Qliro AB (publ)

welcome to clero q3 presentation 2025. 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 ceo christopher rutgersen please go ahead

Great. Welcome to today's Q3 presentation for CLIRO. I'm Christoffer Rutgersson, the CEO here since a bit more than three years. With me today, I also have our new CFO in the background. He has only been here for a few days, so I will run through the financials as well today. So the agenda for today, I will walk through some of our strategic highlights as usual, and we jump into the financial update, talk a bit about the outlook, and then end with some Q&A. So first of all, we still see a big opportunity to build a new European leader in composable payments, starting in the Nordics, where we want to achieve market leadership within the next few years. We're taking clear steps in that direction by accelerating our total payments volume growth to more than In Q2, we are up to 50% volume growth in Q3, up from 37% in Q2. We also see a change in trend and a turnaround in the BNPL share of checkout or share of the total volume, leading to a BNPL volume growth of around 20% or 90% in Q3. Up from previous where BNPL volume been fairly flat. We think that's a good indicator for upcoming loan book growth as well as the income growth, which we still estimated around 15 percent in Q4. We also continue to see a strong momentum in the SME segment with more than 30 percent of our volume growth coming from the SME segment. New sales on SME side is reaching a new all-time high both in September and also again in October. So far, if you compare it to previous months, so we see a big, big step up in kind of the commercial momentum. And we'll come back to what that means. We also have a good traction in our new Nordic market. So we launched our Norway sales office August last year, and we launched in Finland in April this year. And we see a good momentum in both markets. So far, since market launches, we have More than 2 billion in total payments volume signed in new contracts from new merchants in those markets. Also, as we announced after the Q2 report, we have initiated some organizational changes combined with our other initiative to accelerate the scalability, efficiency and profitability. With profitability being expected already in Q1 next year. So overall, our vision is to build a European leader in composable payments. We want to be the best partner for modern e-commerce companies that have a modern tech stack. So we're doing a lot of partner integrations to make sure we are leading in this field. We're starting in the Nordics, but we already have global capabilities. And most of our merchants that start processing with Cliro today use us for all their international volumes, not only in the Nordics. Our mission is to deliver a world-leading experience for merchants and their customer journey and we're taking good steps in that direction also in Qtree with a couple of product launches especially on the onboarding side where we're improving the onboarding experience so we can be quicker to onboard new merchants with a good experience. We have the ambition to become the Nordic market leader within the next three to five years. We still have less than 5% market share in the Nordics, but if we keep up growth at this level, we expect to be a market leader within the next three to five years. So... Going into the strategic highlights, we launched in Q2 our new generation of the checkout, Generation 3. Internally, we call it Generation Lion, with the strongest checkout performance in the Nordics. We have done extensive A-B testing of new merchants going live on the platform, comparing their previous supplier of payments to our new checkout. This is something we initiated already in the autumn last year, when we launched the second generation of the checkout last year. last year, kind of the summer of 2024. Then we did a big kind of marketing campaign where we offered merchants to do A-B testing. And if we would lose a single A-B test, we would pay one million Swedish krona in penalty fee. So far, we haven't lost a single A-B test against any Nordic or global competitor. We've done A-B testing against all of the niche banks that are in payments. We've done it against the market leader, Custom, Forum Corona Checkout, but also towards some of the global PSPs like Adyen. Typically, we see a conversion uplift for merchants of around five percentage points, which directly can have increased the merchant sales, which is also why we see a big intake of new merchants upgrading to the Cliro platform. Also, if compared to the niche banks that are also offering pay later services, we typically see also an uplift of 30 to 40% in share of pay later, in kind of share of the total payments volumes, given that we have a stronger brand and a great consumer experience that we invested a lot in. we see a higher share of pay later, which is good for us, it's good for the consumer, and it's also good for the merchants that typically reduce their cost of payments when shifting to us, given that they get a better payment mix in their checkout on top of the increased conversion. With that said, if you look into why leading merchants are choosing Cliro, we are positioning Cliro as the leader in both merchant experience and consumer experience. And that could be compared to, for example, Klarna that in the past was strong in this field, but then sold their checkout and now focusing only on the consumer experience and went into more of the marketplace business, a bit like Amazon, focusing on price comparisons and not only the merchant experience. We have the niche banks that typically don't invest as much in product and the consumer and merchant experience that offer this kind of financial services. And then we have the global players that are kind of offering payments, but don't have their own pay latest. So they don't have the kind of economic strength of having their own kind of related solutions. So this leads to a couple of benefits