Cint Group AB (publ)

Good morning, all. Of course, my name is Patrick Comer. I'm the CEO of Sint, and I'm joined by our CFO, Niels Boone. It's a privilege to speak with you today as the new long-term CEO, having stepped into the role at the beginning of September, after two and a half years of being chair of the board. As many of you know, I am uniquely qualified to lead the organization. I was the founder and CEO of Lucid, which of course was acquired by Sint in 2021. Over the past 45 days, I've spent a lot of time in dozens of meetings with our largest and most important customers, many of whom I've known for many years, speaking with them about their opportunities and the challenges that they face. And what I've learned is that Sint remains a critical part of this industry. and that our partners are ready for us to complete our migration and our integration so that we can build our future together. Welcome to our results presentation. Next slide, please. I'd like to start with our heroic purpose, which serves as our North Star. Our purpose is to feed the world's curiosity, and it's this purpose that informs every decision that we make. It is our commitment to help our clients understand and to engage with their audiences more effectively. And this purpose not only defines who we are today, but also shapes our vision for the future. Next slide, please. And a quick reminder slash overview of the role that sent place in this market research industry or ResTech industry. We are the critical global exchange for distributing surveys. We power insights for a wide range of research types, and most importantly for us, the media measurement or audience, I'm sorry, advertising effectiveness industry. With customers in more than 70 countries, our platform reaches more than 300 million respondents and we reach respondents in more than 130 countries globally. And every day surveys are launched on our platform, leveraging our profiling data to connect researchers with the right audiences in the right time. Our role is to provide this critical technical infrastructure and insights platform, servicing more than 4,300 customers globally. And at Scent, we have built the world's largest automated survey exchange, ensuring the efficient delivery of insights at scale for businesses worldwide. Next slide, please. So looking at overview of our third quarter, despite our ongoing and challenging market conditions, we have maintained stable sales and achieved continued improvements in our profitability. As you can see, our media measurement business continues to grow strongly, offsetting slower sales that we've seen in Ascent Exchange, which has been impacted by weaker demand. What's important to highlight is our improved gross margin, driven by higher operational efficiency and lower cost, thanks in part to the ongoing platform integration process. We're on track with customer migration and expect the majority of clients to be fully transitioned by the middle of next year. Our commitment to innovation also continues and will highlight recent investments, focusing on product enhancements and leveraging automation to deliver more value to our customers. Next slide, please. Briefly looking at our Q3 figures, our net sales for the third quarter reached 42.4 billion, reflecting a 1.6% growth on a constant currency basis. As mentioned before, this growth was mainly driven by strong performance and media measurement. Our gross profit increased to 37.3 million with a gross profit margin of 88%, slightly up from 87.4 last year. This improvement of gross margin could be attributed to lower operational costs, particularly in hosting. Our operating expenses were down to 25.6 million leading to an improved EBITDA of 11.7, which translates to an EBITDA margin of 27.5. This is a significant improvement from 22% last year, partly due to lower costs associated with our long-term incentive program. Overall, our focus on operational efficiency has resulted in a stronger financial performance and positions us well for the future. Next slide, please. Let's talk a little bit deeper about the progress we've made with platform integration, customer migration, and some of our innovation products. By the end of the third quarter, we had successfully migrated 66% of our customers to the new Scent Exchange. And we're aiming for 80% by the end of this year and expect to fully migrate all customers by the middle of 2025. Obviously, customer retention is a key focus during this migration. I'm pleased with the momentum so far and feedback from our customers. We have a dedicated team closely working with each client to ensure a smooth transition, and we've implemented several support initiatives to address concerns they may have. We have not seen significant churn, and we're closely monitoring customer satisfaction throughout this process. In terms of looking at innovation for the quarter, One of our key releases is our AI-powered Fielding Assistant, which helps our customers get the best price and best delivery options for their surveys while cutting down the time it takes to manage projects. This is a major step forward in making the platform more efficient for all of our users. We've also rolled out what's called RPI, which is revenue per interview. This replaces the old supplier take rate systems of our legacy platforms by optimizing for delivery, quality, and price. Over 70% of our supplier volume is already using this model, and we're on track to reach 90% by the end of the year. All of these efforts are helping us streamline operations, improve customer experiences, and set the stage for continued profitability. Next slide, please. Let's spend more time on media measurement as it continues to be a key driver for us. This quarter, we built on our partnership with Disney by enhancing our self-service media measurement platform. This now is open to new customers. and allows them to quickly set up studies and to get real-time insights in just minutes, making it easier than ever for them to move from a study concept to actionable data. We've also expanded our capabilities into measuring digital out-of-home. These are particular ad placements and one of the fastest-growing areas of digital ad spend. Additionally, we've introduced AI-powered reporting enhancements to help our customers synthesize their brand lift insights more effectively and optimize their media strategies across different platforms. These innovations are helping us meet the evolving needs of our customers, making Synth an essential platform in providing advanced cross-channel measurement solutions. Next slide, please. And with that, I'll pass the mic to our esteemed CFO, Niels Boe.

