Hello, and welcome to today's webcast with eEducation Albert, who will present their year-end report for 2023. With us today presenting is CEO Jonas Mårtensson, Co-CEO Ann-Louise Wirén, and CFO Katarina Strivall. After the presentation, there will be a Q&A, so if you want to ask a question, please send them in via the form to the right. With that said, I hand over the floor to you guys.
Thank you, Ludwig, for that introduction, and hello, everyone, who tuned in this morning to listen to our webcast. I'm Jonas Mårtensson, CEO of Albert, and with me is Ann-Louise Wirén, Deputy CEO, and Katarina Strivall, our CFO. Before kicking off real, I would just like to summarize the year, and I'll talk more about the year as a whole. Then we'll spend most of the time talking about the Q4. For those of you who are not really familiar with Albert, I mean, we're an edtech group, really striving for becoming one of the leading edtech players in Europe, and our mission is to democratize learning by giving every child a customized learning experience. We today have a portfolio of eight different edtech brands, and we're mainly present in the Nordics, the U.K., the U.S., and France.
Going into the numbers for 2023, I think we can summarize the year as being where the business was very stable. I mean, year-over-year, net sales grew with 59%, which was mainly driven by acquisitions, and we ended up at SEK 195 million. Switching to profitability, which has really been the focus for us this year, we improved the EBITDA with SEK 54 million to SEK 25 million in a negative result. Last but not least, we're also very well-funded right now. We have SEK 80 million in the bank account when we closed the year, and with the cash at hand, it should really take us to profitability. Our focus on profitability and cash flow has even been strengthened through a recently launched profitability program that we will talk about in the presentation today.
So talking more about the agenda, it looks like this. We'll start to give a little bit recap about Albert as a company and our strategy, and then zoom in on the Q4 results, both from an operational perspective and the financials. Then we'll spend some time talking about the journey to profitability and recently launched profitability program. And then, as Ludwig said, we'll conclude with a Q&A session, so we're looking forward to hear your questions then. But now, let's kick it off, and Ann-Louise, the mic is yours.
Thank you, Jonas. So I'm gonna start and talk a bit about Albert, who we are, and why we exist, and what we bring to the market. And I want to start with zooming out a bit and looking at the big global challenge that we at Albert want to be part of the solution to, and that is that formal education today is facing challenges. I think many of us knows this. We read about it in the media. We might have experienced this ourselves, either being in school or having kids at school. We know that many children today struggle with school, and especially math, and I will come back to this later with recent proof of this, unfortunately. We also know that there is a lack of equal access to qualified teachers. To start with, there is a lack of qualified teachers in many markets.
Too few kids want to become a teacher, and with the teachers we have, unfortunately, a too big portion of them decide to leave the profession after a couple of years. And this hits harder in socioeconomic weak areas compared to socioeconomic strong areas, which then leads to this lack of equal access to qualified teachers. Again, a global challenge that we are facing. We also know that not all children can get the help that they need at home. It could be that the parents don't have the time, they might not have the knowledge, or they might not have the money to actually pay for someone to help with tutoring the kids if they do lack time or knowledge. And this then, unfortunately, leads to school results getting worse and also the socioeconomic inequalities increase.
This, again, is a global challenge that we want to be part of the solution to, and it's a reason why, why we exist as a group. Our mission is to help every child reach their full potential through fun and personalized learning. We know that by using technology, we can make learning fun, we can make it individualized, and we can also make it scalable, cost-efficient, and time-efficient for teachers. We do this by building this ecosystem of learning products. We are targeting both school and homes because obviously, you know, schools is not the only place where learning happens. The home is just as important. Therefore, to be able to really fully work towards the mission that we have, we are targeting both home and schools.
So this is what we call the B2B market, being the education sector, and the B2C being the home, the parents, the households. And we do this by offering a wide variety of learning products. We today have a quite broad portfolio of different type of products. Again, back to this, helping every child to reach their full potential. Starting with our digital apps, which is probably what we're most known for, at least on the Swedish market, we have a range of different apps targeting different age groups, and segments, and markets, and subjects. We have maths, we have second language, we have spelling, we have science, et cetera. Some of the apps are targeting only the B2C market, other ones only the B2B, and then we have a few also covering both B2C and B2B.
