Good morning. My name is Patrick Comer, and I'm the CEO of Cint AB. I'm also joined here by Niels Boon, our CFO, and we're here to go through the results of our third quarter. I want to be direct this morning and move past some of the pleasantries. Obviously, our third quarter results are challenging. To be very clear, as CEO, I'm accountable for both the results of this quarter, but also the strategy over the past year that's led us to this point. Recalling over a year ago when I stepped into the business, I was given the mandate of solving what we would call the multi-year integration that had been dragging and causing uncertainty not only for the market, but most importantly for our customers.
Very quickly, we put forward the strategy of resolving the timeline of integration and migration for the second quarter moving into the third. We set forth the date of June 30 and communicated that clearly to the market and to our customers. Additionally, very quickly, we moved into announcing our Cint 2.0 strategy and also a successful rights issue in the first half of the year, which has clearly positioned our debt and balance sheet in a much better place on a go-forward basis. We chose to execute the final phase decisively, moving from the second to the third quarter, so that we would no longer continue a death by a thousand cuts and communicate decisively with our customers when this transition period would occur. We also knew that this final phase would cause short-term disruption.
These Q3 results are a direct consequence of this migration and of this decisive strategy. It is a transitional low point and has been clearly a result of our largest customers moving their access and their volume from the legacy platform to the new. This is not a falling market, nor is this a failed strategy, but this is literally the cost of the transition. We see the results clearly in these figures, with net sales down and, because of that decrease, a correlated result both in terms of profit and EBITDA. Over the past year, we've improved our cost structure, which you can clearly see in overall margins have improved year over year. My responsibility, of course, is to manage the long-term health of the organization, which has required this short-term pain in order to launch the unified and scalable platform.
Now, these sales have been affected by migration on the exchange side, but also by a weaker business climate and also the change in political season. We started to look at the root cause within this quarter. There are really three key impacts on the exchange business for the quarter. Around 25% of the quarter-over-quarter change is the fact that the political season was well on its way in Q3 of last year. Of course, we aren't seeing the same political season in the U.S. in 2025. Over the past three quarters and earlier, we've seen a weak business environment for market research, and that has continued based upon the third-party documentation that we see, but also our own numbers. We see about 25% of the root cause around the weak business environment for market research.
Of course, around 50% of this change is directly attributable to the change in migration. On the media measurement side, you see roughly a 0% growth rate, mainly driven by the fact that that business is primarily in the U.S. We've seen, obviously, the effects on the U.S. dollar. More importantly, in media measurement, there is a preemption of media measurement because also of the cyclicality of the political season. What that means is a traditional stronger Q4 was moved to Q3 of last year. Therefore, the comparable is quite strong. Along with these impacts on sales, however, we have the financial discipline where you see stronger operating cash flow and better receivables as we improve the execution against our balance sheet.
The payoff of the overall pain that we're receiving now through this migration is the ability to move to innovation and set ourselves up for growth, which you should hold us accountable for on a go-forward basis. To clearly state where we are in the consolidation process, almost all of our legacy Cint customers now have access to the new exchange, and the revenue delta that we're experiencing is the transition of project work on the exchange side of our business from the legacy platform to the new. Obviously, we're very focused on helping our customers through this transition, obviously in the third quarter, but also in coming quarters. There's also a conversation around the upgrade cycle of our legacy Lucid customers.
It's important to note that the Cint exchange platform is built on top of the legacy Lucid tech stack, which means that transition is an upgrade cycle and much less disruptive than moving from the legacy Cint platform, which is a very different platform than the Lucid technology stack. What we also want to point out is that there are happy and engaged customers. We included some testimonials pointing out the value of the platform. In particular, we're seeing new customers talk about the improved user interface and the ability to leverage the speed and scale of our platform as Cint. As I stated before, the purpose of going through the short-term pain is to provide clarity for the market and for our customers as to the long-term platform they can invest in.
Over the past 2+ years, the majority of our R&D efforts have been dedicated to the build, launch, and execution of the new Cint exchange. We're excited to be able to spend more of our capacity on innovation. In particular, over the past quarter, we've released these very important innovations, first being the Luci chatbot, which is on top of our measurement product, which allows customers to chat with their data, which allows them a deeper level of insights. The important part is we're seeing a pickup of utilization of this capability, but also stickiness and value creation for our customers. Probably even more important is our data partnership with Affinity Solutions. This provides point-of-sale information from retail point of sale, which is customer data from cardholders across the United States.