Thank you, and good morning, everyone. Next slide, please. This slide is just a reminder that we changed our reporting formats in Q1. So the three main changes are the revenue recognition, function-based P&L in terms of costs, and the EBITDA measure instead of EBITDA. So just to remind you, because of the year-on-year comparisons. Next slide, please. So all the numbers that you see here are pro forma numbers, meaning they are like for like under the new method. So as already mentioned by Patrick, we had 1.6% constant currency growth at the group level. Cross-profit was higher. You could see we had this one-off dip in Q1. And since then, we have been improving, mainly due to the lower hosting costs and ongoing optimization of that. Then on the right, you see EBITDA, the profitability. And of course, there, we also see a nice spike upwards towards 27.5%. It was, however, held by a 2 million kind of one-off adjustment on the LTIP programs. compared to 0.9 last year. Next slide, please. So here you see the different business segments. So as was already kind of common during the previous quarters as well, media measurement has been growing quite well, 47% year on year compared to SIN exchange with minus 12%. Then if you go to the right, you see the regional split of the same numbers. So here the Americas includes media measurements. Therefore, it went up. Without that, it would also have been a negative growth there, unfortunately, with 17%. EMEA, minus 1%, and APEC, minus 17% as well. Next slide, please. So going down the P&L, so you already discussed a little bit gross margin and total OPEX. So as you can see further, you also see the split there, the different function-based cost items. We also had this efficiency program that he announced in July that becomes visible here, mainly in the sales and marketing expense line. And other than that, words to point out, amortization last year was related to the deprecation of systems. This is why it's a big number last year and not so big. this year. So this year is more normal, I would say there. Items affecting comparability has to do with CEO change mainly and that's therefore also non-recurring. So yeah, coming down to EBIT of 3 million compared to minus 21 last year. Going to the next slide, please. So this is about cashflow. You see total cashflow was minus 7 million compared to minus 4.3 in the previous year for the same quarter. Operating cashflow actually improved by six and a half million. So based on the stronger profitability as you already saw before. Changes in working capital, minus 9.9 million. We will go deeper into working capital later on. Investing activities that has to do with capitalized development costs was stable compared to last year. You see here cash flow from financing that has to do with a 3.6 million loan down payment that we had. in 24, but not last year. So that's the main change that you see there. So total cash 23.4 million and total net debt is 78.6. Going to the next slide about working capital. So here you see the split. So total working capital went up with receivables being stable. Accounts receivables actually going down here, but you have to kind of look at that one in combination with the other current receivables as well. So if you take those two together, it's stable. Accounts payable went down, however, and therefore total networking capital went up as a percentage of total customer spent and also an absolute number, of course. because the customer's brand was stable compared to the previous quarter. So we are still and will be focusing on working capital going forward. I expect more gradual changes there, improvements there rather than a step change. We have a couple of major things working to our favor there that will become visible over time. So one is, of course, the ongoing migration slash consolidation of the two platforms going into one platform. We're doing the same with the CRM systems and also with the ERP system, where we still have multiple or two, one for Synth, one for Lucid. And we're close to completing that as well. And also we went through what we call legal entity rationalization, where we went from 28 legal entities to 18. And we're just finalizing the last two of that. All of this will lead to more efficiency on the invoicing side in particular going forward. However, in the short term, it's not helping because it's more confusing and extra work maybe, but it will pay off in the medium and the longer term for sure. Yeah, so the teams are fully focused on this. I think that's my last slide. I'm going to go back to Patrick for the last one before the Q&A.

