Welcome to the Hemnet audiocast with teleconference Q4 2021. For the first part of this call, all participants will be in listen-only mode, and afterwards there will be a question and answer session. Speakers, please begin your meeting.
Good morning, and welcome to this presentation of Hemnet Group's results for the fourth and final quarter of 2021. My name is Cecilia Beck-Friis, and I am the CEO of Hemnet, and I am joined today by Carl Johan Åkesson, our CFO. Together we are very excited to be with you today to give you an update on yet another strong quarter for Hemnet, as well as an overview of our annual results for 2021. Starting things off with page four, you will see that this is yet another strong quarter for Hemnet, with strong growth in both revenue and adjusted EBITDA. Net sales increased 24%, once again above our financial target of 15%-20%. This is the third quarter in a row that Hemnet outperforms its financial growth targets.
We continue to demonstrate scalable growth with adjusted EBITDA increasing 76.3% to SEK 84.6 million, and margin increasing 14.1 percentage points to 47.7%. Once again, we continue to see high operating leverage in our business model with a significant portion of revenue growth going down to the bottom line. We continue to execute on our plan. I will talk you through in detail the product updates for Q4 later on in this presentation, but want to highlight now that we are finally in a position with much of the foundation for growth in place, and this is especially apparent during this quarter where we leverage product launches from earlier this year to continue delivering on our goals. Finally, I'm pleased to presenting the plan for Hemnet's first dividend since going public.
Our policy is an annual dividend of at least a third of net income, and in the event that there is excess cash, to return this cash to shareholders in an efficient way. The board will therefore be proposing to the AGM a dividend of SEK 0.55 per share. Additionally, also in line with our policy, the board will be seeking a mandate from the AGM to conduct a buyback program of up to 10% of outstanding shares in order to distribute excess cash. Turning to page five and looking at Hemnet's first annual results as a public company. We delivered 34% growth for the full year 2021, significantly above our financial growth target. Adjusted EBITDA, which is mainly adjusted for costs related to the IPO, grew 76% with margin increasing 12 percentage points to 49%.
On the right, you will see one of the charts that I am the most proud of. Hemnet is a rare company that delivers both a strong and consistent growth with plenty of headroom remaining, as well as a highly profitable business model. Our CAGR since 2018 is now at 25% for revenues and 37% for adjusted EBITDA. The bottom line is that our consumers want the products we sell and launch with strong demand for seller products as conversion steadily increases and strong demand from business to business, especially the real estate agents that continue to invest in Hemnet as one of their primary marketing channels.
The demand is coupled with a successful change in our business model during Q1, where we made adjustments to the way we compensate real estate agents for the publication and upsell listing on Hemnet, as well as how we'll price our products. The result is a toolkit of growth enablers that we have leveraged during 2021 and plan on leveraging going forward. While we are not dependent on the growth in the number of listings to execute on our growth strategy, we did receive some positive tailwinds from an exceptional property market this year, with the growth in listing being more than double of a typical year. More on this later on in the presentation. Finally, from an internal perspective, we have enjoyed a continued high pace in product development with solid execution and focus.
Turning to page six and our ARPU, we'll use two tools to grow ARPU, conversion and pricing, both of which we work with continuously. We can impact conversion in several ways, such as, for example, product improvements, increasing awareness, proactive communication, and having real estate agents recommending our products to property sellers. Since the launch of Plus and Premium in 2019, we have made several major changes, adding more value to the product. For example, including the appearance, like size and quantity of the search result list photos, and features, such as sorting in the result list.
More recently, we have focused on the process of buying and selling, upselling the listing, making it easier for the seller through an updated sales funnel, and also enabling the real estate agents to recommend the package to their seller, further underscoring their importance as a partner to Hemnet. For 2022, we will continue developing our product offering, improving the purchase experience for sellers, leveraging our relationship with the real estate agent community as a driver for conversion, and working with pricing to continue driving the ARPA. Turning to page seven, where I want to briefly touch upon the topic of listing volumes. We are fortunate to operate in the market with stable and predictable listing volumes that do not fluctuate significantly over time, except for seasonality during the year.
