CDON AB (CDON) Earnings Call Transcript & Summary

Welcome to CDON Press Conference 2023. [Operator Instructions] Now I will hand the conference over to the speakers Chair of the Board of Directors, Josephine Salenstedt and CDON's acting CEO and CFO, Thomas Pehrsson; and Fyndiq's CEO, Fredrik Norberg. Please go ahead.

Thank you, operator, and good afternoon, everyone. Welcome to CDON's extra Investor Call. I'm Josephine Salenstedt, and I'm a partner of Rite Ventures. Rite Ventures is one of the largest owners of CDON and has about 24% of the company. With me today, I have Thomas Pehrsson, CFO and Interim CEO of CDON, and Fredrik Norberg, the Founder and CEO of Fyndiq. The topic of this call is yesterday's announcement of CDON's acquisition of Fyndiq, after CDON, second largest Nordic business-to-consumer marketplace. Before we jump into that topic, I will start with a short background. Next slide, please. From both a market perspective and a CDON perspective, the years 2021 to 2022 have been turbulent. At CDON, we have had a volatile financial development and a high rotation both on CEO level and top management level. These results are disappointing. And as the Chair of the Board, the final responsibility for this lays on me. We have had some progress. A consistent work has been done with improving our capabilities within SEO, SEM and consumer experience. In Q4 2022, CDON executed on several commercial initiatives and on a cost reduction program of SEK 60 million to SEK 65 million, taking out about 35% of the costs, excluding one-offs. The aim was to increase efficiency and enabling profitable growth. And for this reason, the Q4 results was heavily impacted by costs of one-off nature. We are now through most of this work, and we are proud that the EBITDA result was positive in January in this quarter. And with that, I consider a large part of the turnaround to be complete. In December, we also communicated that the CEO, Peter Kjellberg, [indiscernible] the company. Thomas Pehrsson of CDON was appointed Interim CEO. That was only about 2 months ago, and the Board is very impressed with what Thomas has accomplished during this time. In parallel, we're having to say goodbye to a large part of our team, the organization has refocused to our core processes and gain momentum in operations again. Now being closer to our goal of positive EBITDA for the full year of 2023, we have a much more solid foundation in place. Therefore, it is time for us to take the next step towards increased scale, next level of consumer experience and of entrepreneurial leadership. And for this reason, I am extremely excited by our intention to combine our efforts with the team of Fyndiq and to become partner with their owners and entrepreneurs. Later on in this call, Fredrik will give us a brief introduction to the company. But before that, I will shortly cover the main pillars of the transaction. Next slide, please. CDON will acquire 100% of the shares in Fyndiq. Fyndiq's shareholders will be paid mainly shares in CDON. The transaction also included a small cash component to enable key management in Fyndiq to switch from the current incentive program in Fyndiq to a new incentive program in CDON. The 2 businesses both had their strengths and weaknesses, and both have had different strategies in the last 2 years in terms of investments and marketing. Therefore, they also have different profitability profiles in the short term, but they do have very similar business models. We believe that the measure that most correctly reflects the underlying profitability potential in each company by today is profit after marketing. Therefore, the relative valuation of the company has been based on the relative gross profit after marketing for the full year of 2022 for each company. CDON has a gross profit after marketing of SEK 118 million and Fyndiq of SEK 76 million. After smaller adjustments for relative excess cash positions, and effects of the proposed incentive program, the ownership split of the combined company will be around 60% to the shareholders of CDON and around 40% to the shareholders of Fyndiq. And based on an average share price of CDON [indiscernible] this prior to signing this to signing, this implies a purchase price of about SEK 730 million. As part of the combination, Fredrik will become the CEO of CDON. This is something that I am particularly excited about. With Fredrik, we get an experience and driven entrepreneur who also have a substantial ownership in the company. In addition, I'm very happy that Thomas will continue in his role as CFO, and he will also assume the responsibility of being Deputy CEO. I'm convinced that Fredrik and Thomas as the leaders, we will have a solid foundation in place for the future. Next slide, please. Let's now have a look at our rationale for the combination. First, getting the benefits from scale. The marketplace business model is substantially reliant on scale with high incremental margins once the relative fixed cost base is covered. We see a clear benefit from being able to leverage investments in customer experience and services on a larger customer and merchant base. While the final assessment and plan for synergies, we will have to wait until after completion of the transaction due to competition reasons, we see significant room for both operational and commercial synergies. Second, getting a strong entrepreneurial team and leadership. As mentioned earlier in the call, we believe that the highly entrepreneurial team of Fyndiq will complement CDON's current organization in several ways. The team of Fyndiq has impressed us within many areas, for example, tech development, customer experience, working quantitatively with data and risk prevention. To us, it has also been key that Fredrik will have a significant ownership of about 3% of CDON upon completion of the combination. And in addition to this, the Board of CDON will be complemented with Erik Segerborg and Christoffer Norman. They are both active investors and entrepreneurs with extensive experience from very successful growth journeys on 2 sided marketplaces Avito in Russia and Hemnet in Sweden. Christoffer will be a large shareholder of CDON owning about 3% of the company after completion. Erik has an ownership of 0.5% and will be offered to invest up to SEK 7.5 million in a convertible loan based on market terms. We are convinced that the combined company will have a very powerful and robust team at all levels, and that holds from the Board to Fredrik as CEO and entrepreneur, Thomas as a commercially oriented CFO and a solid and agile management team leading the organization. Next, I'd like to briefly touch on CDON's previously communicated targets. Next slide, please. In Q3 last year, we communicated financial directives aiming to clarify our strategic priorities and high-level targets. With the combination with Fyndiq, we accelerated our pace in taking market share towards our long-term goal of 2.5% of the e-commerce market. CDON's average take rate will increase as a direct effect of the combination with Fyndiq having a substantially higher take rate on CDON of approximately 25% compared to CDON of 11%. When implementing learnings from both companies after completion of the transaction, we expect there to be room for incremental positive development with regards to take rate on top of the direct effect. We are also confident that the combination will shorten our time to attractive profitability levels as the marketplace business model has the ability to generate very high margins when basic operational functions are covered. Both Fyndiq and CDON have expectations of profitability in 2023, independently of each other. Therefore, we will take measures to maintain the momentum of each company in the short term. In the medium term, we expect significant synergies in both operational and commercial level, though the timing of those are yet to be defined. The path over in this respect will be finalized after completion of the transaction. Our target of positive EBITDA in 2023 remains intact as well as the long-term target of 2.5% market share in 2025. With that, I'm happy to let Thomas continue the presentation. Thank you, and good afternoon.

