Dustin Group AB (publ)

great thank you very much and good morning and most welcome everyone uh to our conference call our third quarter presentation both welcome to our existing and new and special new shareholders uh and i hope you are all well here on outside of the call it's myself tomas ekman and we have johan carlson cfo also in room and uh our head of ir as well good so today we present our third quarter results for our fiscal year 21 22. And I think we can proceed directly into the presentation. For your reference, we have Dustin at the glance on slide two, but I think we can move directly to slide three for the financial highlights to see how we are improving and performing now during Q3. We report a very robust organic sales growth of almost 20% for the third quarter, mainly driven by strong demand for hardware and, to a certain extent, price increases. Our site and our active work in purchasing has created a high degree of availability for our customers in a market that has been affected in various ways by disruptions in supply chains and an overall unstable geopolitical environment. Zooming in on our market, the availability of standard hardware such as computers and mobile phones is normalizing right now, while the more advanced hardware like infrastructure, network equipment and AV equipment, for example, is still scarce. The fact that we see a normalized availability on standard is good, given that the vendors and manufacturers logically now can produce more of advanced hardware, which in turn is good for the balance of our product mix. Still, though, there are disruptions in supply chains that create a certain unpredictability, of course, in delivery. Total net sales were 5.8 billion 94 sec, up with 83.4% versus last year on reported level. And the organic growth, as said, was 19.7%, of which SMB showed a very positive 14.2%, and LCP at a very good 30.7%. B2C came in at a negative 33.6%, as an effect of much less campaigning there. Our SMB segment performed strongly in the quarter, and our LCP segment had a very strong growth, while slightly lower margins due to a high share of sales of low-margin standard hardware, such as computers and mobile phones. But overall, strong organic growth, which shows not only good underlying demand, but also, of course, our capability to make use of it and deliver. And we have clearly strengthened our position in the markets during the quarter. Gross profit was 842 million SEK compared to last year's 557 million SEK. That gives us a gross margin of 14.3%. The change versus last year is mainly attributable to an auto mix with higher share of sales within S&P related to the acquisition of central points. together with a high organic growth in LCP. Our adjusted EBITDA increased with 27% to 201 million SEC versus last year's 158 million SEC. And that gave us the adjusted EBITDA margin at 3.4% for the quarter versus last year's 4.9%. The EBITDA margin was obviously affected by the current customer mix towards LCP and product mix of lower margin products within LCP. And the integration of rebranding of our required operations are proceeding as planned. Gave us some extra cost in the quarter for the rebranding and the marketing. And everything in Benelux is now adopted, which is very good. And that is, of course, strengthening our position for continued profitable growth in our markets with increased clarity, with increased efficiency, and with increased impact. Items affecting comparability was minus 19 million SEK and that's consequently giving us an EBIT at 140 million SEK compared to last year's 114 million SEK. And EPS earnings per share was 0.75 SEK per share versus last year's 0.87. Cash flow from Operating activities was negative 277 million SEK versus last year's negative 93 million SEK during the quarter. As to improve, EBIT could not in full offset an increase in tied up working capital. Johan will come back on that later on in the presentation to give you details on that. Our leverage in the end of the quarter was 3.7 versus 3.4 for last year as the increased inventory levels to prepare for large public rollouts. during Q4 and also to mitigate for the ongoing uncertainty in the supply chain. So apart from an intense quarter in general from an operational perspective we have continued the integration work with our Benelux companies and clear steps have really been taken in that perspective. Johan, now you can take us through the finances for our different segments. Yes, let's move to slide four and the SMB segment in some more detail. So sales for the quarter ended at 1,862,000,000, which was an increase of 24.1% over last year, representing an organic growth of 14.2%. Another quarter with strong sales growth despite the turbulent environment, And the challenge is with the global supply chain. Hardware sales continues to be strong with good demand among especially large and medium-sized customers. And price increases have affected sales volume for the month positively with no significant negative impact on demand. On the services side, the standardized recurring services developed well in line with the overall growth of the segment, while consulting continues to be weak as we are strategically moving away from consulting. Shortage of infrastructure and AV products also affected the services sales negatively. From a geographical perspective, sales was strongest in the Netherlands, Finland, and Norway. Segment results for the quarter ended at 185 million, up 15.2% over last year, with the segment margin of 10.0% compared to last year's 10.7%. High share of sales coming from computers and mobile phones affected the margins negatively, while a positive sales development in private label products compensated positively. As Thomas mentioned, we continued the integration in the Benelux during the quarter with the change of the brand to Dustin for all entities. This is especially important for SMB, where a lot of the web traffic is generated by a strong brand. As we're now using the same brand in the whole group, we can benefit from the Nordic experience to a greater extent in the Benelux. All in all, a very