All right. Thanks, Niels. So as we look ahead, the completion of the platform consolidation in the middle of next year is the major milestone for Scent. Once this process is complete, we'll be able to shift our focus towards accelerating innovation and expanding our commercial capabilities, particularly within the core marketplace business, which has seen a slower demand over recent quarters. While we continue to work through consolidation and migration, we anticipate only modest year-over-year sales. However, we do expect a typical strong seasonal fourth quarter. Looking further ahead, we're developing our robust strategic plan, which we will present in the coming months. And our vision is clear. We want Scent to be the fastest, most efficient provider of consumer insights, offering the best quality and the widest variety of data to our customers. This will position us for sustainable growth as we move into the next phase of our company's journey. I'm specifically focused on improving our commercial footing and positioning our platform for success post-migration. And personally, as a major shareholder, I'm passionate about this company and this industry. I am focused on executing this strategy and believe that we will see results in profitability and free cash flow. And I'm committed to clear and transparent communication with our investors throughout this process. I appreciate your time and attention, and we can move to Q&A.

Thank you. Ladies and gentlemen, if you would like to ask a question, please press star, followed by one on your telephone keypad now. When preparing to ask your question, please ensure your phone is unmuted locally. We have our first audio question from Thomas Milson from Nordic Markets. Please go ahead.

Hello, Patrick. This is Thomas Nelson from Nordea. I have two questions for you. First, in terms of the overall market, do you see any signs of improvement? And secondly, media measurement is showing very strong growth. Is there any risk that Synth is competing with its Synth Exchange customers here?

These are two great questions, Tomas, and I appreciate it. The first question is about the overall market. Are we seeing improvement around growth? And the second question is around media measurement. Do we see any kind of conflicts with the marketplace or exchange business? Did I get that right? Yes. Perfect. Overall, the market, having spoken with all of our customers, I think that across the board, and you've seen that with some of our other public partners that released, it's been a challenging market for research globally over the past few quarters. In the U.S., we have seen some improvement, particularly around the U.S. election. And so we have seen those volumes come through as we would expect. But in general, I still think that the overall view towards the research industry has been sluggish at best. And I think you see that across the board with public statements. On the media measurement side, there are particular customers that actually use both of our products. They use the marketplace and they use media measurement. They license both, as it were. And so the number of conflicts are actually relatively small. Most of our customers in media measurements are the agencies and the platforms themselves like at Disney. And so we don't see that many conflicts in the market between those two product suites. Does that answer your question?

Yes, perfectly. Thank you so much. Thank you.

We have our next audio question from Amu Sarr from Dansk Bank.

Hi, MSR calling on behalf of Victor Högberg. First of all, I would like to know, since the media measurement is continuing to outperform, is there anything we should be aware of on year-on-year comparables for the coming quarters that could potentially affect the growth? Secondly, given the currently muted growth, What's the OPEX plan for 2025 in order to protect the cash flow? We can start with those and then I possibly have two other questions if we have time for that.

Can you clarify a little bit about the media measurement question? What do you mean by year-over-year comparables with media measurement?

Is there anything that we could expect for the next coming quarter? in like results or revenues that we could compare to last year? Or is it expected to be growing as expected?

So media measurement continues to be an outperform from our perspective as that the overall TAM and opportunity with that group continues to evolve and grow. So I can say that we don't see an obvious external reason why that product cannot continue to grow into the future. Does that answer that question?

Yes, yes.

And in terms of operating expenses, obviously, we did an efficiency program over the summer, which is paying dividends. And as we plan our next three-year strategic view, we look at, of course, the correct operating structure of the business, and we'll make the right choices to create a free cash flow environment that's positive for the company. Obviously, expenses and how we go forward are of particular importance as we navigate the growth of the business.

I can also add that we don't have NRIs next year anymore that we had this year, right? So we had about 8.7 million of NRIs in 24 that are not coming back in 25 and beyond. So from the integration.

I'm sorry, could you repeat that? Sorry, I couldn't hear you that good.

Yeah, the NRIs. So we had items affecting comparability this year of 8.7 million, mainly related to the integration still. We don't have that going forward anymore because we stopped those at the end of Q2. So therefore, that is also a positive effect combined with the efficiency program going into next year.

Thank you. Do I have time for two other questions as well?

I think so.

Well, then I'm just wondering how you're viewing the net depth and the gearing in the light of cash flow and cash position. And then the second question would be... Oh, sorry.

That's the second one. That's all right.

Okay. And the second question would be, you mentioned it in the call previously that The gross margin is shrinking to 88%. And I'm just wondering, would you say that it's also driven by the mix, or is it mostly costs? Yeah.

