Qliro AB (publ)

Hey everyone and welcome to CLIRO's presentation for the first quarter 2024. I'm Kristoffer Rutgersson, CEO of CLIRO and with me today I have our CFO Robert Stambro. The agenda for today is four topics. First, we will run through our business strategy update. Then I will hand over to Robert to run through our financial update and we'll talk quickly about an outlook for the year. and then hand it back to the operator for questions and answers. Moving into our business and strategy update. So first of all, with a focus on payment solutions, our mission is to deliver a world-leading experience for merchants and their customer journey. This is something we have clarified over the last year, when Clearo has transformed back to its core, focusing on the merchants, focusing on e-commerce, and seeing the end customer as the merchant's consumer. This is a big differentiation versus competitors and a solid reason for why many of the merchants that have joined Claro this year have chosen us as a partner. We continue to see a growing pipeline of merchants, both in the SME and enterprise segment, with the potential to significantly boost our total payments volume, considering this new focus. The value for merchants lies primarily in helping them improve their checkout conversion, which drives more sales for the merchants, helping them drive more sales to improve their order value and creating loyal consumers that come back again and again to buy at the merchants where they came from. We are, during this year, launching significant product improvements in all of these areas that we continue to see with strengthening our offering. We have also, as you know, launched unified payments. We've talked about this for a couple of quarters. We'll continue to see positive development from a both product perspective and a commercial perspective in relation to unified payments. We are launching all relevant payment methods for the Nordic market, where we historically focused more on our own consumer credit offerings, but we are now expanding into all relevant payment methods packaging this to reduce administration for the merchants, enabling quicker onboarding, fewer payouts, less reconciliation. And with one contract, it also improves our onboarding as well as more flexibility and simplicity in pricing for the merchants. This is also a major reason for why we are able to accelerate in SME as well as kind of simplifying administration for our larger merchants. so far we're now kind of accelerating to over 20 percent of our total pay now volumes processed in unified payments by the end of the first quarter we have increased the number of merchants on the unified payments platform with total of six of our top 10 merchants signed up to activate unified payments some of them are already live and some of them expect to go live before the summer During the quarter, we have also added both trustly and mobile pay to the offering, and we expect to add more payment methods going forward. Moving on to our key business highlights. For Q1, I want to highlight a few updates on our progress and how these align with our strategy. We see a continued growth and profitability in our recovering e-commerce market, with a total operating income growth to 8%, and notably our payment solution segment witnessed an operating income growth of 12%. The growth combined with improved cost efficiency has translated into increased profitability, with an operating income rising by 4 million to 5.3 million in the quarter. We are thrilled to report a significant 44% growth in the number of active merchants on the platform, largely driven by the SME segment and enabled by our launch of unit payments. Moreover, we have signed new enterprise agreements laying the groundwork for accelerated growth going forward. Noteworthy contracts are, for example, Skruvat Reservdelar and BTU Norden, boosting a total payments volume exceeding 1 billion Swedish kronor. Looking ahead, we have also recently secured a new contract with Makevibo with a total payments volume of approximately 500 million, further fueling our growth trajectory. Lastly, we have also extended and signed a deepened partnership with our existing merchant, Epicolo, with pay now volumes exceeding 500 million to be processed within unified payments, demonstrating our commitment to expanding partnerships and transaction volumes with existing merchants. and also showing the value of unified payments also in our enterprise portfolio. I also want to highlight a few updates on our progress and how these align with our overall strategy. Over the past five quarters, we have consistently achieved profitability. This success laid a solid foundation for ongoing investment in growth initiatives. As we're doing this period, we've also scaled up our commercial activities and product investments. I'm also pleased to announce the appointment of our new chief credit officer, leading the work to enhance our credit scoring models and modernize the platform for credit scoring. We also see a significant milestone in the remarkable 44% increase in number of merchants live on our modernized platform. This progress is particularly crucial as it reflects the growing demand for our services among e-commerce entrepreneurs. It indicates that we're delivering the solutions they desire and perceive as valuable. This growth in our merchant base not only reflects positively on our platform, but also strengthen our position in the markets. Operationally, we're currently focusing on the onboarding process in order to speed up the process and automate as much as possible to increase scalability when new merchants go live on the platform going forward. We have signed a lot of SME merchants that expect to go live in the second quarter. An important part of this work relates to the launch of unified payments, which also simplifies the onboarding with simplified agreements and having everything in one place for the merchants. We have our first Norwegian merchant live, and our establishment on the Norwegian market continues as planned, including the ongoing recruitment of a local team with experience in payment solutions. We expect to launch fully in the market by second half 2024, and in the long term, geographical expansion alongside acceleration in enterprise and SME are important part of our growth strategy. With this, I hand over to Robert to move into the financial update.

