Welcome to the Hemnet Q2 conference call. For the first part of the conference call, the participants will be in listen-only mode. During the questions and answer session, participants are able to ask questions by dialing pound key five on their telephone keypad. Now, I will hand the conference over to the speakers. CEO Cecilia Beck-Friis, CFO Anders Örnulf, and IR, Nick Lundvall, please go ahead.
Good morning, and welcome to the presentation of Hemnet Group's results for the second quarter of 2024. My name is Cecilia Beck-Friis, and I'm the CEO of Hemnet, and today I'm joined by Anders Örnulf, Chief Financial Officer, and Nick Lundvall, our IR Manager. As always, there will be an opportunity to ask questions at the end of the presentation. Please follow the operator's instructions to ask this through the provided telephone dial-in. Before going to the financial summary, I'd like to spend some time on page two to share some thoughts on our market position. Hemnet is Sweden's largest property portal and has been since our inception in 1998. We have significantly more unique users, visits, and engagement per listing than the second closest player in the market.
Our leading views per listing is especially important as we consider the value we provide to property sellers. No other portal can offer a more cost-effective way for sellers to reach the largest number of potential buyers for their property. Furthermore, we estimate that 60% of our visitors are in an active search process, meaning they are likely to transact if they find the right property. This means that we can create unparalleled value to sellers looking to market their property to the largest number of potential buyers and to agents, property developers, and other advertisers looking to be seen by a large number of active property buyers. Turning to page three for a quick word on Hemnet's share of property sold. We sometimes refer to the fact that nine in ten properties sold in Sweden are listed on Hemnet in a given year.
This is a key statistic as it highlights the importance of Hemnet in the Swedish property market, illustrating that even though there have been talk about off-market or pre-market, most transactions occur via Hemnet. New data published by Statistics Sweden confirms that also in 2023, nine in 10 properties sold in Sweden were listed on Hemnet. This is based on preliminary figures from Statistics Sweden that will be ratified in 2025. Important to note that this percentage may fluctuate over time, especially in hot or cold markets, but for as far back as we have data, the figures have been stable around the current level. Now, turning to page 4 and the summary of Q2. Hemnet's strong results for the second quarter were mainly driven by higher demand for our value-added services from property sellers.
We also benefited from a steady increase in the number of published listing as the positive trends in the property market continued, with more properties for sale, more transactions, and increasing property prices. Revenue from property sellers increased 68%. This is largely demand-driven, as more sellers choose a Plus or Premium package for their listing, driven not only by the value that this product provides, but also the launch of the full digital flow, ability to pay for a listing when it's been removed from Hemnet, and of course, our win-win relationship with the agent industry. We've also seen a 10% listing growth in the quarter, further supporting our net sales growth. The portion of ARPU coming from our value-added services more than doubled compared to last year, underscoring that our growth is demand-driven as opposed to reliant on price adjustments.
The new compensation model was launched on July first with the launch going as planned. That, coupled with the launch of our full digital flow in May, will be a key driver for future ARPU growth as we continue executing on our strategy. Many of our business-to-business customers, especially property developers, are still impacted by macroeconomic factors. We are seeing some positive development in the property market, but we need time for this development to convert into increased sales and commissions for property developers and agents, respectively, before we see higher willingness to invest in product and branding from these groups. Nonetheless, we continue to see potential to use our unique data and market position to develop products for these customers. The prevalence of 50 on this page is not a typo, but a testament to the strong financial quarter that we delivered.
We delivered 51% net sales growth, a growth in average revenue per listing of 52%, a growth in EBITDA of 54%, and an EBITDA margin of 53.4%. I'm very proud of this result, as it underscores the fantastic business model of Hemnet and our ability to execute as we continue to expand our product offering, in particular to property sellers and real estate agents. Now, turning to page 5 to dive deeper into our main growth driver, ARPL. Growth this quarter came mainly from more property sellers choosing to buy a plus or premium listing than last year, resulting in an ARPL growth of 52%. On the right of this page, you can see a reference to the product and purchasing flow in the first bullet point, and I'd like to expand on what we mean by this.