Thank you, Josephine. CDON has been listed at Nasdaq First North since the 6th of November 2020. After the complete combination with Fyndiq and the combined company will continue to be listed at Nasdaq First North and traded on the short name, CDON. After the integration, the combined forces of both companies will operate as one team from Stockholm and Malmö offices, the former one will act as the company headquarters. The company will act on 2 clearly differentiated consumer brands, where both CDON and Fyndiq will continue their respective focus on the core categories, which will allow for optimization in both segments. This will also allow for continued improvements in the commercial process and customer experience. The integration is expected to take place gradually in the coming 12 to 18 months to ensure efficient integration of our commercial processes and human capital. Next slide, please. To the pro forma financials. Please note that these financials do not consider any potential synergies as we have just signed the agreement, we have yet to begin the integration process and cannot currently provide quantitative estimates around synergies. That being said, given the similarities of the business models, we believe there are significant commercial and operational synergies that will result from this combination, and we look forward to providing greater detail once the integration is further along. The table you see on the screen now shows preliminary pro forma numbers based on CDON full year results and unaudited numbers for Fyndiq 2022. The combined company of CDON and Fyndiq had for the full year of 3P GMV amounting to SEK 2.3 billion and the gross profit amounting to SEK 326 million. CDON is currently phasing out its 1P business. The combined business has approximately 10% of the GMV related to own inventory. Total net sales amount to almost SEK 1 billion with a gross profit of SEK 352 million and a gross margin of 37.4%. During 2022, as Josephine said, CDON has incurred significant one-offs as well as initiated a large cost reduction program, which means the go-forward OpEx level will be a much lower, as you can see on the right side of the screen. Further, as a result of the combination of CDON and Fyndiq, we expect significant synergies, as I said, in terms of gross profit level from commission optimization harmonization between the companies. We also expect synergies on the operational expenses. We reduced costs relating to IT, office spaces and organizational efficiencies. The strong performance from Fyndiq in the full year of 2022 and the initiatives of CDON in the past quarter make us confident that we will reach our EBITDA target of being at least breakeven in 2023, as Josephine also said. And thank you for that. And then I hand over to Fredrik, please.

