Earnings Call: Q3 2021

Oct 21, 2021

And welcome to the CDN AudioCast with Teleconference Q3 2021. Throughout the call, all participants will be in listen only mode and afterwards there will be a question and answer session. Today, I am pleased to present Josephine Salinstead, Chairperson of the Board Alan Jumiejensen, Interim CEO and Niklas Tige, CFO. Please go ahead. Hi. Welcome everyone to the call. I hope you're doing well. My name is Josephine Stahlenstedt and I'm the Chairperson of CDM. I'm also a partner of Wright Ventures, which owns about 25 percent of CDN. With me on the call, I have Alain Junge Jensen, Interim CEO since early Q3 and our CFO, Niklas Seeger. Today, I'm going to do a short introduction to our strategy and then hand over to Alain and Niklas, We'll give you a deep dive into our execution results of Q3. Let's jump straight into the next slide. We have built our execution priorities around 4 pillars. First, CDN aims to become the starting point of shopping in the Nordics. Right now, a large part of our population in the Nordics are familiar with the CityOn brand, but we are not yet their go to place for their shopping. However, our aim is to become a natural shopping destination for consumers, where people go in order to find and buy the products they want. Next slide, please. To do this, there's no secret sauce. We just need to offer our customers the best experience they can find online. Even though we are in the year 2021, shopping online in the Nordics is often messy and time consuming. With the number of online retailers growing And the number of products available to consumers exploding, it becomes harder and harder for consumers to find the products they want and to make their purchasing decision. If you don't know for sure exactly what your search for and where to find it, you tend to start with a Google search, the opening of several windows to check out different web Going back and forth between different pages, comparing, checking specifications and reading product reviews. To some, I just think it is unworthy of our time. At CDN, we aim to eliminate all of these friction points, Creating a great seamless joyful shopping experience. Shopping research and selection tools will be the core of our offering. Our customers should be able to find the best assortment at the lowest prices, the best tools to make their shopping decision, be it reviews, product specifications, Our ambition starts early in the customer When the customer becomes aware of the desire to look for a product and ends long after the products are delivered. However, in this quarter, our core focus had been on our on-site prepurchase experience. We set the bar high, but we start from where we are and we are working on improvement step by step. Next slide, please. In Q2, as many of you know, we identified the structure of our product data as a root cause to many of the challenges we have had with improving our on-site UX and the efficiency of our traffic acquisition. We acquired a minority stake in Shopbit and the aim was to leverage the technology to step change the quality and structure of our data. Both the CDN and Shopee teams have worked hard on the project and releases based on Shopee's technology is coming basically as we speak or very soon. We're excited to follow the results from this release and also to follow the coming releases of ongoing projects related to Shopbit. Alain will tell you more about the road map here. Q3 has been a lot about fixing the basics and getting up to speed. And my view is that we have carved a lot more ground in relation to fixing the basics than I would have hoped for just 4 to 5 months ago and further on this topic on the next slide. At CDEON, we talk about our platform increasingly becoming a powerful sales engine for merchants, both local and international. That means providing the distribution, platform applications and services to substantially increase the merchants' revenue. The power of the platform becomes stronger for every new merchant and every new customer joining, and our service layer will be developed to help the merchants leverage that to drive their sales. As the work stream of fixing the basics is going well, we can now in parallel invest our time and resources in developing our merchant offering and ecosystem. And as part of this work, we have in Q3 increased our M and A capabilities and are actively building an M and A pipeline. Next slide, please. We focus very hard on our core categories, aiming to be in a leading position in the Nordics in these categories. We have a steady and healthy inflow of new merchants to our platform. And since Q2, we work more strategically here than before. Today, most of our merchants are 1P retailers selling other brands' products using CDON as an additional sales channel to their own channels. In the future, in parallel to our current type of merchant base, we expect a part of our coming merchant base to be brand owners using our platform to to communicate and sell directly to consumers as their major or only digital channel. To be relevant for larger brands, we work to develop our offer and we design our services to cater to this need as well. Next slide, please. 4, we're going to create a strong local brand. Sirion is historically well known for being a reseller of citizen books. That history has taken us to the position we have today. Tomorrow though, we want to be a brand that is not only known, but loved. The CDON brand should be a brand for people to rely on and to relate to, partly because it's Nordic and to return to over and over again. Our ambition to become a preferred distribution and sales partner for strong brand owners and to build a strong consumer brand requires a leadership with deep understanding of brand development, Service and product development and experience from business transformation. For this reason next slide, please I'm thrilled to welcome Peter Kjellberg as the CEO of CDN starting from January 1. Peter Kjellberg comes from a background at the listed companies, Domedica and Thule, 2 companies that have undergone severe transformation and repositioning of their respective brands, to a large extent driven by Peter. Both companies have also driven aggressive organic expansion alongside very active M and A agendas. Both companies have created a tremendous amount of shareholder value. We have chosen to appoint Peter