Last year, we decided to dip our toes into the more traditional learning material by releasing our first physical book called Matteäventyret. This is, of course, we do believe that our products will be complements to the more traditional learning material, and so entering this is a very interesting step for us as well. Speaking about the physical products used in classroom, we also offer hands-on learning products for construction, coding, engineering, and STEM. STEM is short for science, technology, engineering, and math. This is all about taking theoretical knowledge into the physical world, adding the tangible element, which is super important to many kids out there to actually understand the theoretical knowledge. We have also added films to our portfolio, both educational films and feature films, and again, this is a great complement to our other products.
We know that many kids really enjoy learning by watching movies. I think it goes for grown-ups as well. And again, by offering this wide range, we have a great complement and a broad portfolio to really work towards our mission. And I also want to say that with our B2B products, they are all curriculum-aligned, which means that if you are focusing on a specific part of the curriculum in school, then you can definitely use the different products we have to complement each other. And we do this, we operate under eight product brands, all part of the Albert family. Some of these brands are one-product brands, whereas others might have many products within the brand. So we have Sumdog, Albert Junior, Strawbees, Albert Teen, Swedish Film, Holy Owly, Film och Skola, and Jaramba. And today, we are present in many different markets.
We have three home markets. It's Sweden, it's France, and it's the U.K., but we're also present in other parts of Europe, in the U.S., and in Asia. And of course, connecting back to the challenge that we're facing as global citizens and our mission, of course, it's important for us to know that our products actually do the work that we say that they do and that we want them to do. And therefore, we continuously do impact studies to make sure we're moving in the right direction. And just to show two of them that really shows the learning impact that we have, the first one being a Sumdog research study that showed that 20% of the knowledge gap that existed between socioeconomic strong and weak students was closed by using Sumdog for one year.
We also did an impact study this summer with Albert Junior users' parents, and 96% of them said that they experienced that their kids' knowledge developed by using the app. So this shows that our products work. We take pride in our products, and we know that we can really have make an impact on learning. That's the short section about us, and now we're gonna move on and speak more about the Q4 results. I'm gonna start talking a bit on what's happened in the world around us, and then zooming in on some more business highlights, and then I will leave it over to Jonas to go through the financial highlights from the Q4. Start to look a bit on the world around us.
Well, the big thing in the education sector, and a big thing in society in general in Q4, was that the results of the PISA study from 2022 was published. If you don't know the PISA study, it's an OECD study that's conducted every third year, the last one was a bit delayed, though, due to the pandemic, that measures 15-year-old students' knowledge within mathematics, reading, and science, and it's done globally to be able to compare the global results, and also then development over time. Unfortunately, it showed that performance in math, reading, and science had declined in all OECD countries, which is, of course, it's a very unfortunate development, but it also shows that the problem that we are here trying to solve, it's definitely still valid and even growing.
The PISA study also highlighted a positive correlation between moderate use of high-quality digital tools and higher performance in school. We can see that the PISA results have increased the interest in us as a group and in our products. Of course, we made our voice heard within the debate surrounding these results, and we could see that that really gave traction and interest in us as a company. We also did some marketing communication with the PISA message, and we could also see great conversion rates on those campaigns. It's obvious to us that in a world that's really craving solutions to this educational issue that we see, as a group, we are well positioned to really make a difference.
To then move on and look a bit internally and talk about some of the highlights from the Q4, one thing that we have been talking about for a few quarters now is to increase our focus on B2B, which then is selling to the education sector. And this, the reason for us focusing more on B2B, it's partly because the education sector is not as hard hit by the current macroeconomic climate as the B2C business. It's a more stable revenue source. It's also less capital-intensive to grow in the B2B sector. It might not be able to grow as fast, but it's less capital-intensive.
We also know that being successful within B2B with an EdTech product is really a proof point that we have a high-quality product, and it is a way, if we can be successful in schools, it's a way to also reach the parents. We can see that in our U.K. product, for example, Sumdog, where we are mainly focusing on schools, but we also get the parent sales coming from them knowing about Sumdog through the schools. So what we can see in the Q4 is that 55% of our revenues actually came from B2B, and this, just two years ago, we didn't have any B2B sales. This is mainly driven by acquisition, but we also have some organic growth here. So again, aligned with the strategy we have and a positive development.