With regards to product investments, improving the product and purchasing experience of this is key to our ARPU growth strategy. Since last year, we have launched the ability to pay for a listing after sale, pre-republishing of a listing, including in Premium, and soon we will launch the ability to purchase value-added services on invoice or to upgrade listing from Plus to Premium. The purchasing flow was completely overhauled in May of this year, meaning that now almost all property sellers have to make an active package choice before their listing is published on Hemnet. As seen in the quarter's strong financial, this was an important contributor to our ARPU growth.
Finally, it is just necessary that the majority of our property sellers buying Plus or Premium are satisfied with the product, meaning that we are still in a very good place when it comes to the return on your Hemnet investment for property sellers. Now turning to page 6 for an update on the property market. This quarter, we benefited from a steady increase in the number of published listings as the positive trends in the property market continued, with more properties for sale, more transactions, and increasing property prices. The number of listings published on Hemnet grew 10% in Q2. At the same time, the number of transactions grew 16%. Price expectations remain high, with approximately half of all buyers and sellers expecting prices to increase in the next 6 months.
The rest expect prices to remain unchanged, and only one in 10 expect a decline. Last time we had such positive expectations was in the winter of 2020 and the spring of 2021. In terms of macro, inflation measured as, inflation came in below both Riksbanken's target of 2% and below consensus at 1.3% . We've already seen the first rate decrease in May of this year, but the recent inflation numbers paved the way for further decreases and a more confident and active property market. Now on to page 7 for net sales per customer group. Net sales from property sellers is up almost 70% and continues to be the main growth driver for, of the business. We've covered the drivers already, more demand for our value-added products in combination with a 10% listing volume growth.
So let's talk about the business-to-business net sales category. Net sales from other customers decreased by 6.2%, which is primarily due to lower display revenue. While we are seeing some positive signals in the market, we believe that more transactions need to happen, both for agents and property developers, to be comfortable in increasing their discretionary marketing spend. Revenue from bank integration, on the other hand, continued to increase as the revenue from value-added services for real estate agents. In part, this is due to our new products that help agents connect with potential sellers. Okay, let's shift focus to some product and company updates, starting with page eight.
We successfully launched our new compensation model on July first, and the first quarter where commission will be based on the new model is therefore, this quarter, Q3, with the first payout based on the new model happening shortly after the end of Q3. The new model further strengthened the alignment between Hemnet and our most active partners to create a win-win situation. In order to make it easier for agents, specifically office managers, to track their historical and future compensation, we have launched a new dashboard. Some of these features will be launched in the near future. On the left and right side of this page, you can see examples of our new commission dashboard that is available to office managers through the Hemnet customer portal. On the left is an example of what an office manager sees to track the progress to the next commission level.
Top right is an example of how an office manager can track the performance of individual agents belonging to that office when it comes to listing recommendations and upgrades. Bottom right is a chart showing historical commission and administration fee payment to remind office managers of the total compensation that Hemnet has recently paid out to them. We strongly believe that the new compensation model is a win-win for real estate agents and Hemnet. The new model is designed to give agent offices who are active partners even better possibilities to earn more from their partnership with Hemnet, and we see this as one of many opportunities to strengthen our relations with the industry. Now let's turn to page nine for a brief product update.
This is a non-exhaustive list of a number of key initiatives where we are investing time and money this past quarter. The purpose of this is to give you a sense of some of the areas that we are currently prioritizing in product development, especially when it comes to usability and consumer improvement. First of all, we have rebuilt our map experiences from the ground. At first glance, this might not be a significant change, but over time, users should appreciate the smoother, faster, and more responsive search experience. The updated code will also allow us to add layers, such as new functions and products on top of the existing map search in the future. Secondly, we have retained a team of app developers to make some significant changes to the scalability and pace of our app development.
Apps drive a large portion of our traffic, but we need to do some more work to get usability and development pace up. Going forward, we expect that this will enable us to work faster in our app development to bring products and new features to apps faster than before. Finally, we are investing in fixing some of the pain points that real estate agents may experience on Hemnet. This is an important initiative as we continue focusing on being a critical partner to the real estate agent community. Some examples here include the new Commission Dashboard that I showed earlier. We're also integrating seller leads straight into the agent's own CRM and some changes to Plus and Premium that have been requested by a number of agents, especially when it comes to payment and purchasing flow.
