Hello and welcome to CDON Group's Earnings Call for the first quarter of this year. Next to me, as usual, we have our CFO, Carl, who will join us later on for some more digging into the numbers.
Thank you.
To summarize this quarter, it was a challenging start of the year. We had a weak start with a weak January and February. We did a lot of operational work to turn this around during February and identified a lot of adjustments that we implemented. Happily enough, we saw that it yielded a good return. We had a good ending, at least, of the quarter. We just released that we also are now reviewing strategic alternatives in order to realize our business' full potential. Starting with the sales, as I mentioned, very weak start of the year. Both January and February were way below our expectations. In February, we identified the problems we had, both with some key merchants, but also with some key categories that were underperforming.
We implemented and worked really swiftly with this and managed to implement a lot of changes during the end of February. Looking on March, we can see that it was a good comeback, so to say, for the quarter. Looking into the gross profit after marketing, our main KPI, we can see that it is, though, lower than last year. This is affected partly because of the weak start of the year on the top-line sales, but also affected by higher marketing costs. We still have a dependency on the paid marketing channels, and that makes, becomes, and continues to be costly for us. We also see that we have a negative development in our two home markets for both segments, Sweden. However, looking at the Nordic countries, they are very positive for both segments. We also introduced a new API at the end of the quarter.
We now have one API where merchants and aggregators can integrate with instead of having two. We now have one way of integrating in order to sell on both our marketplaces. This has also meant that we have had a little bit of a pause of onboarding of new merchants waiting for this new API to get live. I am really happy now to inform that we are live with it and we have the first merchants and aggregators integrating to it. This will enable us and open up for much more onboarding of new merchants with great supply the coming quarters. What we just press released is that we have now initiated a review of strategic alternatives in order to realize our full business potential.
It's including, but not limited to, take private transaction, capital raise to fund strategic growth opportunities, as well as sale of the company in part or in whole. The whole management team really supports this and believes that all these venues we have would be very good for this company realizing our full potential. Let's not forget, we are building something really big here. We are changing the way we are shopping online in the Nordics, and that does take time. We believe that these venues are very positive in order to build this for the future. All right, let's look into some numbers, and I will get back for a summary in the end.
[audio distortion] In the quarter, we were impacted by macroeconomic uncertainty, limited competitiveness in our supply, and also a larger impact.
A larger impact. Sorry, can you hear me properly? Can you hear me okay? Okay, I'll continue. On the GMV side of things, in the Fyndiq segment, we were impacted by Chinese New Year's to a larger extent than before, given a higher exposure to a Chinese merchant base. 16% lower net sales in the quarter, heavily impacted by the weak 1P performance, which affects net sales adversely. If we isolate 3P net sales, it was only down 4% versus last year. GPAM declined by 13% as higher take rate was more than offset by higher marketing costs. In total, EBITDA amounted to SEK 0.2 million, but adjusting for a bad debt resolution, EBITDA amounted to minus SEK 4.4 million. Both segments struggled to reach growth, but for different reasons. We saw the uncertain macro environment and uncompetitive supply mostly affecting CDON, but also Fyndiq.
GMV in the CDON segment was down 14% versus last year, but March sequentially better. The positive momentum in 2024 for Fyndiq turned negative as Chinese New Year had a larger effect this year following our higher exposure and our willingness to manage and mitigate any negative customer experience during this period. GMV was down 4% for Fyndiq in the quarter compared to last year. We see continued steadiness in our take rate and a strong take rate in CDON as we continue to benefit from the higher shipping commission that we introduced end of last year. There is a seasonal recovery in the case of Fyndiq, and all in all, this led to a take rate of 15.2% for CDON and 29.2% for Fyndiq. As mentioned, this led to a lower GPAM and continued pressure on our GPAM margin.
Despite the high take rate in the quarter, GPAM declined 16% more than GMV for the CDON segment. The margin fell slightly to 8.5% versus 8.7% a year ago. Fyndiq GPAM declined by 9% in a quarter where we experienced an expensive traffic mix reading. The margin fell to 17.9% from 18.9% a year ago. Some positive signs, as we saw lower marketing cost as percentage of GMV, but we are still really looking into the expensive traffic mix that we currently experience. Across both segments, we see a high share of paid traffic compared to organic, and reducing this dependency remains a strategic objective of ours, but it takes time to achieve this. The marketing cost as percentage of GMV came down slightly for both segments, reaching 6.6% for CDON and 11.2% for Fyndiq. Positive reported EBITDA, but adjusted EBITDA is not in line with our ambition.
It is a seasonally weak and tougher Q1, and we are reporting a positive EBITDA compared to Q1 of last year. However, adjusting for and being honest about the resolution of bad debt, EBITDA amounts to SEK -4.4 million in the quarter. Lower OpEx, which we will see on the next slide, does not fully offset the weaker commercial performance in the quarter. We remain on track and are satisfied to report the lower OpEx versus last year and also versus Q4. This means we have been able to realize cost savings related to personnel, consultants, and also software and platform costs. This was enabled by the successful migration in September last year, but we now continue to reap the benefits of being integrated and operating on one shared platform.