due to his deep experience from the commercial and drivers of strong consumer brands and are building very competitive positions. We also think that Peter has an ability to drive change and performance at a high pace, which obviously is a perfect fit to our current core team and the culture we're building. Peter comes with a great vision, Ability to sell this case, a track record of building teams and of getting things done. Obviously, I'm super excited and almost can't wait to have Peter on board to lead CDN from 2022 and onward. This was all for me today. Thanks a lot. And now I hand over to Alain. Thank you, Josephine. Please turn to the next slide. Before I turn to the presentation, I would like to give you my assessment of the past 3 months as Interim CEO for the company. First of all, I would like to thank all the fantastic employees at CDON. They are all, in my view, committed to building the starting point for shopping in the Nordics. The transformation from 1P retail to becoming a 3P marketplace has been done fast and both the technical platform and the liquidity And the liquidity in the number of merchants is a very good starting point to achieve success. With this in mind, we proceeded with our initiatives to grow our business, and we are happy to report double digit growth in the Q3 of 2021. One of our main objectives in the quarter were to commence the integration of the Schabbard technology as Josephine talked about. By now, the first iteration is about to be completed and we are expecting to see results and improved categorization and higher quality of the attributes connected to individual products. Furthermore, we conducted a direct advice issue raising approximately SEK 200,000,000. And lastly, we appointed Stefan Eggerstadt as Interim CFO as of November 1 this year. Next slide, please. During the quarter, we saw a positive trend in growth where September stood out as the month with 22% growth in GMV. This trend has continued into the 1st 18 days of October where we have realized more than 40% growth in gross merchandise value. Despite the higher GMV, we are increased we have increased the investments in improved customer experience, which is reflected in the EBITDA development in the quarter Slightly downward. Next slide, please. Our priorities for the immediate future are to continue expanding our core categories and to continue with the integration of the shopper technology to improve customer experience. Further, we will direct attention to our loyalty program, CDN Plus, which will be relaunched in the coming weeks, taking away the bonus element and concentrate fully on free shipping at a fixed price. Further, we will continue our work On improving our marketing efficiency and lastly, we will build and execute on our M and A pipeline to strengthen the development of our marketplace, both from a technical perspective and from a consumer perspective. Next slide, please. Having a category is not necessarily the same as having everything available to offer to our consumers. We want to expand our Core categories to become key categories and later on destination categories, simply implying that eventually consumers can always find whichever item they want on the CDN marketplace. Linked to this strategy, we continue focusing on onboarding high value merchants, which will increase the assortment in our core categories. Next slide, please. When expanding our core categories, we need to address the challenges of displaying several thousands of different and similar SKUs. The Sherbet acquisition assists us in this matter as we in the next phases of the integration will focus on the onboarding of new SKUs And grouping of the same SKUs from different merchants. This, together with the built in machine learning capabilities of Shop It implies that we will become better at Displaying the most relevant data for each SKU as well as optimizing our marketing efficiency in online media. To say it in short, the overall objective of integrating Sherbet is to leverage the increasing number of SKUs at CDON and at the same time, avoid future pollution of our marketplace. Next slide, please. In addition to the already known revenue streams, we have during the quarter initiated a relaunch of CDN Plus to take place in October 2021. And we have also commenced a pilot project of fulfillment by Syneon, where we have started out with 6 merchants. We will continue to explore the improvement of our offering to both merchants and consumers with respect to additional revenue streams as we Still see great potential in creating more value to our stakeholders. Next slide, please. In line with our long term growth, this table illustrates that we expectedly are gaining market share in the 3rd quarter and also that we are pursuing to take market share in the coming quarter. Just to remind you, we still do expect volatility in GMV growth moving forward. However, over a longer cycle, we aim at outgrowing the market. And now to walk you through the numbers, I hand over to Niklas, our CFO. Thank you, Alan. Q3 was in many ways a turning point. We started off well, saw a slowdown end of July August and then turned again to 22% growth in September for the marketplace business. We still have work to be done, But at the moment, we are driving sales at a much more efficient way compared to Q2, which we can see by the 3P GMV growth, which in total amounted to 50% in the quarter. Our retail business continues to decline, mainly related to the market within the traditional media categories. As we communicated in Q2, We are working more targeted on our merchant onboarding, shifting focus from volume increase in number of merchants to a more strategic and tactical approach. For this reason, we are now focusing in on the KPI merchants that are selling instead of previously merchants that have products on the platform. This will naturally be a lower number, but it will better reflect the status of our merchant base and correlate better with the development in our GMV. Moving to next slide, please. Looking at the KPIs and some of the drivers of our business, if we start with traffic, we did see a decline of 32%. We continue to have a negative development versus last year, but the trend since Q2 is now improving. As a result of the decline in traffic, number of orders also declined with 22%. However, Thanks to strong execution within other parts of our engine, we managed