Hello and welcome to this earnings call for CDON's fourth quarter. Today we are broadcasting this live for the first time from our office in Stockholm, and also for the first time I have our new CFO next to me, Carl.
Super excited to join you here today.
Great, and we will hear more from you in a bit when we are diving deep into the numbers. First up, some summary for the quarter and full year. We see a good progress in our strategic initiatives, namely massively increase our supply and greatly improve our customer happiness. From the supply side, we have onboarded 164 new merchants just for Q4 for CDON. For the customer happiness part, we have improved the customer reviews from 3.8 to 4.1 on CDON. Our platform migration is running according to plan with the deadline in September, and this will also realize the majority of the lower communicated OPEX run rate. We have a continued solid growth of gross profit after marketing, our main KPI. Per segment for the full year, we have increased that KPI with 14% for CDON and 12% for Fyndiq.
And lastly but not least, we have an EBITDA improvement of SEK 138 million for the full year of 2023 compared to full year 2022. This also marks the fourth consecutive EBITDA positive quarter. The Q4 ended on +SEK 17 million, and we have for the full year +SEK 23 million set for EBITDA. Looking into the strategic execution, as I mentioned, we are really focused on the core elements of the marketplace model to massively increase the supply and greatly improve our customer satisfaction. Digging into the supply side, you can see on the left side where we have the graph of new onboarded merchants on the CDON side. You can see this is a big improvement from Q3 and the rest of the year up into Q4. We have increased the average newly onboarded merchants from 21 per month in Q3 to 55 new merchants per month in Q4.
We have also implemented a new process at the end of Q4, enabling us to double this velocity of onboarding merchants. Looking into the important aggregators and Octopia in specific, we can see that we are now increasing the sales from these merchants from 1.9% of the GMV in Q3 up to 3.2% of the GMV in Q4. Worth mentioning is that you don't immediately get sales from a new onboarded merchant. You first need to get the merchant onboarded, and this includes a lot of technical aspects. Then you need to make sure that you get products uploaded that are compliant, categorized correctly, and so on. Then after that, you need to make sure that your marketing channels find these products and start to test them on the new customers.
All in all, this can delay the sales effect from a new merchant up to three months. We are very positive that we will see a sales effect on these new merchants by the end of the first quarter. Looking into the customer satisfaction part, you can see to the left is the customer review score. From the start of the summer, you can see that we are increasing this in a very good way. We have moved from a customer review score of 3.8 to 4.1 only on CDON for Q4. Also, the customer service part has become more efficient and become better, which shows with a customer satisfaction score that has improved by 10% for the second part of the year compared to the same period last year. Last but not least, we have zero financial impact this quarter from defaulted merchants.
This is thanks to our switch into becoming more customer-centric in our approach and also prolonging the payout times to the merchants. This marks the first quarter where we have no financial effect from bankruptcies from merchants. As we announced earlier this week, we will now centralize our operations to one office. This means that we will close down our second office in Malmö. This affects 35 full-time employees and 32 part-time employees. The majority of the full-time employees will be offered similar roles in Stockholm, while the customer service will be fully outsourced. We are really hoping to see as many of our colleagues from the Malmö office moving over to Stockholm and continue the journey on CDON from Stockholm. The cost side of this, this was not due to cost savings.
This is due to us increasing the efficiency in the organization by having everybody under the same roof. However, we see some increased cost, one-off cost for this year of SEK 7 million-SEK 9 million. These consist of tech and finance interim consultants. We have customer service outsourcing transition, and we have recruitment cost. We see, though, that these increased costs for this year will be offset already by 2026 due to a lower cost base from just having one office. We have increased confidence to realize our communicated SEK 40 million in lower OPEX run rate by the end of this year. With this said, I would like to hand over to Carl and some deep dive into our numbers.
Thank you, Fredrik. Let's dive straight away, looking at our reported figures. Please note that the performance for 2023 is within the group of CDON, including Fyndiq, from April 12th and 2022, both the fourth quarter and the full year, is really effectively only looking at the CDON segment. The comparability is a bit tricky. We will be looking into the segments further in this presentation. Despite adding Fyndiq to our business, we report a 4% lower GMV in the quarter compared to last year. On a full-year basis, we are 3% lower than last year. We grow our net sales by 6%, driven both by the acquisition of Fyndiq, but also a commission increase on both of our sites during the year.
