SaveLend

Q1 - 1 January - 31 March 2023
Amounts in parentheses refer to the same period the previous year.

• Net revenue for the period was MSEK 44.6 (29.8)
• Adjusted EBITDA was MSEK 4.5 (-3.0)
• EBITDA was MSEK 4.5 (-3.7)
• EBIT was MSEK -1.1 (-8.1)
• Net result was MSEK -1.2 (-8.2)
• Earnings per share before dilution were SEK -0.02 (-0.17)
  

Events during the quarter 1 January - 31 March 2023

• A company within the SaveLend Group receives license for crowdfunding from the Financial Supervisory Authority.
• Strong start for SaveLend Group's originator Flex.
• SaveLend Group AB's annual report was published on March 29.

Events after the quarter 1 January - 31 March 2023

• SaveLend Group acquires Lendify, Lunar's P2P business.
• On April 19, the Annual General Meeting was held in SaveLend Group AB.
• SaveLend Group launches savings strategies on the savings platform to improve user-friendliness and make it even easier to invest in credits.

CEO COMMENTS
Leaving the first quarter of the year behind, I can only say how my enthusiasm for our business just keeps growing. I think we can already see the impact of the investment we made in the previous financial year, and I have heightening expectations looking forward to more growth in the coming year. We are getting ever closer to confirming the leveraging power of our model for both the savings and billing platforms where every new krona in revenue costs less to earn.

We have achieved this by keeping our focus long-term, not letting ourselves be driven by short-term market expectations. I remain fully committed to maintaining our strong customer focus and convinced this will create long-term shareholder value. For example, I have no problem taking lower margins today to increase capital inflows to the savings platform. Satisfied customers will eventually repay that investment many times over. This is exemplified by our decision to raise interest rates to our savers in advance based on planned adjustments to reference rates.

This Q1 has been full of activity paving the way for the coming year. We’ve completed another three months of stable yields, where the twelve months leading up to the period-end showed average yield was 7.92%. This was done while we also enabled our customers to reduce their risk by investing in consumer credit using our 100% sales agreements. Our offering is therefore quite attractive in the current financial climate.

Lendify Acquisition
The biggest news – our acquisition of the Lendify P2P operations from the Danish digital bank Lunar A/S was closed after the quarter-end. In short, this addition involves synergistic benefits, and immediate positive contribution to EBITDA and group cash flow after we've completed migration. The positive financial benefits add to the synergies such as new business opportunities from the acquired customer base, and a strong brand. I am convinced our Lendify acquisition has enormous potential for us. We estimate this acquisition will add MSEK 40 to revenues from the closing date to the end of 2027 while we can maintain a cash conversion close to 50%. Additionally, we anticipate that synergies will contribute nearly as much in revenue. We expect these effects will have higher earnings per krona than what Lendify has had. This compares to the investment required to otherwise reach all these new savers and customers we now can welcome. I plan to personally ensure we do our best to take care of these newcomers as best possible.

I can mention the interesting history trivia that SaveLend almost chose the name Lendify when I founded our company, and that their company was also a customer of Billecta at an earlier stage. This heightens my pleasure in welcoming the over 20,000 new customers to the platform this summer.

Strategy levels and credit losses
Since Lendify investors to a greater extent have invested in longer maturities and lower risk/yield, this acquisition opens a great opportunity for future product development and diversification we could only dream of before. This also ties in with our historically higher yield levels that have come in exchange for accepting a higher credit risk. With this broader base of investors who have shown an interest in longer maturities with more predictable yield, we have already started to develop new products in this direction.

Since the quarter-end we have launched strategy levels in response to this demand. Investors can now choose to invest in our strategies Balanced or Yield, or keep their current strategy which will henceforth be called Freedom. The Balanced strategy is designed to deliver returns of 4% to 7% (or two points above reference rates) with low credit losses and volatility. The target for the Yield strategy is to deliver 6% to 10% over a slightly longer saving horizon that can withstand greater volatility.