to increase our average order value with 34%. Moving on to next slide, please. Our income statement. CDN Marketplace had a growth of 15% GMV, which resulted in a net sales of the SEK 47,600,000. The reason for the lower net sales and gross profit is mainly due to a shift in product mix, which is related to a strong growth within the consumer electronics segment. Our other segment, CDN Retail, Continues to be phased out according to plan as the majority of the volume is related to traditional media categories. EBITDA amounted to minus SEK 3,200,000. This decline is mainly driven by lower gross profit from CDN Retail And increased operating expenses related to investments in CX and our platform to build for future growth. Moving on to next slide. Our fixed assets increased to SEK 90,600,000, which is related to the investments We did in ShopIt of CHF 27,100,000. Inventory continues to be reduced related to CDN Retail. In total, it now amounts to CHF 12,900,000 compared to CHF 26,300,000 last year. The direct share issue in Q3 increased cash with total of SEK 188,700,000, which also increased equity, which now amounts to NOK 202,000,000 Moving to next slide, please. The cash flow from operations during the quarter amounted to CHF 12,500,000 compared to CHF 4,400,000 last year. The difference versus last year is mainly related to the lower EBITDA and inventory that during last year had a positive cash flow effect of SEK 17,000,000 compared to SEK3 1,000,000 this quarter. The investment in ShopIt impacted cash flow from investing activities with SEK27,100,000 And our investments in CapEx amounted to SEK 4,100,000 compared to SEK 5,000,000 last year. The direct share issue with net proceeds of SEK188,700,000 increased cash, which at the end of the period amounted to SEK186,600,000. And now I hand it back over to you, Alan. Thank you, Niklas. What you should take away from Today is that we are continuing our growth into the Q4 and that we will accelerate our on-site customer experience. We have the team in place to execute our strategy, and we will pursue all opportunities within organic as well as inorganic growth to strengthen our future offering. Thank you very much for this time. And now we open up for the Q and A session. And the first question is from Nick Forum, SEB Equity. Your line is now open. Please go ahead. Thanks, operator, and good afternoon, everybody. So my first question is actually on the trading update in terms of October actually. And my question is, now if you're right that you expect the first releases connected to Shop It on CVON's platform should be done in October. Does that mean that you've generated sort of these Plus 40% growth rates in 3P GMV actually without any specific Sort of impact from the shopper technology so far? Or how should we read that? Alan speaking here. I think that you should read it as the 1st part of October is growth without The ShopIt technology in place. So when we communicated October, it is actually as of the past 2 days That we have released the majority of the first integration of Shopee Technology. Okay, okay. Thanks for clarifying that. Very interesting. You also write in the comments from the board that in many aspects, Q3 was a type of quarter that you hope to be able percent on a regular basis. What does that relate to? Is that relating to sort of The current run rate in 3P GMV growth or does that relate to the 15% generated in Q3 as a whole? Or is there any other implications of that statement that you would like to convey and clarify, please. Hi, Josephine here. Good question. Thanks for that. Yeah. What's important to us is that we improve every quarter in all aspects. And when we say that Q3 was a quarter that we hope to report many times in the future. It relates to that. We worked a lot with the team. We improved our internal processes and how we worked, but we also did some really great recruitments. We also think that we have improved our growth rate from Q2 both from Q2, but also during the quarter, ending the quarter with a better momentum than we had at the 1st part of the quarter. And then obviously, you know, What we are trying to accomplish is to create a great customer experience. And so it's really important that we make improvements step by step all the time. And we have done some improvements here and there on the customer experience during the quarter and that will continue moving forward. And then 3rd, obviously, Work with the merchant base and make sure that we continue to develop our assortment and the pricing points so we become even more relevant to our customers from an assortment point of view. Thank you again. Could I also ask you, when you say that you think that there is no particular reason for why you cannot have the same market share as bol in In the Netherlands, that implies doubling of kind of your penetration right now. Is there any timeline here? Is that in 2,030 or in 2,040 or when do you expect that picture to emerge? We have not communicated the time line. What we have said is that we aim to take market share at a high pace. And so, yeah, we'll see where that takes us. Okay. Final question and then perhaps I can come back into the call with a few more later on. But my final question is, Could I ask you to elaborate a bit on sort of the take rate developments in Q3, the actual underlying take rate for the marketplace and how The sales mix and other drivers probably impacted in this Q3 of 2021, please. Yes, Nikolas here. I can start. I mean, as we do say, we have seen a shift in the product mix, both during parts of Q2 and also continuing in Q3. And what that means is that we have a larger share on the within the Consumer Electronics segment. Also, as we've talked about before, or As we present in the as in the presentation with regards to Sponsored products and this is that is still a small share of our total revenue. Yes. Can I just follow-up and ask you, did the take rate Increase or decrease compared to Q2? The underlying take rate is increasing slightly. Excellent. Thank you so much. And perhaps I can come back later on in the call. Cheers. The next question is from David Lee, Lazard Investors. Your line is now open. Please go ahead. Great. Thanks for taking my question. First question, I think I missed a part about the monthly trending On the 3P business, can you just talk a little bit about what happened on the last sort of the