Welcome to Lumi Gruppen official Q3 webcast. With us today is CEO Erik Brandt and CFO Martin Prytz. The floor is yours when you're ready.h Thank you, Andrea. Good morning, and thank you all for joining this Q3 presentation by Lumi Gruppen. I'm Erik Brandt, and I am, as always, joined by Martin Prytz here. As usual, we look forward to presenting the results of the quarter, and also we'll answer any questions you might have by the end of the session. First of all, it has been a challenging quarter because of the post-COVID market decline. I think it's fair to say that Lumi Gruppen has handled the situation and executed on significant cost cuts. Lower revenues. We have experienced a bit lower revenue, but we have successfully mitigated the financial effect through the cost cuts implemented, and at the same time, created a leaner and more flexible organization. When looking at the market position, Lumi Gruppen has maintained its market share in the private candidate market in 2022, and has a strong digital position in both segments. With a lower cost base and a more flexible and scalable operational model in combination with a strong market position, Lumi Gruppen is well positioned to benefit from a potential market recovery in 2023. We have, through these challenging times, maintained a solid education platform, both campus and online, and with a strong market position and high student satisfaction. I think it's fair to say that all this represents a solid foundation for a more positive development going forward. Online students now represent 50% of the private candidate students and 71% of the higher education students. First, just a brief summary of the third quarter. The revenue decline in Sonans is the result of a combination of several market drivers, including significant decline in applicants to higher education, which we will come back to later. You see the revenues ended at NOK 121.5. That's a decline of NOK 7.2 from last year, 7%. Adjusted EBIT ended at NOK 30.9, slightly below last year. Martin will go through more in details, but I think the result is, considering the circumstances, showing that the measures that we have implemented have a positive financial effect. I think we move on to you, Martin, so you can go through the financials in more details before we come back to the strategy and operation part of the session. Thanks, Erik. Let's move on then. In this quarter, we see a solid growth for online in a challenging market. We actually grew by close to 55% for Sonans and almost 14% for ONH. We also see in the quarter that the changes in commercial terms that we implemented for Sonans has also positively affected the online revenues in the quarter, together with also the price increases we implemented for online. For ONH, we had flat sales this autumn intake, so the growth is mostly from higher recurring revenues in line with the strategy for ONH by increasing the share of multi-year students at the university college. When we look at the EBIT for the group, it ended at NOK 13.9 million. It's below last year. However, we're happy to see that the margin actually improved in the quarter, as we have a relatively lower cost base compared to the decline in revenue compared to last year. We are also happy to announce that we have been able to pull together a cost program for ONH as well in this quarter with implementation from Q4 that will also give full impact from next year, totaling NOK 15 million as well, together with the cost program already then implemented in Sonans. When we look at the bridge, we see that there's a significant decline in Sonans revenue, driven mostly by the campus decline. But we see that the OpEx reduction in Sonans is fully offsetting the decline in revenues. While we see that ONH still in the Q3 have some growth in the OpEx from the new programs, that will now be balanced out by the cost program decided on. When we look more closely into Sonans, first of all, at the revenue for the quarter, we announced a 28% decline for the school year 2022-2023. When we look at the quarter Q3, we see a decline of 16%. The reason for the difference between the 28 and the 16 is due to the new commercial terms for online. They yield positive impact in Q3 and Q4, but will normalize again from Q1 and Q2. To repeat, the changes in the commercial terms is changing in the way we're selling the online courses in line with the model. It's aligned for campus and online. In the quarter, personnel expenses were reduced by NOK 0.3 million, a decline of 35.3%, and number of FTEs is down by 22% as well. Operating expenses reduced by NOK 3.4 million, and this mainly relates to lower campus operational expenses, overhead from group shared services, basically, and marketing expenses. We're also happy to see that the relative margin in the quarter improved as well. Looking a bit more closely into the cost program, as we state, we have a successful implementation program in Q3. I think the key message is that a large share of the measures that we've implemented is not short-term in nature. This means that these will continue to yield impact going forward as well and contribute to an improved profitability for Sonans as well. Just to give some granularity on details on the reduction cost reduction program shown that is in the bridge on the right side here. First of all, we reported 112 FTEs at end of Q3, and we expect 105 at end of Q4. When we look at the LTM adjusted OpEx base at Q2 2022, we ended at NOK 232. Then we see the different measures implemented. It's closing three campuses, Hamar, Bodø and Porsgrunn, where many reductions in personnel, teachers and administration in Sonans. We have reduced overhead costs by reducing number of FTEs in shared services in the group, and we have reduced marketing expense for Sonans. That should lead us down to NOK 171 million in OpEx on 12 months basis for Sonans. The impact should be around NOK 50 million per quarter. As we reported for Q3, we have made savings of NOK 15.6 million for Q3. Looking a bit more closely at Oslo Nye Høyskole, we see that the growth is, as I said, driven by the new programs with a higher share of recurring revenues from the multi-year programs. We see still