BHG Group AB (publ) (BHG) Earnings Call Transcript & Summary

Thank you for joining us on our conference call today to review BHG's fourth quarter 2021 results. This call is being recorded, and a replay of the conference will be available later today on our Investor Relations website. Today -- together with me today are Adam Schatz, President and CEO; and Jesper Flemme, Group CFO. Both will be available for Q&A later in today's call. With that said, I now turn the call over to Adam.

Thank you, operator, and good morning, everyone. If we move to Slide 2, please. We grew in the quarter despite our own high comparative figures from Q4 of last year and despite a weak overall market. The BHG recipe, combining organic initiatives with M&A and unlocking synergies, was thus once again in display with especially strong performance in Mainland Europe. And with Germany now having made top 3 amongst our largest geographies, our progress towards becoming the undisputed European online leader within home improvement continues. Slide 3, please. I'll start this morning's presentation by reviewing the Q4 highlights. I will then move on to the business update. Jesper will then cover the financial update before I conclude and we launch into the Q&A session. And Slide 4, please. On to Slide 5, please, for the Q4 highlights. In a weak overall market and despite tough comps, net sales in the quarter reached SEK 3.5 billion, up 48%, corresponding to pro forma organic growth of 9% and organic growth of 2%. Adjusted EBIT amounted to SEK 186 million, corresponding to an adjusted EBIT margin of 5.3%. Cash flow from operating activities at minus SEK 247 million continued to be affected by the disruptions to the global supply chain, which, among other things, have led us to accept higher inventory levels for now as we have previously communicated and as we will get back to in the financial section. The environment in the quarter was similar to that of Q3 with consumer spend on services having normalized to prepandemic levels while supply disruptions continued to be in play. However, our performance in the quarter as well as over the longer term provides confirmation that we continued gaining market shares, more on which shortly. Slide 6, please. Zooming in on organic and pro forma organic growth, we did well in the quarter given our high comparable figures and the decline in the overall market. Organic growth amounted to 2%. This against the Q4 of 2020, which saw organic growth of 36%. Like-for-like, on a pro forma basis, our units grew by 9%. In other words, a similar level as in the previous quarter. Slide 7, please. Now taking a broader perspective on growth. To the left, the group's net sales is up by well over 100% compared to the prepandemic level, a period over which pro forma organic growth has increased by 25% per annum. Turning to the middle of the slide. The group's share of net sales from outside of the Nordics has increased by 8 percentage points and Germany became our third largest geography in the quarter. And over to the right, our growth in the quarter, just as our growth over the past 2 years, shows that we continue to strengthen our position. The total home improvement market is larger than in prepandemic times, although it did contract somewhat in the quarter from its pandemic peak of last year. However, the growth trajectory of our underlying markets remains intact. We reaffirm that we believe our markets will grow by around 15% per annum over a business cycle. Although a higher base for online penetration has been established, penetration remains low and is sure to continue expanding. Slide 8, please. For a quick reminder on our total addressable market opportunity. We estimate that the total Nordic market offline and online is worth some SEK 300 billion per annum. A large market, indeed, however, eclipsed by the orders of magnitude larger European ones. This is the backdrop against which we revised our medium-term financial targets in the first half of last year, including that we're going for SEK 20 billion in net sales on the next leg of our journey. A temporarily weaker market offers a leader like BHG opportunities to further strengthen our position and extend our lead, including by continuing our still nascent foray into Mainland Europe. Slide 9, please. Moving to the business update. Slide 10, please. Our recipe combines organic initiatives and M&A with the synergy possibilities created between the two. Our organic strategy remains focused on our 4 cornerstones of assortment, scale and own brands, an unrivaled digital experience and supporting infrastructure. In addition to benefiting from the secular trend of rising online penetration, we continue adding product categories and we continue adding geography. We're also further industrializing our approach to M&A. We have the organization capabilities and we have a proven track record. We also have the deal flow, as we will see shortly. Our markets are still fragmented. This is true for the Nordics, but also size, perhaps to an even greater extent to the European continent. And we continue refining our post-merger integration playbook. We've fine-tuned how we go about integrating the bolt-ons on to our platforms and the model for how the group ensures that we leverage the assortment, delivery infrastructure and data and automation across our units. Moving to Slide 11, please and a quick update on organic initiatives along these headings, i.e., assortment, delivery and data and automation. We continued to expand our assortment in the quarter in support of our mission: we make living easy. A growing number of units are now operating in our proprietary system for automated product data exchange. And we are grouping our units to reduce complexity, including consolidating