Ladies and gentlemen, welcome to the Desenio Group Audiocast for Teleconference 2021. Today, I'm pleased to present CEO Fredrik Palm. For the first part of this call, all participants will be in listen-only mode, and afterwards, there will be a question and answer session. Speaker please begin. Thank you very much, operator, and welcome everybody to Desenio Group's Q3 results presentation conference call. I hope you're all well and as usual presentation materials are available on our website and the Q&A session will follow the end. Can we go to slide two, please? In our Q2 report, we mentioned that forecasting of how the easing of COVID-19 restrictions will develop and affect the market was very difficult. Our belief was that we would see a return to more normal customer behavior during the third quarter. The positive trends we saw in July and in the beginning of August didn't last throughout the quarter. Still, I feel confident that this is not the new normal regarding customer behavior. The slowdown seen is temporary caused by effects that are caused by reopening of societies. We cannot see anything that has changed long term in our underlying market and this decline is affecting the whole sector not only Desenio. All data points we are following shows that the market share has not been affected for us. We are still perfectly positioned to capture the growth opportunities that lie ahead. First, let's dive into Desenio's performance and how we're navigating in the current market. First, a brief update on Desenio, our story, and the investment case. Next slide, please. Desenio is today the leading online provider of affordable wall art. We have successfully established ourselves in 36 countries, showing that our tech-based, data-driven strategy and innovative, unique product offering sets us apart from competition. This expansion has been done while at the same time growing our profits and generating significant cash flows which demonstrates the attractiveness of our strategy and business model. The pandemic and its restrictions did increase our sales. I want to remind you that our growth was very strong also before the pandemic. Next slide, please. Now, let me turn to our Q3 performance. Net sales increased by 14.5% to SEK 239.5 million. Organic sales growth was -20.9%. Active customers were at the same time up over 74%. Gross margins were at 82.8% and adjusted for Poster Store, so Desenio only the gross margins was 83.4%. Next slide, please. As I mentioned, net sales increased by 14.5% compared to the same quarter last year. Net sales were positively affected by the acquisition of Poster Store during Q4 2020. Poster Store in Q3 this year contributed with SEK 75.3 million. The lower than expected sales have impacted adjusted EBITA. They landed at 12.2%. The decrease is mainly explained by lower than estimated market demand, as I have been elaborating around, leading to both lower than expected sales and higher than expected marketing costs in relation to sales. The differences in adjusted EBITA margin versus last year is mainly due to gross margin down 1.7 percentage points, marketing 4.9 percentage points, fulfillment 2.3 percentage points, mainly due to somewhat lower average order value in Poster Store due to higher campaign activity in the quarter. Admin and other, down 4.1 percentage points which is directly caused by lower sales. Next slide, please. We have successfully expanded our customer reach now active in 36 countries and active customers increased by 74% to 3.64 million. Organic active customers increased by 26% to 2.6 million. Site visits increased by 14% to 22 million, and organic site visits decreased actually by 20% to 15 million. Customer satisfaction remains high with Trustpilot scores of 4.6. Our mission to democratize art and create fantastic pieces of art that are affordable for the masses. Our strong creative process and creation of new, unique in-house art continued throughout Q3. With the platform, we instantly observe how new designs performs, and how styles are trending. Our data-driven creative approach allows us to quickly meet these demands. Next slide, please. Cash flow from operating activities amounted to SEK 21.5 million for the quarter. The main reasons for lower cash flow than the same period last year is again lower operational results and somewhat higher levels of inventories of 3.9 million. Still, Desenio is very capitalized with very limited need for working capital or CapEx investments. Here and also, of course, in the report, it looks like we have SEK 47 million investments. This is a IFRS 16 adjustment. That's due to the lease agreement of the new warehouse in Czechia. That's actually SEK 45.8 million of this, which do not at all affect cash flow. I would say real CapEx was SEK 1.3 million in the quarter. Despite rather low cash flows in Q3, we managed to keep the net working capital negative. We ended the quarter with a net debt position of SEK 989 million. Next slide, please. To summarize the Q3, the effects from the ease of restrictions are still challenging for the market and for us. Our target group are more focused on socializing than decorating their homes at the moment. Due to the fact that we currently find it very difficult to predict market developments and customer behavior, we have decided to remove our financial targets for 2021. We are still committed to deliver on the expectations for the fourth quarter. However, based on three factors, I'm confident that the market we experience now is not the new normal. First, our growth was high before the pandemic. Even if it did see an increase in sales during the lockdowns in Q2 last year, the pandemic is not the main reason for our steady growth. Second, our market share remains. We are still the number one specialized affordable art player in Europe. The fact that we've only dipped our toes in the vast market of affordable art, there is much more market