Another highlight worth mentioning is that we did launch our flagship math app, Albert Junior, in France under the Holy Owly brand. So basically, the Albert Junior addressed as Holy Owly launched in France. We launched it in Q3, and we talked about it then. But during Q4, we marketed the product, and we can see that the marketing yielded high number of new subscriptions and that the product KPIs, such as usage, customer retention, shows really strong numbers. Why did we go into France with this? Well, first of all, France is a big market. Also, the willingness to pay for education is higher when comparing to the Nordics, for example. We also want to open up the math segment in France. We have Holy Owly, it's a language product, so it made sense to add a math product as well.
Of course, we also wanted to see how we could capitalize on the strong brand that we have in France with Holy Owly, and this really shows that that worked. So this is a synergy proof point for us as well. And then, a final highlight from the Q4 is that we developed our own streaming platform for feature films as part of our Film och Skola service that's targeting the Swedish market. And this is replacing a previously third-party solution. And the reason for us doing this is, of course, it gives us full control over the product and technology, the content, and also the customer experience, which is, of course, very important. It improves our margins, and it will also serve as groundwork for exploring additional revenue streams, like, for example, being able to offer a transactional streaming of feature films.
So there we have some highlights from the business side of the Q4, and now we're gonna jump into the financial side of it. Jonas?
Perfect. Thank you, Ann-Louise. So to go more into the numbers then, and starting with the net sales part of it, I mean, comparing the Q4 of 2023 to the same quarter of 2022, we had a really nice growth of 41%. Of course, most of that growth came from the acquisitions that Ann-Louise talked about before, about the Swedish Film and Strawbees and Holy Owly that joined the family last winter. Because if we instead look at the development quarter-over-quarter, you can see that it was SEK 48 million in Q4 , and it was SEK 48 million in Q3 . So very much, I mean, the organic sales development is now very stable.
This is also very much in line with our strategy, where we now focus much more on profitability and improving the bottom line instead of growing the top line. So moving over to talking about the profitability and looking at the EBITDA, summarizing the quarter, the EBITDA came in at SEK -1.1 million, which is a significant, significant improvement from the SEK -23 million last year. However, I would really like, though, to stress that when closing the year, there were a number of one-time effects that impacted the EBITDA in a positive way. For instance, we did a number of write-downs. They had a negative impact, but especially we did a reversal of a earn-out reservation that we had of SEK +13 million.
So to combine these, the net positive effects were about +SEK 9 million . So I think a more representative EBITDA would be around -SEK 10 million . And if we then would instead compare the -SEK 10 million to the -SEK 7 million last quarter, the big differences and developments were negative exchange rates of around -SEK 3 million. We had some periodic effects, such as vacation pays and some seasonality things. We also started to take some cost because we wanted to build a group that we talked about earlier in the call. And we also had some positive effects of paying less royalty fees than we had planned for. So all in all, I think a more representative number is around -SEK 10 million when it comes to the EBITDA.
Switching to the cash flow, it was -SEK 5 million in the Q4, which should be compared then to -SEK 12 million last Q4. So obviously, a great improvement of 54%. But as you can see in 2023, the cash flow has varied very much quarter-over-quarter, and this is due to the newly acquired companies that have a more volatile cash flow. So, for instance, the improvement now comes from a better result in operations, which is more stable, but then it also comes very much from the operating liabilities that have increased, mainly in Swedish Film, because they are now in the beginning of the quarter.
We send out the absolute majority of invoices for the rest of the years, so we get them prepaid, which is very good from a cash flow perspective, and that improves the result. Talking about the cash balance, it was SEK 80 million when we closed the year. And looking at the cash burn going forward and our profitability planning, this cash should really be sufficient to take us to positive cash flow. And before concluding the financial section here, there are a few, like, extraordinary things that we would just like to talk about that we wrote about in the report. And one is regarding this earn-out clause related to the Sumdog acquisition that we did two years ago.
We had a reservation for around SEK 13 million here, and that clause or that earn-out will not fall out, so it became a positive one-time effect on the EBITDA of SEK 13 million . We also now, in the end of the year, decided to do an impairment test and look at the values of our different, both the acquired companies and some of the other things on the balance sheet. We decided to write down SEK 39 million in the parent company, related to the shares in the acquired companies.