We have also been around for over 20 years, meaning that approximately 90% of all properties sold in Sweden are listed on Hemnet. Because of this, we do not expect volumes to be the key driver for Hemnet going forward, and neither has been, this has been the case in the past. Growth will instead come from our own ability to monetize our core customer groups, the property sellers, and the business-to-business partners. We do, however, enjoy the benefits, of higher than usual listing volumes, as has been the case in 2021, with the growth in published listing of 4.8% being higher than the average growth of 2% that we have seen in the past. While high listing volumes does have a positive impact on results, our results, it's not a factor in us meeting our financial targets.
That was a brief summary of the quarter and of the year, and we are now turning to page nine to dive deeper into some of the details. Here we have outlined some of the major product updates launched during the quarter for each of our target groups. For consumers, focus has been on increasing retention and stickiness. We are working with this by improving a recommendation based on historical searches. This means that users stay with Hemnet for longer and have a higher chance of finding a property that matches their criteria. For sellers, we have made significant updates to our payment flow to make it easier to pay for their listing. As a reminder, a key differentiator between Hemnet and other vendor-paid business model is that the seller actually transact with Hemnet directly, rather than paying to an intermediating agent.
We also made the decision to remove social media advertising previously included in Hemnet Premium. In addition to making the product easier to understand for the consumer, we also found that the media space on Hemnet is far more effective than social media at driving relevant traffic to a listing. For agents and our business partners, we have made a couple of important changes in the quarter. For agents, we made product improvements to Hemnet Business, our pro-broker subscription product, to which nearly all agent offices subscribe to. We also made the price adjustment to this product at the same time. For property developers, we are testing a new listing product that would give developers better and more relevant exposure on Hemnet. Finally, we updated our banking product, now showing a more comprehensive mortgage calculator.
Turning to page 10, where I am very excited about showing you a glimpse of what to expect in 2022. For consumers, we will continue to leverage our position as the most visited real estate portal in Sweden, with over 60 million visits per month to create an even better user experience, focusing on personalization to increase retention and add value to the research and search phase of the property journey. For sellers, we have in place a very strong product offering and a direct contact through which they can purchase packages directly from Hemnet. This relationship is strengthened by the fact that the real estate agents act as ambassadors for Hemnet product and are able to guide their sellers to which product choice is the best fit for them.
Going forward, we will be focusing on increasing the effect, the awareness, and value of our products, while at the same time continuing our work with segmented pricing to capture more pricing headroom. For agents and business to business, we currently offer a relatively limited product offering, with the majority of existing revenues coming from display products. More focus will be put into launching new products beyond display that support customers in growing their business with focus on branding and exposure. Looking at revenue by service category on page 11, you will see that value-added services, once again, is the fastest growing product category in our portfolio, as we see increasing uptick of our products coupled with pricing adjustments. Listing fees grew despite the slight decrease in listing year-on-year.
Important to keep in mind here that no price adjustment was made in Q4 of last year, nor any preceding quarters in 2020, which makes the comparison favorable. For advertising and other services, we are seeing one of the very few line items that is declining in Q4. I would say that this is a supply-driven challenge rather than a demand-driven one. We continue to see solid demand from our business-to-business customers, with some customers, mainly property developers, choosing to invest less in Hemnet during a hot property market. Looking at the full year basis, we grew our advertiser's revenue by 18% in 2021 compared to 2020, and 57% compared to 2019.
Finally, turning to page 12, and an update on our next framework for sustainability. I have previously mentioned to you that we are doing a complete overhaul of this framework, which is now ready and will be included in the next annual and sustainability report. I want to thank the research analysts and investors that have been involved in this process for your great input, which helped form the basis of this report. The conclusion of the review is that our sustainability efforts should support our business as well as be a force for good in society. You can see the main building blocks on the right of this page.
What is important for us, and I'm sure for external shareholder stakeholders, is that these initiatives are measured and followed up in a qualitative way, which is how we plan on presenting them in the report going forward. With that, I will hand over to Carl Johan Åkesson, who will take us through the financial updates.