You want to take the first one?

uh yes uh i'll start with the first one so of course um it will depend on on the next couple of uh quarters last year and the plan that we will um uh most later on right but of course like what i said before as well we will have more opex already from from the nri and the efficiency program so that will help uh cash flow as well of course So from that perspective, next year looks brighter than last year. But we're currently developing the strategic plan that we will come out with later. And that also, of course, affects this number. But yeah, other than that, we're more confident than a year ago or two years ago, I would say. On the gross margin, it is mainly the improving processes and how we do hosting, et cetera, and also the consolidation of platforms and less so the mix, I would say. I don't know if you want to add.

Yeah, I think that's right. I think as the platform consolidation continues, we expect to see a reduction in hosting costs, and that should have a sustainable positive impact gross margins.

OK, thank you very much.

You're welcome.

Thank you. We have our next question from the webcast from . What kind of activities are other current receivables related to? You wrote about some unbilled revenue in the Q3 report. Could you elaborate what this is? Thank you.

Yeah. Yeah, so this is what I briefly alluded to. We have accounts receivables and we also have other current receivables. So that's a common item on the banner sheet. So other current receivables are items that are not invoiced yet at the end of that period. And also here we had some improvements in terms of consolidating systems and the process, the way we were doing things, but that led to a delay in the invoicing at the end of September. So therefore, it's about roughly five million US dollar, so four and a half euro, too much you could say in other current receivable compared to a normal period. And therefore, I'm looking at those two combined. So the improvement in accounts receivable is about 5 million, right? So this is roughly equaling out this. So it will still be improving, but less so. And all those invoices already went out, of course, right, in the first week of October after that. So, yeah, as you can see also in previous quarters, there's always a certain level of this. It was just a bit higher this quarter, which I would consider a one-off as well, and it would be... different again in Q4, et cetera. There's nothing specific to it. It's more like from an accounting perspective. This is how you record that.

Thank you.

We have our next question from... Sorry, thank you. We have our next question from Thomas Wilson from Nordea Marcus.

Okay. Yes, hello again. And could you talk a bit about networking capital, either as a percent of sales or as a percent of total customer spend and where you would like to see networking capital to grow in, say, two to three years time after the migration is complete?

Yeah. It's a bit difficult to answer as a straight number, because we're not giving guidance yet, but I can say in general that of course we have the accounts receivable as a major component here, as you can see in the numbers. And from that, at least 70% is current. So you have about like 30% that can be reduced. And what we've said in the past is that you can say that you can close that gap, for example, by half. This is kind of what we're working with. And then you have to see that, of course, as a percent of customers spent because that's what's driving it ultimately, right? So when you look in a static way, meaning not as percent of spent, then it would be 10 to 15 million Euro from the current amount with this logic. But of course, hopefully it will go up again after the migration, right? And that's the plan. And also this amount will follow as a percent and therefore increase in absolute amount, but then decrease as a percentage. But yeah, there's a lot of different factors coming together into this number here. And that's definitely difficult to predict with certainty. And then also it depends on our strategic plan, et cetera, and the speed of the migration and all those other factors. Yeah, but we will see improvements for sure. And I'm quite confident of that because we have so many ongoing efforts coming together that will affect this number in a positive way.

Okay, thank you, Niels.

You're welcome. Thank you.

Thank you.

We have our next question from the webcast. Have Triton partners or other institutional investors expressed alternative forms of support beyond share purchase activity as part of SYN's robust growth? Thank you.

I think the question is around Valero becoming one of our more significant partners. We have good conversations with all our investors, including Valero. We welcome Valero as part of our NOMCOM to help guide at the board level. But other than that, they've been helpful in terms of asking good questions and being an important investor for us. We've been delighted to see their interest as well as other interests in terms of investors buying shares into the company.

Thank you. We have our next question from the webcast. In an effort to strength, since commercial team will since work to increase, sorry, will since work to increase the compensation package that better align with the employee incentives. Thank you.

To be clear, I'm not exactly sure what that question is about. What I can say is we are consistently looking at whether it's sales or executive or employee compensation and making sure they're aligned with the strategic growth of the business. We're going through a strategic review process now, which we will report on in the coming months, which will look at our forward plan for growth. And of course, aligning employee incentives with that plan is critical.

Thank you, we currently don't have any further question as a reminder, ladies and gentlemen, to ask any question you can press star fold by one on your telephone keypad now, thank you. Thank you, we currently don't have any questions and I will hand over to Patrick for any closing box.

Well, once again, I want to say how much a privilege it is to join you as the long-term CEO with Niels Boone, our CFO. This is our first webcast, and so bear with us as we learn this new mechanism, but appreciate your time and attention to send in our shares. Thank you so much.

Thank you.