monthly trending? Have we seen the traffic sort of decline Already bottom or traffic is already start growing again. Maybe talk about that first. Then I have a couple of follow ups. Yes. Alan here. Generally speaking, over the quarter, the upward trend is Also very much related to sort of strengthening our own internal merchandising discipline towards Our merchants' stock availability and pricing of certain key value items. So you could say that it's a couple of factors working together, slightly awkward traffic, but also internal optimization of working streams That actually pays attention to having more out of the traffic that we actually gained during the quarter. Okay. And but in terms of traffic, I mean traffic is because I from the press release, it looks like the traffic is still Down, right. Is the traffic already flat now year on year for September or is in October so far, Are we seeing the traffic coming back year on year basis? So where are we on that? I can take it. Yes. Yeah. So we still are down on our traffic compared to last year. Okay. That being said, we focus less on that comparison now internally. It's obviously a year ago. We are past COVID restrictions. The market has changed a lot. We have another platform, a new team and the new vision and From a new team and the new vision and clear strategy. So I I don't ask the team to come back to where we are and and work from there. What we need to make Sure is that we get better every day from where we are today. So we have worked a lot of we have doing a lot of initiatives on traffic acquisition and we have Improved, I think I wrote it in the board letter, especially in the Swedish market. Now we need to do the same Things in the other markets, because we also have a long list of other things that we can do to improve the traffic. But then It's also about relevance of the traffic that you have to decide. The relevance of the traffic is more important than the actual Quantity, so that's also one reason we are not really comparing so much to last year anymore. Our focus right now is To make sure that we find the right customers at the right cost and that the journey that they experience on our site is not only relevant to them, but also that it's a great experience and that we have the means to make them eager to come back. Sure. Maybe you talk about the competitive situation, like where are you guys How is Amazon, because we saw Amazon is in Poland, like just rolling out their Prime membership A few other countries, smaller countries in Europe, how are they doing in Nordic? How's the competitive landscape changed versus before? If anything significant, you know, that you guys think, you know, might be preventing you guys or I don't know, helpful, like just maybe a little bit color on that. Yeah, sure. So we see some competition from Amazon, but also from others. As mentioned before, we have a lot of new players and retailers going online during the pandemic. But when I think about its competitive landscape, I also find it helpful to overview the underlying market dynamics. And there first, we have the general GDP growth and then we have the shift from physical retail to online. And then on top of that, Marketplaces are taking share from e commerce and Amazon entering the Nordic market is In our view, helping us and driving that trend. So we see that they are there, But they are not really, at least not yet, preventing us from doing what we want. They obviously have a lot of power, And they also use that power in deciding how they should treat their merchants. So When we think about how we should compete in the market, we look a lot about at At other markets, local marketplaces in other markets that have grown alongside Amazon and we follow their playbook. And we see that it's really important that we Continue to develop our competitive advantage as being very local and being very merchant friendly and very easy to work with. So that is what we're focusing on. And maybe just talk about the ShopIt Opportunity, because I think you guys it's 30% ownership right now, right? And I just want to understand like how is Shopify helping you guys driving the overall CDM platform? Or how integrated are we? How should we think about this as a combined entity or synergy going forward? Maybe just talk a little bit about that. Yes, I can do that. So, if you take a look at the integration, The first integration, as we talked about just now, actually has a huge impact on all the navigation and the search Possibilities on CDN Marketplace. And next to that, when we move further on, we will also make it Much easier and much faster to onboard new merchants, 100 of 1000 of SKUs in the future without compromising quality. And I think that that's actually the most important part is that we make sure that not only The existing marketplace is in a much better shape from a consumer experience point of view, but also going forward, it will be much faster, A better consumer experience without any hiccups and the pollution that I was talking about. Because of course, you can imagine If you have to do this manually, it will entail a huge amount of working hours. Besides that, From a company's point of view, for now, we own 30% of Schobbit. And Of course, as also mentioned, we have an option to acquire another 70% at a later stage, but that remains to be seen. Okay. Okay, great. I jump back in the queue. Thank you. The next question is from Adam Wyden, ADW Capital. Your line is now open. Please go ahead. Hey, guys, can you hear me all right? Yes. Okay, very good. So, yes, no, I mean, look, I think most of the people have covered most of my questions surrounding Data and categorization, I think when you look back 6 months ago and the company Put up suboptimal GMV growth, I think most of you guys blame that on the platform change and kind of the migration there. I mean, Is it fair to say that the 40% growth that we're seeing and the growth that we're seeing now, I guess, Last quarter, do you think that that's more a byproduct of market trends or do you feel like You've made significant inroads in terms of your categorization and your SEO and SEM. I mean, It's for all the purposes, this is not a destination yet. So it's less about organic traffic and more about kind of getting the SEO and SEM right and the is the destination and the Amazon Prime, all that stuff. I mean, is it fair to say that these