Thank you. Next slide, please. Hello, everybody, and these are the bullets I will guide you through. I will start with some information of who I am and then tell you a little bit about the Fyndiq story. And then I will go into my high-level thoughts on the new CDON. Next slide, please. I am 43 years old, married and father of 2, Edith and Adam, 8 and 10 years old. We live on Södermalm in Stockholm, and I originally come from the West Coast of Sweden, Gothenburg. I usually describe myself as an academic entrepreneur since I have a Masters of Science in Innovation and Entrepreneurship from Chalmers School of Technology in Gothenburg but also a Bachelor Degree in Finance from Gothenburg School of Economics. But after that, I really haven't had the opportunity of showcasing my broad academic background but have started several companies since the beginning of my 20s. And the last company is Fyndiq, which I founded together with my 4 cofounders in 2009. Next slide, please. Here are some highlights from this 13-year-old exciting journey. We went live in 2010. After that, we got our first seed round, and we got -- amongst others, we got the legendary businessman, [indiscernible] as investor and part of the Board of Directors for a couple of years. After that, we had a couple of years with high growth. 1 year, we grew from SEK 8 million to SEK 56 million in turnover. And the Next Web graded us as one of Europe's fastest startups. 2 years after that, this led to an investment from North zone, the Nordic venture catalyst. And 2 years after that, we got our biggest shareholder, which still is Karl-Johan Persson, the previous CEO of H&M, and that's through Philian Invest. In 2018, we realigned our strategies and focused on proving that a marketplace like us could become profitable. And we worked a lot with that during 2019, which was perfect timing for the upcoming pandemic. During 2020 as a part of this, we also built our second version of our Marketplace platform. We have built everything in-house from day 1, and this was the second generation of our Marketplace platform, which we launched a year after and with a very successful launch. And the proof of the quality of this platform is that we also the year after, we sold a copy of this platform to a global big retail company. And according to them, this is due to the fact that this platform is the best that is out there. Last year, we reached a milestone, which is -- I am very extremely proud of, and that is that we reached 4.3 in Trustpilot score. And that seems like a minor thing, but we moved from 4.2, which is light green stars to 4.3, which means dark green stars. And I have never loved the dark green as much as this time since we did that move. This also says a lot that we could -- you could see that we could have a challenged when it comes to quality of the products. We have low-priced products and so on and being able to deliver this high customer satisfaction score is impressive, if I may say. On the other spectrum, we can see that we have a really high employee NPS of plus 50. The employee NPS ranges from minus 100 to plus 100. Usually, you say that above plus 30, it's extremely good, and we are solid on plus 50 for a long time. And this also showcases my strong belief that a coworker that is happy and in balance is the best coworker. And end-to-end, we also can see the GMV of roughly SEK 0.5 billion for last year and the net revenues of SEK 125 million. Enough about Fyndiq. Next slide, please. Let's talk about CDON and what really impresses me with CDON. There are a lot of things, but I would like to highlight 5 things here. To start with CDON has always been like a bigger brother for us to look up to and look into and get this fire from. And yes, this is a big thing for us. But if I would highlight 5 things. The first thing is really the reorganization that has been done in December. I've been through that 2 times in the history of Fyndiq, and it's not fun, but it's also crucial sometimes that you have to do that. And the key to succeed with that is that you get the new normal very fast, and you get a new team that's into that normal and have a forward-looking attitude. And as I understood, this is something that the management have succeeded with the lead from Thomas, and I'm very impressed by that. Also, the strong brand that CDON have now and have always had, I would say. And I know this really from firsthand because in all their brand positioning analysis and service that we have made, we have always had CDON as a comparison for us, of course, and we can really see that CDON has a really strong brand when it comes to top of mind, aided awareness and even down to the very crucial consideration part of the branding. Also, I would like to touch upon the rebranding that have been done now. To be honest, as a new upcoming CEO, it's maybe not the dream to get a new branding in the last rebranding from an old CEO who is leaving the company. So I was a little bit worried about this, to be honest. But I must say that this has panned out in the best possible way. I really like what the team has done when it comes to rebranding. And this is perfectly in line with what I see that we should do with the CDON brand and the Fyndiq brand, which is to emphasize the position that they today have and emphasize it even more to position them apart in the future. And this has really laid the groundwork for being able to do that. So really happy with that. I've also been very impressed with the brand merchant, so to say that CDON have been able to acquire and work with both the Swedish with good big brands and also international ones. And this is something that we at Fyndiq always have long for to be able to also get onboard. And then we have a part which is competing with giants. And CDON has been, I mean, it's been quite some big competitors that CDON is still competing with like Media Markt, which now will turn over to Power, but also [indiscernible] and also, of course, Amazon. And being able to grow with that competition is really impressive. And last and least, I would say, but I call it FBC. I don't know what the name really is, but fulfillment by CDON, the third party logistics part of it. It is something that I'm really interested in and curious about to understand more. And this is a part that I strongly believe is crucial for the long term when it comes to delivering a good customer experience, both when it comes to being able to deliver fast and in line with what the customer expects from a top-of-the-line e-commerce player, but also being able to help merchants that have great products with the great prices that aren't really -- don't have a good logistics setup or warehouse setup. And this, I think, is a perfect way of onboarding those types of merchants. And then lastly, I also think that this is a perfect revenue stream. And looking into Amazon, this is big business for them, and I think this is a really big untapped potential in the long term for CDON as well. Next slide, please. So what brings Fyndiq to the table. If I would like to highlight 5 things here as well. I will start with the happy customers that I already touched upon, 4.3, and you see the beautiful dark green color here. We are also live in the Nordics since more than a year ago, and it's still early days for us. But if we look into the satisfaction score there, we can see that they also are high. In Denmark and Finland, we are at 3.9. And in Norway, we are at 4.1. And I would say this is very impressive given that this is early days still. And in the beginning, you, of course, do mistakes. And even though it's so new for us, we are delivering a really high customer satisfaction score. The second part is our take rate, which is plus 25%. For last year, it was exactly 26.1%. This is internationally on a good level, and this is not something that we just raised last year or so. This is something that we have had on pretty high level for a long time. And it's a recipe that really have worked for us. The third part is our in-house built platform that I already talked about, and I think this is something that really can serve in the long run for CDON as well. And then we have the strong and unique bargain position. Even though it's not as strong when it comes to awareness, it's strong within its part of the industry, which is the discount industry and more specifically, the barging position. When we are asking and doing service, we can see if people are talking about striking a bargain online. The #1 answer is Fyndiq and that position is unique and is strong and it's good to have with us. And then lastly, we have the CDTC, China direct-to-consumer. So we have been working with this for a couple of years and really established this as a solid part of our business model. Roughly 20% to 30% of our sales is from Chinese sellers sending directly from China to Swedish consumers. And what they bring to the tables are 2 parts. One part is that they are cutting middleman and can really push down the prices. The second part is also that they are bringing trending products since these type of marketplace merchants are selling at numerous countries and marketplaces and can really fastly find new trending products. And usually, they are fastest on it even at our marketplace, and this is a great value that we believe we can add to the new company as well. And next slide, please. So what do I see index on the horizon really trying to become and becoming the leading marketplace for the Nordics and fending off Amazon. Let's do it. We want to increase the penetration of marketplaces, market share in the Nordics, which is so low when you compare it to pretty much the rest of the world. This must and should be increased to really much higher levels than we are seeing at the moment. And lastly, but not least, to leverage the scale benefits of the marketplace model to deliver reliable growth but with expanding profitability. Next slide, please. So where will I start or where will we start this journey. We will massively increase the supply, both in reach, depth and with quality or I would say, but with quality. That's so important. But the marginal cost of increased supply is so low for a marketplace, and that is something that we really need to utilize. We will strive for enabling growth through focus on performance and efficiency. This goes with everything from marketing to organization, to merchants, to software, to tools we're using, everything needs to have a focus on performance and efficiency. And we will aim to own the Swedish market and continue expanding in all Nordic countries. Next slide, please. We will become one stronger company to own the Nordics. We will be one company, one team, we will have one merchant interface. It will start with 2, but we will go over to one merchant interface. We will continue with 2 consumer brands that will have distinct brand positions in the market, and each and every customer will know exactly why and when they should go to Fyndiq to shop something or go to CDON and shop something, and this is a work we have ahead of us to really emphasize this on both brands. And as Thomas said, we will have 2 offices in Stockholm and Malmö. And this was the last slide from me. And before letting in the questions and answers, I would also like to say that I'm really looking forward to this journey. And I'm looking forward to work with Josephine and Jonathan and in the Board and of course, also Christoffer and Erik and also really looking forward to working closely with Thomas as CFO and Deputy to CEO. And to have an American and Board member in Brad also is something that I'm really looking forward to. And then lastly, but not least, I'm really looking forward to meet everybody in the Malmö team and to get to know that amazing team as well. Thank you for me. And now we open up for the Q&A.