in the quarter that we have a higher OpEx base compared to the quarter last year, which relates to the new programs and expansion of the portfolio. However, with the cost reduction program, we will be able to offset the increase in OpEx, and the program is totaling NOK 50 million. I think we can say that the prerequisite for the OpEx flow that we've seen in ONH over the last quarters has been also that we should grow the sales as well. Now when the student volumes are flat year-on-year in terms of new sales, it makes sense now to adjust the OpEx base accordingly, given the situation and in line with the student volumes for Oslo Nye Høyskole. Following the intake of the autumn intake, both for Sonans and ONH, we saw that there was a risk for breach of covenants for the group. We are satisfied, as we announced previously, that we achieved an improved financial flexibility with the amendment to the loan agreement for the group. This agreement includes a covenant holiday or a waiver for Q3 and Q4, and new leverage covenant for Q1 next year and Q2 next year. We have worked with several measures, also improving the net working capital situation for the business as well. We've also been able to achieve pre-monthly payments, for instance, for leases versus pre-quarterly payments. That is key for us at end Q4, start Q1, and also for Q2. That's the time of the year where we have the lowest cash position in the business, and that will reduce need for any RCF in those quarters. I think it's also, we should also resolve that the net interest-bearing debt is not increasing, as a slower increase compared to what we should expect given the intake that we saw this autumn, actually, with a 6% increase compared to last year. To end this part of the financials, just to summarize, I think for us now, for Sonans, is to continue to execute on the already decided, implemented cost program for us totaling NOK 61 million. I think we also look into additional measures, as I think we also presented in the previous report as well and this quarter. Also continue to look at the campus network and also the online offering and to find the optimal mix based on student needs and hopefully what the market demand will be for the quarters going forward. For ONH is to execute on the cost reduction program now decided, and also then to mitigate the effect of flat volumes year-over-year. Further, for the group functions, we continue to work with optimization processes and also to reduce the overhead expenses that has been allocated to Sonans and ONH, previously. Erik, I give the presentation back to you. Thank you. Thank you, Martin. I think this section has the following highlight. I think it's important for also you to know that we have upheld the market position despite the challenging market. We also believe that the underlying demand for education is strong and will continue to be strong going forward. Also, that when we have taken this opportunity to reduce the cost base, we have also created a more scalable and flexible operational model going forward. It's also important to emphasize that ONH actually outperformed the market development with this year's intake, even if it was flat year-on-year in the first semester. First, I think let's start with the private candidate segment, a little bit more details. After several years of topline growth for Sonans, the private candidate market was hit by several negative market drivers at the same time, all connected to changes because of the COVID pandemic. It's also important to say that in the market, Sonans was not the only player being hit by this. When we sent out sales update early August, we estimated a decline of 30%. We saw some recovery in the last weeks of the cycle, and the final decline ended at -28%, as you can see on the bar there. The decline was driven by the young part of the market, the young student segment, and that affected the campus sale quite seriously with a 42% decline for campus courses. Online, including live, increased by 12%, and also underscores the importance of the new Live product that we have. Now we have three channels: campus, online, and live. The most important market drivers affecting the education market in 2022 was. I think we need to start with the COVID pandemic and the historically low unemployment rate after the pandemic, especially for young people. It was the first time since 2019, since young people were able to travel and do something else before they started study of choice. This also led to a strong decline in applicants to higher education with almost -13%. You have a strong decline in students without an admission place in public universities. It dropped by 43%. You have the final high school exam, which has sort of disrupted the grade setting and the system in the schools. If we move on to the next slide, Martin. I think when we started the process of cutting costs, and we actually started a year ago, but I think it was accelerated in June this year, it was very important for us not just to cut costs to save money, but also to build a more future-oriented operation, to be better able to adjust the operation to current and future shifts in student volume. We have reduced full-time employees by 22% in combination with successfully closing three small campuses, and at the same time, launched Live as a new digital product. I think the measures are also including increasing classroom efficiency, which resulted in fewer classes, but with higher or the same average class size as last year. We have also reorganized the Sonans administration, more specifically when it comes to the sales work, but also when it comes to student service and quality system, has been centralized to better utilize resources and reach economies of scale across the different campuses and different platforms online, Live. That all these changes give Sonans a clear competitive advantage and lay the foundation for a more profitable business going forward. Pending a market recovery in 2023, Sonans will be able to increase student volume significantly without significant investments. The digital offering, which now handles 50% of the students, have attractive financial metrics and can handle more