share to take, both in existing and new countries. For example, in the largest market, Germany, we still have well below 10% market share. In our second-largest market, U.K., we still only have well below 5% market share. Then third, when we look at the traffic and the search trends to Google, that data supports the conclusion that we maintain our market shares. Therefore, our medium- and long-term targets remain intact. Let me walk you through some of the findings in Google Trends. Next slide, please. First, let's take a closer look at Germany being our largest and most important market at the moment. This slide shows the index development of brand searches in Google for Desenio, Poster Store, JUNIQE, Wayfair, Westwing, and then in the bottom right is the search trend for the most important keyword we have in search in Germany which is Poster. You can see the sudden drop in search volumes for all brands as well as for Poster in the end of May this year as I also showed in the Q2 call. After that, the traffic increased from low levels in June but halted in late August. One exception there is Westwing, who seemed to continue to grow search both throughout the quarter. I mean, Westwing is not fully comparable to us. They have a much larger range than affordable art and well, Desenio, Poster Store, JUNIQE, I would say are more directly comparable. Next slide, please. If we gather the indexed brand search volumes for us and affordable art specialist peers in Germany we can see no signs of losing market shares. If anything, it would be the opposite that we actually take market share in a tough market. The whole truth seems to be that Desenio, JUNIQE, Posterlounge, and of course Poster Store are tackling the same challenges. Next slide, please. In the U.K., brand search volumes for Desenio has a positive development in contrast to the most important search keyword in the U.K. Which is prints and also to competitors. Well, maybe except for King & McGaw. Next slide, please. On the other hand, King & McGaw, as you can see here, when we put the graphs together are very small. I would say this slide gives you better overview of how we perform in comparison to our competitors in the U.K. What we see here is that we have a slight positive trend even if we obviously still are experiencing low levels well below the normal level. It also shows again that we're not losing market shares in the U.K. either which is our second largest market. Next slide, please. Let's look at the conversion rate we have. If the stable of this period, which you can see the top graph, this leads us to conclude that the website is still performing as it should and our customers are still ordering and still liking the products and designs. The challenge is not that the site visitors don't buy our products. They still do. As previously mentioned, we have one problem, and that's the traffic. The traffic to websites, as you can see in the bottom graph, is much lower than what it should be. You can see here compared to other years we're not following the upwards trend in Q3. Next slide, please. In our Q2 presentation, I showed this graph that was then pointing upwards in mid-August. As you can see here after mid-August it actually turned downwards again. As a consequence of the search volume development with volumes much lower than expected gross order intake development followed suit. Next slide, please. Beyond the challenges with the sales volumes, the Desenio Group has taken several important strategic actions, speeding up and preparing the company for a strong comeback. The shining star in our customer-centric approach, and at the same time, cost-saving measures is our new logistics center in Bor, in Czechia. We've also recruited Weiwei Yue as the new CEO and member of the management team, and her skills in geographical expansion and logistics will continue to contribute to the growth story that we have. Today, I'm also very happy to announce the recruitment of Michael Kurlancheek as our General Manager for North America. Michael will, together with me and management will be responsible for establishing operations on the ground and accelerate our development in North America, and that's including setting up a fulfillment center. Next slide, please. As we communicated in June, we are opening a new distribution center in Bor in Czechia. The first orders were actually shipped out from this new warehouse last week when we started shipping to Czechia, Poland, Austria, Romania and Hungary, so quite small volumes to make sure that everything works as it should. It did. This week, we have started to ship to Germany, Spain, Ireland, Portugal and what we call the rest of the European Union, which is a bunch of smaller markets for us at the moment. But now we have some major volumes going out from the warehouse this week. By the end of this week, around 40% of Poster Store's order volumes will be fulfilled from this new warehouse. Within two weeks, we will also start shipping to France, the Netherlands and Belgium. By then, around 80% of Poster Store's volumes will be fulfilled from Czechia. We estimate a high single-digit percentage reduction of the group's fulfillment costs to be realized already during next year. Next slide, please. The Desenio Group is the leader in several large markets in a global market worth EUR 15 billion. I am again convinced that customer demand will come back. I cannot see any reasons why COVID would change the market once lockdown effects are gone. All data that we look at shows that we maintain our market shares and when the market is back to more normal levels we are very well positioned. I look forward to getting back to the strong growth and profitability that has been the Desenio signal for more than five years. I'm also looking forward to looking back at this very abnormal period as saying that we took the right measures in accelerating our penetration in existing and