Release Date: July 16, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- EBITDA increased by 31.5% to SEK6.3 million, indicating improved profitability despite lower sales.
- Marketing costs in relation to net sales were reduced to 30.4% from 32.1% in Q2 2023, showing better cost management.
- Efficiency improvements led to lower fulfillment and admin costs, with fulfillment costs decreasing from 29.6% to 27.8%.
- The average order value increased by 10%, partially offsetting the decrease in active customers and number of orders.
- Desenio Group AB maintained its share of voice in key markets like Germany and the UK, and saw a steady increase in the US market.
Negative Points
- Net sales decreased by 10% to SEK166 million compared to the same period last year, reflecting weak market conditions.
- Operating cash flow was negative SEK48 million, driven by reduced current liabilities and net interest payments on outstanding bonds.
- Gross margin slightly decreased from 84% to 83.6%, mainly due to a different product mix.
- Active customers and number of orders decreased compared to last year, indicating potential challenges in customer retention.
- The company is still not achieving the full effect of its marketing efforts, leading to lower returns on marketing investments.
Q & A Highlights
Q: Can you elaborate on the reasons behind the 10% decrease in net sales for Q2 2024 compared to the same period last year?
A: Fredrik Palm, CEO: The decrease in net sales is primarily due to weak market development for affordable rollout and the fact that our marketing efforts have not yet yielded the desired return. Additionally, we are still not getting the full effect of our marketing investments in the short term.
Q: What measures have you taken to improve profitability despite the lower sales?
A: Fredrik Palm, CEO: We have reduced marketing costs in relation to net sales and increased efficiency in the organization. Fulfillment and admin costs were lower in Q2 2024 compared to the same quarter last year. These measures have helped us achieve a 31.5% increase in EBITDA to SEK6.3 million.
Q: How has the cash flow from operating activities been affected this quarter?
A: Anna Stahle, CFO: Cash flow from operating activities was negative SEK48 million, mainly due to decreased cash flow from changes in working capital driven by reduced current liabilities and net interest payments on outstanding bonds amounting to SEK25.6 million.
Q: What are the new financial targets set by the Board for Desenio Group?
A: Fredrik Palm, CEO: The new financial targets are to achieve organic annual net sales growth of more than 5% in the medium term and to improve the adjusted EBITDA margin to more than 15% in the medium term. The dividend policy remains unchanged.
Q: Can you provide more details on the development of your business in different markets?
A: Fredrik Palm, CEO: In the Nordics, net sales decreased by 4%, in Europe and the Rest of Europe by 10%, and in the rest of the world by 24%. In North America, net sales decreased by 19%. Despite these declines, we have maintained our share of voice in key markets like Germany and the UK.
Q: How has the average order value changed compared to last year?
A: Fredrik Palm, CEO: The average order value has increased by 10% compared to last year, which has somewhat counterbalanced the decrease in the number of active customers and orders.
Q: What are the expectations for net sales and EBITDA margin for the full year 2024 and 2025?
A: Fredrik Palm, CEO: For the full year 2024, we expect net sales to decrease by 5% to 10% compared to 2023 and the adjusted EBITDA margin to be 11% to 13%. For 2025, we expect net sales growth of 0% to 5% and an adjusted EBITDA margin of 11% to 14%.
Q: What strategic initiatives are being explored for refinancing the outstanding bond?
A: Fredrik Palm, CEO: We are continuing our dialogue with Desenio Group bondholders and evaluating strategic initiatives to arrive at a solution for refinancing the outstanding bond of SEK1.1 billion, which is due in December 2024.
Q: How has the gross margin been affected this quarter?
A: Anna Stahle, CFO: The gross margin decreased slightly from 84% in Q2 last year to 83.6% in Q2 this year, mainly driven by a different product mix.
Q: What are the main factors contributing to the negative operating cash flow this quarter?
A: Anna Stahle, CFO: The negative operating cash flow of SEK48 million is mainly driven by reduced current liabilities due to lower sales and net interest payments on outstanding bonds.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