It's incredibly valuable for our media measurement customers so they can tie the advertising directly to the outcomes, i.e., did someone actually buy the product that people are trying to sell? This will have an impact long-term, not only for our media measurement business, but also will impact the success and capabilities for our exchange business as well. With that, for a more detailed review of our financial performance, Niels.
Thank you. Good morning. Moving on to the financial updates. Even though it was not the best quarter in terms of top line, as we just heard, there are also some positive elements that will be highlighted. Let's dive in. Before we go into the numbers, I just want to remind you all of our financial targets. We have medium-term targets for sales growth being 10% organic growth annually, combined with the 25% EBITDA margin. We are targeting a leverage ratio below 2.5x. Furthermore, we are reinvesting our cash flows into growth initiatives and therefore not expecting any dividends in the short term. We're also committed to the net zero emissions by 2045. Moving on to the financials. As we have seen, sales were down by 20% quarter on quarter, 16% in constant currency.
The sales were affected on the Cint exchange side by the migration, the weak business climate, and also strong comparables affected the media measurement side. Moving on to the gross profit, that's also down as a result of the lower sales and the margin as a consequence of that as well. However, when we look at the EBITDA, the final graph on the right, you see that it is less down than the gross profit, and that's due to lower operating costs. We had about EUR 2.6 million lower operating costs, and that was even despite that last year had a EUR 2 million positive one-off effect in there. Going a bit deeper into the net sales development, here we see the split between the two business segments.
First, Cint exchange down 27% in reported currency or 24% in constant currency, as we already explained, due to migration as well as the market environment. On the media measurement side, it was more or less flat in constant currency. Here the main factor was the strong prior year comparable due to the US elections happening in Q4, and therefore the budgets moving to Q3 last year, and also in general the market environment there due to the tariff uncertainty in particular. Moving to the regions, there's actually a similar picture of decline across the regions for Cint exchange. The media measurement business was kind of stable in the Americas, was down in EMEA and up in APEC. However, it's predominantly Americas, so that's the main one to look at. The rest is relatively small. Moving on to the P&L.
We already looked at the top line being down, so the total sales went down by $8.7 million year on year. However, the EBITDA was only down EUR 5.4 million, and that's due to the EUR 2.6 million lower operating costs that I alluded to before, and also despite this EUR 2 million one-off effect last year. Furthermore, it's also good to note that we didn't have any items affecting comparability this year, the so-called NRIs, non-recurring items. That's also helping us for the cash flow, of course. Our EBITDA percentage was 18.7% during Q3. Moving on to cash flow, cash flow actually improved in total by EUR 6.3 million, mainly driven by the operating cash flow, and that one was in turn driven by the change in working capital.
That one improved by almost EUR 10 million, actually, thereby compensating the operating cash flow all the way at the top, which went down by EUR 1.6 million as a result of the lower profitability that we just saw. Moving on, the investing activities cash flow is actually similar to the previous year. That has to do with the capitalization cost of development costs of the platform. The financing cash flow has to do with the loan repayments. That one was -EUR 4.7 million, mainly due to a $5 million down payment on the loan. That gives us the cash position of EUR 50.4 million, which is actually higher also than last quarter. The net debt is only EUR 9.2 million. That gives the leverage ratio of 0.2x, which is well below the 2.5x target that we have, of course.
This is also the lowest net debt position we have had in several years. Finally, moving on to working capital, working capital overall was reduced by EUR 1.4 million, and it was now EUR 44 million during the third quarter. Receivables improved by EUR 7.5 million. That was great to see that development continuing that we have seen also in the previous quarters. It's still from the same, basically, improvements that we announced in Q1. We have the legal entity rationalization. We are much leaner now in terms of setup, one ERP system, one unified system with billing information, and we have reinforced the teams as well working on this. Also, the EUR 80 million accounts receivable is actually the lowest we have seen in four years since actually the Lucid acquisition by Cint. That's quite good to see that that's the lowest point so far.
Also, as a percent of total client spend, it has been hovering around the lowest points in Q2 and Q3 as well right now. We still are committed to drive this down even further, of course, because in absolute amount, we still want to have it as low as possible. Our emphasis will remain on that. I think that's actually the final update I have.
Thank you for updating us on our operational discipline regardless of the net sales position. I want to reiterate the obviously challenging outcome on the top line for the quarter. I take full responsibility and accountability as CEO for these results and see them not as a long term, but rather a short-term transitionary period. The next level of accountability is showing the growth that's now possible because of a unified platform that this short-term pain has essentially paid for. I look forward to taking your questions. Brett, you want to join us up here for any Q&A?
