Good morning, and welcome to the BHG Q2 2022 Earnings Call. All participants will be in listen-only mode. Should you need assistance, please signal for a conference specialist by pressing star then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask your question, you may press star then one on your telephone keypad. To withdraw your question, please press star and then two. Please note this event is being recorded. I would now like to turn the conference over to Adam Schatz. Please go ahead.
Thank you, operator, and good morning, everyone. Moving to slide two, please. We strengthened our position in the quarter, yet again delivering profitability. Despite challenging trading conditions, high comparative figures, and the main focus on defending profitability rather than market share, we held up well against the contracting market. At the same time, investments in the technology and customer platform continued, positioning us to take advantage of unchanged long-term growth trends. Slide three, please. I'll start this morning's presentation by reviewing the Q2 highlights and providing a business update.
Jesper will then cover the financial section before I conclude, and we launch into the Q&A session. Slide four. Onto slide five, please, for the Q2 highlights. While the long-term conditions for profitable cash-generating growth are unchanged, conditions have shifted in the shorter term.
We are living through the aftermath of the pandemic, and spend on services has fully normalized. Now, in addition, consumer sentiment has suffered a blow. At the same time, it's important to point out that our markets remain larger than they were before the outbreak of the pandemic. Furthermore, our focus on price leadership throughout our portfolio, from the value to the premium range, puts us in good stead as consumers' disposable incomes are likely to be under pressure for some time to come.
Against this backdrop, net sales came in at SEK 3.9 billion, corresponding to total growth of 10% on the back of recent acquisitions. Pro forma organic growth amounted to -7% and pure organic growth to -8%, more on which shortly.
Adjusted EBIT amounted to SEK 162 million, corresponding to an Adjusted EBIT margin of 4.2%. Cash flow from operating activities at SEK -162 million was adversely affected by working capital developments, which we will come back to, but also by timing effects between the first and second quarters of the year and the nature of recent acquisitions. Measures to adjust purchasing were instituted some time back, and the effects of these will kick in fully from the second half of the current quarter. Slide six, please. Zooming in on organic and pro forma organic growth.
At -7% and -8% respectively, we did quite well in the quarter, given the significant contraction in the total market against the highs reached during the pandemic. We at least maintained our position in the Nordic region while our geographic expansion contributed positively.
Slide seven, please. For a longer perspective on growth. To the left, the group's net sales has increased by 129% over the past three years, a period in which pro forma organic growth amounted to 17% per annum and pure organic growth to 10% per annum. Turning to the middle of the slide, the group's share of net sales from outside of the Nordics has increased by 17 percentage points since 2019, and Germany confirmed its position as our third-largest geography in the quarter.
Over to the right, our growth in the quarter again confirms that we continue to strengthen our market position. The total home improvement market, although in a rough patch currently, is larger than in pre-pandemic times, and we maintain that the longer-term growth trajectory of our underlying markets remains intact. Slide eight, please. Moving to the business update.
Slide nine, please. Our recipe combines organic initiatives and M&A with the synergy possibilities created between the two. The organic strategy remains focused on our four cornerstones of assortment, scale and own brands, an unrivaled digital experience, and supporting infrastructure. In the quarter, we continued to invest in our technology platform and further improved our ability to leverage the breadth of our assortment through all our sales channels. Further, customer satisfaction continued on its path to higher levels. Turning to the middle section of the slide, M&A, acquisitions will remain an important tool going forward.
However, given current elevated market uncertainties, we are particularly selective and discriminate. Nonetheless, in the quarter, our M&A team evaluated numerous potential acquisition candidates. We saw evidence of valuation expectations on the sales side adjusting to new realities, and we completed an in-depth mapping of the German M&A landscape.
Over to the right, we are unlocking synergies from assortment, tech, data, and infrastructure across the group. In the quarter, we saw continued progress along the path towards larger units with harmonized tech. Moving to slide 10, please. Traffic generation conditions resembled those seen in the past quarters. In a contracting market, our active customer base at 3.9 million held up quite well year-on-year and is up by 41% over a two-year period.
As you can see on the top right-hand side, our key customer-related metrics remain healthy, with both orders per active customer and repeat orders somewhat higher than last year and a continued healthy marketing ROI. Investments into gaining further insights from customer-related data across the group continue.