a number of our own brands into the newly acquired Hafa Bathroom Group. We are making significant investments into delivery within the DIY segment. These include bolstering our drop-shipping capabilities to meet rising customer expectations. Within the Home Furnishing segment, these are focused on consolidating warehousing infrastructure and expanding our showroom and last mile delivery footprint. And on the data and automation side, we're well underway with automating parts of our warehousing infrastructure and upgrading our customer data platform, more on which shortly. Turning to Slide 12 for an ESG update. The process of integrating ESG into our strategy is well underway. ESG is a broad area, as you well know, and our priorities are guided by the materiality analysis we concluded a little while back and include the areas shown in this slide. More specifically, the past quarter saw us updating our Code of Conduct as well as the Code of Conduct for our suppliers. We are now at the point of defining our sustainability targets and intend to include these in our 2021 sustainability report due out in the week of April 4. Furthermore, we will report in accordance with the EU taxonomy. Turning to Slide 13 for a quick update on M&A. Acquisitions remain an important tool going forward and 2021 became the busiest M&A year for us to date. We evaluated more than 100 opportunities and we added 6 new stores to the BHG galaxy. We firmly established ourselves as the most relevant acquirer in our field, a position we have previously attained in the Nordics, but which we have now also established in Mainland Europe. Despite deciding not to follow through on a couple of potential acquisitions in the quarter due to sellers' valuation expectations not adequately reflecting the prevailing market circumstances, the 2022 M&A outlook is promising. In addition to having further defined the Nordic M&A map, its mainland European equivalent is also taking clear shape. Before turning to our customer metrics, first, a few remarks on digital marketing. Slide 14, please. Our marketing approach differs from the majority of our peers, and we're further developing it. On the top left-hand side, the e-commerce approach of many online players has long been grounded in leveraging cookie-based personal data to optimize marketing. With regulatory changes and the ramping up of privacy-first initiatives by firms such as Apple and Google, this approach is becoming increasingly fraught with challenges, not least since many actors do not leverage nonpersonal data to optimize their approach to customers and assortment. Bottom left, BHG's success and marketing efficiency, by contrast, has not revolved around cookie-based personal data, but rather customer cohort-based data as well as search volume data, both to optimize how our web shops are structured and the richness we apply to aspects such as landing pages and editorial content. Similarly, our assortment expansion has always been data-driven, allowing us to avoid making bets and improving our SEO ranking. Over to the right-hand side, since a little while back, we have earnestly begun to complement our marketing model with investments into our customer data platform, or CDP, taking with us the elements that have served us well to date and adding the CDP layer on top. The depiction you see on the right-hand side is inspired by Google's take on the customer journey, which we, in principle, agree with and have modified to suit our purposes. We are taking the concept to make shopping easy to the next level by incorporating every step in the customer journey into our CDP setup. This will further improve our search rankings and so drive organic traffic. It will also be empowered by content-based personal data, increasing the quality of paid traffic, reducing search costs and allowing tailor-made personalized offerings. As we write in the report, the first launch of our CDP is imminent and we will then dock additional BHG businesses onto it. In addition to perfecting the unit-by-unit approach to the customer journey, the BHG CDP will also enable leveraging insights between our units and so drive customer lifetime value and brand awareness. Turning to Slide 15 for customer developments. Traffic generation conditions resembled what we saw in the third quarter and were clearly more challenging than in the preceding year. Despite this, our customer base continued to grow and our customer metrics held up well. As you can see to the left on this slide, the number of active customers, defined as customers who have made at least 1 purchase in the past 12 months, surpassed the 4 million mark, an increase of 15%. We succeeded in maintaining the number of orders per customer as well as the marketing ROI at the same level as in the previous quarter, while the share of net sales from repeat customers edged up to close to 50%. Our investment into gaining further insights from customer-related data across the group continue as we just discussed. More generally, driving BHG towards a higher level of customer centricity remains a key focus area for group management. Slide 16, please. Summarizing, this is BHG today at a glance. On the left-hand side, our CAGR since 2014 exceeds 40%. In this period, EBITDA has grown by more than 100% per annum. Our EBIT margin on an LTM basis stands at 6.4% and is generated by our over 100 customer-facing web properties. And now moving over to the right-hand side, these web shops have been visited over 400 million times in the past 12 months, generating over 5 million orders from customers in 24 countries. And finally, our leading product portfolio comprises some 1.5 million SKUs. Slide 17, please. And handing it over to Jesper, who will walk us through the financial update. Slide 18, please.

