Welcome to Qliro Q1 Presentation 2025. During the Q&A session, participants are able to ask questions by dialing pound key 5 on their telephone keypad. Now, I will hand the conference over to CEO Christoffer Rutgersson and CFO Carl Löfgren. Please go ahead.
Thank you, and hi everyone, and welcome to our Q1 presentation for Qliro. I'm Christoffer Rutgersson, CEO of the company, and with me today, I'm very happy to also have our new CFO, Carl Löfgren, that's joining us from Investor AB. For today's agenda, I will walk through a quick strategic update, then hand over to Carl for our kind of financial update, talk about the outlook, and then come back to kind of a Q&A at the end. Regarding the strategic update, we still see a large opportunity to build a new European leader in what we call composable payments, and to deliver a world-leading experience for merchants and their customer journey.
We see that Atis now kind of making a mark in the Nordic market, where we have accelerated momentum with more than 39% growth in new volumes signed with merchants that are expected to go live on the platform during the year. We see a significant contribution from our SME segment in relation to our operating income, which is now representing more than 8%, up from 1% last year. That is driven by a strong merchant-based growth of more than 200%. We expect that our expectations on our Nordic launch is now higher than before. We are above expectations. In Norway, we have signed more than SEK 500 million in volume only in the last kind of eight months since launch, which is a great achievement, and more, I think, than we signed in the whole year of 2023 in all of Qliro.
That volume in itself will take Norway to profitability when it's fully live, and we'll come back to that. We also see that the scalable business model and the sales model is now working. On the expected profitability from new contracts that were signed in the first quarter, we see an expected lifetime value over CAC of a ratio of 5x-10x, which is a strong proof that the growth investment is working. If we go back to the first topic of our vision to build a new European leader in composable payments, we are starting in the Nordics, but we're building it with global capabilities so we can support our merchants across the globe and through their volume kind of get more volume into other European markets and then expand kind of step by step.
We have now started on that expansion journey, going from historically only focusing on Swedish merchants to establishing a sales office in Norway in August last year, and we launched in Finland in April this year. Quite new in Finland, and we will also come back to that in the presentation. Our mission is to deliver a world-leading experience for merchants and their customer journey. I've been in the payments industry for more than 10 years. I think there's no one that does this really well, and I think this makes Qliro unique that we can handle the customers of the merchants in a good way and send them back to the merchants they came from to build kind of loyal consumer relationships for our merchants.
That's a strong driver for the growth of kind of merchants that is kind of shifting to us from other players in the market. Our short-term ambition is to ensure we become a local market leader in the Nordics within the three to five years. If you take the growth we've shown in new volume signed so far with around 40%, if you extrapolate that forward, we will be a market leader within three to five years in the Nordic market. To reach that, why are leading merchants choosing Qliro? First of all, our mission makes us quite unique that we focus in both on the merchant experience and the consumer experience of our merchants. We invest a lot in this experience if you compare to the niche banks.
We're quite different from some of the other paylater providers that are moving more into building their own consumer experience with marketplaces, price comparisons, kind of their own shopping experience, more competing with the merchants. While we're not competing with the merchants, the merchants are our customers, and we kind of develop their consumer journey to kind of guide the consumers back to them. We do this through our product strategy, composable payments. That is leading to the new product offering we launched last year with the Qliro Checkout 0.0 that was launched during last summer. We now see a leading conversion in Nordics for our checkout.
When new merchants change to us, they typically A/B test our solution to what they had before, and we see improvements, everything from 4% to more than 30% in conversion increase for the merchants, which means more sales for the merchants. Secondly, we have upsell features that will help the merchants sell more. Our solution is modular, and we've now built integrations to more and more platforms in the Nordics, which means that more merchants can come live with us quicker and easier than before, and that's expanding our addressable markets. We are doing that also with a very partner-driven and performance-driven approach. We spend a lot on kind of analytics and kind of product improvements to maximize the performance of our solution, not only on conversion, but also uptime, upsell, as well as kind of driving kind of a good consumer experience that guides the consumers back.
