Qliro AB (publ)

Welcome to CLEARo Q2 presentation 2025. During the questions and answers session, participants are able to ask questions by dialing pound key five on their telephone keypad. Now I will hand the conference over to CEO Christopher Rutgersson and CFO Carl Lofgren. Please go ahead.

Thank you. Hi, everyone, and welcome to our Q2 presentation. I'm Christopher Rutgersson, and with me today I also have our CFO, Carl Lofgren. Today, I will talk through our strategic highlights. I will hand over to Carl for our financial update. We'll come back for outlook and we'll walk through any kind of questions that comes up. So in terms of our strategic highlights, we still see a large opportunity to build a new European leader in composable payments, to deliver a world-leading experience for merchants and their consumer journey. We're taking big steps in that direction during the quarter. We see a growth of more than 37% in the quarter accelerating to 45% in July. So we have a great momentum in terms of new volumes on the platform. Part of this is a significant contribution from SME turning into an operating income contribution of 13% from the SME segment. And when we look at new volumes, more than 30% of the new volumes on board on the platform are coming from the SME segment. Our Nordic expansion, where we have launched into Norway and Finland during the last year, we are above expectations with more than 1.3 billion krona in volume signed for new merchants in Norway and Finland, of which around 1.1 billion from Norway, which is more than double the signed volume we announced in Norway in the last quarter. So it's an accelerated momentum in Norway. And the early indications in Finland, we've only been live since April in Finland, is a quicker growth than we had when we launched in Norway. So that's also a positive indication of our momentum in the Nordic expansion. Our BNPL volumes, which is important for our income contribution, is turning around to growth and bottoming out in the quarter, but still lagging behind the total volume growth. We see also kind of a success with the fundraising we did during the spring with an oversubscribed rights issue of 117 million. So it was oversubscribed by more than 300% with strong support from more or less all our top 10 owners, including myself, Right Ventures and Mandato. We'll also kind of increase our focus to improve income generation from the new volume. we'll focus on increasing our scalability and efficiency going forward. And we'll talk that through now. So, first of all, on our vision to become a new European leader in Composable Payments, we are starting in the Nordics and we have an ambition to become a local market leader in the Nordics within three to five years. With the volume growth and all the market share we're taking now in the Nordics, if we continue that momentum, we will be there within three to five years. So from a volume perspective, we're not only growing in actual numbers in the quarter with acceleration in July to 45% volume. If you look at all the volume that are kind of assigned with new merchants, but they're not fully, not yet fully live on the platform, we expect an additional 40% growth compared to the last 12 months when those merchants are fully live on the platform, which will bring us to around A bit more than 20 billion in total payments volume process on the platform. Part of this is driven by our strong acceleration in the SME segment. So we see a strong uplift in number of active merchants on the platform. In Q2, we had the largest number of merchants going live on the platform ever. Around 90 merchants that went live with Cliro in Q2. which is also kind of on the back book of our new product launch, of our new checkout, Generation 3, which I will come back to shortly. Looking at SME segment in total, that's now generating 13% of our income in the quarter, up from 3% last year, and it's an increase from 8% in Q1. So we see an additional 5% income contribution from SME increasing just quarter over quarter, signaling kind of the strong momentum we have in the kind of the buildup of the SME business. As I mentioned before, more than 30% of all new volume on the platform is coming from SME. And we see a higher profitability in the SME segment and higher income per volume in the SME segment compared to enterprise. So we expect this to kind of increase this kind of importance for our income generation also going forward. When it comes to our market launch and Nordic expansion, we launched in Norway in August last year. So we've now been live for a year and we launched in April in April or in Finland in April this year. As I mentioned before, we have more than one point three billion in volume with signed merchants from from these markets with more than one billion coming from Norway. So Last quarter in Q1, we announced the 500 million signed volume in Norway. So we've more than doubled the momentum in Norway, which is good. And as you know, we have fairly long sales cycles, primarily in the enterprise segment that may be up to several years in the most complex cases. So we expect this momentum to continue to increase as our sales teams get more mature and as our pipeline in these markets get more mature. The early signs in Finland is also positive with 200 million on kind of signed volume so far, only being live a few months in the market. And that is slightly more kind of more quicker than we signed volume when we launched in Norway. So we expect similar results also in Finland going forward. Apart from the launch in the Nordics, we also see an opportunity to continue to grow with our merchants outside the Nordics. So most new merchants on the platform are now using Clearo for all their markets, not only for the Nordics. And we will continue to increase our payment capabilities for markets outside the Nordics with more local payment methods. We also see an opportunity to support European merchants that have a significant volume in the Nordics and we have a couple of these dialogues ongoing with larger merchants. When it comes to our income generation and especially our BNPL volume, which is critical for our income generation, BNPL volume is turning