Synsam AB (publ)

Welcome everyone to Synsign Group's Q&A session as released the interim report for the second quarter 2025 this morning. My name is Frida Leim and I'm Head of Investor Relations at Synsign Group and the moderator of this Q&A today. I'm joined by our CFO Per Hedblom and our CCO Jimmie Engström. Those of you watching this live you can ask your question in the chat and we'll try to answer as many questions as possible during this session. We have an analyst from Citi joining us. I would like to hand over to Yang Yang.

Hi, everyone. And thanks for having me on the call today. You know how I always start these questions. I would just like to, just to begin with, getting your latest thinking about the market that you guys are in. Is there any particular countries that you would like to flap?

Good morning. Yes, what we have seen regarding the consumer confidence is that also the second quarter remained relatively weak as the previous quarters. But we have seen a slight uptick now during the summer. Whether that is sort of lasting or not is still to be seen. But the second quarter was weak and similar levels than that Q1 and Q4.

And when you think of the uptake that you just mentioned, is it broad-based in all of your countries? Is there any one country that is standing out?

No, I mean, the overall consumer sentiment is similar, where we have seen an uptick in when we read the statistics, the public statistics, that it's Sweden and Norway and Finland, where Denmark maybe is a bit hesitant. But we will see where this will take us during the fall.

Okay, and now I'm going into the different countries, and let's start where we just spoke about. So let's start with Sweden. Very good growth in the quarter. Is there anything that, looking forward, we should be concerned about or we should be paying particular attention to when it comes to the growth momentum in this country?

Well, we are taking market shares, it's important. Going forward, we have communicated that we have rolled out, as at the end of the quarter, which gives us the opportunity to add more capacity, actually, regarding eye exams, which gives the potential for further growth. So that's the goal of the rollout of scenes from iview. So a better opportunity to grow more in Sweden, thanks to this.

And do you expect the benefits from iview to show as soon as Q3 in terms of sales?

I mean, the fact that we have rolled out as end of Q2, and rolling out means not just putting a machine in a store, but rather training our colleagues in the store and so forth, means that it's up and running. So everything else being equal, there is potential for positive effect in the coming quarters, already from Q3, if everything remains the same in all other aspects. But that effect in isolation would be positive, yes.

Okay. And is there any lesson or trend that you observed in Norway that you would expect to repeat in Sweden? Perhaps you could talk about after a quarter, after maybe a half year, how much of sales contribution did you see in Norway and whether it's reasonable to assume the same kind of trends to be shown in Sweden? Or is there any expectations about how long it would take to ramp up to a significant level of capacity from around 14% in Q2?

No, I think the dynamics is very similar. But in Norway, of course, IVU is one part of the actions taken over the past years that has given a good momentum. But one could expect, I would say, similar sort of dynamic when it comes to iview in both Norway and Sweden and it is a store by store rollout and the training program employee by employee so basically every store that gets you know since some iview and gets trained there you see sort of the capacity start to build up the accessibility start to build up and with that of course comes more customers and revenue opportunity

Okay, understood. And now if you look at Norway, also a very good quarter in Norway. Is there anything in particular that has been driving the strength that we have been seeing in Norway so far this year? And actually not even in the first half, but really in the last three quarters or so, the growth number has been very good. Would really be interested to learn more about these drivers.

I think in Norway we've done very well and the local management team has performed very well along all dimensions really. Of course iView has helped with improving the capacity and accessibility but I think, overall, they are doing a fantastic job at the moment. It's the same strategy as in all markets, where it's solid, tangible levers, with everything of having the best store in town, good assortment, but then how we work with the customers, how we ensure capacity, how we work with the subscription and the customer satisfaction and so on. They're doing that very well, and that is giving results.

And is there any sort of best practice, like amongst the ones that you mentioned, that you are looking to implement also, say, in Finland and in Sweden?

Well, Finland is a growth case where we are targeting market leadership, as we have communicated. And that involves quite fast rollout on new stores. and increasing the awareness in Finland to the levels we have in Sweden and Norway. So Finland is not really comparable to Norway. It's also a different competitive environment. So we can always learn from each other between countries, I think, in all aspects. But it's not necessarily that you can copy a Norway effect into Finland. We are progressing well in Finland and also this quarter in line with our strategy for Finland specifically.

Thank you. And maybe now we go to Denmark, which is still a soft spot for Sinsam this quarter. So I understand that Q2 was still impacted by the credit regulations and particularly on the extensions in addition to new sales. Can you talk about what has been done since last quarter to mitigate this sort of extra regulatory effects? And when should we expect to see an inflection point?