Fifth, kind of on that consumer experience, with our kind of premium consumer experience, we see that that is building more loyalty with consumers, which is also driving kind of the customer lifetime value for our merchants and reduces their cost of acquisition. Sixth, if you combine all of these factors, when new merchants are moving over to us, they typically see a positive business case of kind of 10x-20x kind of return on investment on kind of the cost of changing suppliers. That is what's leading to that we now see a big step up in volume.
Volumes kind of 2023 and 2024 were fairly flat, but since the new product launches we did last year, we now have contracted new merchants with an expected growth of around 40% when all of that volume is coming live on the platform if we compare to last year. What is very good now is we also see that volume now materializing for real. In Q4, we had a 60% growth. Q1, we had a 20% growth. If you look at March and April, we are trending more than 30% growth, also including the kind of Easter period. We are seeing that contracted volume now kind of materializing into real process volume on the platform. SME is a big driver of kind of the new volumes and also expected income and kind of profit in the future.
In Q1, we see the income from SME going from 1% last year to 8% of our income in Q1. That is driven by kind of the large growth in the merchant base, and we expect that growth to continue with the growth in the merchant base on the SME side. The reason Qliro is now very well positioned to win the Nordic SME market is, first of all, our kind of great checkout performance and that we packaged all payment methods into unified payments. This is something we have been working on for three years. We continue to develop the offering. That means that all new merchants can very easily go live with Qliro with all payment methods without working with multiple providers. We handle all the currencies, all the conversions, all the payouts, all support.
It is very simple to work with Qliro, which leads to it being a great experience for SMEs working with Qliro instead of other providers. We are now quicker on the onboarding, and quick onboarding is important both for us to generate revenue earlier, but especially for the merchant to have a simple experience. With plug-and-play integrations to more and more SME platforms, we see that not only is the onboarding getting easier, but it is also getting easier for merchants to choose to upgrade to Qliro. We do that through partners. We are partnering both with the e-commerce platforms, but also different kinds of agencies and partners within the e-commerce ecosystem that are helping the merchants to develop their web or their platform or their ERP and so on.
We have plug-and-play integrations not only to the e-commerce platforms, but also to CRM systems, BI systems, and ERP systems. That means that Qliro fits well into the modern technology stack for SME merchants. That is leading to the growth in the merchant base. We will see a big step up from during last year. We started to see accelerated growth with the new product launches. We're still trending more than 200% growth in merchant base. That's still mostly driven by our solutions and teams in Sweden. Norway is taking off, but we expect Norway and Finland to be able to contribute as much as Sweden when they're fully up and running.
If you look at it from a kind of product perspective, we also made a few product launches and partnerships in the quarter. We announced that we launched Two as a payment method in our checkout, which is a B2B paylater method. Historically, Qliro had been very strong on Pay Later for consumers, but we have not spent that much effort on B2B, which typically is a bit more complex, a bit more risk, and then quite different from kind of consumer kind of credit. We are now making a kind of international partnership with Two, which is one of the leading players in this area with a global solution that supports us in all our current markets.
That is strengthening our offering and basically kind of expanding our addressable markets to segments of merchants where we have not been a perfect fit before, but now we can address those merchants as well. That has also been a clear requirement for some of the kind of enterprise merchants that joined Qliro recently. We also launched an integration in our onboarding with BIT Technology, basically a solution to streamline and optimize kind of our KYC processes. We also made a lot of product investments in improving our onboarding and configuration of new merchants in general. We see an improvement of onboarding times or lead times by more than 50% since we launched this. We see a big step up in kind of improvements and getting merchants live quicker with a better experience.
If we move on to the topic of our Nordic expansion, our sales team in Norway started in August. Finland was in April. Our Norwegian team that started in August now had eight months. Typically, the sales processes are longer, especially for enterprise, but we have already made merchant contracts with expected volume of more than SEK 500 million. If you take our kind of average profit on volume, which is more than 2%, then only with this volume, when that is live and mature, we will be at the kind of break-even in Norway, which is very positive and a strong sign that the investments to expand in Norway is kind of a very positive investment.