We launched our customer data platform in Finland in the first quarter with early promising results. Three of our Swedish units are progressing towards launches during the latter part of this year. More generally, driving BHG towards a higher level of customer centricity remains a critical focus area for us. Technology investments into optimizing and personalizing sales and marketing, as well as driving customer satisfaction, are key in this regard. Slide 11, please. Handing it over to Jesper, who will walk us through the financial update. Slide 12, please.
Thank you, Adam. As per Adam's introduction, in the second quarter of the year, we further advanced our position despite a difficult market situation. Net sales increased 10% to reach SEK 3.9 billion . Pro forma organic growth amounted to -7% and organic growth to -8%. Total growth was driven by the operations added to the group through acquisitions since the corresponding period last year, with HYMA and AH-Trading being the largest additions.
Adjusted EBIT amounted to SEK 162 million , corresponding to an EBIT margin of 4.2%. The EBIT margin was negatively impacted by higher shipping, product fulfillment, and traffic generation costs. The weak Swedish krona also adversely impacted earnings. I will get back to the EBIT margin compared to last year in a while. Slide 13 and the segment view.
Net sales in the Do-It-Yourself segment grew by 5% to reach SEK 2.3 billion, while the Home Furnishing segment grew by 17% and net sales amounted to SEK 1.6 billion. Adjusted EBIT amounted to SEK 118 million in the Do-It-Yourself segment, corresponding to an EBIT margin of 5.1% and to SEK 60 million in the Home Furnishing segment, corresponding to an EBIT margin of 3.7%. As in the first quarter, price increases compensated to a great extent for high shipping and inventory costs in the Home Furnishing segment, while that was not the case within the Do-It-Yourself segment.
However, the Adjusted EBIT margin in the Home Furnishing segment was negatively affected by traffic generation costs and the weak Swedish krona.
Let's turn to slide 14 and a closer look at our EBIT margin compared to last year. The gross margin development in the quarter was attributable to increases in the prices of raw materials, shipping prices that remained high, higher cost for fulfillment and traffic generation, as well as the weak Swedish krona. Cost increases were partly offset by implementation of price increases. However, due to tough campaign pressure in the market, not least when it comes to our portfolio of own brands, the ability to adjust prices was more limited.
Costs for online marketing remained high as a result of weak demand and tough competitive pressure. The increase in organizational cost from same period last year is partly explained by the continued high share of sales from our own brands, which requires a somewhat larger organization, and partly by continued long-term investments to drive customer centricity.
Finally, increase in depreciation and amortization was primarily driven by continued tech investments and new lease agreements. All in all, our EBIT margin amounted to 4.2% in the second quarter. Let's turn to cash flow, slide 15, please. Cash flow from operating activities amounted to SEK -162 million, negatively impacted by changes in working capital as a result of inventory buildups during the period.
The inventory buildup, in turn, was driven by a delayed beginning of the outdoor season, a weaker than expected demand in the German market, and a competitive situation for the Do-It-Yourself segment's portfolio of own brands. Actions have been taken to reduce and delay purchases, which are estimated to become fully effective beginning in the second half of the third quarter.
The right-hand graph showing the development in liquidity walks us through the starting period position of SEK 274 million, deducting the cash flow from operations and the impact of investing activities, a majority of which is M&A related, and finally adding the financing activities which are primarily related to the new share issue completed in the period and the amortization of our revolving credit facility, but also include amortization of leasing liabilities, bringing us to the period end SEK 520 million of liquidity at hand.
Slide 16, please. The group's net debt amounted to SEK 1.803 million at the end of the quarter, and net debt in relation to LTM Adjusted EBITDA ended at 2.5x just inside the medium-term financial target range.
On top of our liquidity at hand, we had unutilized credit facilities at the end of the quarter of SEK 1 billion. Handing it back over to you, Adam, to summarize and conclude.
Thank you, Jesper. Slide 17, please, and turning to slide 18. As we write in the report, much has changed, while at the same time, nothing has changed when it comes to our prospects. Much has changed in the sense that we're living through especially turbulent market conditions with the aftermath of the pandemic affecting consumption patterns, markets temporarily shrinking, and now more generally, consumer confidence having been pummeled. In addition, Russia's war of aggression can be expected to continue for some time to come, creating further business uncertainty and complexity.
Yet, nothing has changed in that the secular trends of rising online penetration and consumers focus on their homes remain intact. We continue to be in the driver's seat in terms of leading the consolidation of our markets over the coming years.
