Desenio Group AB (publ)

So welcome everybody to the senior group's Q4 results presentation conference call. So with me today, I have our CFO, Johan Roslund. Johan is, as you probably know, our new CFO since mid-January this year. So we will today start with presenting the outcome of the quarter and then continue with presenting the development in regards to the bondholders and finish with the Q&A session. The development in the quarter continued to be weak in the markets, but better for the Nordics where sales increased moderately. In total, net sales decreased by 8.6% to 268.8 million SEK compared to the corresponding quarter last year. In the Nordics, where our brand recognition is higher, sales increased slightly in relation to the corresponding quarter last year. while sales in our other markets, including North America, decreased. The market sentiment remains rather weak, but we continue our focused efforts to reach out to customer groups that gradually become more efficient in our marketing efforts. During the quarter, we continued to work on successfully increasing our efficiency. So adjusted to beta increased by 43% to 54 million SEC, which I think is a great effort considering the negative growth in net sales. This means that the adjusted EBITDA margin almost doubled compared to the corresponding period last year to just about 20%. And this improvement is partly explained by a favorable product mix that led to a three percentage points increase of the gross margin to 87% and partly by lower cost ratio for fulfillment and marketing as share on net sales. Operating cash flow improved significantly in the quarter from just below 30 million in Q4 2023 to just above 48 million in Q4 2024. We had a net inventory increase and we also had some changes in current receivables and liabilities and those two together was zero. And then we received 13.4 million preliminary tax paid back for 2024. And during the quarter, net interest payments on the outstanding bond amounted to 23.6 million SEK. And as a result of this, cash and cash equivalents increased from 71.3 million in Q3 to 115.6 million in Q4 2024. During the quarter, we continued our dialogue with the bondholders and received approval to extend the maturity of the bonds on December 3rd. And on December 24th, Decendi Group entered into a term sheet for the restructuring of its bonds and capital structure. including a debt for equity swap implying 75% right of the bonds and 95% dilution of the shareholders. And on February 5th, the written procedure was initiated to request necessary approval of the restructuring from the bondholders. The voting record date was February 12th, 2035, and the last day for voting in the written procedure is February 24th, which is on Monday next week. We will then hold an extraordinary general meeting on March 4th in order to approve the shareholders' resolutions necessary to implement the restructuring. And Johan will go through this in more detail, how it's going to work, later in the presentation. And then, as I already mentioned at the beginning of the call, Johan Roslund started as new CFO during, well, after the period, so 13th of January. And to summarize the quarter, net sales decreased in the challenging markets while gross margin increased. The adjusted EBITDA margin almost doubled as a result of higher efficiency and the operating cash flow increased compared to the previous year. On this slide, we analyzed the difference in EBITDA margin in Q4 2024 compared to the corresponding quarter last year. The product model increased due to improved product mix and improved efficiency in fulfillment neutralized the effect from lower net sales. The marketing cost in relation to net sales was, as previously mentioned, lower, as was admin and other excluding one-offs. So now, let me comment more in detail on the development of the business in our different markets. By looking at search trends in comparison to our sales development in Germany and the UK, we can see that our sales continue to trend higher than the market search volumes in Q4. And comparing this any group to a few of our biggest competitors, we see that we, during Q4, increased the share of voice in Germany but we saw a slight decrease in the UK. In both these major European markets, we currently have a strong, around 75% share of voice in search. In Sweden, on the other hand, we have even higher share of voice in search, close to 80%, which has been stable the last three years. Here we see the share of voice development in the U.S. in relation to Post 3, Fine Art America, all posts of Share Society 6. As you can see, we have a steady increase in share of voice in the U.S. market, taking shares in search for more American competitors. And this is the Center Group's growth order index since 2019. In Q4 2024, we saw the usual seasonal pattern, but lower growth already than previous years, but well above 2019. And here we show the development in the segments compared to the previous year. In the Nordics, as mentioned, net sales increased slightly by 2%, In core Europe, it decreased by 11%. In the rest of Europe, it decreased by 13%. And in the rest of the world, it decreased by 15%. In North America, which is included in the rest of the world, that says decreased by 15%. This slide shows customer highlights. we see that both are active customers and number of orders decreased compared to last year. So active customers is defined as a customer that has made at least one purchase the last 24 months and therefore it's still declining. The negative growth in order volumes is somewhat counteracted by average order value growing by 6%. And now I hand over to Johan for the financial update.

thank you as frederick mentioned net sales decreased 8.6 percent in q4 gross margin increased from 84.2 last year to 87 this year this was mainly driven by favor favorable product mix adjusted ebitda in q4 was 54 million compared to 38 million last year although although lower savings, we managed to improve our profitability through improved efficiencies. Consequently, the adjusted EBITDA margins has stepped over the 20% line and reached 20.1%. We have to go back all the way to 2020 for Q4 quarter to show over 20% margin. On the next slide, we see that investments in material, and immaterial assets amounted to 0.2 million in Q4. Networking capital in relation to sales was minus 7%, which means that we can grow without tying up capital. Our operating cash flow in the quarter increased to 48.1 million, which is further explained on the next slide. Here is a bridge explaining how we go from adjusted EBITDA to operating cash flow in Q4. Starting from the left we had 4 million in one offs related to legal cost for the bond restructuring and 23.6 million net interest payment for the bond. Adjustments for non-cash items were 9.3 million and are mainly related to IFRS adjustments and depreciation of initial bond cost. We have a positive tax effect in Q4. This is as Fredrik explained related to preliminary tax. So this effect will balance out if we look at the full year. The inventory change of 10.2 million is to a large extent counterbalanced by increased payables related to product purchases. In summary, operating cash flow was strong at 48.1 million in Q4. After the bond restructuring has been completed, Desenio Group will have a new subsidiary called Desenio Milko. where the operating companies and the 150 million super senior bond will be. This bond will be repaid after two and a half years. In this annual group, there will be a reinstated senior bond of 251 million, maturing in four years. With the existing bond, we had 103 million in gross interest payments during 2024. With the new capital structure, the same cost had been 34 million or a reduction of 69 million. Going forward, this additional cash flow can be used to reduce debt and providing more capital to support and develop the business. I now hand over to Fredrik again for a summary.

Thank you, Johan. So to summarize the fourth quarter of 2024, we can conclude that our improved operational efficiency gives results. We adjusted the beta margin almost double and we showed a strong operating cash flow. However, the market continues to be challenging. We see some positive signs and are carefully optimistic that this year we start to see positive effect on the consumption as a result of decreased inflation and the interest rates cuts that have been made so far. We have an agreed term sheet for the restructuring of bonds and the capital structure, including a debt for equity swap applying 75% write-down of the bond and 95% dilution for the shareholders. On February 5th, the written procedure was initiated to request necessary approval of the restructuring from the bondholders. An approval would be legally binding on the bondholders provided that the extraordinary general meeting to be held on March 4th votes in favor of the plan. The proposal means that the Senate group will have a capital structure that is well adapted to today's profit level. In addition, There is room for value creation going forward, provided that we reverse the negative sales trend we have seen during 2024. And we're already seeing how our work to increase profitability has a positive effect, which together with our scalability creates good conditions as consumer purchasing power strengthens from these low levels. Thank you for listening. And we are now more than happy to answer any questions you might have. So over to you operator.

If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.

Thank you very much, operator, and thank you everyone for your time, for listening in. And please don't hesitate to reach out to us should you have any more questions or any requests. Speak soon and stay safe.