Thank you, Cecilia. Let's start on page 14 with an overview of the quarterly and annual financial results. As Cecilia mentioned, this has been yet another strong quarter for Hemnet, and net sales is up 25%, while adjusted EBITDA is up 76%, which you can see on the left-hand side of the page. On an annual basis, we grew net sales by 34% and adjusted EBITDA by 76%, which meant that the margin for the full year was almost up 12 percentage points. We are, of course, very pleased with these results as they are a testament to the work we have put in to execute on our growth strategy over the past four quarters. Turning to page 15 and the financial highlights for Q4.
I've already touched upon the net sales and the adjusted EBITDA, so here we'll add the following. The main growth driver has been our average revenue per listing, the ARPL, which is up 45% to over 3,000 kronor. As expected, we continue to be highly cash generative with close to SEK 62 million in operating cash flow for the quarter. That also means that leverage is down 0.3 turns to SEK 0.5 adjusted EBITDA, and putting us in a position where we assess that we have excess cash that can be distributed back to shareholders. More on this shortly. On the next page, number 16, we look at the factors that contribute to our strong growth in adjusted EBITDA for the full year. Here we have excluded our IACs, just as in previous quarters, and also split the other external expenses into two components. The first one being the compensation to real estate agents, and the other one is the other external expenses. As a general comment, just like we've seen in previous quarters, we couple high growth in revenue with disciplined cost control, which leads to margin expansion. Looking at the compensation to real estate agents, it increased with about SEK 5 million in the quarter for the full year. This also includes the educational expense of SEK 6.3 million. As you recall, this educational expense was in place for 2021 only, so there will not be any new costs in 2022 related to this.
Other external expenses, excluding the compensation to real estate agents, is up SEK 10 million, where the main change is coming from higher social media expenses for Hemnet Premium. As Cecilia mentioned previously, we have now removed social media from Hemnet Premium, and we will instead invest similar amount in marketing activities related to brand and product launches. We have continued to invest in growing our team, and this remains the largest contribution to cost growth. This is something that is set to continue in this year to support product innovation for business-to-business customers, as well as consumers and property sellers. Looking at page 17 and our customer categories, we see that revenue from property sellers remains the key driver, as it has been in our main priority during the last couple of years.
I think we've touched sufficiently on the reasons for this strong development. Instead of looking at our other three customer categories, we first will see the continued solid development for real estate agents. That is up 16% in the quarter. In a property market with high activity, agents have continued to use Hemnet for their marketing, using both our specific products, Hemnet Business and Mäklartipset, as well as our display products. The next category, real estate developers, is a significantly smaller customer group than agents currently. Just as for agents, we see many growth opportunities here going forward. In the quarter, revenues were down 18%.
Here we see a slightly different dynamic in how the customer group uses Hemnet, as investments are more cyclical or perhaps counter-cyclical, as developers use Hemnet to boost demand when the market is not as active as it has been recently. We also see some supply effects as our display inventory has come down slightly from high levels in Q4 last year. Finally, on the advertisers category, you can see the effect of Hemnet gradually reducing programmatic inventory in favor of core customer groups and other formats, and this results in a 7% decrease for the category in the quarter. Turning to page 18 to look at the cash bridge for the quarter.
As mentioned, we continue to deliver a healthy operating cash flow, up to SEK 62 million for the quarter, and this covers the first four bars in the chart. The majority of this was used for reducing the drawdown on our revolving credit facility, and that's a short-term measure to manage our excess liquidity. Rising costs for income taxes naturally follows the increase in profit before tax. In total, our cash flow led us to reducing leverage to 0.5x 12 months trailing adjusted EBITDA compared to 0.8x at the end of Q3. We end the fiscal year with a cash balance of SEK 95 million. On page 19, we outline the plans for our first dividend as well as additional adjustments to our balance sheets.