new markets and increased our cost efficiency. Myself and my coworkers in the Desenio G roup and the members of the board, we're all committed to deliver in line with expectations short-term and our medium and long-term targets remain. Thank you all for listening. We will now welcome your questions. Over to you, operator. Thank you. Ladies and gentlemen, we're now ready to take your questions. If you wish to ask a question, please press zero-one on your telephone keypad. We have a question from Mr. Brown at ABG. Your line is now open. Thank you very much. Hi, Fredrik. Few questions from me and I'll take them one by one. Firstly, looking at the traffic data you showed there, it seems like October should be slightly stronger than September. Is that correct? That's what the data shows, yes. Great. Regarding your comment regarding meeting expectations in Q4, what are the main building blocks here for you to get there in terms of demand and customer acquisition costs and the likes? Sorry, I lost you there. Can you please repeat that? Yeah, sorry. Your comment regarding meeting expectations in Q4. What's the main assumption here for you to get there? What has to change from a Q3 to a Q4 for you to meet those expectations? Yes. Okay. As you all know, this has been a very strange year in terms of customer behavior. In a normal year, we can say almost exactly month by month how large a share of the full year sales a certain month would have and certainly the start of a quarter. We're now going into what normally is a high season, which we also expect this year. In a normal year, we have around 35% of our annual sales in Q4, of which the majority is in November and December. To answer your question, this year we do assume that we would have a somewhat stronger than normal month-over-month development from September going into Q4. Mm. On the other hand, if the customer behavior comes back to normal in the high season, which from mid, let's say mid-November, it can be higher. As we also have seen the previous two quarters, it is very hard to predict what customers will do and how we will behave. Thank you. Moving on to the 2021 versus 2019 comparison and looking at the Nordics for example, it looks like you're down versus 2019 organically. What’s your reflection around this in relation to the total market? How do you assess the margins among your competitors at the moment? Yeah. If we zoom out a bit and let's say we were at the end of 2019 and looking back at the history from the previous, let's say four years or so and would estimate the next three years. With, I would say, you know, decent estimates based on history, based on market shares in certain markets and so on. A market development for 2020 would be roughly SEK 50 million below what we actually came in on 2020. Which indicates that the COVID effect in terms of sales was around SEK 50 million extra 2020 and all that was in Q2. If we then continue to 2021, the levels would be a lot higher than the levels we are at at the moment. Which indicates that together with a lot of other data that we see, for example, in Google Trends, is that this is not the normal level. It's way below. Also, as you say, when we can see that, for example, in Nordics we are at lower levels than 2019, it also indicates that it is not normal especially since we cannot see that we're losing any market shares. It's the whole market that is actually down. When it comes to competitors' margins, of course I don't know, can only assume, looking at other competitors' history that some of our smaller competitors are probably having a quite tough time now. I mean, even though we think performance is very low for us at the moment, we still have the profit margins that are, you know, higher than many companies will ever experience. I think that's important to remember also. Great. Thanks. Regarding the SEK 15 million additional savings from the Poster Store acquisition that you mentioned in the report as well. Can you just clarify more concretely what these savings are coming from? Yes. So this part of the organizational integration between Poster Store and Desenio was planned but it was planned to you know be executed somewhere next year. Due to lower than expected sales, we've made the decision to do it earlier. This means that around 30 positions disappears. That does not mean that we terminate 30 people's employment. It's roughly a third that actually are terminated and that's people on probation periods. But the rest are more people going on for example parental leave or people who quit that we don't replace. The savings, the analyzed savings of SEK 15 million, it's solely in salary costs. Great. Thanks. Those were all of my questions. The next question is coming from Kristofer Liljeberg at Carnegie. Your line is now open. Yeah. Thank you. First, could you repeat what you said about the impact from the new logistics center? What that will have on the fulfillment cost and margins here in 2020? And how soon in the fourth quarter you expect to see those effects? Second question relates to the U.S. organization. When do you expect to have the organization in place given the hire you announced now? And what are the plans to step up marketing activities there once the organization is ready? And then I just wonder here for the fourth quarter and, you know, Christmas sale, Black Friday, et cetera, are you planning any extra activities that you haven't done before to drive people to the webpage? Thank you. All right. To your first question. Sorry, that was around the fulfillment center, right? Yeah. If you could repeat what you said, the impact that will have on fulfillment costs and also, you know, how soon in the fourth quarter you expect [crosstalk] Yeah. to have this effect. Yeah. First, in the fourth quarter, we don't expect it to have material effect in the total since we are doing Q4 running, you know, parallel fulfillment centers in Stockholm