for merchants. First of all, the leading conversion, which drives more sales for the merchants. Secondly, we offering kind of upsell functionality where we can keep the order open, enable kind of consumers to add more products into their order, which drives kind of a higher order value for the merchant and hence kind of a gross margin tree boast for the merchants. So they get more money per order. Then we're focusing a lot on having a very modular and composable checkout that fits well into the modern partner ecosystem for merchants. Hence, we're working a lot also becoming a partner with the merchants, focusing on performance. That's what's been leading to some of the performance metrics I just showed. We're also making sure we have a premium consumer experience, so we make sure consumers are happy and coming back again and again. We see the financial impact of that, that we are reducing reminder fees, for example. But on the other hand, we believe that if the consumers are happy with experience, they will come back more often, both to us and to our merchants, increasing the customer lifetime value, both for us and the merchants. Overall, this typically leads to a positive business case of 10 to 20x in return on investment, compared to the cost of change when merchants are changing providers. Overall, as I mentioned before, we see a total payments volume growth of 50% in Q3. On top of that, we have signed merchant agreements with volumes that are expected to take us to around additional 34% growth compared to our volume the last 12 months, leading to a total payments volume expected at an annual basis of 21.5 billion Swedish krona when all the merchants are fully up and running. So that's kind of very good for also kind of the growth kind of going forward. And we have experienced the challenges during the spring and kind of reduced kind of share of checkout for BNPL volumes that we also presented in the Q2 report. We see that turning around now leading to a growth in BNPL volumes. So we see a 90% growth in BNPL volumes. And the BNPL volumes is basically all our different part payment products, which is the most profitable payment products we have representing around 90% of the gross profit in the business so that we see a volume growth in BNPL is very positive. We expect that to lead to a growth in the loan book and then to the income and gross profit in the coming quarters. If you look at the SME business, overall in merchants, which is primarily driven by SME, but also including enterprise, we're growing more than 100% in merchants. So we still see kind of an acceleration in number of merchants kind of upgrading to Clio and being onboarded to the platform. And Q3 is a high number despite... Basically half of Q3 being vacation months where typically merchants are not making technical changes in July and the first half of August. So the underlying momentum coming into the rest of the autumn is even stronger than we see here. And on the right hand side, you see the contribution to our operating income from the SME business of around 14 million in Q3 representing 15% of our total operating income. But most interestingly, we can see that new cohorts of SME business are kind of adding more and more operating income. And we see a good retention of previous cohorts being onboarded in kind of even back to kind of before 2024. So we see a big value of kind of continue to invest in accelerating the SME space and continue to accelerate volume to drive kind of the growth going forward. If you look at Norway and Finland, where we have launched during the last year, we continue to gain increased momentum. So far, new merchant contracts represent over 15% in volume growth, so more than $2 billion Seek in a kind of transaction volume or total payments volume that we signed so far. Finland, of course, being a bit behind Norway as we launched Finland eight months later than Norway. But the first months in Finland, then we have a stronger momentum than we have the first months in Norway. So we're very optimistic about Finland catching up over the next 12 months as well. On top of that, we are supporting our merchants in processing payments also outside the Nordics. That's also why we're seeing a bit stronger volume in PayNow transactions than in PayLater transactions, as we only manage PayLater on our own products in Sweden, Norway, Finland, and Denmark. But we're also addressing some larger European merchants that could use Glido for the Nordic business in the future. So that's an opportunity that's not materialized yet, but we continue to focus on. Jumping on to some of our initiatives to increase efficiency and scalability in the business. These different areas were presented also in Q2. And after the second quarter, we also launched initiatives on the organizational side to streamline our organization and improve basically the setup, especially on our product and tech side, as well as on analytics and kind of getting sales and marketing closer together. And combined with that, reducing staff a bit. So we have done organizational changes that amount to items affecting comparability for severance and notice period in Q3, of around 20 million SEK. We expect a bit more in Q4, up to 25 million in total for the second half of the year, as announced previously. On top of that, we're doing initiatives to improve our pay later offering and kind of increase the share of checkout of our BNPL product even further. We are investing in modernizing our platform. So during the summer, we went live with a new platform for our deposit products to kind of widen the offering for consumers on basically our funding model. We're taking consumer savings both in different euro markets as well as in Sweden. In Sweden we go direct and that's where we have the new platform. On top of that we're adding more euro markets going forward to get a better funding base. We're also changing our core platform for PayLater. During the last month we've been live with the first transactions on