Well, it's very much about the coaching and training of our personnel on the one hand in the short term. And that takes that takes a few quarters, actually, because it's about I mean, ensuring that dissatisfied customers, which are rejected in this creditworthiness assessment process, that they can actually be converted into a cash customer or a lifestyle cash customer. That's the core. And we progressed quite well, but then this new interpretation of regulation, which came into effect this year, which affected then also prolongings, That took us back a little bit, so we just have to rebuild the methods. It takes a few quarters. It's very much about training and working store by store. Then of course we also look at other opportunities in Denmark, not related to subscription as such, but how we can improve our presence with assortment and so forth in stores that's not related to subscription but it will it can improve our market position as such so such actions are are being taken continuously yeah i mean worth adding could of course be that in denmark we we we are very good as well in in you know

the meeting the customer and we have a very high customer satisfaction score in denmark so so that one is is is very strong but so it's more due to the the factors the pair mentioned around the legislation impact and then of course ensuring that we have the best store in town also in denmark in all locations

okay that is clear um i just want to um ask the follow-up questions on on lifestyle cash for example because that was you guys just mentioned it but it was also on the press release as a one of the the measures to mitigate this impact is there any difference when it comes to convincing extensions customers to take up lifestyle cash versus the new sales customers trying to think whether you know this this this period of trying to convert extensions customer, whether it will take less or more time than the time that you spent working on the new sales conversions last year?

I think it's the main issue, not really the time it takes, it's whether it's possible at all, I would say, to convert a customer. And the thing is, it's a bit larger challenge to to mitigate the dissatisfaction when existing customers who have been with us six, seven years sometimes, when such a customer is suddenly rejected. Then you need to work your way back again. Of course, it's a problem also when you have new customers, but they don't have the same relationship with us. So it's a little bit more work to get back on track with such a renewal customer. So it's more work, I would say, but it's not the time it takes, whether it's possible at all or not. You would agree?

Okay, that is actually very clear. And also, Jimmy, earlier you talked about looking at slightly different assortment, trying to encourage more people to come into your store. Exactly what kind of changes to assortment are you looking to make? Are you looking to have more affordable options in stores? Or what other changes are going on there?

I don't know. I mean, the first thing is... One important element for us always in all markets is to ensure that we have the best store in town. With that we mean of course the store concept, the service levels but also the assortment and that means that we should have a broad assortment to pick and choose from, but also that covers different customer needs, both in terms of styles, in terms of brands, in terms of price points, but also in terms of sizes, for example. It's important, all of these needs for the consumers. And that is what we have worked on ensuring in all locations and still doing also in Denmark, in many locations.

And okay, so now putting all of that together, and I'm also looking at the growth number from last year, you do have a tougher comparison base in the second half of the year. When do you expect to see Denmark organic growth back in the positive territory? Just putting all of these commentaries together?

We haven't communicated a timeline for that, but of course we want that to materialize as soon as possible, but it will take a few quarters. We need to be aware of that. But I want to reiterate as well that Denmark is a profitable business. This is a bump in the curve, I would say, in the road, and we will overcome it, but it will take a few quarters. And we are working quite hard on the ground to rectify this.

okay make make sense um i think i have um sufficient information on the countries now i'm also looking at the churn rates and i think on this call last quarter we did speak about since i'm taking some measures to bring the churns rates down um and i look at the charts that you have in your press release that shows that the churn rate has been taking up slightly but consistently since the middle of 2023 Where are you focusing your efforts on and what are you looking at in terms of mitigating or reversing this trend?

First of all we see a mixed picture between the countries also in Q2 where we see stabilization and slight decline in a couple of markets and of course increasing a little bit in Denmark. But one thing is of course the cohort patterns, how they develop. But then the measures we do take in, I mean, that is over the whole customer journey, of course, you know, to find the right needs analysis and the right match in the beginning, but to work with the customer throughout the journey. And if they have some problems along the way, that we solve that. And if they want to churn, that we have a dialogue with the customer to see if that is really the need. But I think important also to mention in the context of churn is that in our business, we are after all taking care of a vision correction need that will last. And that means that even if a customer churns from the subscription, it does not mean that the vision correction need is gone. So we see of course that these customers come back into the market eventually to buy new glasses and where some choose cash and some choose subscription again. So the sort of retention of the customer for Synsam is of course larger due to this sort of underlying behavior.

And is there a reason why specifically at the group level it has been ticking up since the middle of 2023? Is it a function of also your live site revenues base or like the live site subscription base growing? And so naturally as part of a bigger pool of customers, you expect to see slightly higher churn rates. Like what would be the normalized churn rates reflecting the size of the subscription base that you have?