and in Borås. However, in 2022 we expect well, a high single-digit savings in the total fulfillment cost for the group. Just to be clear that's not fulfillment percentage points. I expect it to be. It's from the absolute numbers and then, you know, high single-digit savings from that. Then the coming years after 2022 we believe it's to save even more due to this. Should we expect this to drop through to the EBIT margin line, or will you take those savings and spend elsewhere so to say? Yeah. That's a good question. I mean, like for like it will come back to the bottom line. Whether we will use that for other activities, it's actually a bit hard to say now. Well, partly the main sort of depends on how the market develops now. As you all know, currently, we have, you know, higher marketing spend in relation to sales than was planned. If the market continues to be like it is now, the higher marketing spend in relation to sales will continue for a while. If the market comes back we will have more efficiency in the market again. Your next question was around the U.S. Yeah, we're very happy that we finally have signed our general manager for North America. And that he can start already in the middle of November. From here, he will start slowly to build a team in the U.S., consisting of people working with operations and with marketing mainly. Then the plan is to have a fulfillment center established in the U.S. probably in Q3 before the high season next year. The marketing activities in the U.S. will be stepped up during this period and to reach its well, short term full effect by the time we have the fulfillment center established I would say. Then your last question around the Black Friday. I can't really reveal right now. You know, if we were gonna do more or less than we did last year. Rest assured that there will be high activity from us around Black Friday. Okay. Thank you very much. I remind you that if you have a question for our speakers, you press zero one to enter the question and answer queue now. We have one more question coming in from Mr. Emmanuel at Bank [Bend]. Please go ahead, sir. Yeah. Hi, can you hear me? Yes. Yes. Perfect. Thank you. Yes, a question regarding your net debt that you said almost reaching SEK 900 million, I think, something like that. What are your views on the net debt situation? How do you expect it going further? Also do you have any like covenants connected to the debt today from the banks? Well, the net debt is of course highly dependent on the profits that we will have. Regarding covenants, no there are well no real covenant. Well, there are no covenants on this bond. There is an impairment test in case we want to do dividend or, for example, well, other changing to the balance sheet. No, there are no covenants, so to speak. Okay. Perfect. Thank you. Also regarding marketing, do you feel like there are any like special marketing activities that's not working fully or maybe there are some marketing activities that works better than other at this current situation in the market and with the web traffic data? Yes. I mean, we are even in good times constantly, you know, looking at ways to improve marketing efficiency and of course we do so maybe even more right now. One thing I can mention is that, you know, efficiency in marketing spend is of course highly dependent on, for example, the interest in the market, which is, well, quite lower than normal right now. It also depends on, you know, do we offer the right assortment at the right price and so on. For the latter, assortment and price, since our conversion rate is constant, we can't see that, you know, we're doing anything wrong there. When it comes to the market demand, when market demand is lower or when interest in home decor and wall art is lower, there is also lower effect in marketing spend. For example, the most important top funnel driver for us is influencer marketing and other social media activities. Normally here in high season so Q4, the reach we have in social media is higher than what it is in low season. Well, normal low season in Q2 which means, for example, that if we work with an influencer that has a certain amount of followers, a larger share of those followers would see and engage in this particular post in high season in Q4 than what they would do in Q2. What we see now is that the normal sort of Q2 effect has continued throughout, you know, Q3. When the reach in social media goes up again, which means that people are more interested in, well first interested in using social media and then also in home decor, the efficiency in marketing spend will come up again for us. Okay. Perfect. Thank you much. That's clear I think. Also, a last question from my side. I think it was the last quarter report you mentioned that you expected like the new normal to be in effect in the mid Q3 or if it was in the Q4. Did you have a, I mean, like new estimate for when do you think the new normal will happen, basically? Yeah, that's correct. When we reported Q2 which was mid-August, as I also showed in the graph there, we did see a very clear and positive trend from June throughout July up until mid-August that was pointing upwards. We estimated that the market would come out, customer behavior would come back to more normal patterns towards the end of Q3. Well, that didn't happen. It's, I mean, we, as we have had experience, currently it's very, very difficult to forecast customer behavior. I mean, of course I have some theories, but I think the stat is too wide now to really communicate what I think around that. Okay. Yeah. I totally understand. Thank you very much, Fredrik. There are no further questions at the moment for closing remarks. I give back to Fredrik Palm. Okay. With no further questions, thank you all for your commitment and for good questions and discussions. I'm sure I'll speak to more of you over the course of the next couple of days. Thank you.