Hemnet Group AB

Welcome to Hemnet's Q3 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 2026 Q3 release call for Hemnet Group. My name is Jonas Gustafsson and I'm the Group CEO of Hemnet. With me here on my side today at our headquarters in Stockholm, I have our Chief Financial Officer Peter Messner and our Head of Investor Relations Ludvig Segelmark. As usual, we will go through the presentation that was published on our website earlier this morning during today's session. I will start and kick it off with a summary of the main highlights during the third quarter of 2026 and a recap of the game-changing news that we announced a few weeks back in late September. Thereafter, Peter will cover the financial details before I will come back in the end to summarize and wrap up today's session. 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 dial-in details. So with that, let's get started and let's move to slide number three, please. So to summarize the main events and the highlights of the third quarter, first of all, we announced important strategic initiatives during the third quarter, including free listing tiers, an updated compensation model, and a cost-saving program. With these actions, we're taking decisive and game-changing steps to build a better Hemnet for buyers, for sellers, and for agents. It means that we're conducting a strategic pivot for full market coverage and continued market leadership. Secondly, during the past couple of weeks and months, we've adopted a new approach to product development with a clearer focus on providing the best possible experience for all property buyers in Sweden. As a part of this, we've rolled out significant user experience improvements during October, including the one-list search experience, and we're just getting started. When looking at the financials for Q3, net sales decreased by 17.8% driven by lower listing volumes paired with a timing shift in revenue recognition from Sell First Pay Later. Published listings amounted to 36.2 thousand and were down by 13%, while paid listings amounted to 29.2 thousand, with the difference in paid and published listings being explained by Selfers Pay Later listings and Under the Radar listings. The EBTA margin amounted to 47.8%, 5.5 percentage points lower year-on-year due to declining listing volumes that impacted net sales and resulted in lower fixed cost leverage. Now, let's turn to slide 4 for a closer look at the financial performance. Net sales amounted to 302 million SEK, down by 17.8% compared to the same period last year, driven by lower listing volumes and a revenue recognition effect from sell first, pay later that continues to impact revenues. EBITDA decreased by 26.2% to 144.1 million SEK. The decrease was driven by the lower listing volumes, which impacted net sales and reduced fixed cost leverage. The EPTA margin amounted to 47.8%. Peter will break down the profitability dynamics in more detail as we move on in the presentation. Now, let's turn to page 5 for a look at the property market and the listing volumes. On the right hand side of this slide, you'll see a combined chart showing published listings per quarter and yearly published listings, as well as the year and year change between quarters. Published listings decreased by 13% in Q3 and by 20.5% on the last 12 months basis. Average LTM listing duration on Hemnet in Q3 increased to 65 days. up from 64 days in Q2 2026 and 52 days in Q3 2025. Over the last months, we're seeing that the time it takes to sell properties on the platform is coming down, although it's not yet visible in the LTM number. Looking at the overall property market, we're seeing clear signs of a market that is gaining some momentum. Improved economic conditions accelerate transactions while pushing apartment prices to record highs and reducing inventory levels. Going forward, we should expect this to be a driver of more listings coming to market as well. Let's move on to the important strategic initiatives that we communicated in late September and that we are rolling out this and next week. In late September, we announced a number of important strategic initiatives for Hemnet. First, we announced the introduction of free entry-level listing formats to gather the complete public market inventory into a single user-centered search experience on Hemnet. In addition, we also announced that we're simplifying and improving the paid package structure. Secondly, we're updating our compensation model for real estate agent offices, introducing a simplified and more predictable structure for commission that focuses on paid listing conversion. Thirdly, we are streamlining our operations to build a faster, leaner and more agile hamnet. This is expected to yield annualized cost savings of approximately 80 to 85 million SEK. We broke this down in detail in the conference call that we held on 29th September, but we also want to take this opportunity to talk them through. Now, let's move to the next slide, please. Hemnet is uniquely positioned in the Swedish property market. We have superior traffic and superior reach compared to our competitors, and we're substantially bigger than number two in the market. This is a market and a brand position that we've built over the last 25 years. We also have a unique position in the market thanks to our agent relationship. Hemnet was founded by real estate agents more than 25 years ago and we continue to engage and work with the real estate agent community in Sweden every single day. Our market position also means that we have access to more embedded data than anyone else in the market, on which we are able to build an even stronger platform going forward, not at least through the use of AI. And most of all, Hemnet has a platform that works. Sellers and agents all know that if you want to sell a property in