Qliro AB (publ)

Thank you and welcome everyone to our Q4 presentation for CLIRO. I'm Kristoffer Rutgersson, the CEO of the company. And today I will talk about some repetitions on our strategic highlights, where we're heading, go through our financial update, talk about the outlook and then leave some time for Q&A. So first of all, in terms of our strategic highlights, we still see a large opportunity to build a new European leader in composable payments. And we are continuing to broaden our integration in the composable payment space with platforms across the Nordics and different kind of best of breed solutions that our merchants are working with. We want to deliver a world leading experience for merchants in their consumer journey. We see that as a foundation for our growth over the coming years. We see good indications in Q4 on this momentum with 46% volume growth in the quarter leading up to a full year growth of 39%. That is also leading to that our BNPL volume, which is our most profitable volumes on the part payment side of the business, on the pay later volumes, that we are accelerating with 32% growth in Q4 up from the growth we had in Q3. And as you know, that's been lagging a bit in kind of early 2025. So our income generation come a bit later than expected, but we see that momentum now kind of increasing to 32% on the BNPL. leading to an income growth in the quarter of 14%, which is within our guidance for the quarter. This is also fueled by our success in the small and medium segment of e-commerce, where we see a growth of more than 40% of new volume growth is coming from this segment, with new sales also reaching all-time high in Q4. So we expect this kind of growth momentum to continue also going forward. And we see improved profitability in Q4 from Q3. We're reducing the losses by more than half compared to the last quarter. And we're still targeting profitability in Q1 2026. So as you know, our vision is to build a European leader in compostable payments, as I mentioned, and we do that through delivering a world leading experience for merchants in a customer journey. I still believe with my kind of more than 10 years experience in European payments that both merchants and consumers are a bit underserved, especially in the SME segment. And we see that there's no one else that kind of handling the consumer on pay later as the merchants consumer. And by doing that, we have a strategic difference compared to all our local competitors. Our ambition is to be the local market leader in the Nordics within the next three to five years. And if we keep up the growth momentum we now have, we're confident we will get there. that's also based on our product performance so this is a bit of repetition but we during the summer this year we in 2025 we launched the third generation of the clear checkout on our new infrastructure built for a higher performance and we see that we have in benchmarks the strongest performance in the nordics When new merchants are upgrading to our platform, we typically measure the performance compared to the previous supplier, sometimes ourselves, sometimes we fix the kind of external validation from the merchants, the growth partners and conversion analysts. And we typically see a conversion uplift of up to five to six percentage points compared to what they have before, which is directly leading to more revenue and more profit for the merchants. We also see when we benchmark to local niche banks that are offering payment solutions that we see a higher share of pay later in the checkout. So more consumers are choosing Cliro due to the consumer experience where we want to create a great consumer experience where the merchants can come, where consumers come back again and again, both to us and to the same merchants. And we see that kind of boosting the share of pay later in the checkout, which is good for us and it's also good for the merchants. So why do leading merchants choose Cliro? And I just mentioned some of the most important factors, which is on the top of the list here of kind of leading conversion, getting more sales, and also working with Upsell. We had a good example in the quarter where we launched Upsell 2.0 for Lyko, one of our largest merchants, which include that we can now do Upsell after a transaction on all payment methods. And that's a unique functionality in the Northern European kind of payment space where we can offer more value for our merchants, keeping orders open, enabling merchants to add more products into the same order, increasing their order value and hence kind of increasing their gross margin, getting more value out from every kind of user on the site and from every kind of package they're shipping anyway. So that's a clear value driver. We see more than 150% uplift in the upsell orders for the first merchants being live. And we expect to roll this out on all our kind of integrated platforms. kind of going forward. So with that and the other functionalities we have is a positive business case for merchants of more than 10 to 20x the return on investment for the cost of changing. And that is driving more and more merchants to kind of upgrade to our platform. And we're quite unique in that we work on doing both a great both digital and kind of service led merchant experience and a great kind of digital consumer experience. So with that said, we have also during the last kind of 18 months launched new markets from a sales perspective. Clear, we have always been active for consumers kind of across the Nordics. But in August 2024 and in April last year, we launched first Norway and then Finland. And we see a stronger and stronger momentum as kind of both our salespeople and kind of the pipeline we have are maturing. So we see a good potential to continue to increase momentum in the new markets going forward. We're also starting to integrate more and more local e-commerce platforms. So far, we have mostly sold to merchants that have been integrated on either Swedish or international e-commerce platforms that we been integrated for the Swedish markets. But now we're also kind of getting live with more and more local capabilities, increasing our addressable markets in both Norway and Finland. So that is leading to, as I mentioned, that we grow 39% for the full year 2025 and 46% in Q4. And we also have a lot of merchants that have been going live during the year and that merchants that we have signed contracts with that are not yet live or not yet fully live on the platform. So all that contracted volume, also including expected churn, we are estimating that we will continue to grow at least 21% only from those contracts. And on top of that, we will continue to sell in 2026 so we can keep up kind of the growth momentum going forward. And in new sales, we had a new all-time high on the SME side also in Q4, so that momentum is continuing. We see that volume growth on total payments volume