Hemnet Group AB

Welcome to Hemnet's Q4 and full year 2025 conference call. 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. Please go ahead.

Good morning, everyone, and a warm welcome to this 2025 Q4 release call and full year review for Hemnet Group. My name is Jonas Gustafsson, and I'm the Group CEO of Hemnet. With me, you're on my side today at our headquarters in Stockholm. I have our Chief Financial Officer, Ambe Jönö, our Chief Operating Officer, Lisa Parral, and our Head of Investor Relations, Ludvig Segelmark. Today, we've called for an extended session to cover an update on some important strategic and commercial topics, and we'll therefore have a slightly longer presentation than usual. Firstly, we will start with a normal quarterly presentation where we go through the financials from Q4 and the full year of 2025. After that, we will follow up with a deep dive on Hemnet's market position, as well as our strategic and commercial focus areas going into the first part of 26. Amdesh will also quickly break down what this means for our financial reporting going into this new year. As always, there will be opportunities to ask questions at the end of the presentation, and we will combine the Q4 Q&A and the Deep Dive Q&A into one session. Today's presentation will be moderated by our operator, so please follow the operator's instructions to ask questions through the provided dial-in details. So with that, let's get started, and let's move on to the next slide, please. Despite a very difficult market backdrop, Hemet demonstrated strong performance and resilience in the fourth quarter. Net sales decreased by 4.4% in Q4, driven by a continued weak market with low published listing volumes. New listings were down with 26.4% in the quarter. Around 5 percentage points of the volume decline during the quarter was attributed to a new business rule introduced in February 2025, impacting the year-on-year comparison. This new business rule is allowing sellers to change agents without buying a new listing. ARPL average revenue per listing grew by an impressive 29.2% in the fourth quarter, driven by a continued increasing demand for Hemnet's value-added services, fueled by a continued conversion towards Hemnet Premium. EBTA declined with minus 12.8%, 154 million SEC, as the low listing volumes lead to lower net sales and lower fixed cost leverage. For the full year of 2025, the results demonstrated strong resilience with net sales increasing by 9% to 1,526 million SEC and EBTA increasing by 7% to 768 million SEC, corresponding to an EBTA margin of 50.3%. This was driven by, yet again, strong ARPL development of 28% for the full year, and this underscores our ability to maintain strong underlying value creation, even in a challenging and unpredictable market. Going into this new year, we have several exciting product launches planned for the first half in 2026. This includes the rollout of Sell First, Pay Later, which will start on Monday next week in Stockholm. We will talk more about why we're so excited about the new product launch later on in the presentation, but the pilot results have indicated a fantastic opportunity to drive both more and earlier listings to Hamnet. Now, let's turn to page three for a quick look at the financial performance. Net sales amounted to 348 million SEC, down by 4.4% compared to the same period last year. driven by the significant decline in listing volumes during the quarter. EBITDA decreased by 12.8% to 154 million SEC. The decrease was driven by the lower listing volumes, which drove lower net sales and reduced fixed cost leverage. The EBITDA margin amounted to 44.2%. As per usual, Anders will break down these profitability dynamics in more detail as we move further on into the presentation. Now, let's turn to page 4 for a look at the property market and the listing volumes. On the left-hand side of this slide, you'll see a combined chart showing published listings per quarter and yearly, as well as the year-on-year change between quarters. Published listings decreased by 26% year-on-year in the fourth quarter and by 13% for the full year. The slow market continues by negatively impacted by longer selling times, And the average listing duration on Hemnet has increased by 20% year on year, to 55 days in Q4 compared to 46 days in the same period last year. In addition, a sell-first mentality is continuing to impact the value chain and the industry dynamics. The volume decline was partly attributed to the change business terms in February 2025, for changing agents, which explained approximately 5% for the new listing decline compared to last year. While the overall picture remains bleak, there have been some positive signs of renewed activity during 2025, with rising prices, a record bill of sales, and a supply that started to decrease towards the latter part of this year. With that said, the inflow of new homes remains constrained going into the new year as the market positions itself for a stronger expected market from the second quarter and onwards. Let's move on to the next slide to look a bit closer on the strong ARPL development. ARPL, average revenue per listing, grew by 29% in the fourth quarter. The ARPL growth was again mostly driven by a strong demand for value-added services. The conversion rate to higher-tier packages continued to increase during the quarter and is at all-time high levels. Hemet Premium, which was launched in late 2019, is the main driver of our ARPA growth in the fourth quarter. When looking back on its history, it's important to keep in mind and it's important to remember that Hemnet Premium was initially met with some skepticism from both agents and buyers, and it took more than two and a half years after the launch before Hemnet Premium was able to reach double-digit conversions. With that in mind, Hemnet Max is well positioned to capture the next level of demand for customers seeking to maximize their chances of a successful sale and become a key growth drivers for many years to come. The initial results and the product performance of Hemnet Max has been stellar. Before moving into the financial section, let's have a look at what has happened during 2025 from an overall Hemnet and from a product perspective. While 2025 was characterized by resilience, it was above all a year in which we geared up for the future. Through an increased pace where AI tools have notably helped us to become more efficient, we entered a new year with a significantly strengthened product portfolio and an organization ready to drive the market forward. In 2025, we made significant progress in developing our consumer-facing proposition and we've taken actions to strengthen our relationship with the industry, and we're well prepared for our large strategic product initiatives being brought to the market in early 2026. With these elements in place, we do look forward to 2026 with great pride and confidence, ready to deliver more value to our users, to our customers, and to the real estate agents than ever before. And with that, I will hand over to Anders for the financial update, starting with page 7. Anders, please take it away.