We have this cohort effect, as Jimmy mentioned, which means that larger cohorts in previous years, when they get out of the binding period after two years, Even if each cohort would have the same percentage churn as before, more customers in the cohort mean more overall churn for the group. Maybe technical, but that's one effect indeed. We have the Denmark effect. That's one effect as well. Then we have an effect that we discuss sometimes. Is it possible to buy out the spectacles after two years? Some people choose to do that even if they like the services they've got and so forth. Sometimes if they've been a customer for a long time and have not prolonged, it can even be attractive for them. So a lot of aspects which we need to face. On the other hand, we've started a win-back program, which is progressing well to ensure that customers who have left us have done it for, well, haven't done it for the wrong reasons. And sometimes customers leave us because there's been misunderstanding or something, and then we can rectify that. So we do take actions. We are looking at whether we can give a projection of churn rates, where it will stabilize. We are not really there yet to give such a figure, but that's something we are looking at closely to see if we can do that in the future. The increase now isn't increased sequentially from last quarter indeed but we believe the increase is not dramatic sequentially we need to say that we we are not really worried about at all about that sequential increase although each lost customer is a bad thing we we we are taking action we have the situation under control

hope to be able to come back on a sort of target for the showing rate at some later stage although not now okay thank you that's really helpful um i think well departing the top the top line topics and now i want to look at the gross margin um specifically around the mix effect and suppliers negotiations that you that you have seen in q2 i i noticed that those tools were helpful to gross margin in denmark sweden finland um but the mix was actually negative in norway um so anything that you can comment on the mix in the quarter how do you see that you know trending into q3 um and also on the topic of supplier negotiations just want to confirm as a matter of fact you didn't really see you know any price increases from your suppliers any concerns from that from that angle

Regarding mix, I mean, mix can be different things in different quarters. I mean, whether it's more online, less online, how much lenses we sell compared to frames, lenses having high gross margin. We have worked during last quarters quite a lot on lenses and the lens mix that has helped us, I would say, overall. Supply negotiations, I mean we are a strong player and we have a good partnership with our suppliers and we believe they appreciate what we're doing so we've been able to increase gross margin thanks to that as well. Price increases, we don't really comment on that more than we have a method now where we can handle sort of price adjustments in a more effective way than we did actually in 2022. Do you want to add? No, that's good.

That makes sense. And can you talk about the sunglasses sales in Q2 and the dilution impact that you have seen on gross margin?

We haven't mentioned sun as an important factor in the gross margin. It affects, I mean, we have not highlighted sun as sort of, I mean, the sun sales can vary between Q2. Second quarter is an important sun quarter, of course, and it can vary between different years. This year, we haven't seen that as a meaningful impact on gross margin compared to last year.

Okay, and are you thinking that it might become a topic in Q3 or it's also in terms of year-on-year basis, it should be similar to sort of the small impacts in Q2 that's not worth calling out?

We have to come back on that after Q3, I would say, it's too early.

Okay, and one more question on gross margins. The FX effect that you saw in Q2, could you maybe let us know what's the magnitude of that effect and any forward expectations?

Well, okay, we had this new contract with the supplier which you mentioned, I think, and which would give us a positive effect compared to last year, if the SEC-euro wouldn't change too much. As long as the SEC would remain strong, we would have a positive effect. We're still in that territory right now, the SEC-euro, where we get a positive effect compared to last year. although the SEC has deteriorated a bit against the euro, if you compare March to June, actually. But we're still in the positive territory compared to last year, thanks to that specific contract. So, a few million, but not a major effect, though. We have seen, I mean, over time we have seen Better exchange rate C equals US dollar. And we do some purchases in US dollars and of course that has a certain effect, but not major.

Okay, got it. And now in terms of cost, I'm thinking specifically about the Sinsam final implementation. Could you provide some sizing of the extra cost in the quarter, either on group level or on a country level related to that final stage of implementation or at least comments around whether it was more or less of a margin pressures versus the previous quarters?

I would say we I mean the thing is we have a central team which work with a implementation that scores easy to quantify but the thing is the major effect is that you actually take out opticians and personnel in the stores to work with implementation which give extra costs in the stores and that quantification is somewhat more difficult how to allocate, but it's quite significant. We have actually pushed now in the second quarter in Sweden to reach our goal of rolling out this. Of course, there have been costs associated with this rollout. Going forward, now we need to ensure that the good effects capacity-wise remain. So they built some monitoring still in Q3 I would say. Over time we have said and we maintain that the extra costs associated with implementation will of course not be there in the longer term. Q3 is kind of middle quarter in that respect.