I want to emphasize again, that this is a non-exhaustive list of some of the product initiatives and the investment areas we are focusing on today. Beyond this, we continue to work on making Hemnet the best property portal for our visitors, improving our value-added products for property sellers, and leveraging our unique data and brand to create products for our business-to-business customers. Turning to page 10 for my last slide, that covers brand and marketing. While we enjoy one of the strongest brands in Sweden and a top five brand in the media category, we consider it important to keep investing in building our brand, both through product and marketing investments.
Not only is baseline marketing spend best practice in the industry, but we have also made significant changes to our product offering in the past few years, and so it's still a need to remind our consumers about our updated offering and the value that we deliver. Thus, we have upgraded some of our marketing efforts during the spring. Firstly, we did an outdoor campaign in Stockholm with the intention of expanding it to more cities after the summer. Secondly, we upgraded our social media work by updating our existing channels, such as Instagram and Facebook, but also adding new channels such as TikTok to reach a younger audience. Thirdly, we are investing in SEO and SEM and using external expertise to ensure our investment yields the highest ROI.
And finally, we invest time and money into physical events, especially those focused on real estate agents, such as annual meetings, roadshows, after works, and so forth, to get our message across to the agent in a less formal setting and strengthening our relationship with the industry. That is it from my section, and I will now hand over to you, Anders, to dive deeper into the financials.
Thank you, Cecilia, and good morning, everyone. Let's turn to page 12 in the financial highlights for the second quarter. As you have heard, we see a similar development in published listings in Q2 as we did in Q1. We started the year with an 11% higher number of listings compared to the first quarter of 2023. This trend continues in Q2, with a 10% increase in published listings. With double-digit underlying volume growth, we are experiencing a strong financial impact in our core business. With a solid Q1 behind us, growth accelerates further into Q1, into Q2, sorry, and we will take you through the what and why. Starting on the left-hand side of this page, we have net sales increasing by over 50% to SEK 405 million.
As Cecilia mentioned earlier, we want to highlight the strong development in our property sales revenue, which increased by 68%, driven by the ARPL growth, of course. It is also worth noting that due to the increased average time our listings are active, we moved from 42 days in Q1 to 43 days in Q2. Remember, this is a rolling twelve-month number, so in a normalized market, it doesn't change that quickly. There are two effects to consider with the increase in listing time. One, the revenues in Q2 are recognized over 43 days, meaning more revenues are moved into next quarter compared to last year. But also, more revenues also shifted into Q2 from March 2024 compared to March 2023. And since March is a significantly larger month than June, the overall effect becomes positive.
The net effect of the increased listing time is plus SEK 6 million for Q2. It is worth noting also that with increased listing times, the seasonal effect is strengthened in our quarters. As always, we communicate this effect all else being equal, so we don't take into account that with our strong growth, which in itself means that with larger net sales, a larger proportion of revenues move to the coming quarter compared to previous period. I would recommend looking at the quarterly ARPR growth as an LTM value to smooth out some of the seasonality effects. I refer to page 5 in the presentation and in the report as well. Moving then to the right, we saw ARPR increasing by 52% in the quarter.
The drivers saw a combination of conversion to our more expensive value-added services, price adjustments across all seller products, and a small effect of the increase in listing time. Our EBITDA came in at SEK 260 million, up 54% from last year. We will dive into the EBITDA development on the following slide. The combination of underlying volume growth and our ARPR results in a very favorable profit development in the quarter. The EBITDA margin came in at 53%, up one percentage point from last year, and we will discuss the cost side later. As expected, we continue to see a high cash conversion, which was 91% LTM in the quarter, in line with the figure of Q4 2023. Cash conversion was impacted by a negative change in working capital for the last 12-month period.
That change in working capital is mainly due to, the availability to pay when listing is removed, which delays the timing of payment from the property seller, thus leading to higher working capital, all else being equal. Leverage came in at 0.7 x, rolling 12-month EBITDA, which is an improvement versus the previous quarter and well below the financial target. This is an expected development with the current earnings, and it's also due to our dividend and the continued return of capital to shareholders through our share buyback program. Now, we'll release that topic in a few slides. Let's move to our EBITDA bridge on page 13. As we have mentioned, there's been a very strong EBITDA development in the quarter, with an increase of SEK 76 million.