Yeah. Wonderful.
Brett Schnittlich, our CEO, is joining us, who always moderates questions from the field.
Got it. Thank you so much, Patrick and Niels. I think the first things we're going to do is be taking questions on audio. I will pass the system over to our folks behind the scenes.
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.
You want to start with the first one here?
Yeah, while we're waiting, I can start with the first questions that have come in via text. Our first question comes from Carl-Frederic Danielson Oxton. An assistant question, where is the profit warning?
Indeed. As we were seeing the quarter develop, we recognized that this would be challenging, and we started to answer the question, what's the best way to communicate this to the market? Obviously, a potential profit warning was one way that we considered, working with the board and our outside partners on this. At the end of the day, it was decided that releasing this information in the normal earnings release process was the most appropriate, given all the information outstanding. Either way, it doesn't change the challenging sales cycle, but rather the timeline of communication.
Wonderful. Before I go to the next, there's no questions on audio right now. Let's see. Our next question actually is a quick follow-up from Carl-Frederic.
Thank you, Carl.
With sales declining approximately 20%, why isn't there a net working capital release? Please clarify.
You want to answer a net working capital release question?
Yeah. We saw already that it improved with working capital overall, right? There's, of course, a bit of a delay in terms of payment terms. It doesn't follow one-on-one. What happens in Q3 doesn't affect right away in Q3 the working capital. That goes more into Q4, basically. That's the short answer there.
It's a good question to understand the timeline difference between revenue and cash collection and understanding how accounts receivable should be improving based upon net sales over a period of time. It's a good question.
Wonderful. Our next question comes from Jaco. The question is, will operating costs continue to decrease?
At the moment, we see our operating costs being consistent as we have the right headcount and team. As you have seen throughout our story for the past few years, the majority of our focus has been on this consolidation and this platform build. We are now transitioning to innovation, which allows for long-term growth and maturity of the platform and net new products. We are transitioning resourcing from maintenance and consolidation into innovation and growth. The answer to the question is we expect a consistent cost basis.
Wonderful. A question from Ben. Will Cint focus on diversifying suppliers?
We always focus on diversifying suppliers. In our supply chain, we have hundreds of panel companies that are integrated and work with our platform. We have a dedicated supply team that are working to find new sources of supply, both consumer and B2B supply, because one of our key strategies is around premium capabilities, not just consumer survey capabilities globally. It is something that I'm very interested in because I got my start in this industry building out the supply chain over 20 years ago. The long-term build and expansion of supply is near and dear to my heart.
Yes. A quick follow-up from Jaco. Will this lost revenue be recovered in coming months?
Our expectation is this is a low point, not a consistent trend that we'll see on a go-forward basis.
Good deal. At the moment, I have no other questions coming in through text. Just checking, is there anything out there on audio? Wonderful. Let's just take a moment. If there's any other questions that people have, feel free to push them through either via the online system or dial in. Hold on. An additional question. How can, oh, here we go. How can accounts receivable be lowered during the coming year?
In general, the question is, I think, right?
Yes.
Yeah. OK.
Yes.
Yeah. We have improved our processes, as you could see already in the numbers the last couple of quarters. Basically, every quarter this year, the number went down. We keep on working together with our clients on this. It's quite a cumbersome process sometimes, depending on the complexity of the situation, right? We keep on working together with them. We have also improved our capabilities in terms of invoicing process and working on re-invoicing or whatever is required to make invoices payable quicker. We are uploading quicker in payment portals, all kinds of steps operationally that you have to go into before you can get it paid. We are working on and addressing these. Like I mentioned as well, we also reinforced the team. We have much more dedicated resources to this topic than before. It takes time, basically, to work together with the clients on this.
So far, it's paying off.
Wonderful. One final question for now. Another one coming in. What do you expect from CapEx going forward? I'll pass that back to you.
Yeah. Like Patrick already said before, we expect it to be quite stable. How it is right now in terms of OpEx and also our workforce, I would say, generally speaking, we try to keep it kind of stable. Of course, we will always consider investment opportunities, right? CapEx, in our case, is roughly the tech team and the capitalization of that. That's a direct consequence of the workforce. That's kind of the answer there as well.
Yes. OK, so an additional question from Roy at Invest AB. Patrick, how confident are you on this turnaround since it's been ongoing for a while? Do you believe this is the low point in terms of revenue, et cetera?