around to growth in the quarter and especially in July after the quarter. But it's lagging behind the volume growth. And we see that this is due to both kind of new merchants and new markets coming live where we face a lot of new consumers. They may not be fully used to Clio yet. A positive signal is that we see a very strong growth in invoice volume with more than 40% in the quarter. And we're also taking different measures to improve this trend and kind of turn around the BNPL volume growth so that comes closer to the TPV growth going forward. One of those initiatives was the launch of our new payment product, new payment method, monthly invoice in the quarter. that are not fully rolled out with all merchants and all markets yet, but we see positive signals that this will be very well received by consumer. It's basically like buy now, pay later product where you buy now and you pay after next month's salary, which is a good consumer experience. So a bit better than the 30 day invoice that's been quite popular in the market from competitors. where we see that that most consumer want to pay after they get the salary so that's why we package this as a monthly invoice where you get the invoice the same date every month and you always pay after the salary yeah so with that said we we are growing the BNPL volume nine percent in in july it's been declining previously it's stabilized in q2 and we see a positive trend but it's slightly later than and we expected which in impact our income generation a bit and we'll come back to that in terms of product offering and we continue to launch new products so we launched a new generation of our clear checkout during the quarter. We see very positive momentum in the market from this. We have new sales records, new all time high in sales almost every month before summer. And we see continued trend in August being very positive after vacation. So we have more merchants upgrading to Clio and it's both due to new functionality like our integration to and new CRM systems. We integrated new payment methods for B2B. So we're becoming stronger on B2B in the checkout for merchants that are selling both to consumers and businesses. But we also benchmark this quite thoroughly with competitors. So for merchants that are going live with Quiliero, We have done a lot of performance testing, both kind of performance with the previous solution, our new solution when we went live with Cliro, or kind of real A-B testing running both solutions in parallel. With all the local competitors, we see an uptake in kind of conversion when merchants are shifting over to Cliro of up to 10% in conversion rates, which means the merchants get more than 10% in additional sales, which is a large value for the merchants, which is also leading to that more and more merchants are upgrading with Cliro. One of the official reference cases we've seen on this is the reference case we launched with Findic, an enterprise merchant that went live with Cliro in the spring. And we see an uptick of more than 6% increase in conversion when they shifted over to Cliro Checkout Generation 3. Also, we had a successful capital raise during summer and we have raised 117 million in an oversubscribed rights issue. It was more than 300% oversubscribed with strong support from our main owners, Wright Ventures, Mandatum, many of the other top 10 owners, also including myself. Together with the tier two bond that we raised in Q2 of 70 million, we are well capitalized to continue to drive our growth journey. With that said, we're also focusing strongly on turning the new volume into income generation. through our BNPL products, where we do several initiatives to improve or optimize our related offering. It's easier to generate the income from volume that we have compared to volume that we don't have. So we see it's very positive that this is such a strong momentum in volume growth. We're also working hard to kind of modernize our platforms. This has been ongoing for a while, working through kind of platform by platform at Cliru. So as you know, first we launched the unified payments, then we upgraded the whole checkout. With the launch of the third generation of the checkout, we also shifted out a lot of our infrastructure for more scalability, shorter latency, and higher stability on the platform. During the summer, we also migrated our deposit, kind of our saving system, also in relation to that we divested the digital banking services loan portfolio last year so we don't have any private loans any longer so we're exiting that platform and shifting over to a more modern platform for deposit products that will give us more flexibility going forward with that we also sold one of the larger kind of non-performing loan kind of portfolios we had left connected to the digital banking services, which means we had a kind of a one-off effect of that in the quarter. Carl will come back to that. But going forward, the main platform modernization that we are still targeting is to shift out our core platform for our palliative products to an internally built system. We're going live with the first products in the autumn. And that will give us more flexibility and more scalability to improve our consumer offering and be more dynamic in that both across Nordics, but also to potentially launch it in other markets in the future. We're also working hard on process automations. As we grow, we want to manage that in a smart way to not increase costs while we grow drastically both in markets, merchants and volume. So we're working hard to kind of sort out our internal bottlenecks as we grow more than we have done in the past. All our new platforms is kind of contributing to that and the CapEx investment we're making into the platforms to be more automated in our handling of both consumers and merchants. Also, given that we have much more volume now on PayNow and the success of our unified payments offering, we worked hard to reduce our variable cost related debt to increase our margin going forward. been an effort in q2 we invested around 2 million in that and we will see an impact of around 4 million on a yearly basis in cost savings available cost connected to that and