We've already discussed the drivers of revenue earlier in the presentation, so now let's turn our attention to the cost side. Compensation to real estate agents continues to grow, up by SEK 48 million quarter-on-quarter. It's worth noting that the share is increasing as a result of higher conversion, meaning more upselling from agents, but also because more and more agent offices are have commission agreements. This is very promising ahead of the new compensation model that was launched, 18 days ago, actually. This represents an incremental increase of 2 percentage points in effective commission, which is important to keep in mind. In total, this amounted to a cost of SEK 107 million in the quarter. Other external expenses, including compensation to agents, increased by SEK 5 million.
This increase is due to high marketing activity, both digitally and offline, as well as slightly higher consulting. You saw some example earlier in the presentation, what we invested in Q2, and will continue up to the summer without destabilizing our P&L, of course. Other external expenses are composed of several components, but we are satisfied with the mix. The last explanation points require some clarification to fully understand. The increase of SEK 10 million can be translated to 21% increase in personnel costs. The underlying factor behind the personnel cost increase is that the FTE increased by 50 quarter-on-quarter, compared to the number of employees at the period, and only increasing by 4. The difference, the FTE increase, can be explained by lower number of employees on parental leave during 2024, as well as recruitments made in 2023.
Additionally, part of the increase is also due to salary inflation. In summary, regarding the cost side, we can note that 2023 was the year when we were careful with our cost and investment, driven by the uncertainty at the moment, evident in the first half of the year. The two conclusions are: first, we are facing relatively low cost levels in our comparison figures, but more importantly, we've been very successful in investments and prioritizations we made in new products and features. We look forward, of course, to continue that trend to meet our growth plans going forward. These are the drivers behind the SEK 260 million in Q2 EBITDA. Moving on to page 14 and some spotlight on the cash flow. If we start with the graph on the left, it shows a rolling 12-month figure for free cash flow.
Being able to generate such a stable and increasing cash flow is a very strong endorsement for the business and the business model. Close to SEK 500 million LTM in Q1 2024 is now increasing to SEK 578 million in Q2. During Q2, we bought back 333,000 shares, equaling SEK 104 million. The SEK 450 million share buyback program announced after the 2023 AGM was completed during the previous quarter, and a new program was launched in May after decision by the 2024 AGM. The new program also announced the SEK 450 million and will run into the 2025 AGM. Further, the 2024 AGM also decided on the cancellation of 2.1 million shares bought back under previous programs, equal to 2.2% of outstanding shares at the launch of the previous program.
We have stated before that Hemnet's intention is to continue buying back shares and distribute excess cash to shareholders. Of course, we must keep an eye on our leverage ratio. Net debt should always be viewed in the light of our growing EBITDA, thus ensuring a stable net debt to EBITDA ratio. As you can see, it has remained stable for some time, but it's now slowly decreasing, which is a consequence of our strong cash flow. It is, of course, clearly below the financial target of 2.0. As a final remark, we are delivering a strong quarter presentation today. It is gratifying to see that a combination of volume and conversion is driving the revenues. On the cost side, we have higher activity aimed at driving future results.
Despite this, we have achieved an EBITDA growth of 54% and SEK 76 million in absolute figures. A very favorable equation indeed. With that, I will hand it over to Cecilia to wrap things up before the Q&A.
Thanks, Anders. And so this has been yet another strong set of results from Hemnet as we continue to execute on our strategy for consumer, sellers, and business to business. I am particularly proud that this quarter's growth was supported by the results of our many initiatives to make our product offering as attractive for property sellers and agents as possible. With that, let's go straight into the 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 Nikola Kalanoski from ABG Sundal Collier. Please go ahead.
Hi. Just two quick questions on the new commission model. Firstly, have you received any early feedback from real estate agencies on the new model that you could share with us? And secondly, has the new model already resulted in any changes in terms of the mix of plus and premium ads that are promoted so far in July, or is it too early to tell?
Hi, thank you. So the first question on feedback, we have not received any specific feedback after the launch. We have spent a lot of time into dialogues with the agent community throughout the spring, and gotten input, and having a dialogue and explaining the new model, but we have not received any other feedback. On the second question, I would say it's too early to say.
All right, understood. Thanks.
Thanks.
The next question comes from Pete Kujala, from Morgan Stanley. Please go ahead.