This is a period we believe in which the winners of the future will crystallize, and we are in an excellent position to be counted among these. Moving on to slide 19, please. Nevertheless, we operate in a market, online high-ticket items, that has taken a hit by recent developments. The fact that we continue delivering profitability also under current conditions, demonstrates the strength of our model and the strength of our market position. We will continue to prioritize as follows through the coming quarters.
Profitability first and foremost, coupled with cash flow generation, and also important, but third on our list for now, growth, and only growth which is profitable and cash generating.
This entails preparing for a prolonged, challenging market situation by fully leveraging our size, adjusting pricing, campaign and marketing strategies carefully, being particularly disciplined in terms of strategies to reduce working capital and discerning in terms of M&A, while at the same time continuing our range and geographic expansion as well as investments in customer centricity. The final slide for this morning. Slide 20, please. Summarizing the quarter, our journey continues. We held up better than the market organically and with recent acquisitions we grew by 10% in the quarter.
Pro forma LTM sales now stands at SEK 13.9 billion. Our Nordic online position was strengthened while we took share on the European continent with Germany, our third-largest geography.
We believe that the supply situation will continue to normalize, albeit in fits and starts, and we have positioned ourselves to see improvements in our working capital situation rest of the year. Weak consumer sentiment is likely to be in play for some time to come. In this changed landscape, we have adjusted our tactics and are prioritizing profitability and cash flow generation ahead of growth for now. At the same time, the underlying secular trends of rising online penetration and consumers' focus on their home environments are intact.
By continuing to invest into customer centricity, data and automation, we are well-positioned to further leverage our Nordic pole position and to continue expanding our presence on the European continent. Moving to slide 21, please. This concludes the presentation. Over to you, operator, to moderate the Q&A.
Thank you. We will now begin the question-and-answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star and then two. At this time, we will pause momentarily to assemble our roster of questioners. Your first question comes from Gustav Hagéus from SEB. Please go ahead.
Thank you, operator. Good morning, guys. Thanks for taking my questions. I have a few if I may. Firstly, you referenced that you think that the pricing pressure should gradually come down as inventories are being worked down in the market. Could you confirm whether or not you're seeing data points on this already, or is this more of a medium-term expectation of yours? That's my first question. Thanks.
Good morning, Gustav. We are seeing evidence of this happening, but it is a really tale of two stories. We did report already in the fourth quarter of last year and the first quarter of this year that within the Home Furnishing segment, we did see evidence of that happening. Of course, much of the increase in product cost was also first noticed on that side of our aisle. We have seen gradual pricing adjustments, actually quite significant pricing adjustments.
But also again, cost increases have been quite high. Those pricing adjustments haven't fully compensated for the cost increases. The situation on the Home Furnishing side is a market that is less fragmented than in parts of the DIY side.
I think that's one part of the explanation for why pricing is adjusting quicker on that side. There is a caveat still on the Home Furnishing side, which is important for the understanding of the Q2 results, which is outdoor furniture. Specifically, w ithin outdoor furniture, of course, a very, very important category in this season. Price campaigning has been very intense also on the Home Furnishing side, so that stands out a bit.
Within the DIY segment, as you know, we have quite significantly increased the share of sales that comes from our own brands. This part of the market in particular is quite fragmented.
This is also the part of the market where we just as basically all of our competitors source products from Asia, in the outdoor season, but also to large extent, you know, throughout the year. This is the part of the market that has not adjusted to any meaningful extent yet, which in our view is entirely linked to, as you infer, to the high inventory levels among our competitors.
On this part of the assortment. We are convinced that the majority of our competitors are now within this part of the business and not profitable at these levels. Clearly, you know, they're not running sustainable tactics and strategies. We have great confidence that pricing will adjust, but it hasn't, as of yet.
Thank you. That's helpful. Looking at growth comps you faced, if I put together the two years stacked organic growth, you were facing the H1, it was in the high 50s%, which now looks to come down to sort of high 30s% in H2. With that in mind, do you see potential for your headline organic growth year-over-year to have bottom out in Q2?
I think again, you know, there are two factors that move in opposite directions here. One is that our own comparative figures are much easier and now in the second half of the year than they were in the first half of the year. On the other side, we have the deteriorating macro picture with rising interest rates, consumers under stress, very likely consumer disposable incomes under pressure during the second half of the year.
That is a tug-of-war between those two factors, I'd say. With the added uncertainty of how our competitors will act under those circumstances. You know, we're not making any real forward-looking statements ever.
I think that paints the picture of, you know, the reasons to hope and the reasons to be a bit cautious about demand developments in the next couple of quarters.