students with limited investments, as I said. In addition to that, you have campuses with capacity. More into the underlying market fundamental. I don't have to repeat this to you obviously know it, but Norway is a modern and technological society, and we ought to become carbon neutral from an oil-driven economy. I think the very foundation for an advanced economy is an education system that manages to educate people before and during their work life in a cost-effective and flexible way. This is very important for us. This trend will continue, and the demand for upskilling and reskilling education will continue to be strong. The private providers in these sectors have an important role to play, especially in areas where the public offer limited services, and in particular within the online segment, where I think the public is failing. There have also This is also something I think is quite important. There have been discussions of the benefit of the private candidate scheme and the private candidate schools like Sonans in society. Is this only an opportunity for young students with financial resources to improve their grades from very good to excellent? Our own analysis has shown for many years that the market and the benefit of the system is much broader than this. But for the first time, Statistics Norway has analyzed the market and confirmed the importance of the private candidate scheme, and hence the school offering high-quality courses. The elite students only make up a fraction of the candidates. 62% of them didn't have a diploma before signing up for the exams. I think Sonans is crucial for people wanting to change their lives. Also the student outcome is very good. 80% of the candidates entering higher education or the labor market, and 50% are over 25 years of age. I think the report states that the private candidate scheme and the schools has become an important part of the Norwegian education system and give tens of thousands each year the opportunity to proceed with their education plans. Having that in mind, when you look at the next slide, you will see the development in campus sales for Sonans since 2008. I don't think we have shown this before. This shows a growth figure of 11% pre-COVID, and subsequently a massive correction in 2022. When you look on the other hand, you look at the market indicators and the long-term mega drivers for education, we believe that Sonans has hit rock bottom and that the market will start to recover in 2023. Can we go to next. It has been important for us to evaluate the performance of Sonans through this sales cycle. Based on all the information we have gathered, Sonans has maintained its market share of around 60%, as you can see on the right slide there, which is four times higher than the number two in the market. A key priority is to be the market leader, not just in quantity, but also in quality. We were confident that despite the cost cut we have implemented, the high student satisfaction would be maintained. This autumn, the results from the student survey confirms that the satisfaction with the offering and the teacher are at the same high level as previous years. On the right slide, you will see an overview of the market share, as I said. Let's go on to the capital. We have been challenged on the online position for Sonans, and we wanted to measure our online position. The result from this survey, I think, substantiate the fact that Sonans is the leading player also in the online market, with a well-known brand recognized top of mind by 37% of the respondents. The next player is recognized by 10. Yes. Let's go to ONH. We have said a challenging market several times, but it's important to repeat it. Despite the challenging market, ONH maintained the number of new students recruited compared to last year. I think this is a strong performance in a market with 19,000 fewer applicants than last year. Especially the growth in bachelor and master students is important and increases earnings visibility going forward. The new programs also showed robust growth from last year and shows the importance of a commitment to developing the portfolio of programs. Existing programs were affected by the market decline, and it is the demand for the new programs that secures a solid intake this year. In the quarter, ONH has also applied for a new bachelor program using existing resources and academic staff, capitalizing on the investment made in building up the new subject areas that we have talked about previously. Pending NOKUT process, the new program should be ready for launch in 2023. Yes. Yes. I mean, even if the Q4 performance, this intake was good and we are pleased under the circumstances, we had expected a higher intake based on the investments that we have made in the new programs. I think we now need to fully focus on rebuilding the student volume in existing programs and to establish a more effective and scalable operation. This work has now been concluded. As Martin said, a cost cut of NOK 15 million has been identified and are under implementation. The reduction is mainly related to personnel costs. When you look on the right slide there, you will see that the number of multi-year programs has doubled since 2020, and you see a total student growth of 14% in the same period. I think based on the investments made, we had expected an even higher student growth, but the market decline softened the growth in 2022. However, when looking at the increase in multi-year students, the growth is 40% in the period. This underscores the importance of becoming a more solid institution with more students taking their full degree in ONH instead of just doing parts of their degree there. Yes. What's happening next for ONH? I think ONH has reached the growth estimate we set when we acquired a college in 2019, and obviously a key part of the plan was to develop more bachelor program with high potential to grow the business long term. To realize this plan, significant investments in personnel has been made to both develop programs and to hire academic staff running the programs operational. ONH is now in a situation where a flat intake will pressure the financial results, and therefore it is important