Thank you, Adam. As we now put the fourth quarter behind us, we can conclude that we continued to strengthen our market position despite the overall market contracting and high comps. As Adam mentioned, net sales increased 48.1% to reach almost SEK 3.5 billion. Pro forma organic growth reached 9.3% and organic growth reached 1.8%. The general market scenario from the third quarter continued in the fourth with bottlenecks and price increases along the supply chain and fierce competition for customers, which, among other things, resulted in higher cost for online marketing compared with the year earlier period. Despite this, both our segments grew organically in the period, which means that the Home Furnishing segment turned around the negative organic growth from the preceding quarter. Adjusted EBIT amounted to SEK 186 million, corresponding to an EBIT margin of 5.3%. Let us now turn to Slide 19 and a closer look at our EBIT margin compared to last year's. Comparing our EBIT margin in the quarter to last year, we can conclude that the Q4 2020 EBIT margin of 8.2% is a tough comparison as it was favorably affected by COVID-related market factors. Our product margin amounted to 39.5% in the quarter, 0.8 percentage point higher than last year. The negative impact from increases in supplier prices and freight rate was mitigated by significant price increases and mix improvements. Fulfillment costs increased in the quarter compared to last year driven by supply disruption, longer lead times and our decision to accept higher inventory levels for now to ensure product availability. Marketing costs increased in the quarter, driven by a higher share of sales from own brand, high growth in new geographies and a generally tougher traffic generation environment with a higher cost per click. The increase in organizational costs should be seen in the light of under-resourcing in previous periods and continued long-term investment to drive customer centricity as well as a higher share of own brands. Finally, the increase in depreciation and amortization was primarily driven by continued tech investments. All in all, our EBIT margin amounted to 5.3% in the fourth quarter. Let us now have a closer look at the drivers of SG&A in the quarter, Slide 20, please. Comparing SG&A in Q4 this year with the same period last year, it's fair to say that Q4 2020 is a tough starting point as it was boosted by extraordinary demand, temporary underinvestment and subdued CPCs. Starting by looking at the organizational cost part of SG&A. As we reported a year ago, both segments struggled to catch up with high demand during the first year of the pandemic and especially the DIY segment was under-invested. This has been rectified, and customer satisfaction not only restored but elevated. We have continued investments in assortment, delivery and data and automation. The continued expansion of own brands in DIY requires somewhat higher SG&A. And finally, scale effects are visible in both segments and especially so in the Home Furnishing segment. Turning to the marketing part of SG&A. Our higher share of brands in DIY requires a higher cost of sales than a well-known external brand. We have experienced high growth in new geographies with higher cost per click than the Nordics. And finally, just as in Q3, we have faced a tougher traffic generation environment with elevated CPCs as a result. So let's turn to cash flow, Slide 21, please. Cash flow from operating activities amounted to minus SEK 247 million and was mainly impacted by the buildup of inventories to ensure high product availability to counter the disruptions in the global supply chain. I will get back to inventory buildup on next slide. The right-hand graph showing the development in liquidity walks us through the starting period position of SEK 299 million deducting the cash flow from operations and the impact of investing activities, a majority of which is M&A related, and finally, the financing activities, which are primarily related to the share issues completed in Q1 and the refinancing completed in Q2 but also include amortization of leasing liabilities bringing us to the period end SEK 274 million of liquidity at hand. Slide 22, please. The full year 2021 cash flow was negatively impacted by SEK 1 billion from changes in working capital. About SEK 880 million of this was driven by increases in inventory. Roughly 1/3 of the inventory increase was driven by business growth and M&A as well as mix effects from higher share of own brands. Another 1/3 was driven by various ripple effects from supply chain disruption, such as late arrival of season product, longer lead times and higher freight costs. Also, as a consequence of the disruptions in the supply chain, we have accepted a higher safety stock and this increase accounts for the last 1/3 of the inventory buildup. Our current stock levels makes us well positioned for having a high availability going into high season, and we expect strong cash flow in 2022. Slide 23, please. The group's net debt amounted to SEK 2.251 million at the end of the year. And net debt in relation to LTM adjusted EBITDA ended at 2.3x, within the medium-term financial target range. Our financial position is strong. On top of our liquidity at hand, we had unutilized credit facilities at the end of the quarter of SEK 800 million, which means that we can continue to execute both organic and inorganic growth initiatives. Handing it back over to you, Adam, to summarize and conclude.