First, on a general note, we are committed to returning all excess cash to shareholders, fully in line with our dividend policy. The board's proposal to the AGM therefore includes both a dividend and a share buyback. The proposed dividend is slightly above one-third of net income for 2021 at 0.55 SEK per share and would be paid out in May with a record date 3rd of May. When it comes to the buyback, the board will seek the customary mandate to buy back up to 10% of outstanding shares. If approved by the AGM, we then plan to start the buybacks in Q2, and this would result in leverage staying at similar levels to what we see after the dividend is paid in May rather than continuing to trend down.
Before handing back to Cecilia, to sum up, we'll also have a quick look at our financial targets on page 20. We have outperformed our growth target for each quarter since going public, and we are now firmly in our range for profitability with adjusted EBITDA margin reaching close to 49%. We are below our leverage target and expect the buybacks to halt the relatively quick decline in net debt to adjusted EBITDA. With that, I hand it over to Cecilia again.
Thank you, CJ. Turning to page 22, where I want to summarize this quarter and year by saying how proud I am of what we have achieved in terms of executing on product strategy, building our team, and of course, the outstanding financial outcome. We leave behind us a year of 34% top-line growth and a full 76% increase in adjusted EBITDA. We are more profitable than ever with a margin of 48.8% and are able to invest in our team, our brand, and product development in a scalable manner. Furthermore, we are in a strong position going into Q1 of 2022 with a solid platform and product portfolio on which to further build and expand our business. I want to thank you for your continued support, and we will now open up for questions.
Thank you. We will now begin the question and answer session. If you have a question for the speakers, please press 0 and 1 on your telephone keypad. We receive the first question. It is from Pete-Veikko Kujala, Morgan Stanley. Please go ahead. Your line is now open.
Hi, thanks for taking my questions, a couple from me. Firstly, looking at 2022, do you think the medium-term target on growth is a good proxy also for 2022? Or do you think we should expect a deviation from that target like what we saw in 2021? Secondly, you moved to 20%-40% commission kickback on Plus and Premium in January. Have you done a price increases during January or do you plan to do them after January? Thirdly, you mentioned that the penetration in Plus and Premium was over a third in Q4. Should we expect growth going forward to come mainly from this increased penetration or from pricing of the packages?
Lastly, the product journey that you showed on page 10, how do you expect that to affect the cost base versus 2021? Thank you.
Okay, thank you, Pete. If I start with your question regarding the 2022 growth, I mean, the board sets our financial targets, and it's currently 15%-20% annual growth. We haven't updated that, and it's what we're working to achieve or exceed in 2022.
I can take your second and third question also, and maybe combine an answer there. I mean, we are working with both product improvement and pricing. When it comes to the conversion of our Plus and Premium and the uptake of those products, we're very happy to see the uptake that we also presented in the quarterly report. We expect the conversion and working towards the conversion increasing over time. That is one factor. And then when it comes to pricing and your second question there, I mean, this is an ongoing work.
What we did last year was to kind of set the foundation and the toolkit in place, meaning that we now have. We're in the front, so to say, in how to run the pricing. This is also where we're early on in this journey, and we expect to kind of work with pricing on an ongoing basis, rather than in certain periods. It's kind of a way for us to handle the business on an ongoing basis to expand the ARPU. The fourth question, sorry, maybe if you can repeat or maybe Cecilia.
No, I think you were asking also about page 10, the product journey.
Yeah, yeah
What that would mean for our cost base. Quickly on that, I would say this is fully sort of covered with the investments that we do in new team members by staff costs. As we indicated previously, we're set to continue to expand those teams at roughly the same or slightly higher rates than you saw for last year. I think that is the answer to your question.
Yep. Thanks all. Thank you.
Thank you.
Thank you. The next question is from Andrew Ross, Barclays. Your line is open, please go ahead.
Great, thank you, and good morning, everyone. I've got three. The first one is just to go back to the ARPU growth in Q4, which slowed a bit against Q3, despite the comp being about 10 points easier. Could you just touch on the moving parts as to why it slowed down? The second question is coming back to the one third of home sellers on Plus and Premium. Can you just give us a sense as to how that breaks down between the two? Also if you could update us on the penetration now at Raketen and Republishing. The third is just to come back on the margin guidance. You know, you're clearly right at the end of the 45%-50% range. Any reason why you won't go above that in 2022?