[Operator Instructions] The next question comes from Nicklas Fhärm from SEB.

Thank you for a great presentation and introduction of yourself as well, Fredrik. My first question would actually be, I'm fairly sure someone will ask a little bit about potential synergies, et cetera, on a separate note. But I would like to understand a little bit better the Fyndiq proposition. I would assume that the 25% take rate is depending upon a likely lower average ticket, but it would be great to understand sort of the fundamentals of the KPIs at Fyndiq? And what you were expecting Fyndiq to become in a slightly medium to longer-term perspective? Sort of what was the ambition, where would EBIT margins eventually end up? What share of the market would you be at, et cetera? Could you give us some idea of Fyndiq as a stand-alone entity ahead of this merger or acquisition, please?

Yes. Nicklas, thank you for your questions. If I start with the latter part of your question. I would say, on a high level, what we've seen is that we have had a really good start in the Nordics, and this is a potential that we strongly believe will continue for us and to grow that part of the business. Also, what we've seen is that in the market in general, there is a little bit of a vacuum now after which who has pretty much left the whole market, they came in with a big bang and they left, I don't know, I can't say a fallen pancake as you say, in Swedish. And we see that this gap in the market is something that -- I mean we still have a lot of people who want to find new fun products at low prices. And that's where Fyndiq has this strong value proposition that we have, and we can really deliver on that promise as well to the customers. And what we've been missing the first years of the business, I would say, is to secure the customer happiness. And this is a work that we really have done an amazing turnaround in the last couple of years to have really high customer satisfaction scores. If we move over to a little bit more mid and long term, we are on a profitable path, and we have a really lean and efficient organization. And that has been the plan to continue on that. We can add scale without adding cost to the company. And we have been on the path to doubling the profit for each and every year. And I would say that roughly, that's the path that we are going on. Did that answer your questions, Nicklas?

