Hemnet Group AB

To the Hemnet Q1 2025 report presentation. For the first part of the conference call, the participants will be in listen-only mode. During the questions and answers session, participants are able to ask questions by dialing pound key 5 on their telephone keypad. Now I will hand the conference over to the speakers. CEO Jonas Gustafsson, CFO Anders Ornulf, and IR Ludwig Siegelmark, please go ahead.

Good morning, everyone, and a warm welcome to this 2025 Q1 release call for Hemnet Group. My name is Jonas Gustafsson, and I'm the group CEO of Hemnet. With me here on my side at our headquarters in Stockholm, I have our chief financial officer, Anders Arnulf, and our head of investor relations, Ludvig Ziegenmark. As most of you know, I joined Hemnet in early February, so I've been around for roughly two and a half months, which has been a very intense and rewarding period of time. During that period, I've had the opportunity and the privilege to meet quite a few of you on this call. And I very much look forward to meet the rest of you and find a good way of working together in the future. With that said, let's kick this one off and let's start with the agenda on the next slide. As you can see on this agenda slide here, I would like to take the opportunity to start off with a few initial observations from my perspective regarding our market position and our strategy ahead. That will be followed by an overview of our performance during the first quarter. Thereafter, Anders Arnulf will cover the financial details and I will get back in the end to wrap this up. As always, there will be opportunities to ask questions at the end of the presentation. Today's session will be moderated by our operator, so please follow the operator's instructions to ask questions through the provided telephone dial-in details. So let's move on to the next slide. As this is my first quarterly presentation as the CEO for Hemnet, I would like to start by a brief introduction of myself before going into the quarterly results. So to start, I most recently come from a background in the TV and media industry, where I spent the last decade in various leadership roles and positions. Most recently, I was the group CEO for Alente, a leading pan-Nordic TV operator that was founded back in 2020. through the merger of Viasat and Canal Digital on the back of a quite significant synergy case. Alente has been a fantastic journey and a very rewarding personal experience where we got the opportunity to transform two legacy companies into standalone business and at the same time, extracting annual synergies of close to a billion SEC on an EBITDA level. Prior to Alente, I had various CEO and leadership positions at Nordic Entertainment Group and MTG, spanning from digital transformation, advertising sales in TV and radio, pay TV operations, digital streaming services, but also content production. And I must say, even though I come from a different industry and a different past, I do see a lot of similarities with my past experiences and Hamnet. At the end of the day, running a pay TV operator business and a property portal have quite a few things in common. It's all about ensuring that you have the right and most attractive content to appeal to the users and create a best in class consumer experience. In my past roles, I've worked with large customer bases with more than a million paying subscribers. At Hemnet, it's of course different, but we have close to 2 million weekly recurring users that are definitely sort of a logical overlap from the TV business experience. The value creation comes from creating engaging user experiences and making users return to the service as often as possible, creating value across the value chain for various stakeholders and commercial management. How do you monetize on this dynamic? So I definitely see that the past experience is highly relevant also for Hemnet. For now and for today, that was a very brief introduction about myself. And again, I look forward to work together with all of you in the future. Now, I would like to spend a few minutes on my initial observations around Hemnet's position and our strategy ahead. So please move to slide number four. Our point of departure is very strong and the team has done a fantastic job over the last years to continuously develop and to professionalize this company. Hemnet is the unrivaled leader and holds a stronghold position for the housing market in Sweden. So if we just go through some of the main highlights from my perspective. First of all, in 2024, we had almost 3 million unique weekly users at Hemnet, a number that has been growing compared to the year before and a pure testimony of our power position. Secondly, when looking at external metrics, we grew our reach by 5% during 2024, and we rank as the third largest commercial website in Sweden, only behind the main newspapers Aftonbladet and Expressen. And from my perspective, this is a fantastic position and something to be very proud of. Thirdly, if we look at the third dimension, we see on average our users engage with us more than three times per week. adding up to more than 40 million sessions per month. We saw a slight decrease in sessions per user