to become more effective and reach more economies of scale. ONH is now in a position where it should be able to increase student volume going forward without the same level of investments that has been made over the last two years. It's also important to inform you NOKUT, as they always do, is performing a quality audit of ONH next year, and comprehensive update of the quality systems have been made over the last 18 months. I think the quality system is also important to be able to run an effective and professional operations with higher student volume and higher quality. The Norwegian School of Technology, NTech, when approved, will become an integrated part of the administration in ONH and run on the same systems already established there. I think this will significantly reduce their investment and financial risk of launching NTech, hopefully in 2023. With 70%+ online students, the online offering is key to continuing growth for ONH and to continue to expand the offering and build more student volume will be an important part of the priorities going forward. I think it's important to emphasize that ONH has a unique position in the online segment, and pre-COVID, the public sector is not prioritizing the online offering, and we expect the online position to become even stronger going forward. Yes. Please can you go to the outlook? Yes. I think just to summarize the presentation for today, we are obviously disappointed in the sales development for Sonans and ONH with the decline in the market. However, we have described the reasons for the decline. Still we are very satisfied that we were able to make changes in our organization and to reduce cost in the business, both for Sonans and ONH. I think it's important also to keep in mind that this is the type of business we are running is not a complex process as well, reducing costs very shortly, to maintain both student satisfaction but also taking care of the employees in that situation. We've been successful with Sonans and the cost program, and we now decided to reduce costs as well at ONH that we will implement in Q4 with full effect from next year. We are also satisfied that we reached an agreement with Nordea as well, that the covenants for this autumn were waived, and that we agreed on new levels for the leverage covenant for the first half of 2023. For the year 2022, we expect the revenues to end in the area of NOK 505 million and adjusted EBIT level in the area of NOK 105 million. Just to mention, as I think most of the participants in the audience are aware of, we are in a challenging macro environment with increasing interest rates and inflation. We have taken that into account in our calculation, but still there are a lot of uncertainty right now. We can deal at least with our cost base and internal processes, but it's obviously a challenging environment we are in. To conclude, I think based on all we have done during this quarter and the preparations for the quarter as well, I think we are well prepared for a likely market recovery next year. There is, as Erik said, still a strong need for higher education in Norway. We have established a more scalable business model, not just only online, but also changed the way Sonans operate on campus and also integrating Live as a part of the campus offering as well to optimize the product portfolio and program offering for the students. I think we have also shown that the competitive position of Lumi Gruppen has been strengthened during the pandemic also, and also very satisfied to see the position of Sonans online and also the overall market position for Sonans, and that ONH is actually maintaining its position in the market, declining by close to 13% in applicants this year. I think that concludes our presentation, Erik. Yeah. We are open up for questions in the chat. Absolutely. Okay. We'll start with the first question. What is the status for NTech? You said something, Erik. Yes. The status for NTech is that the timeline is by year-end. We don't have any signals whether they will approve it or decline, unfortunately. They don't give that kind of signals. We know the timeline, and we are quite certain that they will uphold the timeline. Next question. Any risk of you cutting costs too hard, which could reduce your possibility for growth? It's obviously always a risk associated with cutting costs. Still, we have the agreement with the bank, and I think the cost cuts we have implemented has been necessary to reach an agreement with the bank currently. But it's obviously that we look into ways of improving the situation still by improving the way we operate and continue to optimize the business and to see how we can allow for continue to invest as well. But I think the cost cuts that we've presented so far is necessary due to the financial terms with the bank and also securing a satisfactory financial position for the group. I can follow if we get any more question. Anyway, also when the market recovers, I think we have still capacity on the existing campuses. Yeah. We have still, you know, resources in place also to handle an increase in the volumes. That's why I also mentioned that we don't believe, but we state that a large portion of the cost cuts that we implemented is also not short-term in nature, but it will remain. There's a question on ONH, who we are taking market share from. Yeah. That's a good question. I would say that the main reason why ONH has been quite successful this year despite the market challenges is the new programs that have been successfully launched. We have seen substantial growth in those new programs. We see that the more established part of the business, the older programs, they have had a decline. Obviously, we are like quite successful within the marketing and business administration and also the organizational psychology. I think. I don't know if we are taking market share from them, but I think the main competitors within those areas would be BI, for instance, or Kristiania as well. I think it's still quite small numbers, so yeah. There's a question on the forecast for the year and expecting a lower EBIT in Q4 compared to Q3. I think some of the answer to that question is related to the