No, absolutely. That's a great introduction. I -- but let me see if we can get a little bit more detail. So you closed last year with about SEK 0.5 billion in GMV. And if you say that your expectations were to double profits every year. What does that imply in terms of GMV growth, for example, let's say, in the 5-year plan or whatever you had on your desk at the time? Because I agree that sort of the retail market is clearly being separated into a value proposition and perhaps an aspirational proposition, and some guys are clearly stuck in between. So I share your underlying view on the growth potential in your segment of the market. But what were you sort of planning for?

We have been quite solid in the growth. We have a turnaround to being focused more on profit and if we're looking at, I would say, both last year and this year, it's still very, very inconsistent compared to the years before the pandemic. It's still very much up and down. It's really hard for us to see how the macro looks like and as we're sitting now here, we have a very uncertain macro. But if we elevate a little bit higher and look a couple of years ahead, I am totally certain that the place -- for marketplaces in the Nordics have a so much higher potential than we had seen so far. And that both applies on both Fyndiq and CDON and I strongly believe that over time, the growth rate of both companies should exceed the average growth rate of the e-commerce industry, which have before the pandemic grew with about 15% yearly. And this will probably continue for many years, that transition from physical retail into online retail. And on top of that, I believe that the marketplace will even have a higher growth rate.

Yes, very clear. And a follow-up question on the same theme. I mean looking out in the industry towards perhaps more mature markets and players like everything from Adevinta to any marketplace in the U.S. or more mature markets, I guess, I would probably say that EBIT margins are hovering around 20% to 25%. Is there any reason for why Fyndiq would reach that level eventually or for that matter, why would not, I suppose. That's my question.

Short answer, no. I cannot see any reason why we shouldn't be able to reach those levels as well over time, and the really big role model that we have, and I have when it comes to marketplace bol.com in holland. They have managed to become bigger, the whole time than Amazon. And Amazon's biggest market in the whole world is Germany. They have roughly a market share of 40% of the total e-commerce in Germany and just country next to it is Holland. And there, they have the local marketplace, bol.com, which actually is 5x bigger than Amazon in Holland, which is a make through, and this is the role model that I have and as we [indiscernible].

So if you don't mind me, I'm not trying to put the words into your mouth, but if I understand you correctly, you're saying that basically, base case is for the online market to grow at about a 15% CAGR over the coming years in more normalized macro environment as it has been doing for some time previously. And no, there is no particular reason for why you should not be able to benchmark your sort of underlying EBIT margin to those similar competitors in more mature markets. Is that a fair summary?

I would say that's correct. And I would emphasize the normalized market part of it because we're not a normal market as it is now. But hopefully, next year, who knows. But yes, you're correct.

All right. I have tons of questions, but I'll stop for now and let someone else speak.

The next question comes from Adam Wyden from ADW Capital.

A couple of sort of logistical questions and qualitative. We've gotten some feedback from some people going through the materials, and I think they're a little bit confused about the accounting. Obviously, you guys have a 25%, 26% take rate. But your GMV and net sales are quite similar. So it seems as if you're booking all of your GMV as net sales as opposed to just booking the royalty. Do you expect to adopt the CDON effectively net sales methodology where you're just running through your net sales of 3P as opposed to running through all the GMV. I think that sort of building on Nicklas' question because when you think about these businesses, if you have a royalty-based business where you're not touching the goods, even if looking at Allegro, those -- before Allegro sort of went down the path of buying 1P and the margins were more like 50%. So do you expect to sort of adopt that sort of convention where you're basically a franchisor -- you're basically just consolidating franchises royalties, sort of top line take rate and then just building a margin off of the take rate as opposed to the GMV.

Adam, it's Thomas. Yes, we need to align the accounting of the 2 companies going forward, not right now, of course, but we have to do that. And just to clarify a little bit because I think a lot of people are confused as you are saying, the net sales 3P for CDON is actually commission plus value-added services. And that's it. For Fyndiq, net sales is the GMV minus returns and discounts. So they are 2 different things. And then we'll go a little bit further below for gross profit for CDON. That is the net sales minus bank cost and handling fees and COGS for our value-added services only. But for Fyndiq, gross profit is the net sales minus the cost of goods and the cost of goods of Fyndiq is merchant cost, selling fees, selling costs and fixed product cost and return for merchants. So there are 2 different ways of looking at the financials right now. That is also what is disclosed in the press release, and that is confusing. And we know that, and of course, over the time, we need to align the 2 accountings of the companies. But right now, we don't go into the Fyndiq numbers anymore because they are not a public company. But that's what we do the integration of it. But you're totally right, Adam. It is confusing, and we will see where we go for the one that you are saying with the commission level and so on and so forth. That would probably be the one. But let's come back to that when we are in the [ integration ].