during 2024. This follows a clear pattern that we have seen over the last year, similar to many other digital services who saw a peak during the pandemic years. Sessions are an important metric for us as it shows how often our users come back. Therefore, the traffic development will be a clear priority and a clear focus also for us going forward. For us at Hemnet, as a property platform, the most important metric is of course that we generate the highest possible engagement per listing. Engaging with property listings is the main reasons why million visitors come back to Hemnet every week. It's also engagement of the listings that ultimately create potential bidders and buyers. As of 2024, we generated approximately 16x more visits per listing compared to the second largest property site in Sweden. If we then kindly could turn to slide number five and Hamlet's strategy. I want to take this opportunity to reiterate our communicated strategy to engage consumers, to grow sellers, and to develop our B2B offering. This overarching strategic ambition remains the same, and we're fully committed to execute on that strategy. We start on the left-hand side with the consumer experience. We want to increase engagement among consumers and strengthen loyalty across the property journey. A key part in maintaining growth momentum is by continuously enriching the user experience and increasing loyalty beyond the buy and sell moment. Ensuring that we have the most relevant and far-reaching supply will also continue to play a key role going forward. We then move on to the seller's perspective. We want to continue to optimize revenue through a balance of product, packaging, payment, and price. With the launch of Hemnet Max, we're in great position and in great shape to offer every single seller package that suits their specific needs. Onwards, we will continue to add value to our different packages while offering flexible payment options for our sellers. Thirdly, for our business partners, we want to continue to grow our product offering to better cater for the needs of real estate agents and our other important partners across the industry. If we then kindly could move to slide number six to sum up my initial observations and our plan ahead. We have a very strong foundation and an excellent point of departure that we should leverage in the future to continue to build the Hemnet success story. As previously stated, Hemnet has a truly unique market position in Sweden. Millions of people visit our website every week, and we want to make sure that these come back as often as possible. This means that we need to continue to work hard to ensure that we can deliver the best possible user experience and that we never take our market position for granted. There is still large potential in our home market being Sweden and in our core business. I do see number of attractive opportunities across our core business, and I'm eager to continue to evaluate and execute on these going forward. I'm also confident that we have the right team in place to grasp these opportunities. The changes in our organization and in our operating model that we've done over the last years has put us in a much better position. Our business is to large extent a relationship business towards the real estate industry, and I can't stress enough how important our strong relationship with agents and partners are for our continued success. Also in this area, I think there's improvement potential and we can improve as we move ahead. With that said, we will need to continue to invest in our business going forward. Hymnet is a fast paced, fast growing company. And in order to continue, we need to invest in our product. We also need to ensure that we continue with our marketing investments to solidify our strong market position. This means that we expect that the cost increases that we saw in Q1 will likely continue ahead. With that said, let's move on to the quarterly update and slide number seven and eight. We continue on the strong momentum that we saw during 2024 and started off 2025 on a very high note. In the first quarter, our net sales grew by 30%, driven by strong development within our property seller segment. Our ARPL growth, average revenue per listing, amounted to almost 37%, driven by a continued high demand for value-added services. The penetration towards our plus and premium packages continued to increase. Listings grew slightly in Q1 and were up with 0.2% compared to the last year. with the underlying market activity remained at good levels with an increasing number of transactions and higher average prices. EBTA grew by almost 32%, leading to an EBTA margin of 47.9%, which is 0.7 percentage points higher than Q1 last year. The increased profitability is driven by a strong sales growth and operating leverage in the underlying business. On 1st April, we launched Hemnet Max, which represents a milestone for Hemnet. In relation to the Max launch, we've also upgraded and improved the functionality across all our packages. So also Boss, Plus, and Premium have seen considerable improvements. From an overall perspective, the Max launch went well from an operational dimension, and we very much look forward to