Thank you, Jesper. So on Slide 24 and turning to Slide 25, please. Summarizing the quarter. On the back of combining organic initiatives with M&A, our growth journey continued and full year 2021 net sales amounted to SEK 12.7 billion. While facing tough comps, we continued to strengthen our Nordic position and we took decisive steps on the European continent as evidenced by Germany now being our third largest geography. Supply disruptions and demand complications were similar to what we saw in the third quarter. Although the environment in the next quarter is likely to continue to be complicated, we see that our mitigating actions are having a desired effect and we believe that peak complications may be behind us. A host of organic initiatives, which sort under the headings, assortment, delivery and data and automation, are in advanced motion as we discussed just now. 2021 was a record M&A year for us. Although we did not conclude any acquisitions in the fourth quarter, the M&A outlook is strong. We updated our financial targets at the start of the year, and we're progressing well towards reaching these with 2021 pro forma sales now at SEK 14 billion. And finally, we continue our quest to create the undisputed European online home improvement platform. Moving to Slide 26. The past couple of quarters have made for a more difficult operating environment than we have seen in a while. But with full year 2021 now behind us, I believe it's worthwhile to take stock on what we have achieved since going public back in March of 2018. When we were at SEK 5 billion, we said that we would double in size and improve profitability and we have. We've grown by more than 35% annually, and we've surpassed the SEK 10 billion mark by margin and our EBIT has increased more than fourfold. Finally, while strengthening our Nordic position, we have also increased our share of net sales from outside the Nordics from 2% to 14% over this period. Slide 27, please, and turning to the future. Here now, we're investing to advance our positions, organic and acquisition-driven growth, not least in Continental Europe remains the focus. A temporarily weaker market provides an excellent opportunity for a leading player to strengthen its position. In a medium-term perspective, we will have achieved and surpassed our financial targets, including attaining SEK 20 billion in sales. At the same time, we will have significantly enhanced our ability to serve our customers in the best possible way. And in the long term, on the back of our current investments into assortment, delivery and data and automation, BHG will have fully emerged as the leading online player in Europe in home improvement with the broadest customer platform in the market. Turning to Slide 28. This concludes our presentation, and we'll now open up the call for questions. Over to you, operator.

[Operator Instructions] The first question is coming from Johan Brown at ABG.

A few questions from me. First of all, on the price hikes you're mentioning in the report, is it possible to say, on average, how much you've raised prices during the quarter. And then just a brief comment on the price levels in 2022 in terms of expectations from your side.

We're actually not quantifying the price rises. And as you know, we -- our business spans over such a broad product range, so an average isn't necessarily all that meaningful. But I can say that it's been clearly most presently felt in the Home Furnishing segment. And I would say that overall, the dynamic has played out much as we thought it would and said it would when we presented our Q3 report. So some of the price rises have had effect now, but we also believe that there will be continued price rises from our competitors into this year. And we've also seen some revisions, especially for the list-based operators that have come into effect early this year. And so the picture is clearest on the Home Furnishing side, I think also as evidenced in the performance of the Home Furnishing segment in the quarter.

