Welcome to Desenio Q3 Report 2024. For the first part of the conference call, the participants will be in listen-only mode. During the Q&A session, participants are able to ask questions by dialing star five on their telephone keypad. Now I will hand the conference over to CEO Fredrik Palm and CFO Anna Ståhle. Please go ahead.
Thank you very much. Welcome, everybody, to Desenio Group's Q3 Results Presentation Conference Call. With me today, I have our CFO, Anna Ståhle. As you may have noticed, we have postponed this report two times. The reason is our ongoing constructive discussions with Desenio Group's bondholders to find a solution for the refinancing of our issued bonds. We believe a solution will include a reduced net debt, and the debt maturity is expected to be extended, but we have to wait for the outcome of our discussions. This outcome will be announced in a separate press release. Now to the Q3 report, so as usual, we'll start with presenting the outcome of the quarter, and the Q&A session will follow at the end. The development in the quarter continued to be weak in all markets, although sales in the Nordics only decreased marginally.
In total, this led to net sales for Desenio Group decreasing by 15.6%- SEK 192.6 million . However, the trend was positive during the quarter, with weak sales in July, somewhat stronger in August, and on par with previous year in September. The current market situation has forced us to gradually adjust the cost levels, and we have also put a lot of focus on efficiency. This work has been successful and led to that adjusted EBITDA only decreased marginally to SEK 23.4 million , and that the adjusted EBITDA margin actually increased to 12.1% in the quarter. In addition, EBITDA was positively affected by a higher gross margin than the previous year, which is explained by a favorable product mix.
We also see that the ongoing improvements in our fulfillment operations continue to show results, which, even though volumes decreased by almost 20%, led to the cost ratio for fulfillment being at the same level as last year, hence 26.4%. However, we have not yet succeeded in our work to increase the efficiency of our marketing efforts. So, during the quarter, our marketing cost in relation to net sales was on par with previous year and amounted to 30.6% compared to 30.4% in Q2. The operating cash flow of SEK 2.3 million during the quarter was lower than last year due to lower sales and the fact that we started our inventory build-up for the high season in Q4 slightly earlier this year. During the quarter, net interest payments on the outstanding bond amounted to SEK 24.8 million .
During the quarter, as previously mentioned, we continued the constructive dialogue with our bondholders to arrive at a solution for the refinancing of Desenio Group's issued bond. So, the forward-looking information we shared with the bondholders and made public in the second quarter remains unchanged. However, given the development in Q3, we expect net sales for 2024 to be at the lower end of the previously communicated year-end growth range of -5%- 10%. The adjusted EBITDA margin is expected to be 11%-13%, and for the full year 2025, as previously communicated, net sales growth is expected to be approximately 0%-5%, and the adjusted EBITDA margin to be 11%-14%. Today, Joar Roslund was appointed as new CFO for Desenio Group as of January 13, 2025. Joar Roslund is currently CFO at the software company Plant.
In addition, Joar is chairman of the board at the Nordic Asia Investment Group and board member of Verve Group, both of which are listed on Nasdaq First North. He was previously fund manager at GP Bullhound and the CFO for the e-commerce company Lekmer, where I was CEO at that time. Anna Ståhle is leaving her position as CFO in January but stays at Desenio Group until the end of March 2025 to ensure a controlled handover. To summarize the quarter, net sales decreased in a challenging market while gross margin increased. The adjusted EBITDA margin increased as a result of higher efficiency despite lower sales, and the operating cash flow decreased compared to the previous year. On this slide, we analyze the difference in EBITDA margin in Q3 2024 compared to the corresponding quarter previous year.
The product margin increased due to improved product mix and improved efficiency fulfillment, neutralized the effect from lower net sales. The marketing cost in relation to net sales was, as previously mentioned, unchanged, while our cost programs in our head office had a positive impact on profitability. Now let me comment more in detail on the development of the business in the markets. By looking at search trends in comparison to our sales development in Germany and in the U.K., we can see that our sales continue to trend higher than the market search volumes in Q3, and it's slightly positive in the end of the quarter. Here we see that in Sweden, Desenio's sales closely follow the market search volumes, which is a sign of our high market share here in Sweden.
In the U.S., our sales development is far stronger than the overall market since we are developing from rather low market share. Comparing Desenio Group to few of our biggest competitors, we see that during Q3, we increased our share of voice in Germany but decreased somewhat in the U.K. On this slide, we see that we during Q3 also increased our share of voice in Sweden. Here we see the share of voice development in the U.S. in relation to Postery, Fine Art America, AllPosters, and Society6. As you can see, we have a steady increase in share of voice in the U.S. market, taking shares from our American competitors. This is Desenio Group's gross order intake development. As previously mentioned, Q3 started weak in July but better in August and on par with last year in September.
Here we show the development in the segments compared to last year. In the Nordics, net sales decreased by 4%, in Core Europe by 19%, in the Rest of Europe by 25%, and in the Rest of the World by 13%. In North America, which is included in the Rest of the World, net sales decreased by 10%. This slide shows customer highlights. We see that both our active customers and number of orders decreased compared to last year. This is to some extent counterbalanced by our average order value increasing by 5%. And I now hand over to Anna for the financial update.