We have higher gross profit, higher gross profit after marketing, and this stems from the underlying higher margin on Fyndiq and the effect it has on the group. In total, we were able to turn around a negative EBITDA performance of -SEK 115 million in 2023 to a SEK 23 million EBITDA in 2022. Diving into the segments, and this will not necessarily add up to the group. As mentioned, it has to do with the inclusion of Fyndiq only from April 12th in the group figures. By all means, we have faced a tough market in 2023 and in Q4 in particular. Svensk Handel estimated the impact on the e-commerce as a whole to 8% on an annual basis and 11% in Q4. CDON segment is down 28% versus last year.
We do compare that with a period which was fueled by lower margin GMV, but we are not satisfied with the performance of the segment in the fourth quarter. Our Christmas sale did not necessarily reach targets that we set up internally. Full-year GMV of SEK 1.6 billion equals a 21% decrease on the full year. On the other hand, on Fyndiq, we are slightly more positive, and we have grown in the fourth quarter of 5% versus last year. We had a strong Black Friday and November sales period, and that contributed to this performance. Full year, roughly in line with last year of SEK 493 million, equals a -1% performance on the segment.
Looking into some of our profitability measures, CDON has improved its gross profit margin to around 60% following a lower 1P share of our business, becoming more dependent on the 3P share with a fundamentally higher gross profit over net sales. Fyndiq has sustained a high gross profit margin of around 98% in the quarter and year. Combining these two segments, we reached an absolute gross profit of SEK 112 million in the quarter, SEK 353 million full year. This is actually higher than the reported figures of 2022. We have seen a step change in our take rate in 2023, which is driven by the commission increase and also the shipping fee increase. We have not only been able to sustain the high take rate that we performed in Q3, but we have improved further in the fourth quarter.
We can see the commission increase in Q1 on the CDON segment, but also the category/service fee harmonization that we did towards the end of the year and the effect it had in Q4. Full-year take rate has increased from 11% to 13%. That is something that we're very proud of. Despite a small drop in Q4 for Fyndiq's take rate, which is really due to a seasonally higher average order value, we observed a higher full-year take rate of around 28% versus 25% for that segment. Bearing the GMV performance in the backdrop in mind, it is a rather impressive GPAM gross profit after marketing performance we see on the CDON segment. Despite a 21% decline in GMV, GPAM has increased by 14%.
The GPAM margin has increased to 9.2% in the quarter and 8.2% full year, equal to a roughly 50% increase versus last year on quarterly as well as full-year basis. Fyndiq's margin remains strong, increasing further from 17.2%-17.5%. While GPAM essentially captures the net effect of our take rate and marketing efficiency, it's worth taking a look at also the absolute marketing cost as a percentage of GMV. We see a lower marketing spend as a percentage of GMV on the CDON segment due to our increased efficiency in our marketing spend. It has been rather stable during the year and something that we expect to continue going forward. Fyndiq's marketing cost has increased as a percentage of GMV, but it's really an effect of our increased take rate and our ability to spend a higher absolute amount on marketing.
As we remember, we're still able to increase our GPAM margin despite this increase in marketing spend. When adding up these two segments, we see SEK 21 million EBITDA. This is an improvement of close to SEK 130 million versus last year. It's slightly different from the reported SEK 23 million EBITDA Fredrik mentioned, but it has to do with the inclusion of Fyndiq from only April 12th. We note this seasonality in our business and business model and the importance of the fourth quarter to us. EBITDA amounted to SEK 17 million alone in the fourth quarter. Going forward, we expect strong leverage on our profitability, and as GMV normalizes, we should be ready for profitable growth from here. As mentioned in the Capital Markets Day in November, we clearly observed a lower cost base in 2023 versus 2022.
At the same time, we have a higher temporary cost base in the second half of 2023, which stems from the ongoing integration of our two companies as well as the platform migration. We remain confident that we will reduce the cost base during 2024 and achieve the SEK -40 million run rate saving that we communicated in connection with the acquisition of Fyndiq. The centralization of operations to Stockholm has further strengthened our confidence that we will achieve this. It will add some one-off costs in 2024, but we are looking to be transparent and show the adjusted effect of those costs in 2024. Lastly, a few words on our cash flow. We are very happy to report a significant improvement in the operating cash flow before changes to work in our working capital. We expect this positive trend to continue from here.