Yes. No, I think that will likely be helpful for folks in terms of people understanding the business quality because again, in America, we have a lot of franchise-based businesses. You guys have [ Henman ] and Rightmove in the U.K. But when you sort of roll through all of the GMV through the income statement. I think people assume that you're touching the goods and stuff. And so if you really just reflect the business, then it's a royalty-based business that you're charging commissions and SaaS fees. I think people will have a better understanding of sort of the margin characteristics of the business. I mean not consultant Nicklas because he's a lovely, lovely guy, but like 20% margins for our 3P marketplace business is absolutely abhorrent. I mean that scale of 3P business should have much, much higher margins. And if they don't, it's because they're growing like crazy. It's -- I mean, 3P marketplace business effectively run is like a software business. And a software business that has a 20% EBITDA margin is growing at an exceedingly high clip or it's making a much higher margin, one or the other. So I'm hopeful that over time, people will sort of understand the margin characteristics of these businesses, sort of building on that for a minute, I sort of reread last night, the transcript. And you guys mentioned that you're profitable in January, CDON, and you raised your take rate in 2023 -- on January 23, 2023. So sort of, again, doing back in the envelope math, and I don't expect you guys to give me forward-looking guidance on GMV. But if I just assume similar GMV trends throughout the rest of the year, I think it -- the number -- I'm getting to a sort of a very, very -- of course, the market is extremely turbulent and we can't sort of assume that GMV is going to be the same throughout the end of the year. But if you sort of assume similar GMV trends and sort of take the January sort of wait it through the rest of the year based on sort of similar GMV trends. I mean, CDON is solidly, solidly profitable. I don't know if that's SEK 30 million of EBIT when you take in that -- I mean, the take rate alone is SEK 30 million of EBIT, assuming you can keep it the whole year. I mean, whether that's SEK 30 million, SEK 40 million, SEK 50 million, SEK 20 million, it's solidly profitable. I mean it would be nice for either you or Fredrik or both to sort of talk about sort of the different buckets of value numerically. I know that Fyndiq is a private company, and obviously, Fredrik has had the benefit of reading CDON's public financials and he runs at a 25% take rate, and we've been running at 11%, we don't have ads. I mean it'd be nice to sort of enumerate sort of the buckets of value in terms of where Fredrik thinks he can take rate at CDON, what he can do with SEO and SEM. I know last year, both businesses had GMV down, but I suspect Fredrik's EBIT, I think it's publicly filed actually, you can go and look at it. EBIT -- the previous year was higher than 7. I don't know if it's like SEK 20 million or SEK 30 million. I mean it'd be nice to sort of give people a sense of sort of what the normalized jumping off point of EBITDA could be sort of before incremental GMV increases or decline because I think a big sort of qualitative component of this merger is that there is so much day 1 cost savings and EBITDA savings sort of before you sort of factor in GMV growth or decline. So I'm long for you guys to sort of tackle that a little bit.

Okay. I can start. Of course, we see a potential commission optimization and harmonization between the companies, but it's too early to indicate any levels of that increase, but that should be an increase of course. And without talking about GMV at all, there are, of course, potentials in both companies of additional services like add incomes and things like that, that we've been talking about before for CDON only. That goes for both entities. When it comes to other cost savings or synergies affecting the EBITDA, of course, we see rather big synergies, which is also disclosed in the press release, but we are not going to quantify them here now, but they will definitely be there. So all in all together, yes, there should be an EBITDA increase going forward without any GMV changes. But we are not to quantify that today.

Okay. Well, look, obviously, we have our buckets of value and obviously, we think that without any changes in GMV, we think that there's meaningful EBITDA, if not triple digit. So I know it's still early, but to the extent that you guys can help enumerate that and share that with everyone, I think that will be really helpful. But we ourselves are very excited about the transaction, and I'll let somebody else jump in and ask a question.

The next question comes from Nicklas Fhärm from SEB.

Just coming back with a few quick ones. So the EGM is scheduled for 28th of March. And it's quite obvious that all the major owners, not all, but enough of them are going to vote yes to this transaction. So my question is, when do you think and I hope you will that we can get some pro forma P&Ls and balance sheets, et cetera, for Fyndiq so that we have something to use as a base for a forecast going forward, please?

Thomas again. Yes. That's a very good question, actually. I think we have to go through Q1 as CDON is a listed company and disclose that as normal. We are planning on, of course, after the potential closing in Q2. Then, of course, we are going to see how to consolidate the companies and what that will be. When we will actually disclose that exactly in time I can't tell that right now, to be honest, because we haven't worked that out -- Q2 -- after Q2 as some kind of pro forma statement [indiscernible] together, and we're also aligned the accounting, at least as a pro forma statement might be. But I can't tell that for sure right now.