Thank you, Jonas. Let's turn to page 8 in the financial summary. As Julius alluded to, we ended the year in a property market that remained challenging, characterized by continued hesitation to list new properties. This resulted in a decline in published listings of 26% for the quarter. However, despite this significant headwind in volumes, our financial model demonstrated resilience. Net sales for the quarter amounted to 348 million, a decrease of only 4.4%. Another noteworthy point is the average listing time, which on a rolling 12-month basis increased from 46 days in 2024 to 52 days in Q2025 and now 55 days in Q42025. The year-to-year effect of the longer listing time is a positive 12 million in revenue for the quarter, And the sequential effect of the three additional days from Q3 to Q4 is negative, minus 2 million. To smooth out system variation, we recommend tracking ARPL growth on a rolling 12-month basis, as shown on page 4 of the presentation. The bridge between the volume drop and the revenue performance is once again the ARPL. You can see that it grew by 29% to 10.9% Swedish krona, a historic high for a single quarter, and was driven by continued strong demand for value-added services. Specifically, Hemden Premium. Looking at profitability on the top right, EBITDA for the quarter came in at 154 million. The EBITDA margin was 44.2%. Margin contraction compared to last year is primarily a function of lower listing volumes. Since a large portion of our cost base is fixed, lower volumes naturally lead to lower coverage of these fixed costs. I will walk you through the specific cost dynamics in more detail on the following slides. One important component in the margin development is, of course, the compensation to real estate agents. When expressed as a percentage of property seller revenue, this ratio increases year-on-year from 31.5 to 32.3 in Q4 2025, driven by a further improvement in both recommendation rates and actual conversions. Higher commission reflecting a substantially stronger underlying improvement of our vast products. And as always, the effective commission is a variable component and tends to fluctuate somewhat between quarters, making what's suitable to measure over longer periods. Free cash flow was 745 million, a 7% increase year over year. This robust cash generation underscores both the scalability of our business model and our strong profitability, even in a very soft housing market. Our operations continue to convert a high portion of revenues into cash, highlighting the quality of our earnings. We continue to uphold a strong financial position. Net debt leverage ended the quarter at 0.7. The increase in leverage is primarily an effect of our active capital allocation strategy, combined with a low listing volumes during the period. Notably, during this year, we expanded our share buyback program from 450 million to 600 million, following the mandate approved at the AGM 2025. We have continued to return capital to shareholders while at the same time maintaining conservative balance sheets. Importantly, this demonstrates the strength of our position. We're able to execute the capital returns and still retain a very high degree of financial flexibility going forward. Headcount increase of 15 largely reflects the organization has been selectively strengthened, primarily within tech and product, as well as new leadership within marketing. However, regarding the total number, it's important to take into account that we had an unusually high number of vacant roles at the end of 2024, which impacts the year-on-year comparison. With that overview, let's turn to page 9, the revenues by segment, to take a closer look at the Q4 figures. Starting with our largest segment, property sellers, revenue amounted to 298, which again, very modest relative to the drop in listing volumes. Turning to the B2B segment, net sales decreased slightly by 0.8% to 51 million. Within this segment, revenue from real estate agents grew by 3% to 24 million. This growth was driven by strong performance in our sold-by-us product and other value-added services for agents, which effectively offset the impact of fewer published listings. Revenue from property developers decreased by 40%. The sector remains under pressure. Fewer project starts and a general cautiousness regarding marketing spent from business customers. Finally, revenue from advertisers grew by 4% to 16 million. This is a positive deviation from the trend we've seen in the recent quarters. Despite the challenging macro environment for the stay advertising, we've managed to grow this line item due to strong sales to banks and other advertisers. Let's go deeper into the profitability dynamics on slide 10, showing the EBITDA bridge for the fourth quarter. First bar shows the net sales impact, which then of course had a negative effect of 16 million. Next, we have compensation to real estate agents. Cost decreased by 2.5. Since commission is largely linked to seller revenue, the decrease in seller revenue naturally leads to lower absolute commission payments. Moving