In combination with the extended payout time for merchants, we believe we are in a strong cash position, do not foresee any additional cash need, and that we are now a cash-generating business.
To conclude, Fredrik, join me on stage.
Yes. Thank you. To summarize this, we see good progress on our main strategic initiatives. Our platform migration is running according to plan with a deadline in September. We have continued solid growth of our main KPI, our gross profit after marketing, and we can conclude a fourth consecutive EBITDA positive quarter. With that said, this marks the end of the first part of this call, and now we open up for the Q&A section.
If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Nicklas Fhärm from SEB Equities. Please go ahead.
Many thanks, operator, and good afternoon to you and everybody. A lot of interesting KPIs and numbers to discuss today, I think. Let's start somewhere. I was going to ask you, when it comes to the churning or purging of unprofitable volumes and merchants, could you give us some idea of how you actually performed on a more sort of organic or lifelike basis compared to the market development that you just discussed in Q4, please?
Good question. And I mean, as we had previously communicated, we should shortly, and I believe we sort of have seen an end of that big spring cleaning that we have been doing. As you were talking about, Fredrik, we have started to add merchants. And I think it's now rather a trimming of performance of merchants on our platforms rather than a sort of bigger cleaning of actual number of merchants. I don't have a, well, I can't report a figure on the exact organic performance, but we should be seeing the end of that cleaning period.
Thanks. And also just reading up on sort of the word from the CEO in the report, etc., it seems to me, if I try to summarize that, implementing your strategy that we also listened to on your Capital Markets Day recently, you expect a significant buildup in inventory, and in turn, that will drive perhaps in combination with some increased marketing efforts that's expected to drive GMV growth in this year, of course. Do you think, though, that I mean, how should we look at Q1 specifically in terms of purging still unprofitable volumes and merchants? Is that sort of going to net each other out, or do you still expect that whatever you do achieve in terms of your strategy to increase inventory, etc., that we should still expect you to underperform the overall market development in Q1 this year, irrespective of how the market develops?
Yeah, good question. We try not to be too specific in our guidance. What we can say, though, we have the ambition, and we are very confident to be able to grow for the full year and grow with profit. When exact that will happen? We can, though, say that the Q1 is a little bit a special month given that we have the Chinese New Year's, and that affects especially the Fyndiq part of the business. And as we're growing the Chinese supply on the Fyndiq side, we get more and more sensitive, so to say, from that effect from the Chinese New Year's. However, after that, if it's the second or third quarter, we strongly believe that we will be able to show growth on top line as well.
Yeah. All right. Let's carry on. When it comes to the increase in take rates, I think it's quite an extraordinary increase, to be honest, even though it's very much in line with your communication at the CMD and your guidance. Can I just ask you, to what extent does that actually reflect a change in mix in GMV, for example, a lower share of electronics, etc.?
So I think starting on the Fyndiq side, I mean, there has not been a fundamental shift in the mix. So I think that's fair to assume that that is a rather stable and accurate reflection of our underlying take rate. Looking at our average order value, it has been relatively stable on CDON, not necessarily reflecting a large shift in our mix. And also on the CDON segment, we have more of a variable commission model compared to Fyndiq, where we are exposed to some fixed part of the commission, which is then tightly connected to the absolute AOV. So I think, as we said, we're able to improve the take rate during the quarter. I think this is a relatively I mean, this should be a plateau that we should be stable on.
Yeah. And just add to that, we don't see that this is any extraordinary levels by any means. This is a new normal level that we have reached.
Yep. Very clear. And final question for me has to go to the sort of savings ambitions. Admittedly, a really, really strong performance on cost management in last year, of course. But looking ahead now, you have communicated that you aim to take out another SEK 40 million in run rate costs as of the end of this year. And I think now you should have a pretty good idea on where those SEK 40 million will come from. And I would be very interested to hear your thoughts on sort of slightly more detailed levels to corroborate that total SEK 40 million, please.
So the SEK 40 million is mostly built up of sort of two, three larger categories: personnel cost, consultants, and platform and infrastructure costs. We have executed on the consultancy part of it and most of the personnel, not related to sort of platform efficiency. So the platform migration in September is key to us to realize the remaining part of the synergies attached to the combination with Fyndiq. We remain confident in that the migration is progressing according to plan. Hence, we should be able to realize the SEK 40 million according to our original plan.