Yes. In the following slides, we will take a closer look at some financials. As Fredrik mentioned, net sales decreased by 15.6% in Q3 this year compared to Q3 last year. Gross margin increased from 83.3% in Q3 last year to 85.2% in Q3 this year, driven by favorable product mix. Adjusted EBITDA in Q3 this year was SEK 23.4 million compared to SEK 25.1 million in Q3 last year. Although lower sales, we managed to improve our profitability through improved efficiency in fulfillment and administration costs. And consequently, the adjusted EBITDA margin was 12.1% in Q3 this year compared to 11% in Q3 last year. CAPEX in Q3 this year is related to smaller investment in our head office in Stockholm in connection with the move of the group's studio.
Excluding the bond, which is, as of December last year, classified as current liabilities, the net working capital in relation to the net sales for the last 12 months is minus 4%. Current assets are flat in Q3 this year compared to Q3 last year, whereas current liabilities have decreased. Our operating cash flow in the quarter was positive SEK 2.3 million , which is further explained on the next slide. Here is a breakdown of the operating cash flow. The operating cash flow during the quarter was positive SEK 2.3 million . We had a positive adjusted EBITDA of SEK 23.4 million in the quarter. Items affecting comparability amounted to SEK 1 million for costs related to the refinancing of Desenio Group's issued bond. So, excluding the items affecting comparability and amortization, we are at a positive EBITDA of SEK 21.8 million in the quarter.
Net interest payment on the outstanding bonds amounted to SEK 24.8 million, and non-cash items include the depreciation and amortization of fixed assets, leasing assets, and intangible assets, altogether SEK 12.7 million. Tax paid in the quarter was SEK 4.7 million, and inventory levels increased by SEK 11.3 million. Changes in current assets and liabilities positively affected cash flow in the quarter by SEK 11.5 million, mainly driven by increased current liabilities because of inventory build-up for the high season now in Q4. So, in summary, operating cash flow during the quarter was positive by SEK 2.3 million, mainly driven by increased current liabilities offset by increased inventory and the net interest payment on the outstanding bonds. And I now hand over to Fredrik again for a summary.
So, to summarize the third quarter of 2024, we can conclude that we achieved increasing operational efficiency, leading to relatively good profitability despite the negative sales trend. We had positive operating cash flow despite lower sales in combination with inventory build-up for the high season in Q4. During the third quarter, we continued the constructive dialogue with our bondholders to arrive at a solution for the refinancing of Desenio Group's issued bond. We operate in a market that continues to suffer from weak purchasing power among customers. It's probably only in the next year we'll start to see some positive effects on consumption as a result of the decreased inflation and interest rate cuts that have been made so far. We are handling the challenge well on the cost side, but so far we have not succeeded in increasing our sales compared to the previous year.
Now it remains to resolve the refinancing and to use the power we as a dominant player in the European affordable art market possess to reverse the negative sales trend and continue to take market shares in North America. Thank you all for listening, and we are now more than happy to answer your questions. So, over to you, operator.
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. As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. There are no questions at this time. So, I hand the conference back to the speakers for any written questions and closing comments.
Okay, thank you, operator. We have a couple of written questions coming in here. So far this year, you've paid SEK 21 million in income taxes but have a pre-tax profit of negative SEK 33 million. Should we expect you to get a tax reimbursement from the authorities next year? Anna, we are in line or?
Yeah, we will. For this 2024, we won't get a reimbursement because we are lowering now the tax in Q4 that we are paying, but we are in Q4 receiving reimbursement for 2023. So, not for 2024 because that will be adjusted in Q4, but we will receive reimbursement for 2023 now in Q4. If that answers the question.
Yeah, so no reimbursement next year.
No. No.
It will come this year.
Yeah, because we have adjusted the tax we're paying now in 2024.
Yeah. Thank you, Anna. And the next one is given the comment on product mix, what was the split between Postery, frames, and Q3, and how did that compare to last year? We're not communicating the exact split of the different products we sell, but we can say that it was somewhat higher share of posters in Q3 this year compared to last year. And then the next question. So, over the past year, you have consistently used the term refinancing instead of restructuring regarding the bond maturity situation. Is this a deliberate choice implying a repayment plan for the bond, or does the current dialogue concern a conversion of debt to equity? Well, we are in a dialogue that is, as we said, it's very constructive. Us using refinancing rather than restructuring, I don't think you should weigh too much into that.
It might just be a language thing, us being Swedish. But we are discussing a solution, and I hope we are quite close to agreeing on the way forward. But as I said, we will press release the outcome as soon as we have one. So, the next question. In your guiding indicator, midterm EBIT margin of more than 15%. However, you have previously achieved higher margins on lower revenues before the COVID boom. Has the competitive situation changed, or do you need a bigger open space now? If so, why? Yeah, good question. I would say that we have, if you compare the company now, the P&L now, to, let's say, 2019, like before COVID, we have increased gross margin.
But then we have in the actual operations of the business, when it becomes sort of more complex and we're expanding more outside of home markets, that gives us slightly higher shipping costs. But given that, we have actually reduced fulfillment costs as a whole together with logistics. But the big difference now compared to 2019 is the marketing cost. So, the marketing cost of sale, that ratio is higher now than pre-COVID. And whether that has to do with increased competition, in a sense, yes. Competition has changed somewhat during these years, though. So, in 2019 and, let's say, 2019 up until a couple of years ago, we saw a lot of smaller competitors each taking a little bit of share, each of them pushing up marketing spend. Most of them are actually gone now.
But instead, we see the Chinese marketplaces like Temu pushing up prices for, well, more or less everyone that is in the retail market. So, I hope that answered your questions. We haven't had any more written questions coming in for a couple of minutes here. So, I'll thank you all for listening. Thank you for your questions. And, well, if you have more questions coming up, please don't hesitate to reach out. And until then, speak soon and stay safe.