Yes. That's clear. And then a question on the working capital and the inventory levels here, which is obviously we're not in a normalized scenario here, but I'm just trying to figure out, given the M&A you've done during the year with different seasonality effects and the likes. If you would describe the inventory buildup and release throughout the 4 quarters of the year in a normalized scenario, which quarters would be an inventory buildup quarter and which one would be an inventory release, so to say?

So the major release will happen in Q2 and Q3. So that's the old seasonality of BHG, which is still very much relevant. With the addition of our premium furnishing segment with Nordic Nest and the Svenssons brand, we also have quite strong typically release nowadays in the weeks around Black Week on the Christmas period and that's sort of a new addition to our seasonality. But still, the old dynamic of Q2, Q3 being the strongest quarters is very much relevant.

And then just a clarification question on the outlook statement you gave in the report as a last question here. Just so I understand the wording correctly, is it correct to say that you're growing in January in order intake organically more than 6%?

Yes. That's correct.

The next question is coming from Gustav Hagéus at SEB.

Firstly, I'm curious about the big discrepancy in organic growth and pro forma growth. I assume most of it relates to Nordic Nest, if you could confirm that. And also if you could let us in a little bit on the hood, what's driving that exceptional growth if it's a function of comps or geographical expansion or something else, that would be helpful.

Sure. So you're right. And I also want to highlight that not only Nordic Nest itself, but also Svenssons i Lammhult, which is now operated as part of the Nordic Nest group with the Nordic Nest management running both these great brands. So both those are premium additions to the group have had a very strong development in Q4. So that's correctly spotted. And also, when it comes to the Nordic Nest brand as opposed to the Svenssons brand, which is still a Swedish brand, it has had very nice growth outside of the Nordics, not least in Germany. So that is greatly contributing to the development that I briefly referenced in one of the slides with Germany having made top 3 as a BHG geography.

And sort of when thinking about Nordic Nest and their comps, is this something that could continue to support throughout the year, you think? Or are comps catching up also with Nordic Nest into 2022?

Nordic Nest is a very, very strong business. Strong brand, strong team. And we definitely expect that the development will continue. But of course, you're quite right that the business has grown tremendously, and comps in 2022 will be tougher than they were in 2021. But our belief and our intention is to continue growing that business nicely.

Okay. And then I'm curious about sort of the margin progression, how one should think on a quarterly basis for 2022. If we could go through a little bit how you see the organizational buildup that you referenced, whether or not they will flatten out or continue to build, where you see opportunities to invest. Marketing costs also, if they stay around here on cost per click, when will they sort of be flattish year-over-year, that would be helpful. And also the seasonal pattern that has, I think, increased through your German acquisition.

So as you will recall, Gustav, we had a very, very strong growth into Q1 of 2021. So we will face just, as we've done now in Q3 and Q4, pretty high comparable numbers also in Q1 of this year. When we turn to the CPC, the picture was actually quite dramatically different between the first half of -- or rather in the first quarter of Q1 -- in the first quarter of 2021, they were still favorable. And then there was a pretty rapid -- actually a very rapid shift and they become -- they became much tougher as of Q2 of 2021. So I guess that probably answers most elements of your question, but please remind me if I missed anything there.

Yes. Also how you think about sort of investments in personnel and so forth. There has been a little bit of a catch-up, I guess. Where is that from a quarterly-by-quarterly basis? Where do you think that should start to take on a more normalized growth?

I think we've seen the biggest impact already now with what we reported in Q3 and Q4. And we did quite clearly state in our Q4 2020 earnings release that the results, especially in the DIY segment, were significantly boosted by the pandemic highs of the first year of the pandemic. So we did invest to catch up. And we're also on this longer-term quest of ensuring that we are fully customer-centric. And much of those investments now in terms of catch-up have -- are already here. And from hereon, of course, as we continue growing, we will continue investing. But again, the catch-up is behind us to a large extent.

