CDON Ab

Hello and welcome to CDON Group's earnings call for the first quarter of this year. Next to me, as usual, we have our CFO, Carl, who will join us later on for some more digging into the numbers. Thank you. To summarize this quarter, it was a challenging start of the year. We had a weak start with a weak January and February. We did a lot of operational work to turn this around during February and identified a lot of adjustments that we implemented. And happily enough, we saw that it yielded a good return. So we had a good ending at least of the quarter. And we just released that we also are now reviewing strategic alternatives in order to realize our business full potential. Starting with the sales, as I mentioned, very weak start of the year, both January and February were way below our expectations. In February, we identified the problems we had, both with some key merchants, but also with some key categories that were underperforming. We implemented and worked really swiftly with this and managed to implement a lot of changes during the end of February. And looking on March, we can see that it was a good comeback, so to say, for the quarter. And looking into the gross profit after marketing, our main KPI, we can see that it is, though, lower than last year. This is affected partly because of the weak start of the year on the top line sales, but also affected of higher marketing costs. We still have a dependency of the paid marketing channels and that mix becomes and continues to be costly for us. We also see that we have a negative development in our two home markets for both segments, Sweden. However, looking at the Nordic countries, they are very positive for both segments. We also introduced a new API at the end of the quarter. We now have one API where merchants and aggregators can integrate with instead of having two. We now have one way of integrating in order to sell on both our marketplaces. This have also made that we have had a little bit of pause of onboarding on new merchants waiting for this new API to get live and I'm really happy now to inform that we are live with it and we have the first merchants and aggregators integrating to it. This will enable us and open up for much more onboarding of new merchants with great supply the coming quarters. And what we just press released is that we have now initiated a review of strategic alternatives in order to realize our full business potential. It's including but not limited to take private transaction, capital raise to fund strategic growth opportunities, as well as sale of the company in parts or in whole. And the whole management team really supports this and believe that all these venues we have would be very good for this company realizing our full potential. Because let's not forget, we are building something really big here. We're changing the way we are shopping online in the Nordics. And that do take time. And we believe that these venues are very positive in order to build this for the future. All right, let's look into some numbers and I will get back for a summary in the end.

Minus 12% GMV in a quarter impacted by macroeconomic uncertainty, limited competitiveness in our supply, and also a larger impact. A larger impact. Sorry, can you hear me properly? Can you hear me okay? Okay, I'll continue. On the GV side of things, in the FinDic segment, we were impacted by Chinese New Year's to a larger extent than before, given a higher exposure to a Chinese merchant base. 16% lower net sales in the quarter, heavily impacted by the week 1P performance, which affects net sales adversely. If we isolate 3P net sales, It was only down 4% versus last year. Japan declined by 13% as higher take rate was more than offset by higher marketing costs. In total, EBITDA amounted to 0.2 million, but adjusting for a bad debt resolution, EBITDA amounted to minus 4.4 million. Both segments struggled to reach growth, but for different reasons. We saw the uncertain macro environment and uncompetitive supply mostly affecting CDON, but also FINDIC. GMV in the CDON segment was down 14% versus last year, but March sequentially better. The positive momentum in 2024 for Findic turned negative as China's new year had a larger effect this year, following our higher exposure and our willingness to manage and mitigate any negative customer experience during this period. GMV was down 4% for Findic in the quarter compared to last year. We see continued steadiness in our take rates and a strong take rate in CDON as we continue to benefit from the higher shipping commission that we introduced end of last year. There is a seasonal recovery in the case of Findic and all in all this led to a take rate of 15.2 for CDON and 29.2 for Findic. As mentioned, this led to a lower GPAM and continued pressure on our GPAM margin. So despite the high take rate in the quarter, GPAM declined 16% more than GMV for the CD-ON segment. The margin fell slightly to 8.5% versus 8.7% a year ago. FinBIC Japan declined by 9% in a quarter where we experienced inexpensive traffic mixed routing. The margin fell to 17.9% from 18.9% a year ago. Some positive signs, as we saw lower marketing cost as percentage of GMV, but we are still really looking into the expensive traffic mix that we currently experience. Across both segments, we see a high share of paid traffic compared to organic and reducing this dependency remains a strategic objective of ours, but it takes time to achieve this. The marketing cost as percentage of GMV came down slightly for both segments, reaching 6.6% for CDON and 11.2% for Findic. Positive reported EBITDA, but adjusted EBITDA is not in line with our ambition. It is a seasonally weak and tougher Q1. And we are reporting a positive EBITDA compared to Q1 of last year. However, adjusting for and being honest about the resolution of bad debt, EBITDA amounts to minus 4.4 million in the quarter. Lower OPEX, which we will see on the next slide, does not fully offset the weaker commercial performance in the quarter. We remain on track and are satisfied to report the lower OPEX versus last year and also versus Q4. This means we have been able to realize cost savings related to personnel, consultants, and also software and platform costs. This was enabled by the successful migration in September last year, but we now continue to reap the benefits of building a being integrated and operating on one shared platform. There are still some temporary costs included in Q1 cost base that we expect to take out in the coming quarter. This means that we are on track to realizing this lower run rate of minus 40 million that we have been talking about since the acquisition of Findic, really. Negative cash flow in line with the seasonal pattern. Negative operating cash flow before changes in working capital, following that with performance. However, our cash balance remains stable and end of period balance was 77 million, similar to that of last year. So it means that we have good control of our cash balance and are able to manage these times well. Is it time to wrap this up, Fredrik? Welcome back up on stage.

Yes, thank you. Yeah, to summarize this, a weak sales start of the year, but we really managed to identify the problems, implemented it in February, and we could see the benefit of it in March. We have press released about us looking into ways of really fully utilizing or fully realizing the potential in the company. And I must end with saying that we are building something big and that takes time. All right. With that said, we open up for some Q&A.