There are still some temporary costs included in Q1 cost base that we expect to take out in the coming quarter. This means that we are on track to realizing this lower run rate of minus SEK 40 million that we have been talking about since the acquisition of Fyndiq. Negative cash flow in line with the seasonal pattern. Negative operating cash flow before changes in working capital following that weak performance. However, our cash balance remains stable, and end-of-period balance was SEK 77 million, similar to that of last year. It means that we have good control of our cash balance and are able to manage these times well. Is it time to wrap this up, Fredrik? Welcome back up on stage.
Yes, thank you. Yeah, to summarize this, a weak sales start of the year, but we really managed to identify the problems, implemented it in February, and we could see the benefit of it in March. We have press released about us looking into ways of really fully utilizing or fully realizing the potential in the company. I must end with saying that we are building something big, and that takes time. All right, with that said, we open up for some Q&A.
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 Johan Fred from SEB. Please go ahead.
Hi guys, thank you. Thanks for taking my questions. First one on sort of current trading. You mentioned that the first two months of the quarter were soft, while March performance was in line with last year. You cite some initiatives in the report that helped you regain this momentum. Given these initiatives, is it fair to assume that the sort of March trend has continued or even improved year on year in April? That's my first question.
Yeah, we have not previously commented on current trading, and we have chosen to continue in that way also. What we can say is that within March, at least, the trend ended even intra the month in a positive manner at the end of March.
Okay, got it. Without commenting on current trading, do you see these initiatives that you mentioned as something that will stick throughout the year?
Yeah, that's a very good question. Definitely, sometimes you have maybe initiatives we're doing that have a temporary effect. What we have been focusing on now is really our top merchants, but also our top categories, and that is something that we will have gained benefits for the rest of the year. We believe now also we have a quite solid base to continue from for the rest of the year, and definitely a very, very interesting base looking into the second more important half of the year.
Very clear. Thank you so much. The second question on take rate. We've seen a step up throughout 2024, which has also continued into Q1 here in 2025. You mentioned your freight or shipping agreement as one example or how you take costs for those. Is this a shift in your model and strategy? I.e., should we expect the take rate to continue to creep upwards, or are you sort of satisfied with the current level? Essentially, how should we think about the take rate coming quarters? Thank you.
Without sort of guiding to in the future, I mean, we do have a fundamental financial directive about increasing our take rate over time. That can be achieved in many ways. As you rightly point out, the increase primarily in CDON that we saw in Q4 and now Q1 as well was driven by a shift in the shipping commission model, so the way we do that. One can also drive take rate through value-added services and other services. I think that would probably be the step changes that we would drive in the future. Looking back before Q4, we've had fairly consistent and steady take rates across both segments, and I think it's fair to view upon our take rate as something that's more stable than volatile.
Also, to add on that, I think it's an interesting question because talking about increasing the take rate and margin, what we announced today to really make the possibility to realize the full potential of the company, that is some parts of this that we're talking about increasing the take rate. Examples of that are, for instance, our fulfillment services. We're talking about retail media. We're talking about merchant ads and so on. All of those things that we have the blueprints for, and all the other marketplaces are doing this, but we really haven't the resources now to fully get that live. Those are examples of things that we want to utilize more when we're talking about the full potential of the company.
Yeah, that was actually my third and final question. It's sort of, I understand that you see great potential for the business, but in your opinion, what is it that you're currently limited to from realizing in your current setup as a listed entity? Is it that you're cash trapped? Or in your opinion, what's sort of the upside for doing any of these strategic alternatives?
Yeah, good question. To start with, the cash balance is, as Carl mentioned, SEK 77 million at the quarter end. It is a solid cash balance we have in the company. What we are looking into is, though, to do some investments. We are talking about maybe into the organization to make sure that we can work faster on things that we have in our backlog, maybe get out with our two marketplaces more into the market, to the consumer market in a higher degree than we have had the ability to do yet. That could be two examples. Yeah.
No, I think you're right to separate this from operations where we have a steady cash balance and the high potential, high return on investment opportunities that we have and the need for additional funds to really complete those investments. Two separate buckets in my book, and that is a driving factor.
Yeah. Where I was going at, and I lost myself a little bit, was also your question about unlisting the company and what the benefits are with that. We are building, as I said before, we are building something big, and to take long-term investments that generate short-term loss can sometimes be challenging in an unlisted environment where you get judged by the last three months, and we are talking about next year and two years and three years and so on. That could be an upside also by operating out of the market.
Got it. Very clear. Thank you so much for taking my questions, guys.
Thank you.
As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. The next question comes from Niklas Elmh ammer from Carlsquare. Please go ahead.