And a few more, if I may. AH-Trading, they have a seasonal pattern, right? So they were loss-making in Q4 -- or what was that name? And what was that impact to margins? And how do you think -- does that suggest that Q4 is now a little bit -- is that big enough to make Q4 a little bit weaker of a quarter in terms of margins for you as a group?

Yes. Absolutely, it does impact. We're not calling it out separately here. So I think that says something about the magnitude of the impact. But yes, there is an impact. And you're absolutely right that the AH-Trading assortment, for now at least, is still focused on the outdoor months. It's outdoor furniture and accessories. So in terms of modeling into this year, we believe that we will have excellent results in Q2 and Q3. And Q1 will probably be an improvement on Q4, but not a massive improvement.

In terms of margins? Or in absolute terms?

Yes.

Yes. Okay. And lastly, given -- could you remind us on sort of the scheduled payouts now for earnouts? And with that in mind and your leverage, what you consider to be your firepower in 2022 on M&A?

Sure. I'll hand that question over to Jesper.

Yes. So the total amount on our balance sheet is SEK 2.1 billion and just shy of SEK 250 million will be paid out in 2022. Then in 2023, roughly SEK 1 billion will be paid out if the company accomplishes their targets for sure. And then the rest of the amount will be paid out during 2, 3 coming years.

So was it SEK 250 million in 2022, Jesper? Sorry, I didn't catch you there.

Yes. Yes.

Yes. Okay. And firepower then, what do you consider your firepower?

We have unutilized facilities of SEK 800 million and we have SEK 300 million cash at hand. And then as we said, we expect 2022 to be a good cash flow year given the inventory level that we have right now.

The next question is coming from Daniel Schmidt at Danske Bank.

Can you hear me?

Yes.

Sorry, I missed the earlier part of this call, so maybe you've answered this already. So my apologies in that case. But the price increases that you are making, even though you don't quantify how big they are, is it your assessment that they are now much, much more sort of compensating for the cost inflation that you're seeing? Or is it halfway through? Or how should we view -- or how should we model that?

Well, as I did mention, I don't know if you caught that or if you joined after we briefly touched on this. But the impact is seen in the Home Furnishing segment primarily. And if we take the group perspective, as one of the bridges in the earnings call deck also shows, our product margins are holding up well and we're almost at 40% in terms of product margins and the Home Furnishing segment is significantly above that. So most of the impact has been on the Home Furnishing side. With that said, we believe that there's still runway for further increases. Of course, we operate in a competitive market and our ability to increase prices, to some extent, is linked to what competitors do. And I'm sure that you've seen announcements from some players out there, such as, for instance, IKEA, about global price rises that have actually now come into effect. And that's a similar picture for -- from some of our other competitors. So I wouldn't say that prices have fully adjusted for the higher cost levels, but they are on the way to adjusting within the Home Furnishing segment.

Yes. So if we -- because I think sort of my interpretation of what you're saying is that we will see more of this and that could, of course, change. But as we enter the spring, maybe will be a full compensation also for the sort of very elevated fulfillment costs. Is that sort of -- is that believable?

Yes. Well, again, as we did discuss the cash flow seasonality with Q2 and Q3 being very important quarters from a cash flow point of view for us, that should also mean that for fulfillment levels come down to the levels we've seen historically.

Yes. Good. And you write and you also answered the question that you have sort of a good start to Q1, if I got you right, with a sort of slightly better start than you saw in Q3 and Q4. And I guess the price increases helped that a little bit, I assume. But is it -- do you feel that the sort of the pandemic has been playing maybe a little bit again in your favor as of late? Is that the reason? Or how do you view it?

We actually don't think that, that's a major factor. We look at a host of data, I'm sure as you do. And from the data we have at least, spend on services is more or less restored to pre-pandemic levels. Of course, depending on the service type. But overall, consumers are spending on services again. So no, I don't think that's a major factor. We assess based on data from Google and some industry indices and also from some of what our peers are saying that the market contracted quite significantly in the quarter, admittedly versus the pandemic peaks. But I think even if you take our lowest growth metric like the pure organic metric, that shows that we're gaining market share rather than riding on the tails of extraordinarily strong demand out there.