numbers in October September are byproduct of You guys basically fixing the SEO and SEM and fixing the issues that weren't addressed earlier in the year? Yes. For a start, I can say, Alan, here that it is incremental steps. So, you cannot say that we are done yet. I mean, we've Taking a lot of initiatives which individually actually improve our game, you can say both from a Traffic acquisition point of view, from a technology point of view, and I mean, the list, to be honest, is actually quite long In how many changes we've made during the quarter, but there's still a lot to be made. So incrementally, I would Say that you're on the right track, but we are not there yet, Adam. Yes. No, of course, you're not there yet. But I'm just saying like, If you were to try and look at inputoutput, it would seem that the company was growing 40 to 50 before without kind of new product initiatives On the old platform, so now it's kind of in my mind when I look at it and I say, okay, well they brought on this platform, there were some things that in the transition that didn't Go perfectly right and now you've got the now you're kind of returning back to kind of steady state growth, kind of pre, What I would call organic and destination initiatives, which kind of brings me to my second question, which is more for Josephine. If I think about the evolution, last 6 months, having Eldar come back, You know who basically helped work on the first the new platform and kind of wasn't there for the transition. Now that we have Eldar back, Now that we have the ShopIt acquisition, it seems as if the product roadmap at the company is Product roadmap and execution is on the product side is kind of largely defined. I look at this Hi, Eir. And again, I have never spoken to Peter before I just listened to the podcast. But it seems as if Peter's core competency is largely around Branding and marketing and I can just speak, look, I've been to Sweden once in my life, you've spent some time there, but Our sense of it is that the local perception of the company is quite different than the people that are So using it. And so I guess my question really is, when you look at what Peter's core competencies and strengths are, I mean, do you feel like Peter was hired a big part of his value add to the company immediately is His ability to rebrand the perception and rollout new customer experiences and kind of Help touch the consumer more from a marketing and kind of customer experience side as opposed to kind of a core product side. And And that's because you guys feel like you kind of have the product roadmap intact? Yes. Thanks, Adam, for that question. Yeah. For 6 months ago, my best knowledge was that we would have, that we would appoint a leader of Sidion being more towards e commerce and tech. But as you mentioned, since then a lot has happened and Our team at Cydion has transformed. Elder came back, Elder and David and Linda together with Nicholas and Alan Have sort of turned around the trend and operation and now we are having a very strong momentum In developing our operations and how we work and how we incrementally improve our engine. So I feel and the Board feel that we are less in need of a CEO that goes into the nitty gritty details of the product and the development roadmap, exactly as you say. So we think it's better to Now when we have a lot of the fixed of the basics fixed and we don't need to we don't know, we have the current team We want a leadership that can leverage that team and can leverage what they are already doing and can build on their abilities and complement their abilities. And exactly as you say, completely comes from a completely different type of background. We have a deep understanding of the dynamics and the decision making around consumer brands. And that is obviously Also important for our next wave of expansion, our merchant base. And he's very skilled at driving Information processes both internally, but also of brands and of competitive positioning and the Perception of brands in the eyes of consumers, and that is what he has done. And in my opinion, he's probably At least one of the best in the Nordics are doing that. Then obviously, he's a very broad and experienced executive and And visitors. So, you know, he will be able to contribute everywhere, but that is where his skills core skills get it. Yes. And on top of that, he's very hardworking. And, yeah, so, and I think he, but, you know, even though he's a marketing guy, he is a market, but marketing guy, but he's also very, No, when we learn about what he has done before, He's described as a person that executes really fast and really gets things done. And so we believe we will fit into the culture of our team really, really well. And actually, I think I said that at the last I'm looking for a partner to us at Direct Lancher and also for a partner to Eldar and David and Linda. And I think then we don't need more of the same. We need somebody complimenting them and I think Peter will be perfect for that. Yes. I mean, look, I haven't spoken with Peter. I look forward to it. But I mean, look, obviously, at Thule, that was a brand that was known for one thing and They were able to make it known for other things. And, look, I think when you think about CDON and their journey, right, CDI was a seller of books and electronics and has transitioned into a 3P marketplace. And look, being able The benefit of CDR is that people do know it, but they don't know it as what it is today. And if someone can communicate a vision and communicate what it is for the consumer today. It's easier for them to get reappointed with the brand. So obviously, Look, I'm very pleased that you're making product inroads. And obviously, as you begin to think about an iPhone app and Prime product and that to me is all about packaging and marketing and figuring out how to price it and how to be competitive. And To me, what this shows is that you guys feel quite comfortable with your technology roadmap. And I was very happy with my meeting with Eldar. So It seems as if you guys are, at least from our level, ready to start playing some offense and that's good. So that's it for me. Just on sort of the path, you talk about So incrementally, you guys are on the right track. There's more stuff to do. Have you guys laid out a roadmap on When do you feel like or timeline or even think about or give us sort of category of