to other external expenses, they are flat year on year. We have maintained cost discipline where slightly higher cost for licenses were balanced off by lower spend on consultants and marketing compared to the same period last year. Personal costs increased by 10 million, representing a 17.7% increase in the quarter, and is driven mainly by increase in number of FTEs and annual salary inflation. We ended the year again in the headcount with 167 employees. Finally, other costs had a minimal positive impact, brings us to Q4 EBITDA of 154 million. Now, let's zoom out and look at the full year 25 on slide 11. While Q4 was impacted by specific volume headwinds, the full year picture demonstrates the robust growth profile of Hemnet over time. For the full year 25, net sales grew by 9.5% to 1.5 billion. This was achieved by the full year decline and published listing of 30%. Driver again is ARPL. Full year ARPL increased by 28% to 8.2%. This consistent ability to grow RPEL faster than volume is, of course, core. EBITDA for the full year increased by 7% to 768 million, corresponding to a margin of 50.3%. The effective commission is a significant component of the P&L, again, and it's increased from 30.4% in full year 24 to 30.7%, given by the strong conversion to our value-added services in the compensation model launched in July 24. Turning to slide 12 for the full year revenue breakdown. Property sellers revenue grew by 11% to 1.3 billion. This segment now accounts for 86% of the total revenue in the year. And again, it really underscores the strength of our business model. B2B revenue for the full year was essentially flat. Declining 0.7% from lower display sales, partly as a result of lower number of published lists in the later part of the year. Real estate agents revenue grew by 3%. A highlight here is our sold by us product, which grew by more than two times compared to 2024. This product, as an example, is becoming a big part of the agents marketing mix. But it's also a further proof that we are able to launch new products that create real value for our customers, even if it may take some time before it's fully in traction. Property developers revenue was flat year on year, which we consider a stable result given the severe headwinds in the new construction market. Advertising revenue declined by 7% for the full year, reflecting the broader weakness in the digital advertising market and lower traffic resulting from fewer listings. All in all, very encouraging that we are able to maintain the evidence in our B2B segment despite the low level of listings, which negatively impacts impressions. We have successfully offset this to growth in our 100 unique products, which creates value for our priority customers, real estate agents, property developers, and banks. On slide 13, we see the EBITDA bridge for the full year 2025. Starting from 720 million in 2024, the primary positive driver was, of course, the net sales growth, which contributed 132 million to EBITDA. Compensation to real estate agents increased by 44 million. The increase is a direct result of the higher revenue for property sellers and the successful launch of the new compensation model, which rewards agents for high recommendation rates of our premium products. Other external expenses, labeled C, increased by 24 million, reflecting the decision to normalize investment levels in marketing and product development after a more cautious 23-24. Personal costs increased by 20 million, driven by mainly the salary inflation and headcount investments I mentioned earlier. All in all, this resulted in an EBITDA growth of 48 million per year, landing at 768. Finally, let's turn to slide 14 to review the cash flow and financial position. On the left, you see our free cash flow on a rolling 12-month basis, generating 745 million in free cash flow over the last year, an increase of 7%. I would like to briefly comment on the operating cash flow for the isolated fourth quarter. In addition to the impact on weekly listing volumes, we also saw a more technical effect of negative change in working capital, driven by the timing of settlements for our payment service providers. This is a temporary timing effect and does not reflect any underlying change in the cash generation. Our strong cash flow allows us to continue returning capital to shareholders. And as you can see in the middle of the chart, we have been very active with share buybacks. In Q4, we repurchased share for 160 million. Looking at the right-hand chart, our leverage is increasing, but putting perspective very low. Net debt to EBITDA ended the year at 0.7, slightly up, as I commented earlier, but also remaining well below our financial target of 2.0. Reflecting our strong financial position and confidence in the future, the board of directors has proposed a dividend of 190 per share. This represents an increase of 12% compared to last year and corresponds to approximately one third of our earnings per share in line with our policy. With that, I will hand the call back to Jonas to wrap up the first section.