... Hey, guys, it's Pete. Thanks for taking my questions. Three from me. So first two are on ARPU. Is there any way to quantify the impact of the new digital publishing flow into upsell? Because I'm pretty sure, like, there's clearly an impact, but is it possible to quantify it in any way? That's question number one. Second question is, do you expect the announcement of the new agent compensation model, or now the launch of the new compensation model, has that driven upsell already in Q2, even though the model wasn't up and running yet, but agents knew that it's coming, so were they already reacting, and to what degree? And then the last one is on marketing. So what size of marketing investment do you anticipate for the second half of this year and into 2025?
Like, any kind of color on why you decide to do it now? Because obviously, we know Booli has been doing active marketing, so is basically your spending does it depend on how long Booli is gonna do advertising, and then if they tone it down, you're gonna tone it down? Any color on that would be helpful. Thank you.
Hi, Pete. Thank you. I can start, and maybe Anders can jump in if you want to add something. But on the first request related to ARPU, I would say that during Q2, I would say it's a mix of several factors that drive the ARPU in Q2. The full digital flow that was launched fully in, I believe, sometime in May, right? So it's not the full quarter has definitely had one effect because we're reaching more people, and that has grown, so that has had an effect. I also assume that the compensation model made some effect as well, kind of leading up to the launch, the first of July. Hard to quantify, we don't really disclose that.
But I would say that those are the factors, as well as happy customers buying the printing products. I would say that those three, and also maybe adding to, you know, the pay when listing is removed, that we launched during Q4 last year. That also continues being one thing. So all those areas, I would say, maybe pointing most to full digital flow in Q2. And then on marketing, I would say that regardless of competition, what we have said and communicated for some time, and we started communicating that, I believe it was two years ago.
We said that we are kind of moving into a phase where we want to come back to put some investment in our marketing on an ongoing basis. Because that is kind of how we kind of run the business long term, and also because we have done a lot of changes in our business and in our products for many years, and we haven't really communicated that. So we said that I believe it was two years ago, we communicated that. And we also started with reviewing kind of the brand platform and so forth. Then last year, we said that we kind of paused that a bit to give them the market uncertainty.
I think it was a good choice last year that we kind of we were a bit more strict on prioritization in our product development and also, not really pushing forward the marketing. We also said then that, kind of coming back to what we said and then kind of following through on what we said last year, is that when we see the market coming back, we will kind of go also back into investing more in product and marketing, and that is what you're seeing. So that is the main reason for us. I kind of foresee that we will be a bit more active on marketing.
Marketing for us, it could be like branding, like with during Q2, but also in making sure that we are on top of SEO and SEM and social media as well. But when we talk about marketing, we're not talking about like big investments in that sense, but we're more or less kind of coming back to having a long-term view and an ongoing view of kind of being a bit more always on, I would say. I don't know, Anders, if you want to add anything or if that's kind of answered your question, Pete, your assessment.
You said it very well, but I can also stress really that this is in line with what we've said now for the last one year, that when the market develops, we can expect that our investment will grow, but it will not be at... You saw the total figure, SEK 5 million. It will not be that dramatic.
So yeah. All right. Many thanks for you - to you both.
Thank you.
Thank you.
The next question comes from William Packer from BNP Paribas Exane. Please go ahead.
Hi there. Thanks for taking my questions. Firstly, ARPU growth was very impressive. Could you help us by disaggregating the drivers of the big beat? So, for example, some of your peers talk to price, product, and other, perhaps to disaggregate that, or alternatively, help us with the penetration of premium or class listings. Clearly, consensus was wrong by a wide margin, so understanding the drivers would be very helpful. Secondly, in terms of the cost outlook for the second half of the year, we have the new commission model. Should we think of downside or upside to the 30% of listing revenue paid out to agents in Q2, or is it too early to say?
Finally, in terms of the non-commission costs, such as personnel, so personnel costs grew 20% in Q2. Is that the right number to think through for the second half of the year?
... Any commentary on the outlook for the second half cost base would be very helpful. Thank you.
Hi, and thank you. I'll take the first question, and then maybe, Anders, you can talk about the cost side also of the business. But we don't disclose the exact, I mean, what is it? We have different drivers that drive ARPU. We don't disclose exactly. What we said before is that we kind of through product price, like 50/50. That's kind of on and off like over time, kind of. What we can say during Q2 is that it's really a demand driven growth. And I'm very happy that we, the last quarter saw more uptake to our value-added services, meaning that our customers really appreciate those products and give them a good grade as well, and recommend those products.