Sure. You also referenced online migration in the report that you expect this to reverse back in favor of the online market already in H2 this year, which is a rather bold statement. I assume you must have seen some data points on this already, or could you please elaborate a bit on this topic?
Well, whether it's a bold statement or not, I think we can disagree on that. I think it's not bold at all to say that the trajectory of rising online penetration will resume. I guess, you know, the exact timing of when that will happen there, we can have an argument whether, you know, we're too optimistic by a quarter or not. I am fully confident that online penetration will resume its secular trend upwards over the next period of time.
What we have in the past two quarters is really the anomaly over a 15-year period. Over the past 15 years, online penetration has been steadily rising, and now we have two quarters in this post-pandemic realignment period where that hasn't been the case. You know, this is the exception, I would say.
Yes, granted, you know, the exact timing of this one can always argue. Directionally, you know, I'm extremely confident that this secular trend will continue to be in play for many years to come.
Yeah, no, I think the long-term trend everyone agrees with was more the timing since you're already almost one month into the half year. I was thinking maybe you've seen something already in terms of a flow from offline to online, but.
Well...
That is not the case.
I can't point to any very tangible data points specifically on that. One thing I can mention, which perhaps is tangential, which we point out in the report as well, that when it comes to traffic generation costs, at least in terms of cost per click, there we did see a trend shift in June. As you know, over the past six, seven, eight quarters, they have been rising accordingly. Now, in June was actually the first month in a good while where PPCs declined.
Sorry, a few more questions, if I may. First, on inventory, you seem optimistic if I read between the lines that the inventory has peaked now in Q10, will come down in absolute terms towards end of the year. My question is to what extent is the inventory management in your own hands, and to what extent is it in the hands of the entrepreneurs given the earn-out structure? I guess it's a complicated discussion to have with your entrepreneurs to lower inventory given that they're incentivized on growth rather than cash flow.
Could you focus through a little bit on that and shed some light onto what share of the total inventory procurement is actually in your control today?
100%. We have very, very clear governance in place now. You know, we all want the business to grow profitably. You know, both we at the group level, Jesper and I and our colleagues at group and our excellent entrepreneurs. Sometimes there can be a difference of opinion about, you know, what is the wisest tactic over the next quarter or two, and then we have those discussions. We have full visibility and we have full control over purchasing decisions.
Two final ones. One relates to this. You had an earn-out reversal in the quarter, which was quite substantial. Could you confirm if this largely relates to the one large acquisition you did last year and if you would expect the full earn-out of, I believe it was SEK 500 million, to reverse if the growth of that company and earnings of that company does not reverse during H2?
I'll pass that on to Jesper.
Yeah. Good morning, Gustav. I will answer the question in a different way, but we have reversed earn-outs, and that adjustment is related to more than one unit or more than one acquired company. I think that when we adjust, we typically want to feel that we are certain about the direction we are adjusting in and then gradually adjust during the year until we know more at year-end. What I'm saying between the lines is that if liabilities would move in any direction, I would assume that they will be lower at year-end than they are now.
Yeah.
Maybe as regarding the acquisitions made last year, we did communicate the big one relating to the Bygghemma acquisition of SEK 500 million, and that one is totally depending on performance in 2022.
Yeah.
Okay. Lastly, just a nitty-gritty. I noticed in your items of technical comparability, you put in SEK 9.4 million on strategy work. As an outsider, not knowing the specifics, it seems like strategy would be a part of your day-to-day business. If you could shed some light on this, that would be helpful. Thanks.
Gladly. We, as you're correctly inferring, we have an annual strategy cycle, and this year's annual strategy cycle is part of that annual cadence. We've basically never previously leveraged the help of external partners in our own strategy work. This time around, we've done so. We've used two external partners, and it's part of the ongoing work, which we've also been communicating a bit about in terms of driving customer centricity, data automation, but also as we're mentioning in the report, the work in terms of continuing to simplify our operating model and structure.
We decided this year that we wanted to have external sounding boards in the process, and we will be updating the community on the outcomes of the strategy cycle during the fourth quarter of this year.
Thank you. Just one more question.
Thanks, Gustav.
Thank you. Your next question comes from Benjamin Wahlstedt at ABG. Please go ahead.
Hello, and good morning, guys. Firstly, regarding the inventory levels, is it possible to say roughly what portion of the inventory is summer dependent?
Good morning, Benjamin.
Yes. I don't have that number in front of me, so not really.
