Qliro

The quarter in brief October-December 2022 (October-December 2021)

• Total operating income increased by 6 percent to SEK 110.8 million (104.8)
• Total operating expenses increased by 16 percent to SEK -116.0 million (-99.6). Operating expenses excluding items affecting comparability increased by 6 percent to SEK -98.2 million (-92.8)
• Items affecting comparability amounted to SEK 17.8 million (6.8) of which SEK 28.0 million related to the profitability program with a negative impact on the result and SEK 10.3 million to the VAT adjustment with a positive impact on the result
• Net credit losses amounted to SEK -41.0 million (-23.6)
• Operating profit was SEK -46.1 million (-18.4). Operating profit excluding items affecting comparability amounted to SEK -28.4 million (-11,6)
• Net profit for the period was SEK -37.1 million (-15.1) and earnings per share amounted to SEK -1.95 (-0.84)

The period in brief January – December 2022 (January – December 2021)

• Total operating income increased by 8 percent to SEK 428.9 million (398.8)
• Total operating expenses increased by 12 percent to SEK -410.3 million (-365.2). Adjusted for items affecting comparability, operating expenses increased by 1 percent to SEK -374.4 million (-372.0)
• Items affecting comparability amounted to SEK 35.9 million (6.8), of which SEK 51.1 million related to the profitability program, legal costs, and severance payments with a negative impact on the result and SEK 15.2 million to VAT adjustments with a positive impact on the result
• Net credit losses amounted to SEK -134.1 million (-81.9) due to higher non-recurring provisions than in the comparison period
• Operating profit was SEK -115.5 million (-48.3). Operating profit excluding items affecting comparability amounted to SEK -79.6 million (-41.4)
• Net profit for the period was SEK -93.5 million (-39.9) and earnings per share amounted to SEK -4.90 (-2.22)

Significant events in the fourth quarter 2022

• New issue of shares and warrants to CEO Christoffer Rutgersson was finalized on November 8, 2022. The new issue provided Qliro with proceeds of SEK 10.1 million
• On December 20, the company received an input VAT deduction and recovered SEK 13.2 million for previously made VAT payments for the period 2020-2021
• Qliro AB’s extraordinary general meeting of December 31, 2022 decided in favor of the long-term incentive program (“LTIP 2023”) and short-term incentive program (“STIP 2023”) proposed by the Board of Directors

Significant events after the end of the period

• The company’s long-term incentive program (“LTIP 2023”) and short-term incentive program (“STIP 2023”) were introduced in 2023 in accordance with the conditions adopted by Qliro AB’s extraordinary general meeting of December 31, 2022

Comment from Christoffer Rutgersson, CEO of Qliro AB

During the quarter we continued to deliver on the transformation of Qliro. In relation to this, expenses of SEK 28 million were incurred within the framework of our profitability program. We have continued to take large steps in our digitalisation and efficiency of the business which makes me comfortable in the ambition for Qliro to be profitable at EBT level for the full year 2023. In total, income grew by a total of 6 percent in the fourth quarter.

Profitability program proceeding according to plan
During the fourth quarter, intensive internal work was carried out in relation to the implementation of our profitability program. Several successful initiatives have been completed under this program and we are giving full focus to the remaining activities. In total, SEK 28 million was recognized as expenses affecting comparability in relation to this project. Of these, SEK 15.5 million consisted of consultancy costs related to driving efficiency measures and the implementation of new and more efficient systems. In addition, SEK 1.6 million consisted of increased amortisation of technology investments and the remainder consisted of personnel-related overheads, and costs relating to reduction of office space. Qliro’s total expenses excluding items affecting comparability increased by 6 percent to SEK 98.2 million (92.8) and were driven by increased general administrative expenses of a one-time nature however not reported as items affecting comparability.