the new platform. So that's a very good step forward and we expect to migrate all of Sweden to the new platform during the first half of next year. We're also investing in process automations, especially on the operations side, as well as in sales, marketing and basically across the business, both from AI, but also kind of pure process optimizations. We're also working hard on kind of making sure we become smarter in our credit underwriting. And we'll come back to that in the financial part of the presentation, which we are making good steps and becoming more effective on lowering our credit losses. And we are making sure we have a strict cost control now until we get into profitability in Q1. So... These different areas combined with our expected growth will take us to profitability in the first quarter next year. So looking ahead, we still have our midterm ambition to build a market-leading position in the Nordics, and we are accelerating in that direction. Our commercial momentum continue to build up, and we expect to accelerate TPV growth with 34% on top of the last 12 months, only based on what we signed so far. And we continue to expect that we sign even more volumes month over month kind of going forward as the commercial momentum accelerate. We also running multiple initiatives to accelerate our BNPL growth and the share of checkout or share of the volume growth that is kind of leading to BNPL volumes as that's the main income driver. We also focus a lot on SME and we expect that to continue to grow with more than 30% of the growth in volumes and typically more than a kind of double kind of profitability that we see in the enterprise space. The Nordic expansion, we see a lot of potential and we expect that to contribute even more also to income and gross profit growth going forward as more and more merchants in Norway and Finland come live on the platform. And short term, we're focusing on improving not only income generation, but also scalability and efficiency to make sure we kind of get the profitability in Q1. We're also reiterating our guidance of around 50% income growth in Q4 on the back of the 90% BNPL growth we saw in the third quarter. And so with that said, let's jump into some financials. So some of this we already mentioned, we see the strong volume growth. However, that is not leading to income growth yet. We see an operating income growth of 3% in the quarter. And we'll come back to kind of what is kind of holding the operating income growth back a bit from previous expectations. Credit losses are Fairly flat or slightly declining despite the growth in volume and the loan book growth. So that's a good step in the right direction and we expect that to become even lower in the future given the trends we see on debt collection. Overall, gross profit was fairly flat in the quarter, given this dynamic. As we see a lot of new PayNow volume, as well as a lot of new BNPL consumers, we see a slight increase in variable cost on top of the TPV growth. But we expect that to stabilize in line with the TPV growth in the future. Operating profit adjusted for items affecting comparability landed at minus 23 million in the quarter. And given the cost savings we now do with the organization and other initiatives, we expect that to reach profitability by Q1 next year. So if you look at the loan book, we see that kind of coming back to kind of accelerated growth compared to Q1 and Q2, growing 6% in the quarter, driven by primarily the increase in BNPL volume and the share of BNPL volume from new volume. So what we see here on the right side is the share of total payments volume that's kind of our most profitable palliative products, the BNPL volume. So that's been around 19-20% in the past. declining during the spring down to 14% in Q2 and then increasing every single month since then so we are at 15% for Q3, we were at 16% in September and it was a slightly higher numbers in October so that's kind of very positive and it's basically as we encounter new merchants with new volumes we also encounter new consumers and it takes some time for the new consumers to get used to Clido Typically, we see consumers start using our invoice products first, where we have seen a stronger volume growth in invoice, similar to the TPV growth. Then when the consumers are using invoice, they also start to trust us to use us also on the pay later side. We see that now with the BNPL volume and share of TPV start to increase again. If you look then at The operating income development for the quarter, as I mentioned, we were 3% up, a bit down compared to previous expectations. But if you're looking at new merchants that's been onboarded to the platform since the beginning of 2024, they are adding 17.7 million in operating income in the quarter. So the challenge in income growth have not been the new merchants, but rather the headwinds in the back book, especially in the existing enterprise portfolio, primarily driven by three things. First, the lower share of BNPL, as I showed you on previous page, that's been going down from around 90% down to 14% in Q2 2020. which means the growth in the loan book have been a bit less and hence we make less money on the historic enterprise portfolio than in the past as that is kind of have been declining. But as that is turning around to growth, we expect that to not be a headwind in the future. We also see slightly less reminder fees given that we have improved both our credit underwriting as well as our of dunning chain and consumer experience and we see that also when we look into credit soon that we are reducing kind of the share of consumers going to debt collection and we also have some still some kind of repricing effects from from the back book primarily to former group merchants and but that's that's that kind of loan book from those kind of merchants are maturing we expect that repricing effect to become kind of less and less in future quarters If you look at the credit side, credit losses was fairly flat in the