Right. I guess we touched upon this a bit, but regarding organic growth, is it possible to give a sense of the entry rate and exit rate for the quarter in terms of organic growth?
Sure. So, the only real anomaly during the quarter was a couple of extraordinarily cold weeks in all of the Nordic region. This was, if I recall, like week 15 and 16 or 16 and 17 or something, where, for instance, in Helsinki, there was still snow on the ground. It was a very chilly start to the season. We also, of course, have our network of people in the industry, and we know that basically everyone had a couple of extraordinarily poor weeks thereabout that timeline.
That was the anomaly. Other than that, you know, no real swings, you know, but a pretty similar across.
Perfect. Thank you. I know you've commented on this in the past, and we have talked about this briefly during the call as well. Given the recent development, I'm curious, could you just give us a rough update on earn-out payments, say from now up until and including 2024, please?
Sure. The total amount on our balance sheet is SEK 1.8 billion, and we have roughly another SEK 60 million to pay in 2022, and then another SEK 700 million in 2023. The remaining amount is to be paid between 2025 and 2027.
Perfect. Thank you for that as well. We've obviously seen some large movements in certain raw materials during the last months. What sort of lead times are we looking for before this is visible in the P&L, please?
I think it's difficult for us to be precise in answering that actually. I guess you're referring to the first massive increases and now in the past two or three weeks, the fact that many of those have been falling back somewhat, right?
Yes, exactly.
Yeah. Well, I think that's really difficult to provide any real timing insights on. But what I can say is that, you know, that external environment is the same for everyone in the market. I think the question is, you know, to what extent and how quickly will market participants adjust pricing up or down? I'm still quite convinced, despite, you know, the relief in raw material prices in the past couple of weeks that the direction on pricing in the market will be up still because of the overall cost pressures that we've seen.
Perfect. Thank you very much. That's all from me.
Thanks, Benjamin.
Thank you. Once again, if you do wish to ask a question, please press star then one on your telephone and wait for your name to be announced. Our next question comes from Niklas Ekman from Carnegie. Please go ahead.
Thank you. Yes, a couple of questions from me as well. Firstly, a question on the market growth. You say that you grew more than the market. Do you have any good statistics there? I'm also curious about kind of the split between online versus offline. It seems you seem fairly clear about online having lost market share. Could you elaborate a little bit on what kind of market data you have and how this compares to the -8% organic growth that you reported?
Good morning, Niklas. Yes, indeed. As we've discussed, previously, you know, there's unfortunately not this definitive data source out there that we can just tap into and, you know, get a number for the overall market that everyone agrees with. We look at very many different data points. One of those sources is the data that Google provides us with through our very deep cooperation with them. We look at, in addition to cost per click developments across thousands of search terms, we also look at the query volumes for those thousands of search terms.
The query volumes are down, you know, on average something like 15%. That's one data point.
Another couple of data points that I'll throw in there, it comes from our peers or competitors or near peers in the market. You probably saw Bygghemma's own estimate where they said that the market dropped by 15%-20%, and that's presumably the total market online, offline combined. If we back out Bygghemma's online business, you know, they didn't specifically provide any details on that. But if we back out, our belief is that they dropped something like 25% online in the quarter.
That's another data point. We have some of the international players, many of which report much later than we do, but some have come out with trading updates or profit warnings to be more precise.
Like for instance, Made.com, the U.K.-based European furniture player, which, you know, is talking about declines of 30% or so, in the market. They also issued, as part of their trading update, a very serious profit warning. You know, it's difficult to find data points out there that talk about anything else than a difficult market situation.
Yeah, thanks. That's very clear. That's very helpful. A second question on your inventory levels. You're at about SEK 3 billion now, which is more than twice the level where you were last year. You're talking about how you're going to address this in the latter half of Q3. How quickly do you think you can adjust to more normal levels? Are we talking about basically reducing the inventory by close to 50% or what kind of inventory development do you see in the next few quarters?
I'll just start with answering then I'll hand it over to you, Jesper. There are, stating the obvious, I guess, you know, there are two elements in that equation. The one element that we are in full control of is the purchasing side of things. The other element which we're not in full control of is the demand side of things. That's, you know, that's just to frame it. Then, Jesper, if you want to provide further details.
Maybe also to remember that some of the increase in inventory comes from the acquired companies of last year, consolidated from Q3. Nevertheless, I do not see that we will reduce inventory by 50%. If we will be able to come down to SEK 2.5 billion, I think that's a great achievement. The speed in which we can do so, again, it's depending on demand.