Sweden, buying a Hemnet ad is the most effective way to do it. With that, let's move on to the next slide, please. So we are expanding our platform to gather all publicly available listings into a single unified search experience. We are doing this by introducing two new entry-level listing formats. a free entry-level option for real estate agents that we launched on Tuesday, paired with automatically aggregated listings, which is going live next week. In practice, this means that all publicly available listings will be made available on Hemnet by the end of October. With all listings available on Hemnet, we reinforce our position as Sweden's leading property portal. simplifying the search process for home seekers while maximizing visibility for sellers and agents. On Tuesday, we also further simplified and strengthened our package structure as Hemnet Boss replaced Hemnet Plus, incorporating all the various features and visibility of Plus into Boss, but remaining at the Boss price point. The product design is there to create the best possible buyer experience while delivering clear upgrade incentives for high intent sellers and agents to reduce paid listing cannibalization over time. Just as today, upgrading to a paid marketing package will remain the most effective way to reach Hemnet's full buyer audience and create maximum interest to ensure a successful transaction. Let's move to the next slide, please. So what does this mean for our platform? We're moving from having approximately 55% of all published listings at a given time to aiming to have all publicly available listings on Hamlet. This will mean that we will move from being the number one platform in Sweden on traffic and reach to being the number one property platform on traffic, reach and supply. We will continue to focus on high-intent sellers and by becoming the single-source platform for all new properties that come to the market. With high-intent sellers prioritized, we increase the value of our paid listing packages. Over time, our ambition is to build the world's best property platform. Hemnet has a unique market position and a business model in an international context, and we're now taking decisive game-changing steps to significantly improve the product. With a new operating model in place and a faster and leaner organization, we will be even better positioned to take more product innovation to market and further improve the user experience at a much more rapid pace. With the new model, we create an even stronger alignment with real estate agents and remove all barriers to list on Hamnet from day one. We're also strengthening our platform for all advertisement partners and ensuring that we become an even stronger platform with growing reach and impressions. Now, let's move to slide 10, please. We are streamlining our operations to build a faster, a leaner, and a more agile Hemnet. With this new operating model in place, we now have a faster and leaner organization with few decision layers. We're doing this to ensure that we have the best possible structure to be able to substantially increase output and transform Hemnet's platform to provide the best user experience for buyers, sellers, and agents. New technology is also changing the way we operate, and we're seeing that AI is driving real operational efficiencies across the organization. With approximately 85% of our code now being written by AI, we're able to do much more with a smaller team. On October 1st, we announced the appointment of Marcus Hartwell as new chief commercial officer with the responsibility for Hemnet's sales and partner organization. I'm very happy that Marcus has agreed to join us and take on these responsibilities. Marcus has extensive hands-on experience from scaling digital marketplaces and property portals, most recently from Daft, Ireland's leading property platform, where he ran the business as managing director. Marcus will work to deepen our partnerships with agents and help them leverage the full value of Hemnet's paid products and services. Next slide, please. As I stated earlier during the presentation, we as a company have adopted a new approach to product development with a clear focus on providing the best possible experience for all property buyers in Sweden. With our new operating model, we are now able to roll out more features and platform improvements, and we have listed a few examples on this slide of what we've launched in October. We have wanted to find a better product design that makes it easier and more intuitive for buyers to find homes that are listed as commande and to connect with agents that sell homes. Therefore, we launched a unified one list search experience in early October that make it easier for buyers to find homes and connect with agents while increasing visibility for sellers. The initial results have been promising. The share of users that click on Comm Monday listings was up by 90% in the first week, while we also saw substantial improvements in engagement and lead generation. During October, we also launched new update designs on real estate agent products and contacts forms, paired with continuous platform innovation to further strengthen the buyer experience, including a new and improved search result layout and updated filters. Next week, we're rolling out external listings on the platform, meaning that all publicly available listings will be on Hemnet. This will be followed by the new compensation model, which will go into effect from 1st of November. All in all, we're entering a completely new phase for Hemnet. We are delivering on our most ambitious product enhancement pipeline to date to drive a superior experience for buyers, for sellers, and for agents. And with that, I will hand over to Peter for the financial update, starting with page 12. Peter, please take it from here.