Thank you.
Okay. If we start with ARPU for Q4, that slowed down slightly. I mean, I think we will see some fluctuations in the growth rates here. It's not a linear movement, so to say, but we're still up, I mean, 45% in the quarter. I think it's quite substantial even though it might be a little bit lower than in Q3.
Then on your question on the Plus and Premium. We don't disclose, we don't break down the numbers, but what we can say, and I'm very happy about that, I mean, we continue to increase the conversion uptake of our products. I think that's the message from us. Also when we talk about the EBITDA, we have the board sets, you know, the margin targets and the targets are there for us to build. I don't know if you want to add.
No. Just as you say, we're here to try and beat those targets. We don't have a certain sort of ceiling for the margin. For the time being, we're in the range and we're here to try and beat the range.
Cool. Can I just follow up what you're thinking on the Q1 ARPU? Because I hear you, but it can be a bit volatile quarter by quarter, but I guess now the comp gets a bit harder in Q1, and you're starting to lap against the pricing model change at the start of March. You know, directionally, are we thinking that the ARPU growth is gonna slow down a fair amount in Q1 or not?
Yeah. No, I think that's a fair assumption. Throughout last year, we've sort of had comps from a year where we didn't really work at all with pricing on the base ad. Definitely it's gonna be a different sort of comp when we now move into 2022. As you say, from first of March, we adjusted the base ad. So that's absolutely correct.
Cool. Thank you.
The next question is from Daniel Ohlvén, Nordea. Please go ahead. Your line is open.
Yes. Good morning, Cecilia and CJ, and thank you for taking my questions. I had a question on the different segment here. On the real estate developer side and on the advertising segment, it seems to have declined in Q4 year-over-year. Based on what you said on the call, it seems like you talk about high activity in general, less need for advertising and also a quite difficult comparison than from last year. How should we think about that going forward during the first half for 2022, for example? Is it the same kind of effects you think will be there also for Q1 and Q2, for example? That's the first question.
Thank you, Daniel. Yes, I think that when we look at the business to business, what we see is continued high demand overall. I would say that we are, and as you said, then as we pointed out, also we have some harder comparables. That's one reason. Also when looking into some customer groups, for example, the real estate developer, that it's more cyclical. And moving into this year, we have accelerated our focus on this, on the business to business partners. And what to expect from the product side is that we will continue to develop and broaden our product portfolio. That is a key focus for us during this year.
I mean, I think that we can still expect it to be harder comparables in the beginning of the year, but throughout the year, with new product launches, that we will continue focusing on the growth in these segments.
Perfect. Thank you very much. Also one question on the personnel costs. After having been growing here for quite a while, it seems like it was down year-over-year in Q4. You mentioned in the text here that you had the lower bonuses, so variable pay versus last year. I just wonder, is this quite a big one-off here? Can you say anything about the rate of growth in personnel costs going forward? For example, if I would look at 2021 full year versus 2020, is that a good indicator going forward, or do you expect kind of lower growth on the personnel cost line going forward? That's the second question. Thank you.
Yeah. I would say on, I think 2021 is a good sort of benchmark. I would view our personnel costs more as a sequential event, so to say, as we continue to grow the team. If you take Q4, that's probably the best sort of benchmark for Q1, with then of course, some additions to the team.
Great. Okay. Thank you. Johan, one question on pricing here. We have a kind of a way to monitor pricing, and it seems like you raised prices quite quickly here up until August for different regions, but then it's been relatively flat after August. I'm just wondering, did you raise a bit too quick here, or are you still monitoring how that is falling out, or how can you say anything around the fast raise here and then not raising anything more? Is there anything to say around this?
Yeah. Not too much to comment on, I think. I mean, what we do is we try to distribute sort of pricing gradually over a period of time. There can be sort of mixed effects that make it jump perhaps quicker in a certain month or two. Overall, we see this much more as a long-term development. There's no sort of tactical or strategic motive to the fluctuations. It's more how we sort of continuously try to work with segmented pricing.