I was just thinking that the entire online industry is gaining again a bit more. I appreciate that you guys do that. But just sort of given the restrictions that have been imposed since late November again in different Nordic markets and Continental Europe, for that matter, I was just thinking that maybe people are okay shifting back again, staying a little bit more at home and not visiting physical stores that much again as they did in maybe September, October.

We -- so from our own experience, from our network of showrooms, we don't see that our showrooms are underperforming. So if we extrapolate that to general consumer behavior, there may be somewhat of an effect from what you're calling out there, but I don't think it's a driver here.

No. Okay. good. And then if I got you right, also, you saw the peak in terms of investments that you needed to do in personnel in the latter half of last year and then you're not adding more than you're growing as you enter '22, if I got you right. And that means that we should have some sort of relief in terms of pressure on margins and costs going forward. And when you talked about AH-Trading making a loss in Q4 and then went on to talk about the coming year, that was still regarding AH-Trading, right? That wasn't for the full group?

Yes.

The next question is from Carl Deijenberg at Carnegie.

So 2 questions from my side here. First, on the gross margin here. I mean, that's similarly seen in Q3 also, but could you elaborate a bit on the gross margin contraction in Home Furnishing versus DIY. I mean it seemed to be flat here in Q4 year-on-year in Home Furnishing, while it's contracting by roughly 2 percentage points in DIY. So could you give a bit more flavor what you're seeing there? And maybe also sort of what you expect on the gross margin here and going into 2022? Is it stabilizing? Or what do you see there on the shipping side?

Jesper, do you want to address that, please?

If you look at the DIY segment and the gross margin, I think one should remember that the comparison with 2020 is extremely tough. Q4 is normally a weaker quarter for DIY when it comes to margin. That's the first thing. And the second thing, I think, also when it comes to 2020 was that many of the supplier bonuses have sort of -- they are like stairs. So when you hit the new plateau, you will get a higher bonus and that reconciliation is partly done in Q4. So that's affecting also 2020. So I think -- looking at the gross margin, it's really 2020 that disturbs the picture.

Okay. I understand. And second question is on M&A. I mean you're stating here in the report that you're witnessing maybe higher multiples from sellers than what you're ready to pay. And I mean, at the same time, you seem quite upbeat here on M&A going into 2022. So I mean is this starting to meet your expectations now? And could you explain that what you're seeing on -- I mean, that statement, are we talking about higher multiples that sellers are expecting in absolute numbers? Or is it just that your sort of valuation reflection on the performance that should be lower given the year-on-year performance also in the market among the targets? Or if you could give some color on that as well.

Sure. So we've all been around the block a few times. And I think it's fair to say that in relatively rapid market adjustments, the impact on publicly listed assets is happening well before private expectations fully adjust. But that adjustment is also taking place quite rapidly. And so overall, I would say now, when we look at our pipeline, we feel good about the discussions that we're having. And we feel that expectations, by and large, are quite reasonable now. And I think the second element, which was an element through the first year of the pandemic was it's quite easy to extrapolate recent performance into the future. I think we've been quite careful all along in our own communication to state and to try and quantify the magnitude by which we were helped by pandemic developments in the first year of the pandemic. However, from some of the sellers' discussions, the expectations on the future, we may have had a more cautious view on how these assets will perform as things sort of come down to more normal levels. And as we've stated all along, the prepandemic trajectory of rising online penetration from these low levels, that is still very much what we see going forward. But I think it's worthwhile to, in most cases at least, to normalize for the peak demand that materialized during the first year of pandemic. So some of the discussions also, I would say, have evolved around somewhat different expectations on the future trajectory of some of these businesses.

There are no more questions at the moment. For closing remarks, I move back to the speakers.

Okay. So thanks, everyone, for calling in. Thanks for great questions. And we look forward to staying in touch with all of you. Thank you. Have a good day.

Ladies and gentlemen, this call has been concluded. You may disconnect.