Final, final, would it be fair to assume that now that you charge your P&Ls with SEK 7 million-SEK 9 million in costs for moving headquarters, is that also the targeted savings as of 2026?
Yeah. So what we're saying is.
Sorry, 2025. 2025. Sorry.
Yeah. So what we're saying is that we have a range. It's not defined yet. We hope as many as possible join us up to Stockholm. But depending on that, we will have a cost between SEK 7 million-SEK 9 million for this year. We see that already during 2026, that one-off cost will be offset by a lower OPEX run rate due to the fact that we only have one office.
Right. Thank you so much to both of you. Thanks for taking all these questions.
Welcome. Thank you, Nicklas.
As a reminder, if you wish to ask a question, please dial pound key 5 on your telephone keypad. The next question comes from Adam Wyden from ADW Capital. Please go ahead.
Hey, guys, can you hear me all right?
Yes, we hear you loud and clear, Adam.
Perfect. Thank you. Couple of questions. You guys didn't really in your EBITDA figures, you didn't really quantify one-off charges. I mean, I know you quantified sort of what the one-off charges you would expect in 2024 from the office, but I know you're not going to be precise, but I mean, is there a way to sort of quantify how much in the SEK 23 million, sort of how much is sort of temporary consultants or one-off or restructuring charges that because I think it might be helpful for people to sort of have a better understanding of sort of what normalized profitability is. I mean, I know there's been a lot of moving parts. You've integrated two companies. You're going to do the tech platform next year. You're going to do the headcount. But it might just be helpful to sort of talk order of magnitude.
I know sort of in old CDON pre-merger, they attempted to sort of quantify what was sort of one-time in nature. I mean, is there high-level, is there any way you can sort of help to sort of give us order of magnitude of sort of what were sort of one-time charges in 2023 so we can sort of get a better understanding of sort of adjusted EBITDA or normalized EBITDA?
I'll do my best. I think, I mean, to start off, there's no cost really associated with any restructuring cost. It's rather temporary consultants related to our platform migration in sort of order of a number of a low number of single-digit number of consultants in IT, tech, and data, really. We have been able to sort of weed out duplicate costs in software and sort of administrative costs associated with that. Out of the SEK 40 million and the three categories that I was talking about earlier, I think we have done sort of most of the sort of fundamental cleanup of the consultancy and the personnel cost side of things. However, the net effect is diluted and sort of all-consumed, really, of the temporary costs to that. The platform migration, we released most of the SEK 40 million.
I think, I mean, to be talking to be saying that we're sort of halfway there, right? I think both in terms of time and our ability to achieve cost is not too bad reference point.
Okay. So yeah, I'm just trying to understand because I think at the Capital Markets Day, you guys sort of threw out a number like you had a chart which sort of said you had an increase of about $10 million of OPEX relative to the 40. And so I'm just sort of working off of that. And sort of, again, I think we're all just sort of trying to figure out. I get it. There's a lot of moving parts. And sort of there's some costs that are going up in the short term, and some costs are sort of restructuring and sort of one-off.
I think what we're really trying to understand is sort of from where we are in sort of for the full year of 2023, sort of how much of that cost is sort of that's not in the EBITDA is sort of temporary or sort of one-time in nature combined, I guess, is what I'm saying. I know there's sort of things that you're taking on, you're one-offing, and then you're putting other things on. But I'm just sort of trying to get a sense of sort of what is sort of the normalized number based on this GMV base, but obviously not giving you credit for the take rate and the tech platform and that.
Yeah. And to me, and I think also referring back to that chart from November in the Capital Markets Day, we are still on the level of the acquisition and have not really decreased from there. We are probably, roughly speaking, halfway there, but we have added cost back to that. So the net position is really similar to the level in Q1, Q2 timing of the acquisition. So net effect on the P&L, a clear majority of that should come out from current levels in 2024.
Got it. Okay. That's helpful. Can you talk a little bit about? I know they talked about sort of take rate and mix and stuff like that, but I mean, do you expect any development sort of on? I know you guys took a big take rate increase in Q1 on the CDON side, but I mean, do you see sort of developments on take rate and sort of value-added services in 2024, or is it primarily the focus on growing GMV in 2024? Do you think that there's sort of can be? I mean, Fyndiq is sort of already there, but on the CDON side, do you expect future sort of more development on the take rate side and the value-added services side?