Okay. Okay. And just a follow-up on Adam's question as well, which is extremely relevant in terms of synergy potentials. And I'm sorry if I missed because the phone line cracked a little bit. But you were saying that you're not going to share any thoughts on synergies today. Is that correct? That's the first part of the question.

[indiscernible] we can speak about what kind of synergies, but not any specific numbers today.

And if I missed it, when would you expect us to be able to read up on sort of the actual numbers? Is that in -- after Q2 as well or...

At least we have to go through Q1 and the deal has to be closed, and we have to come up with those synergies. So I would say in Q2, yes.

It's Josephine here. Maybe I can just add a little bit to that. We are -- we cannot for competition reasons share all the financial information with each other before completion of the deal, and therefore, there is a limitation to what we can actually analyze [indiscernible] completion.

Yes, absolutely understood. That's correct. Absolutely. Anyway, whenever that information will come, it will be very well received, of course. So maybe you can just -- because I think we need to discuss this. Maybe you could just outline broadly speaking, what are, say, the main 3 components of whatever synergy number you will eventually end up with? Where do you think, Fredrik, you guys have probably been discussing for some time, and you have some knowledge of each other. Where do you think it makes a lot of sense to start the new combination? And when should we expect you to be able to announce any synergy estimates of substance.

Okay. I would -- it's Josephine here again. I will take this 1 and then maybe Fredrik can jump in afterwards. Well, I said in the call, both companies have expectations for profitability in 2023 independently of each other and CDON had a positive development in January. And we think it is very, very important right now to make sure that we maintain the positive momentum over each company right now. So over the medium term, we believe that there are significant synergies that we can take out, both on commercial and operational level. But we need to get to know each other a little bit more before we decide exactly at what pace we do that. But I think what is probably the most low-hanging fruit here is on the commercial side where we have the take rate where CDON currently has a much, much lower take rate than Fyndiq and of course, we have slightly different merchant basis and a slightly different model in how we sell, but the businesses are also quite similar. So through harmonizing and optimizing the take rate, we believe that there is a significant potential to increase the take rate. Then in terms of operational synergies, we think there are things we can do both with the tech platform, but also with the organization. And we have been -- we are pretty -- we are very aligned on that we want CDON and Fyndiq to be one team, working with the Fyndiq brand and the CDON brand as one team. So we won't have separate teams working with each brand. And this will mean that we will be able to gear up synergies from the operations as well. And then the third bucket, I would say, is within IT, where we see that there are significant cost synergies on actual IT infrastructure that we estimate to be quite significant, actually.

Okay. Josephine. That's very helpful. That gives us some idea of what may come, and we're certainly looking forward to see sort of the numbers behind everything when that day comes. Okay. I think that's pretty much it for now. Let me possibly come back with the final question. But thanks again for now.

The next question comes from Adam Wyden from ADW Capital.

I just remember what I wanted to ask. So this might be helpful. A big -- this is for Fredrik. A big part of CDON's I think, challenge -- it's had sort of large SEO and SEM. I mean, they use the example we put the whole shopping mall on the site at all times, and you come from a marketing background and you guys have real muscle memory on SEO and SEM, obviously pooling the 2 buying organizations for SEO and SEM and that is in conjunction with sort of the merchant model. Can you talk a little bit about sort of call it, your net sales to sort of contribution margin to EBITDA. I know you have a smaller corporate organization and whatnot, but this is sort of building on what Nicklas was asking in terms of well, how do you double profit every year. You double profit every year off 15% GMV growth because you got this take rate and then you had this marketing cost and sort of maybe it might be helpful to sort of explain to folks sort of your sort of attitude for SEO and SEM and sort of how much of that take rate ends up becoming contribution margin within the original Fyndiq model and sort of how you can build that into CDON.

Okay. Yes, I love your expression, muscle memory on SEO. I remember that. But I'm going to start a little bit more high level. I think when it comes to marketplaces, some people don't really realize the potential that the marketplace has when it comes to SEO and SEM. And why is that? That's because of the enormous broad assortment that the marketplaces have compared to other e-commerce or retail players. We have most -- probably, we have millions of possible hits from searches within mainly the Google sphere. And that's a big difference from a typical retailer or e-tailer for that part. So for a marketplace, that must be part of the DNA of the company. I have been so much into the depth of and in the trenches of both SEM and SEO since day 1 of the company. And this is really a big part of the DNA of Fyndiq and I strongly believe that, that has to be a really, really big part of each and every marketplace in order to succeed to grow and to do it profitable. If you add to that, you need a good CRM and good campaigns on that on top, of course, but to really utilize the enormous supply that marketplaces has you need to focus and have the A game when it comes to SEO and SEM. So that's going to be always a vital part of the marketplace. What that transcripts down to EBITDA and the margins and so on is I think it's a little bit too early and a little bit too detailed for me to throw up here or throw out here, but a big part of increasing the profitability is, of course, the GMV growth, as you said, but also to increase the efficiency of the marketing, that's a relentless work that you have to continue working with each and every day. And each week, you need to do everything 1% better than the last week. And by doing that, you're going to increase the efficiency in the marketing, which is leading to increased profitability. So sorry, Adam, if I'm not into the numbers as you would like, but I hope I gave you something at least around.