change in commercial terms and the effect that yield in Q3 for Sonans, and we don't see the same effect in Q4. It's basically slightly lower revenues compared to what we reported in Q3 for Sonans. That is the main reason. Still some uncertainty on how much of the costs we will be able to report in Q4. We still aim and target for the same amount of NOK 61 million, but it's more the distribution of it, so to say. Is there any visibility on high school exams being reintroduced soon? I think the answer is yes. Erik? Yes. It's clear that exams will be reintroduced this year. It's been very clear signals from the government that exams they will return this year unless something very unexpected happens. The next question is, you earlier ramped up capacity on NTech as a result of increased demand. Can you go into detail what the announced cost reduction consists of? I think it's a combination of several things, but it's obviously personnel it relates to. It's been changes that we made in the organization to adjust the cost base according to the student volumes. It doesn't mean that we're not able to add more students to ONH, but it's changes the way we are working, how we utilize external resources versus internal resources, et cetera. I think it's an optimizing the operation based on the current student volumes, and I think that will still allow us to be able to grow. We have still made significant investments in the business when you look at the number of FTEs increases in the business of our nature as well. I think, it's more a question of optimizing the business currently. Yeah. Following a quite rapid expansion. There is a question around on the impact you see from higher interest rates on your debt position. I think, you know, the margin from the bank is quite in the same area that was previously. We have a slightly higher margin until next summer. However, we see that it will. Our debt is fully floating, so it will. You know, the effect from the increased interest rates will impact in line with the increases that might follow for interest rates in the periods to come. And then how confident are we that the new covenants will be met and the business won't need fresh capital? Well, I think we never can be certain on everything. There's always some uncertainty, but I think that we have reached an agreement and gives, as we say, sufficient headroom. We will continue to deliver on the cost program, taking the necessary measures and at least to the current point in time. We are satisfied with the situation, at least. Yeah. There's a question on loss on trade receivables in Q3, and do you consider the risk for loss to be higher now with the challenging macro conditions? A relevant question as well. It's a bit too early to answer that question already in Q3, because we start to see the results of the bad debt more in Q4. However, if you look at the disclosures on the accounts receivable, we made an additional accrual of NOK 2 million compared to last year to compensate for potentially higher risk in the customer base. But there are no significant signals saying that the situation has worsened. However, we are aware of that several companies announced that there are a more challenging environment, and we are also very closely monitoring the situation on accounts receivable in this case. It's a bit too early for us to conclude in Q3, as many of the invoices is not due so far in the accounts receivable. On the inflation part, for Sonans, for instance, and ONH, the majority of cost is personnel expenses. We will have an inflation in salaries this autumn in line with the annual adjustment, in line with what the level was for most employees, so to say, in Norway. That's in line. Normally, for all of the teachers- Yeah. -also the academics. It's- Yeah. -about, yeah, between 3.5 and 4, so to say. Yeah. Yeah. It's falling in line and we might expect some inflation as well in the cost base for premises and energy, et cetera. There will of course have an effect on the cost base, but still, it's also included in our estimates for the coming year as well. It's obvious that we will see an increase compared to previous periods. Describe the mechanics, I think, on the Sonans revenue in terms of the change in commercial terms. I think we described in more detail in previous reports. It's the change we made is that normally, previously we sold all the online courses. It was flat 12 months, independently of when this course was sold. Mm-hmm. If you bought a course in March, it was then distributed from April to March next year. It's 12 months evenly distributed. Now we have changed the model, so when you buy an online course, you either buy it for the autumn semester, the spring semester, or for a year. That results in a more accurate distribution of the revenue in line when the student is actually attending the course. Previously we, as I said, we distributed the revenue over several months, but the student, in many cases, stopped attending the courses after six months. Because we have the two times in the year where we have the exams. The mechanism here is that we have kind of accrued revenue from the previous model coming into the P&L. At the same time, we start to distribute revenues in a shorter time period because we are now selling contracts more in line with what actually how long the students is attending the courses. Mm-hmm. It means that we bring along an accrued revenue from previous periods or the previous way of selling the online courses. From now on, we are distributing the online revenue in line with how the students progress. We see that a larger share of the revenue then is distributed in the autumn semester rather than distributing it over 12 months. It's basically a shorter period to distribute the revenue that results in a higher revenue in the quarter and the semester. In total over time, it will not have an impact, but it will have an impact from the time you're changing the commercial terms. Okay. Any more questions? No, I think that concludes the session. Please feel free to contact us if you have any further questions or any more details you want to know about. Thank you all for joining and have a great day. Thank you. Thank you.