the journey ahead where Max is an important growth driver for us over the coming years. Now let's turn to page nine for some further comments on our financial development. Net sales amounted to 329 million, up by 29.6% compared to the same period last year. As most of you are well aware of, we have seasonality in our business and the first quarter is typically the weakest. However, with this strong start of 2025, we're well positioned to deliver strong performance also for the rest of the year. EBTA grew by 31.7% to 158 million, representing an EBTA margin of 47.9%. We're very glad and proud to see that we're able to increase profitability while continue to invest in the business. Anders will provide some additional color and some additional details around these dynamics further on in the presentation. Now, let's turn to page 10 and our ARPL development. In Q1, ArtBull grew by almost 37% year-on-year, driven primarily by a continued strong demand for HEM premium, where conversion continued to increase in Q1. As highlighted in previous quarters, we experienced a step change in our conversion rates following the launch of the new compensation model in July last year, which is a direct of agents embracing the new model and more actively recommending our higher packages and leaning in. A gentle reminder to all of us and a clarification, Hemnet Max was launched after the first quarter and thus has no impact on the ARPA growth in the reported numbers. Now, if we please could move to slide number 11 for a few comments regarding our listing volumes. On the left-hand side, you'll see a combined chart showing published listings per quarter and yearly, as well as the year-on-year change between different quarters. Listings grew by 0.2% in Q1 and amounted to 41.2 thousand. On the last 12-month basis, published listings grew by 3.3% and the number has been quite stable over the past year as you can see in the graph. The number of actual transactions grew in the quarter, but listing times remain longer than historical averages and are increasing, which adds to the overall supply situation. Looking forward, we expect the market to show some caution during the ongoing macroeconomic uncertainty, driving continued high supply of listings and also extended time to market. Now, let's turn to page number 12 for some additional comments around the launch of Hemnet Max. During the quarter, our team continued to develop and improve Hemnet's offering and user experience. A particular focus and the highlight was Hemnet Max, which was launched on 1st of April. The package is designed for sellers seeking maximum visibility and includes unique features such as exposure on Hemnet homepage, targeted communication to potential buyers, and enhanced visibility for the listing agent. The package was offered at a discounted price for the first two weeks in order for sellers and agents to try the package and its new features. We're still in the early days, and it's difficult to draw any conclusions yet, but we expect Hemnet Max to be a long-term growth driver for Hemnet for the coming years. Now, if we please move to slide number 13 to highlight some additional product updates from the quarter. In addition to working on Hemnet Max, we continue to deliver product updates and enhance the user experience. In Q1, we made it easier for property sellers to change agent on the listing without having to pay for a new listing. Enabling property sellers to change agent is an important and highly requested features from both the sellers and agents. And we're happy to have that in place. We've also done a few important updates when it comes to the consumer experience at Hamlet. One of the most important changes in user experience is that we've added a swipe enabled image library in the result list. This change drives a significant improvement in the user experience. With this change, we see the number of people clicking into the actual listing will drop slightly, but the quality and the intent will be much higher. We've also added a number of highly requested features to our listings, including listing times on BAS, now visible in the result list, and a lot of more property data being available on each listing. We've increased our brand and marketing efforts during the first quarter. As I stated before, we think it's important to invest in marketing to reinforce Hemnet's message as the leading property portal in Sweden and never take our market position for granted. In March, we went live with a large brand campaign, highlighting the importance of reaching the correct audience on selling and buying a property. We've also added and continued to up our efforts across digital channels during the start of the year with promising results so far. On the business to business side, we've adopted new ways of working by our sales team, where we are building stronger relationship with the real estate agents across the Sweden. In Q1, agent interactions were up with more than 50% compared to the same period last year. Our relationship with the agent community is the backbone of our success. With that said, I would like to end this section and hand over to Anders for the financial update starting on page number 14.

