Haypp Group AB (publ)

Thank you. Good morning, everybody, and welcome to our Q3 2024 interim results. Our CFO, Peter Deli, and I, Gavin O'Dowd, will walk you through our results. I would like to start by reiterating our higher purpose of inspiring healthier enjoyment for millions. Moving along to the operational highlights, I would like to begin with our NP Q3 volumes. where there was year-on-year growth of 42% and 93% across the two-year period. Nicotine pouches accounted for 63% of our total volumes for the quarter, up 10 percentage points versus Q3 2023, as the robust trend continues. We're particularly happy with the continued strong NP volume performance in our growth division, which grew 58%. In addition, nicotine patches continue to show strong performance in the core markets, growing 32%. With that, I will hand over to Peter for more depth in our commercial performance, after which we can walk through other aspects of the business.

Thank you, Kevin. Good morning, everyone. Let me start our financial overview with our sales development. In Q3 2024, we grew sales by 25%, excluding the FX headwind. This means a further acceleration from our Q2 growth and brings the year-to-date average about 20% from a slow start of the year. When we are looking at the contribution of the business units, we are very happy to see that both growth and core markets are significantly contributing to the group growth and also that the improvements in the emerging segment sales makes it a real contributor to our year-over-year sales performance. In both segments, nicotine pouches were the key driver for the growth. Out of the 25% growth excluding FX, it accounted for 26%. The actions we put in place in order to manage the smooth decline largely resulted and this category largely remained flat versus last year. Moving to slide seven, and our profitability. Profitability also remained robust. This is consistent with the previous quarters of 2024. Our adjusted EBIT grew by 81% to 33.1 million SEC, which means a 3.5% adjusted EBIT margin, an improvement from 2.4% last year. The result was supported by the sustained margin expansion, which we partly reinvested into the team, mainly to support our emerging segment. Core and gross markets profitability before investments into the emerging segment reached 4.3% on an adjusted EBIT level. Important to highlight that in the quarter, we created a reserve for the San Francisco complaint based on the available facts supported by external legal advice. Moving to the next slide, to our core markets. Here, in core markets, we achieved a 16% growth excluding the FX headwind of 3% in Norway, driven by the nicotine pouch category, which performed well in both markets. The nicotine pouch volume grew 32%, consistent performance both in Sweden and Norway. Profitability-wise, our adjusted EBITDA is up by 0.7 percentage point versus same period last year, driven by the improved media and insights revenues, which demonstrate the robustness of our business model. Moving to slide nine, annual growth markets. In our growth markets, our sales grew by 44%, excluding the 4% currency headwind. We are happy with the nicotine pouch development across the board in both markets. Adjusted EBITDA was 2.5 million SEC, 0.9% of our sales, in line with previous quarters. Active channel growth was exceptional. The increased search volume demonstrates the opportunity we see for the further online channel penetration growth across the markets. Slide 10, and or emerging markets. In a big scheme of things, these markets are still small. However, the sequential quarter-over-quarter growth remained lost, versus Q2 2024, where sales is up by 64%. Active customers now reached 20,000 within the quarter. The investment for this business segment remained consistent, and EBITDA for this business unit was minus 7.8 million in Q3. This represents 0.8% reinvestment on a total level. Moving to slide 11 and or selected KPIs, here I would like to highlight two numbers. Firstly, the investment level, because the year-to-date Q3 invested 69 million SEC, which is 2.5%, slightly above the historical averages. But as we highlighted it several times earlier, This is not a flat line. Right now, we are working hard in the overhaul of our back-end and front-end infrastructure, which is now visible in these numbers. However, as soon as these projects are completed in the coming quarters, this number will go down to the previous levels. Our net depth to adjusted EBITDA ratio is 0.8, looking at the last 12 months, which shows and represents a very robust and healthy balance sheet, what we maintain for the group. With this, I hand the word back to Gavin to guide us through the legal and regulatory developments.