And that we kind of reach a point now where more and more people see this product and kind of more people convert to those products. Then I would add coming back to the last quarter, where we also talked about the four different drivers. We also talked about apart from product, we also talked about for example, the publishing flow and the payments, and all those things that we're doing, for example, the full digital flow. That also helps us to drive ARPU. And now almost everyone is now exposed to the different packages and are kind of prompted to make a choice. And that has been an uplift as well during Q2.
We talked about, I believe during Q1, that a majority of the sellers are on the value-added services. What we can say without disclosing number, is that that has grown during Q2. I don't know, Anders, if you want to say anything before going into the two second questions or?
No, I think also adding that when we disclose some details along with the Q1, we gave you 12 months, okay, for Q1. 12 months figures, because we know that the condition levels, conversions, speed, upticks and so on, they tend to vary a bit during the quarters, unless there's no drama in that. But it's still a positive momentum and also growth in mind. When it comes to compensation model, it is, of course, early to say, 18 days in, July is a very slow month for obvious reasons, and holiday. But remember that this is a paid for performance model, so it should drive top line. So how it pans out on the effective commission, 30, 28, 32, 26, it's way too early to say.
But hopefully we will increase our payouts to, to agents, and they've done a good job, and also I can live with. Coming back to the marketing once again, I think, as we have said now a couple of quarters, that, when the market develops, we should anticipate higher run rate when it comes to marketing. And I would expect that to happen during the second half year as well, but, and no, no drama there as well.
Yeah, but I think also the question was regarding the personnel.
Personnel cost. Oh, sorry. That's right.
Mm.
Yes, the effect 2023, 2024, will continue in Q3 and Q4. So our figures for Q2 and Q1 are the best forecast model for Q3, Q4. That's for sure.
Thanks for the color. Appreciated.
The next question comes from Andrew Ross, from Barclays. Please go ahead.
Hey, good morning, guys. I've got two, if that's okay. First one is just to ask you how you're thinking about underlying pricing, given how good progress you're making on premium upsell, and whether it changes at all your thinking about kind of pricing adjustments on the core listings in the second half? And I guess what I'm trying to weigh up, as you think into the second half, potentially there are kind of additive factors around the full kind of annualization or let's say full period of inclusion of the digital flow migration, plus the change of the commission model. Should we kind of think about stacking that up potentially on the same underlying price increase that you were always going to do?
Or are you thinking about kind of solving for an end, ARPU, and you may be a bit more cautious on the base pricing in the second half as a result? That's the first question. The second one is to ask you, about, the medium-term plans about how you drive more premium upsell. You've obviously had a lot of success in the last year around pay later, the digital flow, republishing, commission model changes, presumably. As you think about 2025 and 2026, can you give us a bit more color in terms of the medium-term plans as to how you keep driving that on after a super strong 2024? Thanks.
Yeah. Thank you, Andrew. So, I think I heard your question. It was a bit of a poor connection, but the first one, underlying pricing. So to give some color on that, I would say that when we look at ARPU, we see, like we talked about, several different levers for us to work on. And I would say that we've had a great uptake now on some of the initiatives that we've done with the pay later and the full digital flow, but also the compensation model. So I would say that kind of looking into that, that is where our focus is.
We continue also working on price, obviously. I mean, we have a great segment of pricing model, but we do see a lot of levers to pull that are kind of product improvements or enhancements in the publication flow, and that's kind of the main focus for us right now. I would say versus pricing. And then on the medium term plan, also maybe coming back to without disclosing anything, we still see a lot of growth potential, both low-hanging fruits and then bigger things that we can work with for the coming years. And that is really when it comes to products and the offering we have, and I've said that before also.
We've had this product offering for some time now, and I think in the coming years, I wouldn't be surprised if that kind of expands into something else or develops into something else, to cater for different needs for our different customers. That's the big one area. But also with, of course, now we are, like Anders said, 18 days into the new compensation model. Now it's live. Now we need to continue working and making sure that the agents understand, et cetera, and kind of optimizing that. I think that has also huge potential, and hopefully we can bring as many people as along with us as possible. And also with the publication flow and the publishing flow and the payment timing, there are more things to do in those areas.