Thank you, Jonas, and good morning from my end as well. Let's move to page 13 and the financial summary for the third quarter of 2026. Jonas already talked about the development of published and paid listings during the quarter, which were down by 13% and 29.6% respectively. As a reminder, the difference between published and paid listings are the sell-first-pay-later listings that are not yet sold by the end of the quarter and where no revenues are recognized yet, as well as the under-the-radar or in Swedish underhand listings. As a consequence, total net sales declined by 17.8% to 301.5 million SIG. Paid Apple, the average revenue per paid listing, grew 9.2%, where growth reflects minor price adjustments from early in the year, the SFPL payment premium and the sustained level of demand for our value-added services. EBITDA for the quarter amounted to 144.1 million SIG and corresponds to a margin of 47.8%. The increase in leverage to 1.3x is an effect of our free cash flow development together with the active capital allocation policy, and I'll get back to both later on in my part. We ended the quarter with a headcount of 174 employees, somewhat above last year's level and not yet representing the organizational changes that we announced at the end of September. From that summary, let's turn to page 14 and get into financial details, starting with our revenues by segment. As always, our largest revenue segment is the B2C segment representing revenues from property sellers, which generated revenues of 248.7 million SEG and represent over 80% of total sales. In the B2B segment, All revenue streams were continuously impacted by lower listing volumes and resulting lower display sales. On a positive note there, revenue from property developers improved slightly as a result of new annual subscription packages. All in all, the B2B segment was down 2.8% and showed continued resilience despite the much lower listing volumes and display sales. With that, let's continue our next page with our EBITDA bridge. As can be seen on the chart on the left-hand side, the main year-on-year driver in EBITDA decline is the decrease in net sales, and that, as previously mentioned, is a result of the lower listing volumes. The compensation to real estate agents lowered in line with the decline in revenue from property sellers, and the resulting net impact is 48.6 million SIG on 95% of that total EBITDA decline year-on-year. Other external expenses decreased by 5.6 million SIG, which is the result of certain cost optimization measures that we already started in the third quarter, as well as marketing expenses being moved into the fourth quarter. Personal costs increased by 9.4 million SIG, where the comparable period was, however, positively impacted by a 5.3 million SIG bonus accrual reversal. And with the 1.1 million SIG slightly higher capitalized development expenditure, total EBITDA for the quarter amounted and landed at 144.1 million SIG. With that, let's move to page 18 and our cash flow and financial position. The rolling 12-month free cash flow amounted to 557 million SIG and reflects the trends of EBITDA development and lower listing volumes. Still, the business maintains a strong cash conversion of 99.5%, which highlights the continued strength and quality in our business model. I mentioned the active capital allocation policy earlier. The chart in the middle on this page shows our share buybacks. During the third quarter, we repurchased over 1.4 million shares for a total of 132 million SEK. As announced in the beginning of September, Hemnet's board of directors resolved to pause the share purchase program with effect from the 14th of September in order to provide full financial flexibility during the transformative phase that the company now entered into. Finally, let's turn to net debt and leverage shown on the right hand chart on this page. Hamnet has a total revolving credit facility of 900 million SIG, of which 870 million SIG have been utilized. The facility consists of a larger tranche of 600 million SIG that matures in May 2028, and a smaller tranche of 300 million SIG that matures in April next year. As a result, net debt amounted to 718 million SEC and corresponds to a leverage ratio of 1.3x. While showing an increasing trend during the last quarters, there's still quite some headroom in our own long-term financial target of below 2x. With that, I conclude the financial summary for Q3. But before heading back to Jonas, let me update you again on what we shared three weeks ago as part of our strategic initiatives announcement and what the current status is. Let's turn to page 17. Jonas already mentioned that. In connection with the launch of free listings and other package improvements, we shared previously that we're also updating and simplifying our compensation model to real estate agent firms. As a start for real estate agent offices that have a general cooperation agreement with Hamlet in place, each published paid listing will generate a 600 SIG administration fee in the same way as it does today. In addition and over that, the new compensation model will provide for a commission of 20 or 30% of revenue generated per paid listing, depending on the chosen package. And that is now new, also including HEMNET base package. And all of that is subject to an agent recommendation for a paid package. Per published paid listing, there is a 4,000 SEC commission cap, including the admin fee, to ensure that the model is sustainable in the longer term. This updated model will be effective from the end of next week, from 1st of November. Let's turn to the next page and the organizational streamlining we announced in late September. So what we also announced three weeks ago was that streamlining of operations to build a faster, leaner, and more agile organization. And by streamlining operations, we are modernizing workflows, we are shortening decision paths, and Hemnet will be better positioned to accelerate product innovation and ultimately improve the customer experience of our offering. So where do we stand with the restructuring? All union and individual negotiations were carried out now during October and are completed. and the shift to a new operating model in terms of the organisation is now ongoing. The programme is expected to deliver annualised cost savings, as Jonas mentioned, of 80 to 85 million SEK, as compared to the expenses run rate as of the second quarter this year, and the full run rate effect on costs are expected after the first quarter of 2027. The number of employees will be reduced from 184 as of the end of the second quarter 2026 to roughly 115 employees. We now expect that the one-time restructuring charges are 36 to 37 million SIG and will be recognized as an item affecting comparability on the Group's income statement in the forthcoming fourth quarter of 2026. And with that update, I hand back to Jonas for a summary of today's session.