Thank you, Jonas. Let's turn to page 15 in the financial summary for the first quarter. We have already presented the number of published listings on the bottom left, which aligns with a typical Q1. With that context, let's focus on the financial result Q1 2025. Once again, we delivered strong growth on both the top line and the bottom line during the quarter. And I'll walk you through the key drivers behind this performance. Starting with net sales, on the left-hand side of this slide, we recorded a 30% increase to 329 million. As Jonas mentioned earlier, we were particularly pleased with the strong performance in the property sales revenue, which grew by 37%. We will dive into the other revenue streams on the next slide. Another noteworthy point is the average listing time on a rolling 12-month basis increased from 42 days in Q1 2024 to 46 days in Q4 2024 and now 47 days in Q1 2025. The year-on-year effect of the five-day increase is negative 5 million in revenue. The sequential effect of the one additional day from Q4 to Q1 is negative 2 million in revenue for the quarter. To smooth out seasonality effects, we recommend tracking ARPA growth on a rolling 12-month basis, as shown on page 10 of the presentation. Our EBITDA for the quarter can mean at 158 million, representing an increase of 32% compared to the same period last year. We will explore the EBITDA development in more detail on the next slide. The EBITDA margin reached 47.9, an increase of 0.7 percentage points compared to Q1 last year, primarily driven by strong underlying operational leverage. This margin expansion is particularly impressive given the shift in sales mix. Net sales from property sellers again grew significantly, while net sales from our B2B customer, which typically carry close to 100% marginal profit, declined by 3%. Additionally, while commissions and compensation to real estate agents increase in absolute terms, they declined as a percentage of property seller revenue in the first quarter. So even as we continue to see higher recommendation rates and improved VAS conversion, the effective commission rate decreased from 29.9% in Q1 to 29.7% in Q1 2025, partly explained by the fixed admin fee of 600 kronor. We will discuss the cost structure in more detail shortly, but it's important to note that our ability to generate cash remains strong, with cash conversion landing at 98% on a rolling 12-month basis. Leverage came in at 0.5x, rolling 12-month EBITDA, an improvement from the previous quarter, and even 0.3x lower than in Q1 2024. This reduction is especially encouraging given that we continue to actively execute on our capital allocation strategy, including an attractive share buyback program. Our headcount for the quarter increased by just one compared to the same period last year. However, it's important to note a bit of a technical nuance. Last year, a larger number of employees were on parental leave and temporarily replaced by substitutes. That inflated the reported headcount, even though it didn't necessarily reflect an increase in the actual number of hours worked last year versus this year. With that overview, let's turn to our revenues by segment on page 16 to take a closer look at the Q1 figures. similar to recent quarters key net sales growth again were seller revenue the b2b segment saw negative growth of minus three percent reflecting a continued trend was observed for some time the display advertising environment remains challenging with reduced spending across all customer groups again that's related to display advertising this is driven by broader macroeconomic pressures as advertising budgets shrink across the market especially a property developer and further impacted slightly fewer visits per user compared to last year, which affects the number of impressions. On a more positive note, we continue to see strong momentum from real estate agents. Demand for Hamlet Unique offerings remain robust, fueling growth in this product area for the second consecutive quarter. With that, let's move to our EBITDA bridge on page 17 to dive deeper into the Q1 figures. We have already covered what has driven the top line for the quarter, so let's go through the costs. 23 million higher compensation to agents due to the reason mentioned at the summary slide, more engaged agents, higher VAS conversion. Again, the effective commission ended at 29.7%. Other external expenses for the quarter followed a similar pattern as in 2024, driven by increased activity across the board. This includes intensified marketing efforts, coming back to what Jonas said, such as increased digital marketing, production of new brand marketing campaign, as well as preparation and launch of HelmetMax. And we continue with higher investment in product development that you can see in licenses and consulting. In total, this cost item increased by 32% during the quarter. Personnel cost increased by 17%. In addition to salary inflation, it is explained by the full impact of several leadership and few organizational changes made during 2024, which are now fully visible in the Q1 year-on-year comparison. In total, this adds up to the absolute EBITDA growth in the quarter of 38 million or 32%. Moving on to page 18 and some spotlight on the cash flow. start with the graph on the left which shows a rolling 12-month figure for free cash flow the ability to consistently grow cash flow strongly validates both our business performance and our operating model ltm figure now at 740 million sec the primary driver of course being operating cash flow in the first quarter we repurchased 325 000 shares amounting to 119 million This was at high pace in Q4, but should be viewed in the context of the total mandate of 450 million approved by the 2024 ADM. The current buyback program will continue until the 2025 ADM. Board of Directors has proposed a dividend of 170 Swedish kronor per share up from 1.20 last year. This proposal marks an impressive increase of 42% compared to the previous year. This aligns well with the company's dividend policy, representing approximately one third of earnings per share. And as previously communicated, Hemnet remains committed to return excess cash to shareholders through a combination of ongoing share buybacks and dividends. Moving on to net debt, it's important to consider this in the context of our growing EBITDA, which ensures a stable net debt to EBITDA ratio. As you can see, this ratio has remained steady for some time and is now gradually decreasing, driven by the strong cash flow. Notably, it remains well below our financial target of under 2x. In summary, a very strong financial start of the year. And with that, I want to hand over to Jonas for a summary on page 19.