As we have grown with more credit types and originators, investors have asked for more guidance on settings to better find their own balance between risk and return. I believe this (change) will help in matching expectations correctly while it facilitates the investment, and will thereby raise the conversion rate for new customers.

Credit losses were 2.25% over a rolling 12 months as of the period-end. Looking ahead, I can see somewhat higher credit losses for those investors choosing these types of credit, but we must remember that net returns will remain good. For example, investors choosing Balanced will continue to experience lower credit losses. Our broad offering enables us to customize portfolios which I believe will become even more important going forward with continued shaky markets. We will have a strong offering for both seasoned investors who can manage volatility and others who are learning about investment in credit and looking for a stable cash flow at slightly higher yields than a bank savings account.

Flex, migration & crowdfunding
We have also completed the migration of customers from Svensk Kreditförmedling to our primary platform so they are able to invest in our broader offering. Therefore, we managed another successful migration and already see greater cross-sales than previously.

This inflow of new capital and customers means we feel Flex will function even better than we thought in the concept stage. Right now, with six partner credit originators, Flex allows us to manage one side of our marketplace much better than ever before. This also resulted in our reported 95% investment rate for the quarter.

Having described this, with the current uncertain business climate, we continually adjust our credit assessment models to meet these challenges. This is why we work long-term, taking projects with lower earnings, but where the downside is more limited for our investors. We will be well equipped as we make it through this period.

As the first platform in Sweden to do so, we were granted a permit to operate as provider of crowdfunding services. I’m proud of our team who achieved this as it is another vital step in our continued expansion. Sweden and Finland are two sufficiently large markets for lending going forward, as for savings. I see European expansion more as icing on the cake which we will not allow to demand too much in resources.

With a broader base of investors looking for varying types of yield with appropriate risk profiles, I see our opportunities regarding lending as greater than ever. With our scalable platform, we will soon be competing for the best credit customers. Our entire operations will be easier to run with larger volumes of capital and customers.

Billecta
The base we have built of new customer and partner sales continues to bring solid growth – despite not having concluded any new agreements with a larger customer. However, I see our technical capacity and high customer satisfaction ratings and conclude that we can still accomplish even more. Therefore, I plan to recruit senior management to Billecta to supplement their current team, and lead the sales and delivery organization to be more autonomous from SaveLend. I see the investment we have made, especially in the current business climate, will still pay for themselves over the long term.

The first customers we took in through the CRM partnership are fully integrated and I expect a steady inflow of smaller and medium sized customers. At the same time, we naturally continue to work with the larger discussions that will have a greater positive impact on our growth curve.

Financing
Looking only at Operating activities, this was the strongest quarter the company has produced. Revenue was MSEK 44.6 and with an EBITDA margin of 10%, EBITDA totaled MSEK 4.5. This represents a 50% increase YoY. Cash flow from operating activities kept up well totaling MSEK 4.0. This should be seen in light of the NPL portfolios no longer contributing to cash flow. Revenue and the bottom line would have been some MSEK 2 higher (based on the previous year's figures) if these were not eliminated from the statement of financial position. I therefore feel confident that our underlying operations still show good growth, even as we continue to concentrate on building on these numbers every quarter.

We have much more capacity but this is clearly a step in the right direction as we continue to be restrictive in our origination activities given the current business climate.

As I mentioned in earlier reporting, our costs have stabilized at a rather constant level. Revenues have started rising faster over costs, and will continue to do so going forward.

Financial targets
The acquisition of Lendify plus our current growth rate makes it obvious we will exceed our revenue target of MSEK 300 for 2025 with the associated profitability target. I will therefore ask the board of directors in the fall to adjust these to better reflect our potential and forward-looking financial targets.

I’m not entirely satisfied with our current rate of growth. I get a sense that we’re not really in the race yet, that we’re holding back somehow. This is partly due to external conditions, but also partly due to our not having fully completed our transition to a sales organization. This is still a high priority for us, and our technical road maps are tilted in that direction. Still, having said that, the quarter was good enough – but we have a much greater capacity to prove ourselves.