what's left to do, what's already being done, So we can not necessarily just tracking or monitoring or anything like that, but so we can have a better sense on when the prospective opportunity will kind of No, become more visible as we get closer. I can revolve a little bit around that. If you look at it From the category perspective, what we are doing today is that we are very much focused on GAAP analysis within our Different core categories and not just seeking new merchants with the same SKUs, but Merchants which can complement our already existing portfolio of products to make sure that we actually Can broaden the assortment within the different categories. So it's not something different from the past, but it's just more attention to That we need to make sure that we can offer a full range of products within each of our core categories. Okay. So that's on the merchant side, but on the traffic, on the search engine, On everything else, the speed of the website, etcetera, right? Or maybe even on a mobile app, like what are the other Buckets that you think we should have, because otherwise we just kind of we don't really know, right? We just kind of follow until you report next quarter. But we just want to get a sense of where are the other kind of dominoes that you guys are trying to or big buckets that you guys are trying to fix? Well, you could say that a lot of it has to do also with the kind of The individual products that you actually are using for your SCM, Recall that we sometimes you have the same SKU at different pricing communicated to the market at the same time. For us, it has a lot to do with making sure that we are able to prioritize correctly and sorting The same product with the lowest price top wise instead of in the midst of a So, a feed that contains multiple merchants with the same SKU at different price points. So, this is a part of the that we are actually working on to make sure that we become more and more efficient in actually turning the paid traffic into a higher conversion and ultimately a purchase. Okay. Okay. So was it also a broader question in there or? What a broader question, I just want to I understand these are smaller, little items. But like when you guys look at internally, like Like where are you guys through? Like on a website traffic wise, are you guys 90% done? On SEO search engine, are you guys 50% done? I just want to get Yes. Not clear measurement, but clear milestones. So we can kind of hopefully, if we talk about the same issue a year from now, that's probably not Good for the business, right? So maybe stop give me some guidance on that. That'd be great. Yeah. But we are in some areas, we're still at a very, very basic level. And just to give One example, the the the Shop It release that we are doing, we actually did it yesterday and the day before, as Alan mentioned. That was to make sure that our products are actually put in the right categories so that you don't have Beauty products were under the home electronics page and so forth. So really, really basic stuff. And, you know, if that is where we are now, then I think there is, I would say a limitless list of things that we can do to improve the customer experience, both in terms of navigation and in customer experience as a whole. And there's a lot to do just with Shopit, what we can do with Shopit and the way we can leverage the technology from Shopit in smart ways to develop smart features on top of that product data structure with different filters and different Product selection tools and so forth. And we can also use their technology and The structure of the data to improve how we work in SEO and SEM, but we haven't we had to start with this Organization of the product data first. Okay. So We are really basic level, none in terms of all the rest. As Adam mentioned, we don't have a mobile app. So there we also, you know, we're very, very early stage. We we we don't have where we are. We are doing some pilots, We don't really have any fulfillment solutions yet to offer our merchant or our end consumers. No. Even though we have a customer support, I think there are still it's still at a very, very basic level and there are still Too many customers that are not getting such an exceptional customer experience that I would like them to get. Okay, got it. And maybe talk about, once this is all done, like do you guys feel like Viewers have more visibility on how you overlap with Amazon. I know some of the online guys they have Even they don't sell through Amazon, right? They have just enough intelligence, enough stuff out there that you can measure your own I mean, of course, Shopify is helping doing it, right? Are you guys able to see have more visibility or through your merchants to see how much overlap you have with Amazon, so you can compete more effectively With Amazon or maybe any color you can give us on that so we can have a better yes, so we can just think better about the business. Well, for 1, I don't have the exact sort of matching figures in terms of related Inventory in both the Amazon.acandcdion.com. But of course, there will be some overlap. But on the other hand, I think also that what's important to mention here is that sort of the Nordic Sensation and feel about CityOn actually also gives us an edge to particularly the Nordic merchants In some cases, use other marketplaces, but in many cases, they would like to be with someone like us, Who has a more local knowledge of the market and therefore it's sufficient to be on our own marketplace. Okay. So adding to that, I expect there would be merchants that are both on Amazon and CDN's platform and then there will probably be merchants that are only on Amazon and then will be merchants only on CDN depending on the preferences for, you know, how they structure their business, how much to be. So I'm not too afraid of overlap. We just need to make sure that we have a very clear Positioning in relation to them and a very clear offering both towards merchants and end consumers. Okay. Can you see what else I have? Okay. Just good. I jumped back into queue. Thank you. And we do have another follow-up from Nick Forum. Your line is now open again, sir. Thanks, operator. So just a few final questions. Starting with I mean, we obviously discussed Plenty on sort of your new strategy in terms of approaching the number of merchants on the platform. I suppose the change In