Thank you, Peter. Moving to slide 12, covering some legal and regulatory areas. We're encouraged by Sweden's recent policy improvement. This has moved from tobacco and nicotine consumption to the focus on tobacco and nicotine harm, reflecting the benefits of risk reduction. In addition, the UK has recently reintroduced its tobacco and nicotine bill, reinforcing the importance of risk-reduced products. Hype had two regulatory challenges in the latter part of Q3. In Sweden, Stockholm municipality made a decision to withdraw traditional snus. We firmly believe that the decision was unjust and we're appealing it through the court system. During the appeal process, we will continue to sell traditional snus as normal And we believe that the process will take one to two years to conclude. In the meantime, we have implemented all of the recommendations from the municipality, and we expect a very limited impact on our sales. Secondly, the city of San Francisco's attorney has filed complaints against. U.S. entity and their brand own. Resign stores regarding the sale of flavored nicotine patches into San Francisco. There are multiple locations in the U.S. where we restrict flavored products due to local legislation. However, we did not do so in San Francisco as we had received a peer legal opinion from a credible law firm supporting our sales to the city. This opinion was issued in 2013 and was reaffirmed earlier than before. The case is ongoing as we speak. In addition, California is introducing new legislation which will remove the exemption for online retailers to sell flavored and nicotine, sorry, to sell flavored nicotine and tobacco products into the state. Moving to slide 13, the upcoming legislation in California, which extends the restrictions on flavored products to include online, has meant that we have suspended sales, most of which was flavored products, into the state until we have further clarification. While California represented circa 10% of our nicotine patch volume in Q3, the growth levels were substantially lower than the rest of the country. This new legislation impacts not only flavored nicotine patches sold into the state, but also oral tobacco. Oral tobacco products, such as MST and Snus, were already a rapidly declining share of our U.S. sales, and circa half of them were being sold into California. As a result, the group has brought additional tobacco products to late 2024. Moving to slide, the U.S. continues to represent an ever-increasing share of the group, percent of the group volume during Q3. I would like to take this opportunity to provide more depth on the breakdown of the U.S. business and drivers of growth. As stated in the prior slide, while nationwide tobacco products and California's nicotine patches make up circa three percent of the group volume, they effectively have not been growing. In addition, From the latter part of Q3, we have experienced a challenge in sourcing. If this continues out the quarter, our Zin savers in the U.S. continue to offer quality products to our consumers, which in turn diversify individual brands. As highlighted in our Q2 release, other brands which have been on the market for some years started to show robust share growth from late 2023. This is driven by increasing consumer awareness and brand equity. These brands are effectively the drivers of all of our US growth. In addition, new brands from large international manufacturers have and are expected to come to the market during 2024. These are further broadening the range of quality nicotine patches for our customers. Now, to take a look at our long-term performance and our outlook on the next slide. We recognize that it's just over three years since we have listed on the stock market. I would like to take this opportunity to look back at our sustained business performance over that time. Starting with strategically important nicotine patch volume, we have grown over 250% since early 2021. bringing it from 31% of our volume to 63% of our volume in Q3. In addition, we have also entered the vaping category, which now accounts for just over 2% of our volumes. Also during this time, we have increased our EBIT margin. The group intends to provide a set of longer-term targets to the investor community in the spring of 2025. Moving to slide 17. In addition to the strong set of results in Q3, we would like to reiterate the robust fundamentals for risk-reduced products. The suitability of online for the category for a variety of reasons, not least of which is the traceability and control, and HAARP's strengthening position within the online channel. The rapid and sustained growth of nicotine patches is expected to generate increased scrutiny, and in many cases, this scrutiny is warranted. We will continue to invest significantly into compliance, and we recognize that it is not only a source of sustained competitive advantage, but it is also the right thing to do. Moving to our final slide, we would like to reflect on the dynamics underpinning our continued performance. Hype has a substantial competitive advantage in its model, which in turn robust systems. Our overall progress is the result of an excellent team and the connection to our high purpose of ensuring health and enjoyment for millions. I would like to take this opportunity to thank them for their commitment, dedication, and overall performance. And with that, I will hand it over to the operator for questions.