The reason for doing this was very much regarding all the uncertainties in the macro environment that have increased, and especially the interest rates that have increased. And this gave a one-time negative effect on the group's EBIT result of SEK 8.3 million. I would stress, though, that, I mean, this has nothing to do with how we view the company going forward. The companies, I mean, they play really central roles in the strategy, as Ann-Louise talked about before, in the focus on business to business, and everything is developing according to plan. So this was more an adjustment to the world around us. And that was it regarding the Q4 results. And now we would like to talk a little bit more about the journey to profitability that we have been talking about a few times before.
Before going into the details, I would like to zoom out a little bit and talk about the sort of long-term, three-step plan towards profitable growth. We'll start with looking in the rearview mirror on 2023, which has been very much regarding sort of laying a solid foundation for us. For those of you who have followed us for some time, I mean, we did a switch from growth focus to profitability focus last winter. When we were designing ourselves for growth, it reflected the way we were organized, the way we're operating marketing and sales, and the way we're developing our products. So switching to profitability meant we had to sort of adjust the ways of doing this, and that has now really been completed in 2023, which I think also the financial results show.
Before 2023, we also acquired a number of different companies, and so on, and I mean, all the companies had been growing. So we've spent a lot of time in sort of future-proofing the management structure, both of the group as a whole, including changing management team, with us being in this call today, to succeed the founders who have taken the Albert group to the stage it was in before. So now we think we're much more future-proof there. We have also reviewed the management teams of all the different operational units, the acquired companies, and so on, and we have also now future-proofed them. So we feel like us, together with the senior management team, we really have a good and future-proof management team to move on.
We have also, as Ann-Louise mentioned before, focused a lot on starting to capture synergies between the group companies. We didn't want to move too fast here to sort of risk the result in each and every unit. So instead, we started with some projects, like we talked about in the Q3 report, when we took Strawbees to the U.K. with the help of the Sumdog team. We took the Albert Junior product into France, like Ann-Louise just mentioned. So I think we've now seen a number of successful synergy projects, and this has also really created a pool in the organization for starting to collaborate more across the different organizations. But with that behind us, now the focus is really on reaching profitability.
I will soon go more into detail on that, but very quickly, it's really about, on, on the first number, like, really sustained sales on the top line, but then more focusing right now on the cost side and adapting the cost structure to the profitability strategy we have. For instance, this includes really optimizing the current business with a focus on B2B, but also focusing on the way we organize and really consolidate the group of standalone companies to a more united company. But I said very soon more about this. With this in place, we think we have a really solid foundation to stand on with profitability and positive cash flow. Then we can take the third step on this journey, which is really about growing towards the vision of being a leading edtech player in Europe.
And this will mainly be driven in two different ways. One is sort of organically looking at the portfolio of strong products and market positions we have today, where we already today see a lot of opportunities to take these products to new markets. But we also see a couple of really adjacent product segments where we can also expand to with our current portfolio. But we will also continue to work with the M&A agenda. That has been very instrumental for us in the recent years. Of course, we never close the window for doing acquisition, and we always keep the radar up and dialogues ongoing.
But right now, we're mainly focused on integrating the companies we've already acquired, whereas when that is in place, we're gonna much more actively look at bringing new companies into the group and being able to also then really leverage the more scalable structure that we have built so we can easily integrate them. But let's now zoom in on the mid step here, which will be our focus right now, and that is reaching profitability. And one way to do that is through a profitability program that we decided to launch in January this year, and we communicated a few weeks ago. And I will now talk through the main pillars of this program. It all starts with focus more on business to business, and the reason for doing that is very much what Ann-Louise said before.
Business to business today makes up roughly 55% of our sales. By looking on profitability, it's the absolutely biggest contributor to profitability. So if profitability is the most important thing for us, it, it makes sense really to invest in B2B. And here we also have quite... We have mature products, we have mature, brands and market positions, and we know sort of that for every SEK we invest, we will get, good returns for that. Secondly, moving over to maximize the current business, and this also goes to this looking at the entire portfolio of the eight product brands that you heard about before and the roughly 10 markets that we are in today. So, I mean, that is sort of the core of what we're doing.