is converting into BNPL volume with some lag of kind of a few quarters. When we were growing quickly in the beginning, we also faced more new consumers and it took some time for new consumers to adapt to use our first invoice products and then to a larger degree start to use our different BNPL part payment products. So we had a growth of 90% in Q3 and 32% in Q4. So the BNPL volume growth is catching up with the total payments volume growth. And as we grow the BNPL volume, that will over time build our loan book. So if we take for an example, 36 month part payments, if you take such a product from us today, we earn nothing today. We get the cost of credit reserves, variable costs, scoring costs, and so on. And then we start to earn some money next month and we'll do that for the kind of We continuously live for the next 36 months. So the more volume we have that build up that kind of part payment loan book over time, that's in turn kind of build income over time. And we see that now on the income side also starting to catch up with some lag behind the BNPL volume. So we're going from 3% growth in Q3 to 14% in Q4 in line with our guidance for the quarter. Moving on to look at the SME business, where you also typically see higher margins than the enterprise business and lower competition. In total, and this is also including a number of enterprise merchants, but the majority number of merchants are SME, we're growing 155% in the quarter compared to last year. And it's the first quarter we have more than 100 merchants going live on the platform. And that is leading also to an accelerated growth in the contribution to operating income from the SME segment, now representing 18% of our total operating income up from 6% last year. And we expect that kind of momentum to continue. For our profitability program and efficiency measures that we've been working on during last year, together with the program we launched in September, we are expecting profitability in Q1. So we're doing multiple things here. First of all, we are optimizing our pay later products and offering to improve the consumer experience and to improve the share of checkout of our BNPL products. We're also modernizing our platform. So as I mentioned in the beginning of today's presentation, we launched our new generation of the checkout during the summer, and we're now rolling out our new platform for more flexible part payments, starting in Sweden and then at the later stage also for the other Nordic markets. So we're changing kind of the core of Cliro to be more scalable, more cost effective and more flexible to kind of improve our capabilities to meet demands from consumers and merchants and potential new markets in the future. So that's the biggest tech investment Tiro have done in kind of a long time. We're also investing in process automations, including also kind of AI agents and automations across functions. As we do targeting all our larger functions with a lot of staff to kind of boost our automation. So we can see that, for example, on the onboarding side, we have stronger onboarding performance now than in the past, which is also leading to what I just mentioned, more SME merchants going live quicker. We're also doing this on our different support teams and sales teams. We did a staff reduction in September, October that we talked about before that is now behind us and we expect full impact from that on both OPEX and CAPEX in Q1. We're also lowering our credit losses, so over the last 18-24 months we have invested in a new credit analytics and data science team, as well as kind of improving or upgrading our whole data platform and credit models for all the Nordic markets. We have started to see the results of that, we'll come back to that in the financial part of the presentation where we've seen a drastic reduction of cases going to debt collection which is the clear leading indicator for us of how expected credit losses will evolve going forward. We also, during 2025 and especially the end of 2025, we work with strict cost control, including renegotiating most of our external vendors. And we also expect that kind of impact to materialize during the coming year. So together with these organizational changes and the growth that we expect, we will reach profitability in Q1. So some strategic highlights if you're looking ahead. Mid-term, our ambition is to build a market leading position in the Nordics as we're focusing on the Nordic markets for now, even if we have a long term vision of going also for more European markets. We see the same need from a merchant to partner perspective across all of Europe and not only in the Nordics. Secondly, our commercial momentum continue to drive TPV growth momentum. So we expect that momentum to continue going forward. We see that income growth is expected to accelerate, lagging behind the BNPL growth that is expected to catch up during 2026. And we also see that SME efforts will kind of continue to grow and it will continue to grow within that space, both with new partners and merchants, with expectations of more than 30% of our growth in new volumes coming from SME, which will also improve our margin profile over time. We expect also our Nordic expansion to accelerate further given the potential. In total, Norway and Finland combined is roughly as large as Sweden in terms of e-commerce volume. And we have just started to penetrate those markets and we see similar needs for Norwegian and Finnish merchants as we see in Sweden. We also have a focus to improve our income generation, scalability and efficiency during the coming year. But the program as such from a profitability program perspective is now behind us. So with that said, we expect profitability in Q1 2026. And from here on, I will move into a bit of more of the kind of financial details for the quarter. I've already mentioned some of the key drivers, some of our KPIs, with the total payments volume growing 46%, operating income growing 14% in a quarter. We also see credit losses coming down with 15% in absolute numbers compared to last year, despite the growth in volume and loan growth. Hence, our gross profit is increasing even more than income to 26% on gross profit one level and 22% on gross profit two level, which is after all our variable costs. And that is, over time, expected to cover our fixed costs, which were growing 12% in the quarter compared to last year, mostly driven by our investments in our new markets and sales and marketing. We also had some items affecting comparability in the quarter relating to our profitability program of 4.9 million, reaching roughly 25 million in totals in line with our guidance for the program. we move on to the loan book development we see that growing with five percent in a quarter so it's growing less than our income growth which means that we are becoming a bit more kind of capital efficient in our growth than in the past and we also