Okay, that's helpful. Thank you. And looking a little bit further down the P&L, how do you think about the net financial expense line from this quarter, actually, from Q3 onwards, because of the refinancing that you did?

Specifically the refinancing, exactly. With refinancing, we see somewhat improved, that is lower financing costs going forward on that specific item, bank loans, yeah.

Okay, is there any sort of sizing, you know, direction that you can provide here, or as in how should we think about the benefit of that if we look at sort of the minus 200 million that we saw in Q2?

Okay, first and foremost, the net financial consists of a lot of different items. The interest costs on bank loans being one of them. We have the lifestyle effects, and not least, currency effects. Currency effects were quite big in second quarter this year, negative. They were positive last year, which makes a comparison even harder and then we had this quarter also an effect nine million one off charge due to the the termination of the old bank loans okay and the new bank loans coming in so um when we look at net financials and the figure you mentioned that's a total of these all these items so what we tend to say is is we We can't tell beforehand how much currency effects we're going to have, but the expectation is always zero when we start a quarter currency effects. I would say. There's no reason why it should be the positive or negative, but it fluctuates quite a lot. But the expectation is always zero when we go into a quarter. And then, thanks to this negotiation, the bank loans, assuming that the interest rate stays on the same level as now, that's an assumption, we would see some positive effects of these new loans. Somewhat lower. Yes. We haven't quantified this.

Okay, that's helpful. And I'm getting towards the end of my question list, but seeing that we're having the cattle market day coming up next month or in a month's time or so, What can we look forward to at the CMD? I know I don't want to front-run any content, but if there's any sort of bullets, teasers that you could provide today, that would be very helpful. And then I have one more specific question related to the CMD, but I'll let you go first.

One thing is, I think we talked about the smart... Yeah, exactly. What you might have picked up in the news and what we mentioned in the report is the launch of smart eyewear that we have launched now during the summer in 200 stores in Sweden. And that is a completely new technology and a completely new category in our industry. that meet new customer needs, where you can have integrated technology, both cameras, microphones, speakers, and AI assistance built into your spectacles. And that is, of course, an interesting area that now is unfolding and that we will also come back to during this day, for example.

Okay, that's exciting. I will be on the lookout for that. And my final question, but also a follow-up question, is specifically, I assume that we'll be looking at sort of mid-longer-term financial outlook. When you think of Denmark, what would be the assumptions that you would take into account when you set out sort of forward guidance? Just given that we have seen quite a lot of volatility in the markets and the changing regulatory backdrop and related to this. Is there any similar regulatory risk that you could foresee or you're concerned about in the other three countries.

Let's talk to the second question. We are following the regulatory environment in detail, and our view is that the specific issues in Denmark, the regulations there are Denmark specific. But changing regulations that can be expected in the other countries, we are well prepared to handle. But this situation we see is Denmark specific. I think it's too early to talk about what factors we would look at regarding Denmark ahead of the CMD. I think everyone has to wait for CMD to see what we fill the agenda with, I would say.

Okay, well, that's going to be very exciting indeed. That takes me to the end of my question list. Frida, I'll hand it back to you.

Thank you. Thank you, Yang. Thank you. We have some questions sent to us through the web page. So the first one is regarding Norway. Given Sweden is more mature, may we expect in mid-term a better EBITDA margin in Norway than in Sweden?

Well, it's... In Sweden, we are the market leader. We have a large-scale operation, which benefits us to some extent. Of course, we want to grow in Norway. We want to be market leader there as well. Increased size and position can have positive effects. there's potential to improve in Norway. On the other hand, Sweden has the capacity to always improve as well. So I don't want to speculate whether Norway will overtake Sweden, no.

And the second question, why has the gross margin increased in Finland?

Well, I mean, as you know, we've had a lower gross margin in Finland than the rest of the group for a long time due to the country-specific factors in Finland. We have worked during this year and very much this quarter as well, both with the mix, Lens' mix I mentioned, but also been able to reduce discounts to some extent in Finland.

Thank you. So it's time to wrap up, but before we do so, anything you would like to add as a last words?

Yeah, but I think we want to reiterate that we see in the second quarter strong results in Sweden, Norway and Finland with a strong growth and improved EBITDA margins. The organic growth of the group was 9.1% in a market where the overall consumer sentiment was still a bit hesitant. And one important milestone as well was the completion of the Synsam IVU rollout also now in Sweden, which will have and does have positive impact on capacity and accessibility.

Great, thank you. So thank you. Big thank you to Per and Jimmy. And thank you to all of you watching this live. If you have a question you have not received an answer of today, you are welcome to email the question at the email address below and we'll make sure you get an answer. Big thank you and see you next time.