But since we are a very innovative company, we're always looking into, like, future business opportunities to go into new markets, to develop new products, and so on. But now, in this profit focus, we will really double down on the product brands we have and the markets where we're already performing really well. So it will be very much regarding continue to cross-pollinate, like taking the successful product from one market into another one or capture the full potential in an existing market.... and consequently, we will reduce investments in some of these future business initiatives that are currently ongoing, and rather, do more of that, in a later stage when we are in this third step on the journey. Moving to the yellow box here, which is about improving efficiency and capture synergies in the group.
Very much the logic here is, or where we're standing today, is that we are a group of companies that we have acquired through the recent years. It has mainly been operated like four or five standalone companies, and each of these companies are also mainly been or designed organizationally for growth. But we have always had the idea that we wanted to integrate them. So during 2023, we have spent most focus on integrating the B2C part of the group, and that has been taking the two acquired companies of Jaramba and Holy Owly, and really uniting them with the Albert organization. And this has been the focus for 2023, and today, they're really the Albert and Jaramba, and Holy Owly teams work side by side, where processes, marketing, technology, and many things are aligned.
We really wanted to see this as a pilot project to say, "Do we have a good way for integrating companies?" Now I think we feel quite confident that this was successful. So now we want to take and expand this to the entire group and also getting the B2B companies into this. We have one united company, one united senior management team, one united product organization, a united business-to-business sales organization, a B2C sales organization, and so on, to get them all together. This will make it much easier to sort of to capture synergies, to optimize the full portfolio instead of suboptimizing a different brand, and we also utilize our resources in the best way.
And another way, another thing which is very important in this box, is to reduce personnel cost, and we communicated this a few weeks ago as part of the profitability program. We will let go of 25-30 people, being both employees and consultants. This means roughly 15% of the employees and consultants in the group, and this must mainly relate to the B2C operations in Sweden. And the reason for doing this is obviously we wanna save cost, but we also think now as we do it in connection towards reorganizing, we can continue to do a lot of things, you know, independent of letting go of these people. Moving to the last box here, which is reducing costs in general.
And besides some of the specific initiatives before, we're also doing, like, a general cost reduction program, where we're reviewing all the costs in the group, and creating a cost-conscious mindset, renegotiating different type of contracts, try to use the volume strength and by bringing many companies together now to have a better negotiation position. But we will also and are looking into optimizing our office spaces, so they're really fit for their purpose. One example is in Gothenburg, where we today have two offices, we will co-locate these ones into one office, which is, of course, a good cost saving as well. And all in all, we really see that these actions should take us to profitable EBITDA by 2025. But being a little bit more detailed on the time plan for execution, it looks like this.
We took the decision in the end of January to do this. So right now, through February, we've been working on sort of canceling different contracts. We have initiated a redundancy process in Sweden and the U.K., and so on, and really know what to do and working on the restructuring of the group into this new layout. This also means that we're taking most of the one-time restructuring cost in Q1 , whereas some activities, they will keep on into Q2 , because some, like, notice periods take some time, so some costs will still be with us in the Q2. So if we move then into what can this, this means for our upcoming financials, like in Q1 , we will then foresee to have more of a significant negative one-time impact on the result.
But when going into Q2 , we will start seeing the significant recurring impacts, the positive impacts on the profitability program, but still having some negative, one-time effects. But from Q3 and onwards, we should only see the recurring significant impacts of this. So all in all, we feel really confident that this profitability program is really what will accelerate the journey to profitability, and make 2024, and 2025 good years in front of us. But with that, going into sum up mode of this presentation, I think we can summarize is that the journey to profitability has been accelerated now through the profitability program that we just launched, and we are well-funded, and the cash at hand will take us to positive cash flow.
Looking at the business, it is very stable, and despite the challenging marketing conditions, market conditions and the focus on the sales to the education sector, B2B, will really make this, even more predictable and stable. And lastly, we have a number now of successful group synergies that we have captured, and moving into a new, more, much more united organizational structure will make this even easier and better going forward as well. So with that, we would like to open up for a Q&A session, and, over to you, Ludwig, to hear about the questions that have been coming in.
Thank you so much for the presentation here. I think we up to the questions straight ahead here. So the first one: What, what are the main drivers behind the EBITDA development between Q4 and Q3?