see the kind of the BNPL volume as share of our total payments volume is continuing to go in the right direction. Here is where we had some kind of challenges in the beginning of the year where this kind of share of total volumes were declining as we were facing more new merchants, new markets and new consumers. But that is now rebounding and we expect that to continue. Looking at the growth of operating income, it's been in absolute numbers fairly flat the previous four quarters, but for Q4, we are now growing with 14%, reaching 115 million in operating income. And as part of that, SME is now representing 18% compared to 6% before. And that is also part of why we see the gross margin and gross profit improving in the quarter, given that we have a higher margin on the SME segment than enterprise. Looking at the credit losses, I already mentioned credit losses going down 15% in absolute numbers compared to last year. But we also see that exports debt collection is reduced by 33% on our BNPL loans, and the BNPLs are the ones driving the majority of credit losses in the portfolio. We see this is a good leading indicator for continued improvements in credit loss performance also going forward. Given that the majority of our portfolio is on solution rate agreements, it is when the debt is going to debt collection, we know what the future credit loss is going to be, how that's going to materialize. So that's why we use that as a leading indicator. If you look at the restructuring program that we launched in September, we had 4.9 million of costs relating to that in the quarter, reaching 24.5 million for the full program. That program is now behind us. We expect the majority of the impact to materialize in Q1, and some of the vendor negotiations will materialize when contracts renew during the year in 2026. So we are now done with the program in line with expectations on the guidance. On our cost development in the quarter, the cost increase is primarily driven by our volume growth, which we can see on the variable cost. We also have a mixed shift here of markets and products, so that is increasing slightly more than volume. We have our investments in our new markets seeing the growth on sales and marketing and then kind of DNA for our platform investments increasing a bit while fixed cost is increasing 10%. And from a capital perspective, we have a good buffer to kind of our regulatory limits. So in the quarter, we have a 110 million CT1 buffer to our regulatory limit on pillar 2. And on the pillar 2 guidance, we have a 30 million buffer. So we're still well capitalized after kind of the high season in Q4. And if you look at the outlook going forward, we expect profitability in Q1 and we expect at least 21% in the volume growth only from what's already contracted, also including some churn that we have forced out to improve our margin. and kind of going forward that will materialize in 2026. And on top of that, we have all the new sales that we are expecting this year that we can continue to accelerate our SME and enterprise sales engine. And that's something that we have not touched a lot in our restructuring program, keeping up the sales momentum in all our new markets. So we are continuing to build growth momentum also in Norway, Finland, given that we're keeping those investments and continue to support kind of a high growth in our kind of new markets. We will also continue to focus on initiatives to accelerate income generation, improve scalability and efficiency, especially some of our AI initiatives, even if the cost program as such is now behind us. We will also continue to deliver a market leading experience for merchants and their consumer journey. And it's important for us that it's the merchant's consumer, so we can guide the consumers back to the merchant they come from. And if we continue to do this really well, I'm confident that we will over time establish a new leader in European payments. Thank you. And with that, I open up for questions.

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. There are no more questions at this time, so I hand the conference back to the speakers for any written questions and closing comments.

Let's see, we have a few written questions and we just picked up here. We have one question on our enterprise portfolio in the beauty space where one of our competitors announced that Nordic Fil decided to leave CLIRO. And if you look at our beauty segment in total for Q4, we signed one billion SEK of new volume from new merchants in that segment. including, for example, Glow ID and local merchants in Norway, Finland. We also renewed our agreement with Lyko, the largest merchant in Clio's books for the coming years. So we're still very confident on our traction in the beauty and fashion space. We also renewed contract with Nelly in the quarter and other part of our large merchants. So our overall enterprise portfolio is secured for the coming years. And typically merchants are sometimes always looking for kind of better pricing and we are looking to increase our margins. And in that, I think we will always have some churn while we continue to grow with new merchants. Secondly, I have a question on some color on the process about the indicative bid that we announced in the summer. And we will announce news when we have news. So the latest message is still what we can share at this point. Then I have a question on payment volume that's required to be the leader in the Nordics in the next few years. And if we continue this momentum, we definitely believe that we can reach above 50 billion in the next three to five years. And with that growth momentum behind us, I would definitely classify ourselves as the new leader in the Nordics. And we have also one question on churn, if that's included in the 25%. And yes, our expected growth on 21% in total payments volume is included both new merchant and expected churn. We have also a question on gross profit too. And it's true that that's definitely improved by our better credit loss performance. We also have one question on our take rate declined in quarter and take rate is our operating income divided by volume and typically when we see a very strong volume growth as we kind of explained before we have a delay until we see a similar level of income growth because the total volume growth is in turn kind of driving BNPL growth and BNPL growth in his turn driving loan book growth which in turn is driving the income growth. So given that we have a lag between the volume growth and the income growth, we will also see a reduction or that the take rate will decline when we accelerate and then stabilize when growth rates are stabilizing. And then we have one question on Sean, which we already covered. So if there's no more questions, I suggest we close the call for today. Thank you very much. And we're looking forward to talk again in three months from now. Have a nice day.