definition, reflects your statements on trying to get the right ones rather than as many as possible. But my question is, of course, What do you think is a reasonable run rate now? Because obviously, the number of merchants will also be sort of The baseline for forecasting sort of non marketplace commission income, I. E. Aussiliary income going forward? Well, I think it's difficult to speculate on a forecast in number of merchants on boarded to our site. But what I can do, besides Looking at merchants who are actually selling on the platform, obviously, we are also looking at individual merchants From a catalog point of view, how many SKUs can each of the merchants and which are they contribute to the marketplace? So I would say that a fair notion on this topic is to evaluate us on both the number of merchants selling at CDON, but also the underlying number of SKUs available. And that together should also should sort of give you a It's a flavor of how good we are at onboarding, assortment to the site. Okay. But would it be fair to assume that The historical run rate, which has been quite good, I have to say, in terms of the number of merchants being added to your Place platform, with the new definition, that number is going to be slightly lower rather than slightly higher. Maybe, but I now we are in a period where we focus We have a lot of focus on what merchants we want to have in to make sure that we actually execute on our strategy to reach category leadership. So we Really make sure that we have full assortment and great prices. It might be that we will go on doing that for a really long Time, but it might also be that we see that now we are ready with this phase and now we can go back to onboarding more or less in a quantitative way. So that depends a bit on what we see both in our own operations, In our consumer offering and what we see in the market. So that is one thing. And then the other I think you said that it was predicted from for non marketplace income, the number of merchants that might be or might not be It might be that we will have service fee from merchants, but it can also be But we in the future would sell other services that would be more dependent on GMV or number of transactions, the number of SKUs or No, some other driver. So that's why we are not so that's why we don't think it's So important to at this point to focus on quantity and that's why we think it's more important to quality at this point. Yes, yes. Got it, got it. Thanks. My second question would be on the operating leverage. I mean, we've seen now Q4 last year was we saw the SG and A costs, excluding D and A, Increased by about €18,000,000. Then in Q1 this year, they increased by €12,000,000 €9,000,000 in Q2 and now €5,000,000 in Q3 year on year. And I was just wondering, is there any reason not to expect this trend to continue into Q4? Do you foresee any particular for whatever reason increase in the delta in SG and A costs? As we've said here, we are investing in the organization and in the platform. And I mean, we don't really speculate or comment on the future development, But you've seen a trend in the last couple of quarters on the total SG and A costs. And I mean, I don't Short term, that trend is, I would say, fair to Yeah, continue. Yeah, right. So The increase in SG and A's year on year will be lower just as it was in Q3, Q2 and Q1 going back 4 quarters. Is that what you're saying? I think it's Alan here. I think it would be non prudent to speculate on this. I think that What we are trying to achieve is to have a balanced top line growth with the underlying cost That we see fit to achieve that goal. And since we don't do any guidance and outlook. Then I think that you can expect that there will be a correlation between the 2 And that it obviously will go up since, of course, entailing that if you need to invest in growth, it also requires more SG and A. Yes. I agree with that. And I can also add to long term, we know that marketplaces is a very, very scalable Business model and we are pretty early stage in adding different income streams to our take rate. But short term, we have been investing a lot in our platform and in our team. And We think that we have a window of opportunity in the market now and that it's more important that we prioritize growth and that we build the capabilities that we need to really execute at a high pace. So that is what we're going to prioritize. Yes, yes. No, no, and I I fully understand and appreciate that. It's just that if you do not communicate that you expect a significant increase Costs and investment related costs in Q4, by definition, you will have to produce a very nice margin in this quarter, Pretty much irrespective of the GMV developments. So that's why I asked. But In a micro scale, I think that you already sort of have the visibility Between the different quarters and as you can see from Q4 last year, you Very rapidly grow into a scale benefit in that particular quarter. So of course, it is prudent to Speculate that you will foresee the same kind of development from a seasonality point of view in this Q4. Yes, yes. And to be honest, I just think that, that sort of underlines point about that there's truly some scale benefits to be acquired from growing the marketplace. A Q4 2020 will in the future be a normal, let's say, Q1 or Q2 From a stealing point of view, no. Yes. Thanks again. Final, final question. I wasn't aware of that, but At Libris this morning or this noon announced that they have sold disc shop to CDON Retail and I Struggle to find any information in today's disclosure on that transaction, could you just give us, A, a slight update on sort of the financials involved? And B, how does this fit into the strategic decisions on sort of CDN Retail, which I have actually assumed To be sort of a runoff model going forward, please. Two good questions. First one, I think that the headline was a little Overstated, what is actually being purchased is inventory from atlibris and then The actual URL, discshop.acnfi. So it's what I would call a regular In the market transaction, and we did it because we thought that we could improve Slightly, the retail business for the coming 12 months, despite the fact that it is a declining part of our operations. So it was only because we saw an opportunity in the market at a very feasible price. So Actually, a short term go to market purchase. Right. And what