Thank you, Kristoffer. CLIRO generated an operating profit of 5.3 million in the quarter. The e-commerce market is regaining strength and grows with 11% according to Svensk Handels e-handelsindikator. This is driven by more capital intensive segments, which indicate an increased purchase power for customers in Sweden, which is good for clear or long-term. Income grew with 8% in the quarter driven by payment solutions. The realizations of efficiencies within the profitability program combined with tight cost control is keeping the cost base flat year over year. Credit losses is lower than Q4 2023 and higher than last year's same period. Given the improved macro environment, credit reserves was released in the quarter. Worth to notice is that income grew faster than credit losses contributing to the improved operating profit of 4.2 million versus last year. So to sum up, the e-commerce market is regaining momentum with an 11% growth. Income grew with 8% driven by payment solution. They grew by 12%. And we made yet another quarter of profit. Moving into the cost side, investments in automation, efficiencies, and digitalization continue to give long-term results. Total cost in Q1 amounted to 79 million and in line with previous quarters during 2023, except Q4 that included one-time effects such as VAT that held the cost down somewhat in that quarter. Other than Q4, the cost structure in the quarter resembles previous quarters in 2023. What's the notice is that we, from the beginning of the year, capitalized direct costs associated with the completion of development projects. This affected the quarter positively by 1.6 million. So all in all, we can see that investments in automation has given long-term results and costs. We are going to continue to invest in growth, but not on the expense of profitability. Payment solutions continue to show progress in the quarter. New sales resources are starting to come up to speed. The pipeline continues to grow. And we signed enterprise agreement with MakeWebu with 0.5 million of PayNow volumes and ScrewUp with a total payment volume of 1 billion. The number of new onboarded merchants grew with 44% year over year, and we grew our merchant base with 27 additional merchants. Total payment volume was unchanged compared to last year, driven primarily by varied growth among different categories within the enterprise segment. Some parts of the segment shows strong growth. The customer reach of Clido continued to grow, and 5.6 million consumers have used our checkout the last 12 months, a growth of 40,000 new unique consumers. the clear shift in the consumer preference towards bmp volume seen throughout 2023 in favor of invoices continuing in q1 invoices decrease with 14 percent and bmpl volume increase with four percent the increase in bmp volume in combination with the nine percent increased payment balances and previously adjusted consumer prices improve the margins the take rates which is the operating income divided by total payment volume from both pay now and pay later grew from 3.2% to 3.6%. In other words, we are yielding 40 basis points better on every volume Krona processed on our payment solutions platform than one year ago. Income grew with 12% or 10.7 million in the quarter. As mentioned, the growth is driven by the favorable mix shift in between invoice and BNPL throughout the year, combined with adjustments made to consumer pricing. Credit losses continue to grow in nominal terms compared to the same period last year, but at a slower rate than operating income. Credit losses grew with 5.6 million and income by 10.7. The credit losses in relation to pay later volume increased in comparison to previous year, but was unchanged in comparison to the fourth quarter in 2023, 1.8%, which indicates a more stabilized credit loss level. What to remember is that lending in the segment is characterized by millions of loans issued, and just in Q1, we processed 1.3 million pay later transactions. Small loan size, we had an average order value of 985 kronos in Q1. And it's a high turnover of the loan book. The average duration is low and is on average repaid within three to four months. That means that we can adjust the loss level relatively quickly in the segment. And we continue to modernize our platform and our models for high precisions in the credit assessments. So to sum up, To sum it up, income grew with 12% in a quarter or with 10.7 million. Income grew faster than losses compared to the same period last year. Digital banking is a smaller part of our income generation compared to one year ago. The digital banking loan book continued to shrink in size and have lost 11% since last year. The 10% reduction in income generation is driven primarily by the reduction of the loan book size. And the reason for the 20 basis points increase in margin is due to the gradual movement in the customer mix throughout the year, where we lose more low-risk customers than we attract. This has caused operating margin to go up and consequently increased credit losses. So to sum up, segment digital banking continued to be a smaller part of our income generation and the reduction of income generation is primarily driven by the reduction of the loan book let's look briefly at the capital and liquidity position before I turn over to hand over to Christopher clear has the capital headroom of six point one percent to regulatory requirements During the quarter, the Swedish FSA have completed their Pillar 2 assessment. This is an assessment that the FSA do for all Swedish financial institutions in accordance to their recurring SREP process. Based on the SREP process, the FSA is recommending CLIR to hold a capital buffer of 3.5% above the capital requirement. The guidance came into force on the 21st of March and was in line with our expectation. The liquidity position is strong, which is proven by LCR of 489% and net stable funding ratio of 141%. The lending activities are focused on the Nordic countries and funded mainly by deposit in Sweden and in Germany. Lending in Norway and Denmark is financed by the swap markets. And with that, I hand over to you again, Kristoffer.

Thank you, Robert. So looking ahead, we are continuing to focus on growth and profitability initiatives within our payment solution segment. In the near term, we are expanding our unified payments offering and volumes. We see a continued acceleration both within our SME and enterprise segments, which we also plan to expand to Norway in the second half of the year. And we are focusing on operational excellence across the business and especially within our onboarding given the increased volumes in combination with also increased investment in automation and digitalization of our processes to improve scalability. We see an ongoing onboarding process for a large number of merchants, especially in the SME segment, but also the enterprise segments that we have announced during the last few months. Currently, we're also in discussions with more new merchants than ever, some with the potential to significantly boost our total payments volume. We see an increased addressable market also through our Norway launch, but also through the launch of new e-commerce platform integrations that we expect to launch during the year. With that said, I want to thank the Pliro team for their efforts in the first quarter to deliver these results. And we want to hand over to the operator to open up for Q&A. Thank you.

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