we also working hard to of optimize our credit underwriting to reduce our credit losses with we see early indications on that in the quarter if you reduce the one-off effect of the portfolio just mentioned we see ratios going down and if we look at the underlying trains of kind of how much we're exporting to debt collection we're down around 15 of the portfolio and more in sweden so we see early indications that the investments we're doing in optimizing credit is starting to pay off and we expect more impact from that going forward With that said, now we have taken the investment to launch in Norway and to launch in Finland and from here on we will also kind of keep a stricter cost control to make sure we get the scalability of the new volumes going forward to bring us back to profitability and doing what we can to accelerate that journey. So look at the strategic highlights and kind of forward looking. So first of all we see a midterm ambition to build market leading position in the Nordics over the next three to five years. If we continue this growth, we will get there. And we see an increased commercial momentum every quarter. We are now growing more than 40%. And also with all the new volumes, we have contracted but not went live on the platform. We know we will add another 40% on top of the the LTM kind of figures. So that's a positive indication of the growth going forward and that will continue. We'll also expect SME to continue to grow also as a share of our business, given that we have more than 30% of the new volumes or the growth in new volumes coming from the SME segment with a higher profitability in SME than in enterprise. We also see our Nordic expansion with much more potential. We have just started in Norway and Finland And we expect that to accelerate going forward. Our short-term focus from a kind of product perspective and financial perspective is to turn around the BNPL trend that we've seen declining over the last year. We see that bottoming out in the quarter. We're kind of driving that growth going forward. Also, as I mentioned, we have now secured capital to fund our growth journey going forward, which is extremely positive. And we're very happy for all the support from both existing and new investors. And we will focus to improve income generation from the new volume, continue to focus on our scalability and internal efficiency. And with that, we are also kind of updating our guidance of our income growth for 15% in Q4. And we expect that to continue to accelerate into 2026 as kind of volumes are converted into income growth. With that said, I will hand over to Carl for our financial update, and I will come back for questions later on.

Thank you, Kristoffer. So starting off with an overview of our second quarter. As Kristoffer mentioned, despite very strong underlying commercial momentum with TPV growth of 37%, we're not happy with the financial result in the quarter. The growth in volumes has not fully translated into income and profit growth. And I'll give more details on this evolution in the following slides. We made an operating loss of 29.5 million SEC in the quarter. And even though the result is burdened by a number of one-off items, the underlying financial performance is weaker than we would like. And we have already executed a number of profitability initiatives in the quarter and are implementing new initiatives, like Christoffer mentioned, to further accelerate our route to profitability. First, let's take a more detailed look at operating income evolution. This graph shows the evolution of operating income from Q2 last year. The comparison is somewhat distorted by a one-off accounting adjustment made in Q2 last year, where the treatment of merchant and platform commissions was harmonized with how we account for revenues. This led to a release of an accounting reserve of 6.6 million SEK in Q2 last year. On a like-for-like basis, excluding this impact, income grew by 2%. Despite more than 12 million SEK in contribution from new merchants, a number of headwinds almost completely offset this contribution. First of all, we've observed a declining share of checkout, which is the share of TPV that flows to our most profitable BNPL products. This impacted operating income negatively in the quarter. Another headwind was the remaining impact of the renegotiation of certain major enterprise agreements, which we highlighted already in the Q1 report. Additionally, net interest income was a headwind as we see declining policy rates, which impacts our income from consumers and merchants almost immediately, while our funding costs are driven largely by deposit rates in the Swedish and German markets, which have not declined to the same extent. Given its importance to our business, I want to give it a little bit more color on what Kristoffer mentioned around the share of checkout devolution. The graph on the left here shows our TPV growth, sorry, TPV in each quarter that flows into our most profitable BNPL products, such as the clear account and the part payment products. As you can see, this share has declined over the past quarters. This is partially driven by our new credit processes where we have consciously reduced our acceptance rates for these products to reduce credit losses over time. However, given the importance of these products to our income generation over the past quarters, we've also launched a number of product and checkout improvements to reverse the trend, including the new monthly invoice product that Christopher showed and mentioned. And happily, we're now observing that these upgrades have been well received by merchants and consumers, and the trend has stabilized and signs of recovery are visible in July. As a result of these efforts, we're now also seeing that PMPL volumes on the right are back to growth, with 1% growth year-on-year in the quarter, sequentially up to 9% year-on-year growth in July. However, given the lag in our business model, which you're all aware of, where volumes in one quarter contribute significantly to incoming common quarters, The decline in the share of checkout that we have experienced in the first half of the year will continue to impact our business