Okay, great. Just one last question also. I noticed here that you will not be using the full amount of funds that you reserved them for real estate agent training here. Do you know why is that? Is the interest was not as you expected from the agents here, or is there any other reason why you think you not have to use that full amount?
I mean, this, I have to be honest, it's a little bit puzzling to us as well. I mean, there's two things here, because first of all, you need to sign the commission agreement in order to be entitled to this. That's one sort of limiting factor. The other is that the agents actively have to sort of approve and sign up for this. When you combine these two effects, it ended up with SEK 6.3 million for the year. We have, from our side, communicated sort of regularly about this opportunity and really tried to promote it to the agent community. I think we pushed it as hard as we could.
Okay. Maybe actually one last question, if I may. Just on the share buyback initiative also. Do you see this as a kind of one-off situation where you had lower than expected investments or stronger than expected trading? Or do you believe that buyback could be a feature also here for the mid to long term?
I would say it's definitely a feature that we will see going forward as well. I'm saying this since, according to our dividend policy, the dividend is sort of above a third of net income, but that leaves two thirds of net income as well as a cash flow that should surpass net income due to some of the D&A items in our P&L. There will be room for sure, even if we at some point would accelerate in investment. There will be buybacks going forward as well.
Perfect. Okay. That's all my questions. Thank you very much.
Thank you.
The next question is from Eirik Rafdal, Carnegie. Please go ahead. Your line is open.
Yeah. Hi, Cecilia. Hi, CJ. Thank you for taking my questions. Most of them are covered, but I got two or three follow-ups here. If we just start on the high activity you're commenting on, and volumes seem to kind of have picked up nicely right after Christmas, but then kind of accelerated further through January. Is there a really tight supply side in the market now? If that's the case, how do you see this evolving over the next couple of months? I was also wondering on the Hemnet Business product. I think you stated that you did some pricing updates there at the end of Q4.
Could you just give us a bit of an update on that price increase and also the current number of relevant agents on the service? Lastly, a bit on the longer term, I think there was a timely article in local press today, talking about more listings moving to coming for sale, often on the agent's own platform. Could you just please talk us a bit through that threat and how you are addressing that with your own coming for sale offering? Thank you.
If I start, Eirik, with your first question there regarding the high activity at the start of January and what to expect. I think we don't comment on the quarter, but we haven't seen anything that is deviating in particular so far this year. That's sort of the facts we have in our numbers when it comes to volumes.
On your second question on Hemnet Business, we did some improvement in the products and updates, both when it comes to increased exposure of the broker and also improving our analytics tool. At the same time, we also updated and adjusted the prices for that product and adjusted some of the behind the rules product because it's based on the number of listings that an office actually publish each month. We don't communicate the exact adjustments. It's hard to kind of predict, but we did some adjustments in the product and improvements in the product, I would say adding more value.
When it comes to upcoming, I would say that our ambition is to have as many for sale listing at Hemnet as possible. I think that we do have a very solid platform. Around 90% of all for sale listing is published on Hemnet, you know, throughout the sales cycle of a property. That has been very stable for a long time. It's always been the case that you have some listing that is sold outside of the open market. It could be, you know, very expensive houses, for example, or transaction within the family. You might argue that during a very hot market, that could increase a bit.
Over time, I think it's very stable, and I think also that, you know, we are a driver behind having an open, very transparent market. We believe that's very good for all kinds of stakeholders in the property market, both for the sellers, the buyers and the agents in the market. We have throughout last year improved our coming because we do, I mean, we do understand for some property sellers and also for some agents, there might be a need to kind of test the property out before going to the open market. We have made improvements in our upcoming product as well during last year, making it more visible. I would say it's still on the margin. It's not for everyone.
our focus has been, you know, properties for sale, and not maybe for sale.
Perfect. That's very clear. Thank you.
Thank you.
There are no further questions by the telephone lines. I hand back to you.
Okay. Thank you so very much for listening in and asking questions and see you next time. Thank you.