So for us, we really see kind of those levers, and that we can continue working on without disclosing a specific initiative or, or something, but we have several things, that we can work on. Yeah.
Great. Thanks.
The next question comes from Georg Attling from Pareto Securities. Please go ahead.
Good morning, all, and congrats on the very strong quarter. I just have two questions, starting with the pay later product. We obviously saw very swift adoption of that in, especially in Q1. Has that continued up or are you sort of at a stable level now?
I can answer that. With every time we've commented on the, on the pay late or pay when it's removed, the feature that we launched Q4 last year, it has varied over the quarter, some, but not ... It's between 40%-50%, and it continues to do that, but we cannot draw any clear conclusion from that. So, so we don't see a correct correlation with the market or anything else. So it's what we said in Q1 data.
Okay. And my second question is on the other services, revenues down 7% in Q2. Just wondering if this is something you work actively to turn around, maybe especially on the advertising side, or just awaiting a better market?
We're definitely working actively on this. We definitely want to see a trend shift in this area, and we're working actively, both in kind of how we work and with the product enhancement and so forth. We're affected by the overall market, but we also believe that when the market kind of continues showing the positive signals, there will be a bigger willingness for investments, and then we will definitely want to be there. So, definitely working actively in this area.
Okay, good. Thank you very much. That's all for me.
Thank you.
The next question comes from Giles Thorne from Jefferies LLC. Please go ahead.
Thank you. The first question was on, I suppose, ultimately, ARPL, but noting your previous comment that you hadn't seen a big change in behavior by agents on recommendations ahead of the launch of the new compensation model, can you, can you tell us then, instead, what was the driver of the increase in payments, you know, administration and commission costs paid to agents if it wasn't a change in behavior? And secondly, I wanted to turn the conversation to B2B. It's an area where over the past couple of years, you've launched a number of products, and spoken up about the opportunity, but ultimately, the trends that you're seeing within your B2B segment have just got worse.
I think just from Cecilia, maybe an update on where you are on B2B and how you expect it to evolve from here, and with a view, especially on agents. Thanks.
Sure. So on the first question, I don't know if,
Yeah, I think it could be a misunderstanding. I don't know. Let me know if this is an answer to another question, but there's quite a big change in the effective commission in Q2 as well, and I try to be clear about that in my slide. So two main reasons why the effective commission has increased is that, one, more agents have signed commission agreements, and that's, of course, a result of what we've done during this half year, been out in the market, talk about the new compensation model and so on. And the second one is that agents actually climb the current tiers in the current commission tiers. So with a higher conversion, they get higher payouts as well today with the current model.
So those are the two explanation points why the effective commission rates increased in the quarter. That was the first one.
On the business to business, that is true. We have invested in new product launches for business to business, especially agents and also previously also for property developers. It's been a bit of a tricky market, because the willingness to invest has been limited during this market. So the timing hasn't been that easy. That's one thing. And we've also been a bit pressured on the overall kind of display revenue. Our strategy is to continue to expand the products and go into more Hemnet unique products, initiative products, because then we can also reach the mobile audience in a better way. And that kind of still stands.
The strategy still stands, and we expect the market to be more positive going forward, but also coming back to what can we kind of do in order to make sure that we have the best products, potential adjustment, but also the way of working and how we can go sell and package this product. So all those areas we are working on right now. So kind of coming back to an earlier question as well, that this is not – we're not only waiting for a market to change, but we're also working actively in order. And our belief when it comes to this area, it still stands. But then zooming in both on agents, you asked specifically of agents, but also property developers.
Those two businesses have—they have been quite affected in this slower market. So I expect kind of with the more positive signals that they will also, the willingness will also come back, which is a good thing.
Okay, very good. And thanks, Anders. I clearly missed that commentary from your prepared remarks. Just back on B2B, a follow-up. Are you gonna start more aggressively selling some of your agent products into agents this year?
No, but we continue to having a dialogue, and it still stands that we have developed some good products that we are selling to the market, and that kind of continues.
Very good. Thank you.
Thank you.
As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.
Thank you, everyone, for checking in today, and I wish you all a good summer. Bye-bye.