We see also now that we've been live in Norway for a time that our hypothesis that the technology stack we built for Sweden is scalable also for Norway and Finland and other markets. Even if we're expanding into Norway and Finland, we're building for Europe, and many of the partnerships we do are scalable in multiple markets. For Finland, the team started up fully in April, so it's quite new, but our Country Manager has been preparing for a few months. We already signed and onboarded our first local Norwegian or Finnish merchants, and we see the product and experience is working. Now we're scaling up the sales effort to four people in Finland.
For kind of on the European ambitions, we see kind of when this model is kind of fully working in the Nordics, we could also take it to new markets. Our approach is to grow with our Nordic merchants and their European volumes to get more experience in more markets and then kind of taking the steps into new markets after that. We have opportunities with larger European merchants that sell a lot into the Nordics, where we have our own Pay Later offering. We also kind of have been in some interesting discussions on those opportunities. If you take all of this combined, within Q1, we signed more volume in new contracts than SEK 1.5 billion or SEK 1,500 million in the first row here.
We spent around SEK 15 million on sales, marketing, and expansion if you include every sales and marketing cost, which means that if you make the calculations on this, we have an average gross profit 2 over volume, which is more than 2%. We have also announced previously, we look at the business model that we have a ramp-up of kind of gross profit or income generation from the volume of around 50-60% first year, 85-90% last year, or second year, and then 100% third year. That is driven by the kind of the build-up of the loan book, because most of the revenue is driven by part payments, and part payments are split over time. We do not get all the loan book and all the value kind of day one.
You can see kind of the example of the loan book kind of build-up here going up to full run rate in kind of year three. If you look at also the other angle of it, kind of gross profit over loan book, we're trending at around 14% last year, which means that only the first year this volume is processed. We expect more than SEK 15 million in gross profit. The first year of the volume is live, the sales of what we'll have paid off itself. There is some onboarding time and so on, which means we expect a payback of less than one and a half year. If you look at the full lifetime, we expect more than kind of 5x-10x if kind of you take the lifetime value over CAC, which is very positive.
More than 5x-10x return on investment in the sales efforts that we now do. That is kind of one of the big kind of things you need to understand from a logical perspective to say kind of why is Qliro expanding so quickly. We think we can establish ourselves as a market leader in the Nordics. We see good economics in it, and that's why we're going all in on expansion. If you look at the summary of this, we are reiterating our guidance of kind of 15-30% income growth in the second half of this year when kind of more of the volume is live, and we see that building up the loan book. We see a significant volume growth momentum with this kind of more than kind of 39% volume from signed deals. That's a step up also from previous.
We see the momentum from a commercial perspective is increasing kind of month over month. We also see kind of a strong merchant-based growth, more than 3x compared to last year. I think it was around 220% growth in the merchant base. Of course, mostly driven by SME, but you can also see kind of how the SME is kind of both taking a large share of number of merchants volume and kind of leading to income. The Nordic expansion is above expectations, and we have a potential to accelerate further. We're still very new in Norway, and we're just starting up in Finland.
Overall, I think with Norway and Finland, we have around double kind of addressable market than Sweden alone, with a bit kind of less competition in the local markets, given that the e-commerce ecosystem in Finland and Norway is not as international as it is in Sweden. We are seeing improved operational efficiency and digitalization, enabling our scalability primarily in the kind of the onboarding area. We are now onboarding much more merchants and quicker than before. We are capitalizing on our enhanced product offering, where we now see we have kind of market-leading capabilities on the topic of checkout performance and the consumer experience. That is kind of primarily what is driving a lot of merchants to upgrade to our solution.
With that said, I will hand over to Carl, our new CFO, to walk us through our financial update. I will then come back for the Q&A.