strong sales performance in SMB for the quarter in very turbulent times. We then continue on slide five and look at LCP. Sales in LCP was 3,921,000,000 in the quarter, an increase of 162.9%, of which 30.7% was organic. During the quarter, we saw very strong sales increase in both public sector and large corporates. As for SMB, price increases had positive effects on sales during the quarter, but also good supply of standard hardware, such as computers and mobile phones, affected sales positively. Also, software sales grew rapidly during the quarter, as we were gaining ground both in the Danilax and in the Nordics. From a geography perspective, growth was strongest in Denmark, Norway and Sweden. Segment margin was at 6.4% in line with Q2, but down from 7.1% last year. The good supply of computers and mobile phones in the quarter was mainly aimed towards our largest public and corporate customers, affecting the margins negatively compared to last year. This was also the case for the software side. The price increases during the quarter had a slightly negative effect on margins as the subsequent price increase to customers in some cases had some time delay. Segment results was up from last year's 110 million to 250 million, an increase of 127%. All in all, a very strong quarter by LCP where we managed to supply our customers demand in the best possible way. Then move to slide six and a short look at the B2C segment. Sales in B2C was down by 31.7% to 111 million. The main reason for the lower sales was the reduction in price campaigns as the supply of products was still scarce and all focus on delivery was put on SMB where margins are higher. segment margin continues to be high at 9.4% due to the lack of price campaigns affecting margins negatively. Segment results, it was 11 million down from 15 million last year. We then continue to slide seven and networking capital. So networking capital was 4 million compared to last year's negative 293 million. The higher networking capital is mainly attributed to the Benelux region where we are in progress of changing the customer offerings and the working method towards the nordic one if we look at the details of working capital inventory in the quarter was 1 billion 470 million up 210 million from previous quarter and 862 million compared to last year the main reason for the increase over last year was the inclusion of country point adding 592 million and the higher purchase volumes to reduce the risk with shortages during summer, where large LCP rollouts occur. Accounts receivable was up 1,484,000,000, mainly as a result of central points adding 1,048,000,000 and higher business volumes. And in accounts payable, which was 3,665,000,000, 1,000,000,000 slightly more than one billion above last year there the main difference was the addition of central points in total we saw slightly higher networking capital this quarter mainly due to stock built up to cover large rollouts in lcp and we continue to believe that our target range of negative 1 to 200 million is realistic leverage that is net death in relation to rolling 12 months in the ta At the end of Q3 was 3.7 where our target is to stay in the range of 2 to 3. The higher net working capital and currency differences affected the number upwards. Then moving on to slide 8 and cash flow. The cash flow for the quarter was negative 380 million compared to last year's negative 167. Looking at the parts, we can see that cash flow from operating activities before change in network capital was 184 million compared to last year's 136, mainly as a result of vector operating results coming from the acquisition of Central Point. Change in network capital was negative 461 compared to last year's negative 228. The main difference being higher inventory to avoid uncertainties for the larger rollouts during summer. cash flow from investment activities was negative 52 compared to last year's negative 24 where the majority comes from capex and cash flow from financing activities was negative 51 in line with last year and the main component there being the amortization of least debt so then look at the investment they amounted to 67 million in the quarter compared to last year's 64 capex related IT development amounted to 41, that is 31 million higher than last year, and it's mainly coming from project-related IT investment in Central Point, where we are moving the ERP system to default. Investment in tangible and intangible assets decreased from 18 million last year to nine this year, and investment in assets related to service delivery was 17 million, which is down from 26 last year. All in all, 52 million out of the 67 million in capital was affecting cash flow. The others were changes in lease or rent contracts. And with that, moving back to Tom. Thank you, Johan. And over then to slide number nine. And let's do a little detail in our EBITDA margin development here. As you know, as we've been through before, our long-term target is to be between 5% to 6%. And we are not there yet, but we are on our way. The challenging turmoil in the markets obviously affects us as everybody else. And to give you some flavor to it, you can see the graph on the left-hand side of the slide here showing the development since Q3 last year as a reference. And what has affected the margin in Q3 now is the customer mix or the segment mix with a higher share of sales of LCP given the acquisition of Central Point. And that currently affects the margin with roughly 0.4%. And also strong sales to public and with standard hardware affecting also the margin with about 0.5%. We are transforming, as you know, and we are building out our SMB position in the Benelux to balance the share of sales. We're, of course, also growing the SMB part in the Nordics to even more balance the share of sales, which in turn is improving the margin. However, we are not there yet. On SMB, in general, we also have had this quarter a high share of standard hardware and less of infrastructure, network and AV equipment, as an effect of the scarce supply in the world. And that affects the beta margin with 0.2%. And last in this graph, as