in coming quarters, which is a key driver or updated guidance for the second half of the year. Moving on to a second important item, credit losses. Credit losses in the quarter, reported credit losses in the quarter were 27.7 million SEK, which is an increase versus last year, partially driven by increasing pay later volumes, but also impacted by a one-off write-down and revaluation of the small remaining digital banking portfolio held for sale, as Christopher mentioned. Consistent with our treatment in Q1, where we had a positive impact from this portfolio, we have not classified this as items affecting comparability, but we highlight it here for transparency. The 5.4 million impact is the result of the sale of a large share of this remaining portfolio, which triggered a write-down of certain exposures. As you can see in the report, we have now sold the majority of the remaining digital banking portfolio, and as such, do not expect future sales in this portfolio to have a material impact on the P&L in coming quarters. The underlying ECL of 22.3 million SEC is an improvement versus last year, and especially considering the larger loan book, this is evidence of the emerging impact our improved credit processes are having on credit losses. Enhancements we have made include improved predictive models, refined risk assessments, as well as improvements to the dunning chain. These initiatives are already delivering measurable results. And here to the right, we show an example of this in the reduction of the number of loans that we're exporting to debt collection. For the Swedish BNPL portfolio, which represents a large share of our losses and therefore where we have invested the bulk of our efforts, we have observed a reduction in exported volumes of around 30% versus Q2 last year. And across the full portfolio, the improvement is around 15%. Given that the IFRS 9 models for ECL are based on historical data, we expect reported credit losses to reflect more of these improvements over time. Moving on to cost. Overall, costs grew by 21 million SEC versus Q2 last year, largely driven by our growth and expansion strategy, as Kristoffer mentioned. The higher volumes we're achieving, also on PayNow products, drove a 2 million SEC increase in the variable costs. And our investments in growth and expansion are also evident in the sales and marketing spend, increasing by 6.6 million SEC year-on-year, or 1.4 million SEC sequentially versus the first quarter. Beyond this, DNA increased by 4.6 million SEC year-on-year, driven by increasing amortization of intangible assets. Other operating expenses increased by 8.6 million SEC year-on-year, but roughly half of that increase was driven by the 2.2 million SEC of costs we took in the quarter to accelerate our profitability initiatives, as well as an extraordinary settlement with a large merchant of 1.9 million SEC following an operational incident in the first half of the year. I want to share a little bit more details on the initiatives that we're taking to drive profitability. Over the past months, we have taken a number of initiatives to further accelerate our path to profitability. These include a large number of process improvements and renegotiation with major suppliers, the most important of which are bank, card and Swiss providers. To drive these initiatives, we incurred costs of roughly 2.2 million SEK in the quarter, but we've already secured annual run rate savings around 4 million SEK. with a full run rate impact from Q4. Beyond this, as Kristoffer mentioned, we're implementing a number of further initiatives to address our income generation, scalability and efficiency over the coming quarters. Lastly, taking a look at our capital base. As Kristoffer noted, we closed our oversubscribes rights issue with the associated over allotment option in July. So the proceeds from that are not visible in the reported numbers for Q2. And the total gross proceeds, as Christopher mentioned, were 117 million SEK, and the net proceeds after fees of 105 million SEK. This now strengthens our capital position together with the T2 issuance, where we're on a pro forma basis for Q2, including the rights issue, have a total CET1 buffer above the Pillar 2 requirement of 199 million SEK or 124 million SEK when including the Pillar 2 guidance from the FSA. This capital buffer provides us with additional headroom for growth and investments going forward. With that, I'd like to hand over to Christopher for some concluding remarks.

Thank you, Carl. So overall, looking ahead, we will continue on our growth acceleration. We're updating our guidance on income growth to around 15% in Q4. We can continue the acceleration in 2026 as more of our volume turns into income growth. We expect an additional 40% in new volume compared to the last 12 months process on the platform from new merchants that are not yet fully live. We also will accelerate our SME and enterprise sales engine even further as more of our sales reps and our new markets are becoming more mature and the pipelines are becoming more mature. We'll continue to build our growth momentum on the early success of our launch in Norway and Finland. It's still early days in both markets, and we see a lot of positive opportunities. And on top of that, we will also, in parallel to our growth journey, focus on initiatives to make sure we turn the volume into income, as well as focus on initiatives that improves our scalability and cost efficiency. With that said, our mission is to deliver a market leading experience for merchants and our customer journey and we see clear trends on that with more and more merchants choosing to upgrade to clear which we are very proud of and thank you all for listening to our q2 presentation with that said i open up for questions

If you wish to ask a question, please dial pound key 5 on your telephone keypad. To enter the queue, if you wish to withdraw your question, please dial pound key 6 on your telephone keypad. There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.

Thank you for listening to our presentation. If you have more questions, don't hesitate to reach out to our investor relations. We'll get back to you. Thank you.