Yeah. We have some work that we are doing and are about to do when it comes to aligning the selling fees from our merchants. We have some aligning to do there that we can do during the year. When it comes to the value-added services, we need to make sure that we focus on the right things here. And for us, number one, two, and three is to make sure that we get the migration of the platform done by September. So in the light of that, we are a little bit hesitate about also putting focus on the value-added services, to be honest. And for now, we see also that the coming at least six months, we will have a great focus on pushing top line up.
We see that there, we will have the majority of the effect, which will trickle down to both the Gross Profit After Marketing and all the way down to the EBITDA.
So again, I sort of go back to your slide on November at the Capital Markets Day, but you guys basically had, I think, in your middle case, like SEK 230 million of EBITDA for 2026. I mean, we're sitting here in February of 2024. Obviously, interest rates are going to come down. The consumer is probably going to improve in the back half. I mean, it's fair to assume that the path to sort of SEK 260 million in whatever, 2026 is not going to be like a hockey stick. You would expect some sort of linearity in that capacity, right? That you would this isn't like that you would expect sort of more linearity sort of in the financial plan from here.
Is that sort of fair to assume that you would expect some sort of GMV growth in the back half and sort of sort of a more linearity sort of as you sort of go through 2024 into 2025? I mean, obviously, the platform's a big one. That'll be in Q3. But I mean, would you sort of expect more linearity?
We cannot say if it's one-to-one linearity, but definitely not the hockey stick. The hockey stick days are over, and we have a more solid growth in the company, definitely. So we're not pushing everything ahead of us. We see that we will continue to have a solid growth in our gross profit after marketing. The best way now that we can see how to increase those levels are to increase the top line GMV.
We know how to grow a marketplace, have done that successfully with Fyndiq most recently now in the last two quarters. We understand how to grow that profitably, and we should be applying the same recipe, which we're doing key strategic initiatives on CDON as well.
Last question for me. Is it fair to assume then? I know I think Nicklas sort of tried to touch on this in terms of growing out sort of growing market share beyond the market. But putting that all aside, I mean, I know you guys are not macroeconomists, but the Nordic e-commerce has historically grown 10%-15%, but probably closer to 15%. You've sort of seen and then when you adjust sort of for sort of for sort of for inflation as well, you've had sort of big sort of big declines in 2022 and 2023, even more so adjusted for inflation that are, I mean, wildly recessionary. And again, I just use the U.S. as an example.
I mean, in 2009, Amazon won a lot of market share because they were actually able to provide better value and better prices for the customer, and they were more price-conscious. I mean, I guess my question back to you is I don't know, but I would I see a lot of retail bankruptcies in Sweden. I would think that that would be an opportunity for you guys to, I guess, win market share. And I guess I would think I'm curious your opinion, but I would think that there's probably some tailwinds in e-commerce in the context of sort of price-conscious consumers, inventories getting moved from 1P or whatever you want to call it, retail stores and people trying to get their goods. I mean, I read a thing that, well, one of the big sporting goods retailers is basically closing all their physical stores.
I think they're actually a customer of ours. I mean, I would think that those would be all sort of tailwinds for e-commerce in the Nordics. I mean, are you sort of expecting that? I mean, it's one thing to win market share, but it's also another thing to just sort of have tailwinds in sort of the end market. I mean, would you expect sort of the end market to improve sort of in the back half or into 2025? I mean, do you sort of have a view on that?
Yeah. I would say the consensus view, and you know that we like consensus in Sweden. The consensus view now is pretty much that we will have a tough first half year in general in the economy and a much more positive second half year. When you're looking into the consensus for the e-commerce industry, it very much aligns with that view as well. For us to be opportunistic, as you say, to attract more overstock and so on, we don't anticipate that. We are much more fundamentally moving ahead with the big chunks of the core of the marketplace model with the supply and the customer happiness. Of course, we can become opportunistic, but we still believe that these core parts are the parts that are going to win us the battle both in the midterm and in the long term.
Good. Well, that's very helpful. Thank you guys for the progress. It's nice to have four consecutive quarters of EBITDA and no surprises in Q4. Hopefully, we see the shares follow soon. Appreciate all the hard work.
Thank you. Thanks.
As a reminder, if you wish to ask a question, please dial pound key 5 on your telephone keypad. There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.
Yeah. Just one before we close this, operator. We cannot see if there have come in any written questions. Could you please confirm that we have no written questions?