you can see, affecting with approximately 0.4%, is the increased marketing distribution cost in a quarter due to rebranding to Dustin in Benelux. There are still irregularities in supplies caused by the disruptions and supply chains. It is somewhat difficult to assess the immediate short-term effects from both lockdowns in China as well as the Russian invasion of Ukraine. But I can, of course, assure you that we for sure have our eyes on the margins to continue to improve that given the circumstances we have in the world. Also now, I think, Johan, we can do an update also on the Yes, let's move to slide 10 just to be clear on the changes in accounting policies coming from the effect of the accounting board's decision on how to recognize revenue from software sales. This means that part of Dustin's software sales will be recognized on a net basis rather than on a gross basis. That means that it will be 100% margin on that sale. And as you can see in the graph on the left-hand side, That has an effect in this quarter of 278 million less sales compared to the old way of reporting. And it has no impact on the EBITDA or gross profit number, meaning that the margin increase is 0.1% on EBITDA level coming from this change in accounting procedures. The change has not resulted in any changes in our financial targets. Yes. Good. Then we can continue to slide 11 to do an update. As you know, we update on our 2030 commitments regularly or quarterly. And in Q3 now, we increased our share of circular revenue to 23.6%, which is really good. And we have now included all entities in the numbers. As you might know, our target is to reach 100% of circular revenue until 2030. You can see our long-term targets there on the left-hand side of the graph, with zero CO2, 100% circular revenue, and 100 actions to improve social equality. So good development there. So far this year, we have also taken back 296,000 products, also strong development and a good number as an effect of improved work, both in the Nordics as well as in the Benelux. We now can include that very clearly in our offering and that we see a strong demand for that also increasing from the public side but also from the large corporate side. We have also launched our carbon calculator during the third quarter to help our companies and customers to get an overview of their climate footprint of their IT products and how to reduce it. I would urge you all to go into our website and try it out and see what you can do to reduce your own carbon footprint. and and how to act on that and all in all we work hard to fulfill our 2030 commitment so before going into q a let me just sum up our third quarter results on slide 12. net sales grew with 83.4 percent to 5.894 million billion sec where organic growth for the group was 19.7% with SMB at a strong 14.2%, LCP at a very strong 30.7%, and B2C at minus 33.6%. Gross profit, 842 million SEC versus last year's 557 million SEC, and gross margin came in at 14.3% versus 17.3% last year. A change in sales mix with a higher share of LCP as we've been through, and VAT deliveries in Standard Harbor is behind the change in gross margin. Adjusted EBITDA, it increased with 27% and came in at 201 million SEK, giving us an EBITDA margin for the quarter at 3.4. Reasons for that is, of course, due to the flow-through of the reasons for dropping gross margin and some of the extra costs for marketing and distribution in the quarter for rebranding in Denmark. EBIT at 140 million SEK, an increase from last year's 140 million SEK, and APS at 0.75 versus last year's 0.87. And cash flow from operating activities at minus 277 million SEK and leverage ended for the quarter at 3.7 as an effect of changes in network and capital. So all in all, robust growth in the quarter with the mixed effects impacting the margin. The pandemic is still present over the world, teaching us a lot, not least the new way of working. The continued escalation of the war in Ukraine also puts pressure and we sincerely hope for an end to that. The market trends continue to accelerate with distinct changes in customer behavior. The IT service demand is there. There is an increased demand for instance availability online as well as security, mobility and remote management. Security is obviously a big topic at the moment and will continue to be given the overall uncertainty in the world. We have extensive experience and knowledge and can serve our customers in all our markets. And for us, the last years has really meant that our position is clearly strengthened and shows that the business model we have is very robust. In short, we are very well positioned. And I am, as always, very proud of everyone at Induction Group for doing their outmost every day to deliver a great customer experience and driving our competitive edge now when we are also exporting our SMB model to new territories in the Benelux. And with the rebranding done now in Benelux and the continued integration work, we have taken clear steps this quarter to build one Dustin with one brand, one culture, one platform, and a unified offering in all our markets. So that's good progress on that. And with that, Johan, I think we can conclude our presentation and are happy to take any questions you might have. Operator.

Thank you. And if you do wish to ask a question, please press 01 on your telephone keypad. If you wish to withdraw your question, you may do so by pressing 02 to cancel. Our first question comes from the line of Daniel Thorson from ABG. Please go ahead.

yes hi thank you very much my first question is that i'm a little bit curious about the strong organic growth in the quarter here do you also see a solid organic growth in the start of q4 as well or what's the latest development you have seen post q3 which obviously ended up very strong here yeah we can continue to see i mean there are signs of demand that it continues to be um and and yeah so it continues as it has we can say okay and what's your pipeline in lcp because that has been the main driver of organic growth in the in the past few quarters here do you have a strong pipeline in q4 and in q1 as well