Perfect. Thank you, Christoffer. Thanks, first of all. It is a pleasure to have joined Christoffer and the Qliro team. I am very excited to share some of the details of my first quarter, the Q1. Starting off with the overview of the quarter. As Christoffer mentioned, the underlying business momentum is very strong with a TPV growth of 20% in the quarter. Operating income grew by 2%, driven, as Christoffer mentioned, by SME sales, while the backbook enterprise contracts were a headwind. I will get back to you with some more details on that, that we are disclosing to give you a little bit more color on operating income growth.
Moving to credit losses, these were 11% higher than last year. We see that underlying credit metrics are improving in our business, but this effect is offset by a number of reserve adjustments, both in this quarter and comparison quarter last year. As we mentioned in the Q4 report, we expect that these improvements that we have made to the credit policies will also lead to lower reported credit loss ratios over time. Moving on to variable costs, these grew by 29%, driven primarily by TPV growth, but also impacted by payment mix. As a result of that, the GP2 decreased by 4.3% versus last year to SEK 64 million. Fixed costs increased by 18% or SEK 12.6 million versus last year, a change that is driven by our investments in expansion, which I'll get back to in some later slides.
In summary, in the quarter, we made an operating loss of SEK 15.1 million, which is lower than Q1 last year, but roughly flat sequentially versus Q4 on an adjusted basis. Moving on to our operational KPIs. Starting with merchants, as Christoffer mentioned, a number of merchants, our strong sales momentum is evident in the merchant growth of more than 200% year on year or 23% versus Q4, which is evidence of the traction that our offering is having with merchants. As I mentioned, TPV growth was 20% year on year in the quarter. As a result of more merchants choosing to also upgrade to Qliro as a provider for Pay Now solutions or Pay Now volumes, as well as the increased availability of Swish, Vipps, and Mobile Pay in our checkout, our Pay Later share declined to 41% versus 48% last year.
This can also be seen in the BNPL volumes to the right, which declined by 9% year- on- year. Our blended take rate is also impacted by the shift in the payment mix. However, we see a 14% decline year on year to 3.1% take rate. The payment loan balance, as a result of all of this, was roughly flat year on year. We want to share some more details on the operating income growth to clarify some of the key drivers. This slide is new, and we're disclosing a little bit more. It shows a bridge for operating income in Q1 versus the same period last year.
What you can see from this slide is that the first gray box shows the impact of our enterprise backbook, i.e., contracts we've had for a long time, where the reduced share of Pay Later volumes from one major enterprise merchant, as well as a negative price impact from certain enterprise agreements, were a headwind to growth, with a year-on-year headwind on operating income of around SEK 5 million. As we mentioned in the report, this impact will dissipate after the summer as it is fully phased in in comparative quarters last year. More importantly, what is clear and evident in this view are the green boxes, where the strong impact of our new sales and new merchants signed since the beginning of last year contribute SEK 7 million to operating income growth year on year, one from enterprise and SEK 6 million from SME, as Christoffer mentioned.
We believe that this view can provide a little bit more clarity on why we're confident in reiterating our guidance for operating income growth for the second half of the year, as the headwind from the enterprise backbook will subside and we'll see the full impact of the strong sales traction. Moving on to some details on SMEs. This graph shows the contribution of our SME sales to operating income overall. As Christoffer mentioned, we're now seeing the impact of the sales effort towards the segment, with 8% of operating income in the quarter coming from SME merchants versus just 1% last year. Most of these new SME merchants are assigned over the past 6-12 months. We know that we only get 50-60% of the GP2 contribution in the first year.
Going forward, we expect to see the contribution from these recently onboarded merchants to grow further. Diving into costs. Our cost base has increased by SEK 14.8 million, and the main driver are the continued sales and expansion investments we're making. Sales and marketing increased by more than SEK 6 million to SEK 15 million in the quarter, as Christoffer mentioned. D&A also increased by SEK 5 million to around SEK 20 million in the quarter, driven by increasing amortization of CapEx investments, primarily in IT platforms. Other operating expenses increased by SEK 3.4 million, driven primarily by variable cost increases of SEK 2.4 million, but also partially by investments we're making into risk compliance and credit functions. Last but certainly not least, moving on to our capital position. As you know, we successfully issued a new tier two bond of SEK 70 million in March on terms that we're very happy with.