Okay. This work starts in Q3, meaning that this is more ideally a target for kind of the end of the year.
No. This work started quite a while ago. Of course, lead times are quite long, especially on the part of the assortment that is sourced from Asia. If we hop into the time machine and transport ourselves back to the worst quarters of the pandemic, lead times were extraordinarily long back then. We, just as many others in the market, had to make bets, not just, you know, six or nine months in advance, but something like, for some categories, 18 months in advance.
What we've been seeing here in terms of our inventory buildup , in addition to the effects of acquisitions, is the legacy of those very extended lead times. The difficulty of matching that to the demand that we are currently seeing.
Now, lead times are really fully back, which means that additional purchasing for the next seasonal peak in terms of outdoors at least. Now, those purchasing decisions we won't have to make until we have the full data on how this year's season ended. This is why I say that from a purchasing perspective, we have things fully under control now. The question, in terms of the speed of the working capital improvement and inventory reduction, that will depend really on demand and competitive pressures.
Great. Thanks for clarifying. Can I ask about the earnouts as well? The SEK 1.8 billion that is remaining and the write-down you made here. The write-down, is that only related to profits or expected profits in 2022, or have you done any write-down for earnouts related to the coming years as well?
We have also made some adjustments to net present values of put option liabilities in the future. It's not only based on 2022 earnings.
Okay. Thank you. You made a lot of acquisitions in 2020, 2021. Given how the market has deteriorated since then, do you see any tangible goodwill risk related to any of those acquisitions?
No.
Clear. Thank you. Thanks for taking my questions.
Thank you, Niklas.
Thank you. Your next question comes from Daniel Schmidt at Danske Bank. Please go ahead.
Thank you. Good morning, Adam and Jesper. Just wanted to start with some clarifications, and we've been around this for some time now. Coming back to what you said, Jesper, regarding sort of the inventory and how fast you can take that down. When you said 2.5x, was that more a full year projection, or was that really sort of what you could hope for in the best case by the end of Q3 already?
No. No, no, for sure. 2.5x is in the long run. I will not put out a number and a timeline on the speed in which we will be able to reduce inventory levels. I just wanted to say that going forward, I don't think that inventory levels will be at 50% of the current levels.
No. All right. Okay, good. Back to further clarifications on the earnouts and deferred payments. Could you split that up for the coming years? You said the total amount, I think, but that's for both those entities, right? Or those issues. If you split that out in earnouts and deferred payments, referring to minorities, could you give us a brief update on that?
The total amount is SEK 1.8 billion, and that consists of roughly 1/3 earnouts and 2/3 put option liabilities or liabilities relating to minority stakes.
Good. The split for next year, is that the same as you mentioned when it comes to 1/3 and 2/3 ?
No, because we have the big earnout relating to the HYMA acquisition coming up already in 2023.
All right.
The earnout amount.
Got more than-
That is, yeah, roughly SEK 600 million. Most of it will be paid out next year.
Yeah. Speaking about that, is that a hit or miss earnout, or is that sort of a scale that's being applied when it comes to performance?
It's a scale.
All right. Even if they don't perform as one expected maybe nine months ago, there could still be some earnout being paid, if I got you right.
There's a cap and there's a floor, and if they perform below the floor, then the earnout is zero. Then, you know, above the cap, it's still capped at SEK 500 million.
Yeah. Right. Between the floor and the cap, there is a graduated scale.
Exactly.
All right. More sort of from a helicopter perspective question regarding the market and the competitive landscape, which I of course understand, is there any sort of indication that your competitors or you yourself are looking into changing sort of delivery and return policies being applied in the market towards the consumer? Is there any indication that the market would turn to become sort of less generous, if you catch my drift?
I think there is some indication, Daniel, along those lines. As you know, much of what we serve our customers with is big and bulky items. There has been some adjustment in the market as to, you know, the parts of the categories that come with delivery costs. There have been some adjustments also in the fees applied to those delivery costs. Yeah, there is some adjustment. But nothing. I wouldn't say it's anything dramatic. It's, you know, sensible business strategies being applied, basically. Yeah.
All right. Good. I think most of my other questions have been answered already. Thank you, guys.
Thanks, Daniel.
Thank you. Once again, if you do have any questions, please press star then one to register. We are showing no further questions at this time. That concludes our question and answer session and our conference for today. Thank you all for attending. You may now disconnect your lines.