quarter, minus 2%. But we see very good leading indicators on the exports to debt collections. And given that our credit strategy is to use solution rate agreements, we know already in advance how much we're going to get paid for the non-performing portfolio when it goes to debt collection. when the debt is going to debt collection we basically know how much our future credit loss is going to be and we see overall for both invoice and BNPL we have a 70% reduction in the debt collection rate and we've looked at BNPL only which typically represent the majority of the credit losses given that we have longer maturity on those loans as well as typically larger balances per consumer. We see a 40% improvement in the debt collection rate across all our markets in general. So that's a very good leading indicator for the future development of the credit process. If you look at the restructuring program or the efficiency program, including the organizational changes, we are taking roughly 20 million in items affecting comparability in the quarter. This was announced in the end of September, and we have executed on most of it during the last two weeks of September. Some of that is slipping into October, so we expect another up to kind of 5 million in October. items affecting comparability for the restructuring also hitting kind of the Q4. But overall the program have been kind of running according to plan and we expect that to bring us back to profitability by Q1 as mentioned before. If you look at the cost base, we are increasing variable cost, as mentioned, a bit more than the volume growth, driven by a lot of scoring cost and identification cost for new consumers. We are investing in our market expansion, so we are still increasing on the sales and marketing side. We see a slight increase in DNA as more of the the capex get kind of activated and kind of written off. But we are fairly flat on fixed cost in general. So it is the investments in growth as well as in product development that is kind of representing the growth in the cost base. If you look at capital, we're still kind of well capitalized for kind of after Q3. And with that said, let's go into the outlook. So looking ahead, we continue to accelerate. Expect around 15% income growth in Q4 with continued acceleration in 2026 as more of the volume growth is converting into BNPL volume growth, which in turn is leading to loan book and income and has a kind of gross profit. So we expect that growth to accelerate going forward on the back of the success in the commercial momentum and the volume growth. We are expecting additional kind of 34% volume only from merchants already signed and we continue to sign new merchants every month so we expect this to increase going forward. We are growing both SME and enterprise space and we will continue to build on the momentum Also in Norway, Finland, the team in Finland is still fairly small, but making good progress. And we'll focus on initiatives to accelerate the income generation from new volume, improving our scalability as we're taking on a massive amount of new merchants and hence also work on the internal efficiency. So with that said, we will focus to also kind of, of course, living up to our mission to deliver a market leading experience for our merchant and consumer journey as we continue to grow. So with that said, I open up for the Q&A.

If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. There are no more phone questions at this time, so I hand the conference back to the Christopher for any written questions.

We have one written question about the cost connected to the divestment of the previous kind of the digital banking or kind of private loan portfolio. So we divested our private loan portfolio in the summer 2024. Most of that cost was taken at that time and then we have some final costs for that hit in Q2 but we don't have any material cost for that in Q3 and the remaining non-performing exposures are kind of fully covered. So we don't expect any more cost connected to the divestment of that business area. Now we focus fully on payments and making sure we get growth and profitability in the payments business. We also have one question on that we are reiterating the 15% operating income growth for Q4 and profitability in Q1 2026. And if we can quantify the key drivers and the biggest sensitivities that could move that timeline. And the biggest drivers is the combination of cost savings as well as the expected volume growth of BNPL. That in turn is kind of driving the growth of our loan book. And this is the loan book that is primarily driving the income and gross profit. And of course, the biggest sensitivity is the BNPL volume growth. But given the growth we see in Q3 of 90% of BNPL volumes, we are fairly comfortable that we will live up to both operating income growth in Q4 as well as the profitability in Q1. We also have one question on if you've seen any changes in consumer behavior through Q3 and early Q4 on conversion, basket size, and delinquency. And of course, on the delinquency, as mentioned, we see... much lower rate of consumers going to debt collection now than in the past. So compared to a year ago, we see 40% less on the BNPL products, which is a very good leading indicator that we expect the credit losses to reduce as ratios on the loan portfolio and the volume also going forward. We also had one question of the previously announced bid interest that we announced during the summer from the board. And it's more of a board question than a CEO question. But if and when that bid interest materializes to a real bid, that of course would be announced. Do we have any more questions? Yes.

No more questions at this time. So I hand over to you, Kristoffer, for any closing comments.

Great. Thank you very much. If you have any more questions, don't hesitate to reach out to me or our investor relations, and we're more than happy to answer. So thank you for today. And if no more questions, we'll meet in three months again. Thank you.