This can be seen in the graph to the left as a 3.2 percentage point increase to our available capital base, which now stands at 22.3% on a total capital-owned funds level. This gives headroom to our total capital requirement of around 8.2 percentage points or SEK 182 million. When including the pillar two guidance from the Swedish FSA, the available buffer is in excess of 5 percentage points or more than SEK 100 million. Looking at our funding base to the right, it remains strong and diversified. We are drawing on deposits in both Sweden and Germany, as you are aware of. Our liquidity position is also well above the requirements with a liquidity coverage ratio, LCR, of 316%, and a net stable funding ratio of 126%. With that, I will hand back to Christoffer for some closing remarks.
Thank you, Paul.
If you look ahead, we will continue to focus on our growth acceleration. We are reiterating the forecast of 15-30% income growth in the second half of this year. The reason for the range is that it depends a lot on kind of exactly when the merchants are going live. What is very positive is now that many of the larger merchants in the pipeline are coming live quicker and quicker. We also went live with some of the largest merchants we signed, like Skruvat, that went live actually this week. Also, two of the three brands within the Pet Pawr Group that we signed in in January is now also live on the platform. We are expecting more than 39% volume growth compared to 2024 with all the contracts that we have signed so far.
We are increasing kind of sales momentum month to month, so we expect this to grow also going forward. We are accelerating both in SME and enterprise and building this into kind of a repeatable sales engine that we can take into more markets. We are now setting up Norway and Finland based on the learnings and the successful model we set up in Sweden. We are also kind of prioritizing growth, obviously, to capitalize on these opportunities. We see a very strong economics in that, as we showed. We see more than kind of 5x-10x in lifetime value expected from the merchants we sign compared to all the costs we spend on kind of sales and marketing investments. We are also continuing to invest into our platform and our payment capabilities.
We see great success from a commercial perspective from the product launches we did last year. Also, some of the new enterprise merchants come with new requirements. We continue to invest in kind of improving the platform, like we also showed here in the quarter with adding, for example, Two as a payment method to kind of expand our kind of addressable market even further. If you take our addressable market in total, if you look at Qliro two to three years ago, we were only focusing on enterprise merchants in Sweden. We've gone from that focus to also expanding into SME, also expanding into Norway and Finland, adding new partners.
If you take all of these factors combined, I think our addressable market today is probably more than 10 times as large as it was three years ago, which is also a reason we see kind of the accelerated kind of growth momentum when we reach a better product market fit with more merchants in more segments in more markets. Our ambition is to continue to deliver a kind of a market-leading experience for kind of our merchants and their customer journey. We think that will lead to our kind of lead us to kind of establishing a market-leading position in the Nordics within the next three to five years. Thank you very much, and we open up for the Q&A.
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 Ermin Kerik from Carnegie. Please go ahead.
We can't hear you, Ermin.
Hello.
Question comes from Ermin Karik from Carnegie. Please go ahead.
Hi, do you hear me now?
Yes. Hey, Ermin.
Hi. Nice. The first question I had was just on the kind of guidance for the income range, 15%-30%. It sounds like some of these larger merchants have actually maybe been onboarded a bit ahead of expectations. Should we expect it to come more kind of the upper end of the range? For 2026, I believe you said something about acceleration of income growth. Would that be to the upper end, or how should we think about 2026 income growth?
If we start with, of course, everything builds kind of around the business model. When we process new volumes, that volume is kind of in turn kind of building up the loan book. If you take more than 90% of our income, kind of gross profit comes from Pay Later. If you take our longest part payment, which is 36 months, if you process that transaction today, we get the first revenue next month, and then we get revenue over 36 months from that loan book. The more volume we process, that volume builds up a loan book over time, and we get a full run rate after three years.
We get around 50%-60% value in the first year of that kind of maximized run rate, and then we get up to 85%-90% the second year and 100% kind of the third year, which means that we expect our volume growth to turn into income growth over time. That is why we say it will accelerate during the autumn, and it will accelerate also into 2026. That full kind of volume we are expecting onto the platform will turn into kind of income over time. That is why we think we kind of will kind of accelerate income in the second half of the year, and that will continue to accelerate into 2026.