We definitely believe this is the low point of this migration story. The most complex operational transition is what we've already experienced, and we're starting to see improvement from a customer engagement standpoint at this time. We believe that this is the operational low point for the exchange side of the business. We also sense that the measurement business is also going to be able to perform quite well, indeed. From our standpoint, we have made the investments necessary from an R&D perspective to build, launch, and release the new platform. We understand that the customers are receiving value from that platform, which we receive from their feedback and testimonials with us. Now it's about continuing this transition of moving legacy studies and surveys from the prior platform to the net new, which will generate the revenue and volume that we expect on a go-forward basis.
Wonderful. Follow-up from Ulf. Can you please be more specific regarding the customers you migrated during the quarter? You don't have any customers reporting greater than 10% of revenue, so I don't understand this statement.
Historically, we've not gone on a customer-by-customer breakdown of customers in terms of the transition. We spoke last quarter about 95% of customers have already migrated, so this is the remaining 5%. We also spoke about that 5% being the largest and most complex. They have the greatest needs in terms of all the individual features and capabilities of the new platform. In aggregation, obviously, those customers are a larger impact in terms of revenue because you see that in the net sales. It's not a particular customer or even a particular customer type. Every customer is unique in their operational transition. Rather, it's the sum of these customers having challenges over the period. Let's not also forget that at least half of the challenge that we're facing is not about the migration.
It's the delta between political spend year over year, but also the overall and well-documented less spend in the market research industry based over the last couple of quarters.
Wonderful. Our next question is actually, I think you just stated the answer, but I'll give you an opportunity to give it more specifically. This is from Aina at SEB.
Hi.
What do you see going into Q4 for top line? Can you give us some flavor of how much the year-over-year decline in top line was due to migration and how much was a macro-driven impact?
We went through this, as I said before, and it is one of the key questions, and we have to be careful about providing guidance that would be inappropriate at this time. In terms of root cause analysis of the third quarter of the total decline, we see around 25% clearly directional on the political season. We know which customers spend the most during the political seasons, and we can see their shift in volume because we're not in the middle of campaigns. We also take a look at how our other customers who have well-documented decline because of market conditions, and we can attribute about 25% of this just on the challenging macro position. We see that also correlated with the measurement business where certain retail customers literally paused all ad spend for the back half of the year based upon their concerns around tariffs.
These conditions leading into Q3 around macro and tariffs we think are attributable to about 25% of the exchange delta. The remaining 50% we think is purely attributable to those customers who are still going through this operational transition from the old platform to the new.
Yeah. An additional question in a slightly different angle. Can you explain how your continued development, and I believe this is of sample quality, is performing and what KPIs we are seeing?
It's a fantastic question. Quality is obviously near and dear to my heart. I love meeting weekly with what we call the trust and safety team, going through both the technical process of quality control, but also Cint has the largest trust and safety team working with our customers on the buy side and sell side to improve the overall quality of the platform. This is an area where we've had tremendous success over this past year in improving not only the processes we've had, but more importantly, we've been proactively communicating with the market, meeting with customers about quality and how quality is perceived in the market, and also working with the industry in terms of leadership about how Cint can play a leadership role in quality improvement across the board.
This is an area where we see high value and a place where we've been leading in the industry for quite some time.
Yeah, Patrick, as a follow-up, are there any specifics as to the KPIs on quality that we've been seeing internally and how those have been tracking?
Thank you for following up with that. The primary KPI that we track at Cint is the reversal rate, also called reconciliation. What this is tracking is the number of surveys that are rejected by the customer. A customer may be collecting 1,000 different interviews within a survey. While this is in field, they'll actually review the data, and some of that they will reject for quality purposes. Of course, we will refill to get back to the 1,000. It is not really a direct revenue correlation per se, but it is an indication from our customer as to what proportion of all surveys do not hit their quality bar.
We have been consistent in terms of our reconciliation rate for the past couple of years. It has fluctuated between 8% and 9%, which is a strong industry number and well below some of the documentation around quality that has been released even in this past quarter.
Wonderful. At the moment, no additional questions. I'll make an additional call out. If there's anything you'd like to ask this team, please feel free to either call in or send a message via the web.
While we're out, I'll just close out that, again, I feel very responsible for the results for this quarter, but also for walking into this business a year ago and making clear strategic and operational decisions that would close out this migration story in a timely fashion, but also introduce the short-term challenge that we're facing now. The pain that we've seen over the past quarter around migration is a direct result of those decisions. The opportunity, though, is now that we're at this low point and we have a unified platform to build and grow from here. I appreciate your patience and your questions and following us as we continue down the Cint 2.0 journey. Thank you.