... Mm-hmm. Yeah, I can take that one. Yeah, I can understand that it was not very easy to follow on that slide. And mainly it's a number, firstly, of one-time effects related to the year-end closing in terms of this big positive effect of an earn-out clause that was reversed. There were also some write-downs having a negative effect. So the -1.1 that we saw in the reported numbers is probably more a representative number, around -SEK 10 million in EBITDA. And why that was worse than last quarter is very much driven by the worsened exchange rates, some periodic effects, and that we have invested some cost in starting to build a group.
Thank you. What are the reasons behind the decision to write down values related to the acquired business?
I can answer that one. We have, during the last quarter, made the assessment to write down some of our acquired companies, and it's due to high interest rates and more uncertain market situation. We continue to have a strong faith in all our companies, and see that we are well-positioned in the continued work to profitability.
Thank you. In the end here, you talked about the profitability program, but how confident are you that the profitability program will have the anticipated effect?
Mm-hmm. I must say that we are as confident as we can be. I mean, on the cost side, we can obviously impact everything, like personnel cost, location cost, and so on, so that we feel very confident in. And now when we started to cancel different contracts and so on, it goes according to plan. Then, of course, also the revenue side needs to follow according to plan, but the revenue prediction being built into this are very, I would say, realistic, neither too optimistic nor too pessimistic. So we feel confident, I would say.
Thank you. What is the plan for integrating the acquired businesses, to ensure you capture the synergy you foresee?
Maybe I can answer that. As Jonas mentioned before, we have already started in 2023 with integrating the B2C companies, and that has been very successful. Of course, we have some lessons learned, some dos and don'ts, so it feels like a very natural next step to do this for the entire group, getting the B2B companies together and also B2B and B2C together. And even if it's a worn-out expression, maybe, but there is definitely some low-hanging synergy fruits that we think that we will be able to capture by this new organization. And knowing all these companies, they are quite alike when it comes to both culture, it's mission-driven, value-based companies with strong cultures. They are all also quite alike when it comes to ways of working and processes and so forth.
So we really think that this will be, this will be a successful integration. And we will do that, we will launch the new organization on April 1st, and then we will build on that going forward.
Thank you. Could you provide some insight into the profitability and margin profile of the B2B sales segment? Also, how has the organic growth trend been in the past years for B2B?
I would say that the gross margin on the B2B side, it differs between the companies. We have the Swedish Film, obviously, a licensed business, and then we have Strawbees hardware, so those are a bit different than the Sumdog, which is more a classic SaaS model. And the growth of the B2B businesses, as we have talked about, we do see some organic growth in the B2B business.
Thank you. You mentioned a successful launch in France here. Will we see some more foreign launches in the near future? Launches in foreign countries, so to speak, I assume.
Exactly. Actually, we will not communicate any future plans in terms of new market launches or new product launches. They're going to have to wait and see a little bit. But I can just stress what we said before. I mean, the main focus, we are looking at the markets where we are today and where we already have products and how we can sort of cross-pollinate the different products in those markets, but also looking at the market positions we have. And I mean, we do see a lot of good potential. I mean, take, for instance, in the U.K., we're really strong in Scotland today, but England is a much bigger potential, which is just next door. So, for instance, capturing the full U.K. potential is one of them.
It's also looking to some of the markets today where we have just a smaller market share, where we look at expanding it.
Thank you. You are guiding on a positive EBITDA for full year 2025. When do you believe we can see positive results on a quarterly basis?
Mm-hmm. As I mentioned in sort of the last slide, we believe that when we have really... The effects from the profitability program starts to kick in, we should start to see the first effects in Q2 . But really, the more main effects will be seen from Q3 and Q4 and onwards.
Thank you. And also, how much one-time cost do you believe you will take in Q1 based on the organizational cutoffs, you've been communicating?
You can take that, Katarina? Mm-hmm.
I'll take that one.
Mm-hmm.
It's, we have calculated around SEK 3 million for that program.
Thank you. That was all the questions we have received today. So I want to thank you, thank you all for presenting, and I want to thank all the viewers for sending us questions and tuning in, and I wish you all a good weekend.
Mm-hmm. Thank you-
Thank you
... for joining.
Thank you.