Thank you. Just thinking generally about the e-com market, if we just focus on Sweden, it has been quite sluggish if we look on market data year- over- year. How much do you see that impacting your merchant base, or do you feel that you have any mix that kind of the overall market is not really indicative?
We have certain segments in the portfolio that's growing very well, but we have also certain merchants that is not growing as well. Also, as Carl showed before, we have in the quarter roughly SEK 5 million impact on operating income from the backbook enterprise portfolio, partly driven by pricing of certain merchants, but also partly driven by volume, especially on a few larger merchants or one large merchant. That is definitely hitting us in some segments. We also see that kind of more growth in the existing portfolio than we've seen in kind of the market in general. Not that worried about kind of the market momentum. We also expect kind of the consumer demand to kind of stabilize and increase when we see kind of the economy kind of also kind of stabilizing a bit more than before.
That's very helpful. On that enterprise pressure from the backbook, could you give us any more color on that? What's driving that decline in volumes? Is it just that the merchant has less sales? Is it anything with regards to the contract with Qliro? Also, on the one where you're commenting about the pricing, have you changed pricing generally when you're trying to win new contracts? Is that something we should factor in on new volumes to an extent?
No, we haven't changed pricing or pricing model in general. We are kind of onboarding new merchants with expected profitability in line with or above kind of the backbook portfolio in general. However, we had a couple of large merchants that have been with us for a very long time that had kind of quite favorable pricing in kind of the going back, which was renegotiated last year, which has an impact in the portfolio. Secondly, one of our larger merchants in the portfolio have been kind of declining in volume in general, which is also kind of impacting us. We see both of these factors will impact the kind of comparability until the summer. We get into kind of a more stable phase going forward in the backbook, which is kind of hiding a bit of the kind of the growth in from new volume.
Got it. Thanks. Moving over to actual quality, if we look on the kind of breakdown you gave us, it looks like you have fairly high write-offs in Q1, which are just what's driving that, and how should we think about that going forward?
What happened in Q1 is that it actually happened. It started before. We always kind of optimizing our kind of debt collection and solution rate agreements. We changed the provider last year, which gave us kind of more favorable pricing overall than we had before. Some of the debt sales that we're doing, what's happening is when a consumer goes to debt collection, we own the contract for three or four months. If the consumer hasn't paid by then, we sell it off to a predefined price. We already know when a consumer is going to debt collection what we expect in losses from that portfolio every month.
Given that we changed provider last year, we had some of the debt sales that were supposed to happen in Q4 for practical or operational reason got delayed over New Year's and instead happened in early January. If you look at the kind of the debt sales kind of quarter over quarter, that was very low in Q4. That ended up in more or less a double portfolio that was sold in Q1.
This is also, I mean, partially driven by the kind of challenging secondary debt market last year with the turmoil in that market, which where we limited our debt sales for a while. That resulted in kind of written-off losses being lower than normal for the kind of second half of or for the rest of 2024, should we say, following the turmoil in the spring.
Okay. That's very helpful. Just on the capitalization, the REA is outpacing lending growth. Is there anything specific that's driving that?
Sorry, could you say the question again?
Yeah, the risk exposure amount that you have is outpacing the lending growth. I can't really break down the risk exposure amount that much, but if I would just put it in relation to kind of the lending book, there's a relation. Now, you have much higher REA than what the lending book growth would suggest, just almost equal if I would model it that way.
Yeah, it's not, to my knowledge.
We can take it offline, otherwise.
Yeah, yeah, we can take that. Let me get back to you on that one. I think it's a good question. There's no fundamental change in risk weights or anything like that. Let me get back to you on that one, Ermin.
Makes sense. Thank you very much.
Thank you, Ermin.
Reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. No more questions at this time. I hand the conference back to the speakers for any closing comments.
Great. Thank you for today. We look forward to accelerating our growth going forward. We will be back for this topic next quarter.