We completed the optimization of our office spaces, which will generate cost savings of about SEK 4-5 million in 2023. We also concluded the negotiation of several contracts with external suppliers, reduced our use of consultants, and initiated the process of digitizing and automating our Customer Support, Sales and Finance department. During the quarter, we migrated our old customer support system to a new platform which will improve our operational efficiency in 2023. In January we went live with our new CRM system for marketing, sales and onboarding, which will improve our processes for winning and activating new merchants. We will also upgrade and migrate our financial system in the first quarter of 2023, which will help to optimize our financial processes and result reporting for the payment provider that Qliro is today and aims to become over the coming years. During the quarter, we digitized our first large customer send-outs, which was previously sent by physical mail, and the work on digitizing the remaining parts of the customer journey will continue in 2023.

Together, the digitization initiatives will generate cost savings of approximately SEK 10 million in 2023. As regards to expenses and investments relating to the profitability program, non-recurring expenses for all the initiatives were completed in 2022 for the scope of initiatives previously announced, except for some internal work and technical development which will continue to drive investments during 2023 in line with our ambition to invest in our technical payment platform.

Continued income growth despite decline in e-commerce
In 2022, e-commerce volumes in Sweden fell 9 percent compared with 2021. For Qliro this meant that PAD volumes dropped by 11 percent in the fourth quarter and 8 percent for the full year. Despite this, we grew our income by 6 percent during the quarter and 8 percent for the full year, thanks to our broad offering in Payment solutions, where the number of part payment accounts rose steadily during both the year and the fourth quarter, which compensated for the decline in invoice volumes. Payment Solutions are the core of Qliro’s business and was also the contributor to the income growth. This segment grew 9 percent in the fourth quarter, driven by growth in unique accounts.

Successful end of the year
Black Week and Christmas sales went successfully and without incidents thanks to our investment in a new, modern method for continuous testing of our systems, which was introduced in the third quarter. Improving and maintaining high uptime of our services will continue to be a focus area as we aim to scale up our business with regard to both large (Enterprise) and small and mid-sized e-merchants (SME) in 2023. The fourth quarter was also affected by high campaign activity with Buy Now Pay Later campaigns, which largely drove the check-out of several of our leading merchants. We will continue to work more proactively with financing campaigns going forward in order to create improved conditions for our merchants and build profitable payment volumes through partnerships that benefit all parties.

Important initiatives for a stronger credit portfolio
During the quarter, we have strengthened our credit model and made write-downs in the credit portfolio while increasing our provisions as a result of the macroeconomic situation with both rising inflation and interest rates. The write-downs in the credit portfolio in the fourth quarter will ensure that an improved quality of the portfolio for the coming year. These efforts are in line with our ambition to clean up clean up the credit portfolio in 2022 and in the fourth quarter we have taken write-downs in the credit portfolio totalling SEK 7 million in the fourth quarter, resulting in reported credit losses of SEK 41.0 million (23.6). Credit losses during comparison period was positively impacted by a change in credit model and a renegotiated agreement for parts of portfolio that is not covered by current sales agreements with external parties (SRG agreements), resulting in a reduction of reported credit losses by SEK 7.6 million. Adjusted for these effects, credit losses amounted to SEK 34.0 million (31.2).

New strategy focusing on merchants has started to pay off
During the quarter we gained four new merchants in the SME segment. We also entered into contracts with a further eight new merchants who will be connected to our platform in the first half of 2023. Our focus on both large merchants (Enterprise) and SMEs strengthens our ability to deliver a positive customer experience while enabling us to effectively win new merchants.

Strengthened team
The management team welcomed two new permanent members during the previous quarter, which will improve our ability to face future challenges. We plan to strengthen our team further in spring 2023. We can also state that 70 percent of all leaders within Qliro have new positions, which clearly shows our ambition to build a new culture to realize our vision and strategy within payments. Through this, we expect an accelerated growth and development of the business. I look forward to continuing to work with the expanded management team on refining our strategy and making us the market’s most attractive payment partner for merchants.

Presentation of the year-end report

Media, analysts and investors are invited to a conference call on 8 February 2023 at 10 am (CET) when CEO Christoffer Rutgersson and CFO Robert Stambro will present the results.

After the presentation there will be a Q&A session.

Participate via telephone conference:
https://conference.financialhearings.com/teleconference/?id=5002773

Participate via webcast:
https://ir.financialhearings.com/qliro-q4-2022

You can also follow the presentation on:
qliro.com/sv-se/investor-relations/presentationer