Yeah, good afternoon and thank you. My first question is regarding the press release. Can you comment a bit? What is the timeframe for this review? Also, what kind of costs are associated with this?
Yeah, I think I at least can comment on the first one. We have to, for compliance reasons, we have to press release when we initiate this type of partnership that we're doing now with ABG Collier. We are really at the first step, pretty much signing the contract with them. This is nothing on the table. This is just us exploring what alternatives we have. Probably this can take some time, very hard for us to say for now. Yeah. When it comes cost-wise, I mean, we believe that it will be very low cost if nothing will happen. Of course, if it will be some kind of deal, it will arise some costs, but that depends on what type of deal this will be.
Okay, thank you. Regarding your initiatives that you implemented in March, could you please elaborate and give some examples of what those?
No, I think, yeah. I think one thing that we lost a little bit last year, we were focusing on really big building blocks, as I have addressed it as previously, big building blocks as a new organization that are in place now, and one common shared technical platform that is also in place now. By doing that, we lost a little bit of focus not only on aggregated level, but also which merchants were not performing well and which categories were not performing well. We lost a little bit of focus on that, and that became very clear in the beginning of this year. As we said to Johan before, also, there are a lot of initiatives now that we have yielded good effect from already now, but we see also will have a very long-term effect for the rest of the year.
It is sometimes really good to find these things that aren't working and you're fixing it, and you can see that that is good for us for the rest of the year. These, I would say, the majority of the things we have fixed is very positive for the whole business for the whole year.
Okay, thank you. Just one question regarding GMV dynamics. You saw stable traffic, but higher average shopping basket, but drop in conversion rate, I believe. Maybe if you could elaborate a little bit on your thoughts on that.
As you rightly point out, Niklas, it is that complex equation of sessions, conversion rate, and the average order value. We are also in a period of pre and post-migration that might skew the way we define sessions at different points in time. A number of our orders are down driven by that lower conversion rate, and that's something that we're working hard on to get back up to. I think one needs to view those numbers with a bit of caution given that big technical shift that happened during the period.
Okay.
We can see also that in general, last year, visitors and people, consumers are more cautious when opening their wallet, both in actually spending money online, but also getting back and forth a little bit more, comparing prices more and so on. CDON being more on the upper side of average price per product and so on compared to Fyndiq, we can see that Fyndiq gained a lot of new visitors last year with this focus on price sensitivity. That is also the flip side of it, it is something we see now on CDON.
Okay, and that's a bit of a segue to my next question. I believe the last quarter you had some cautious optimism regarding Swedish e-commerce and that you were fitted to grasp the potential. I mean, the macro environment has perhaps changed a bit, but if you could update your view on that.
Yeah, it's really hard. I think I have tried to speculate a couple of times now, and I think it's time for me to stop doing that now. I am by heart an optimistic person, and this should also turn around. It's very hard to say. What we can do is to focus to continue building what we are building, and over time we will get a return on that. Now, I think I will stop now trying to guess what happens in the world.
I think that's fair. I mean, looking both through Svensk Handel or to PostNord, I mean, there are very mixed signals out there in terms of consumer sentiment and macro. We do live in a more volatile macro environment than we did some six months ago. As a marketplace, I think we're well equipped and well placed to benefit from such volatility. We do operate with less risk in terms of our inventory. As long as we continue to deliver excellent customer experience and connect merchants and buyers, we will continue to move in the right direction.
Okay, thank you. Regarding marketing and GPAM dynamics, do you believe, I mean, you have mentioned increased Google tax or what you want higher with it, but is this a normal level now going forward?
Yeah.
11%.
I think it's very hard to say. I mean, we need to look at it separately really for both segments. I mean, as we did see in the presentation, there has been an increase even though there was a slight sort of return to somewhat lower levels in Q1. We have experienced, I mean, quite some competition in Q4. I guess in periods of volatility, weakening macro, there are multiple buyers out there for the paid traffic. You know, there is definitely dynamics that could drive and continue that high competitive pressure that there is. At the same time, we can really focus on what we do best in terms of driving a balanced traffic mix and focusing on the organic side of things to reduce our dependency and the cost of things.
Because as we saw just a year or two ago, we were at different levels. It is possible. We have a clear vision on how we will, how we want to be a shopping destination and be reliant on organic and paid traffic.
Yeah, exactly. To summarize, we have a mix now that is too much skewed towards the paid traffic channels. We are working from the beginning of the year, I would say, had a lot of focus on fixing this. It is hard to say. Google is still very dominant both on the paid channels and also on the organic channels. Yeah.
Okay, thank you, gentlemen. That's all from me.
There are no more questions at this time. I hand the conference back to the speakers for any closing comments.
Okay. No written questions neither. Before I end, I would like to shout out CDON now has the biggest assortment of electrical bikes at the best prices. Take the opportunity now. The sun is up and the bike season is around the corner. Go in and buy a new bike on CDON. With that said, thank you everybody and goodbye.