are we talking about in terms Size of inventory or sales? Nothing. No, the agreement is that we cannot And we do have another question online from David Lee. Your line is now open again. Great, thanks guys. I just want to ask a little bit about the merchants. How are the churn in the merchants so far Throughout these changes and these turnarounds, how's the churn improved or even Maybe it's got worse. Just what are the merchants' view on the business so far given you guys going through these changes? Because I just remember, because Amazon went through these changes before as well, even some of the other marketplace. How do they think about the timing of these changes? Because obviously, because of these changes, they probably can't really do as much business as they want, right? So I'm just kind of curious what's their view on the changes you guys are implementing, how are they thinking about it? And that's all. What do they think are some of the remaining Well, I cannot disclose sort of the any churn related merchant numbers. But what I can say is that I think that it is from what I know, at least from I don't have access to all 2,000 merchants, but from the feedback, I would say that All initiatives that we're doing are assisting our merchants in selling more. And that to me Also proves that it is a we are on a positive cycle here from a also from a flywheel perspective. I mean, we need to onboard merchants which are happy with The service that we are delivering and in turn, we are making sure that our end consumers get as good an experience as possible and then you get this positive cycle. So I think that everything we do is actually enforcing this flywheel that we are talking about. And I don't see any immediate risks neither in this quarter or also for the immediate future that anything that we do will jeopardize our relation to the merchants, If that is if I understood your question correctly. Yeah, that's right. Okay. Okay. Great. Thank you, guys. I mean, what the merchant want most of all is that we help them drive their sales. So the more we grow, the better for the merchants. Of course, of course. Now I get that. Okay. Okay, that's fine. Thank you. And there is another question from Adam Wyden. Your line is now open again, sir. Hey, yes, sorry, there was one last thing. So, look, you guys were successful in raising some capital. It appears that you guys want to have some capital for some flexibility on M and A and just obviously To have a long time horizon, if you guys want to continue to invest in marketing and Customer and traffic acquisition, this and that. So that's all good. But now you guys, as I think as one of the analysts pointed out, I mean, you guys have I mean, You guys have really because of your take rate, your incremental margins are quite high, right? And so when you look at Allegro and some of these other players, Our take rates are higher or better or what have you. And you look at the margins of those businesses, They're doing 50%, 60%. So this has the potential to have best in class margins. And so I think, the combination of the unit economics The fact that cash obviously puts you guys in a good spot. But as you think about playing offense and doing M and A, Obviously, these deals are going to become more expensive. And you guys didn't raise that much capital at $500,000,000 or $455,000,000 But Obviously, when you think about what this company is trading at as a multiple of next year's GMV, I would suspect that it presents Some difficulties in terms of buying assets that, A, move the needle and B, are quite quality. I mean, How do you guys think about kind of accelerating your kind of the right cost of capital? I mean, Obviously, with Eldar back and now with Peter joining in December, I mean, do you guys feel like You guys are in a position to start kind of communicating and I'm not talking about guidance, but communicating your vision for what you want The product to be and what your ambition for the asset to be is. I mean, because it seems as if This is still very much an orphan asset globally. I mean, there's plenty of businesses, Etsy, Redbubble, Allegro. I mean, There are plenty of assets that are out there that have some characteristics, but are more widely unknown and appreciated in the global marketplace. I mean, How do you think about kind of widening your investor audience beyond Sweden, So you guys can kind of get your appropriate cost of capital. I can take that. Yeah. It's really important that we do that. So I agree with you, Adam. I think there are A lot of investors out there that would appreciate us only if they only knew about us. So we have a lot of work to do there. Peter, He is a great visionary. He's great at selling his case. And the main reason I think that is a Great skill for Sirion is for its ability to be able to develop a great customer experience and the destination brand and a great merchant offering. But of course, it will also be helpful when we teach the market and the investor community about CDN. And I agree with you that it's important. So do you think that those efforts are going to be initiated in January? Or do you think that you guys can start kind of Hitting the kind of expanding upon those efforts kind of between now year end because it almost kind of feels like There hasn't been a lot of I mean, in the absence of these conference calls, there hasn't been a Data or opportunities for people to kind of interface with management and the Board and kind of Get an insight into how the company is thinking about that long term. Yes. I agree we have a lot To learn from the more American way of marketing businesses, it's a bit different here in the Nordics, but we have Been very inspired by when you and the rest of the investor community that have pushed us and given us A lot of good ideas and we are evaluating different options and we have some work streams going on. And we let you know when we're out there. Good. Well, look, I look very, very pleased with the results. I think things are kind of going on schedule. And the only thing we have to kind of Triangulate now is the company's cost of capital and at least it sounds that you guys are making efforts in that capacity. So we'll keep waiting. Good. There are no further questions at this time. I hand back to the speakers for closing remarks. Okay. Thanks a lot to everyone. Look forward to meet you next quarter.