. But remember that significantly higher take rate on the Findic segment. All in all, this led to a positive EBITDA in the quarter, but also full year. The second half of the year is seasonally stronger and important to us, but it did not reach our expectations and our long-term ambition. EBITDA in the quarter was 10.5 million and that is some 6 million lower than previous year. Full EBITDA of 4.4 million is 16 million lower than 2023. Still adjusting for the one of costs associated with closing of the Malmö office of 10 million SEK that would then we would reach an adjusted EBITDA of around 15 million SEK for the year comparing to 21 million in 2023. We do have continued control of our cost base and despite the sequential increase in OPEX in the quarter, we argue that we are about to realize the previously communicated run rate cost saving during the first quarter. Q4 still includes consultants, software and other costs. associated with the platform migration. We have exited a lot of those costs and we'll continue during Q1 to clean up the cost base to reach that lower run rate that we have been talking about. Lastly a few words on cash and there was a positive cash flow in the quarter and operating cash flow before changes in working capital was positive on a quarterly and full year basis. It is a seasonally strong quarter from a cash point of view and all in all this contributed to a build up in cash and the end of year cash balance was 145 million compared to 154 million the year before. That said, time to summarize. Welcome back up on stage, Fredrik. Yes, thank you.

Weaker than expected sales-wise, definitely. But at the same time, this has been really a foundational year. We have the main parts of building a long-term business model and business here now in front of us. We will not be doing this every year. And we're past this now. We have a new organization. We have one shared platform that we can build from. And we really strongly believe that the year of 2025 is going to be the year of CDON. Thank you. And now we open up for Q&A.