I understand it's very early, and you guys don't want to speak on CDON specifically. But let me ask you a separate question, and then I think I'll jump off. One of the sort of core competencies Fyndiq has is that they -- you have this China DTC where you're selling sort of directly on behalf of manufacturers. And everybody else -- one of my agreement is with CDON, which has been forever, is that the merchants, whether it's extra digital or mobile shop, we're sort of buying volume, so to speak, we're selling on behalf of the distributor. Well, by definition, a distributor has retail locations. They have lots of -- and they have to make their own margins. So if you're selling on behalf of Extra Digital and their gross margin is 15%, well, you can't charge them a 25% take rate because the gross margin is 15%. But when you're selling on behalf of the manufacturer, a cell phone case that has a 95% gross margin, well, then you can easily sell them take rate of 26% because their customer acquisition costs, whether it be a retail footprint or doing their own brand marketing or whatnot might likely be more than your 26%, I mean, can you talk a little bit about sort of optimizing merchant selection for DTC, whether it's Thule that sells ski racks or consumer Patagonia, I mean really sort of improving the mix of merchants that go beyond distributors and really just getting sort of that direct-to-manufacturer you're getting a larger gross margin because that to me feels like probably the biggest opportunity at CDON, right? Getting take rate by improving the merchant base and getting higher-quality merchants directly onto the website?

Okay. I mean if you just look on one side of the coin when it comes to take rates, it's fairly easy to say that probably when you can come closer to the source as in the China case -- China Merchants case, you should be able to take higher take rates. The thing is though that the flip side of that is that they have a, which most of the marketplace merchants have, is a cost-based pricing structure. So they just add the value-added services that you need to sell for, let's say, Amazon or CDON for that case, the warehousing that you need to add and so on, that's everything they just put on top on the price. And that ends up on a price for the end consumer. So if you're getting too eager to increase the take rates, you also really need to understand the end of that, which means what is the price for the consumer? And is that price competitive enough? Because if it's not, you will lose volume. So it's this constant gain between volume and margins and take rates. But you need, yes...

You need to be able to sell the product cheaper than they can distribute it themselves, right? If they're going to pass along the distribution costs, if they need retail stores or they need to sell it in a CVS or something like that. It will get passed along. So what you're saying is, ultimately, yes, if you have a larger margin from the manufacturer, it allows you to get larger margin, but you have to be competitive on price the end consumer, right?

Correct. And in order to deliver or to have the leverage towards the merchants that they will push down their margins as much as possible. The only thing rocking that U.S. marketplace can offer is volume. The volume part is the one that really can push down the margins for the merchants that they want or are able to do that. And so the volume part of it is so important to be able to really give high volumes, and that will decrease the margins or the demand for higher margins.

Got it. Got it. Yes. Well, look, obviously, 1,500 -- how many merchants does Fyndiq have roughly I mean I guess mostly China, though, right? A lot of China, but roughly how many merchants Fyndiq has?

It's not mostly China. It's mostly Swedish actually. Yes, it's around roughly below 1,000 merchants. This goes up and down a little bit, but roughly below 1,000 merchants.

Well, so 2,500 combined, that's a very big -- I mean with the total addressable market for merchants is -- or whatever it is, 35,000 in the Nordics, that's a very, very low penetration rate for merchants.

I agree.

[Operator Instructions] The next question comes from Nicklas Fhärm from SEB.

Final question. I don't want to get too detailed, but Fredrik, could you give us some idea of where your marketing spend has been or should be in relation to your GMV, please?

No, I don't think I would like to disclose that. It's big part of our secret use, but it is very [indiscernible].

I suspect that. Okay. And perhaps a final question just because I think some people may sort of look around and find other names in your industry like, for example, Fruugo, which if you read sort of what they try to be, to some extent, could be compared to Fyndiq, I guess, but not really. Would you like to outline a little bit how you think that CDON is the best strategic fit for Fyndiq, Fredrik?

Good question. To be honest, now it's other way around, right? So CDON has acquired Fyndiq, but it was only up to me. I still think that CDON is really a perfect match for Fyndiq. We have single parties when it comes to the culture, organizations and merchant base as well. And I think also though that we have more distinct positions on the market than, for instance, Fruugo and Fyndiq has. I would say that Fruugo and Fyndiq is a little bit more similar to each other, but CDON is not that similar from a customer standpoint. And I think that, that type of integration that we're talking now about when it comes to the merchants and supply can contribute more to a bigger business by having different parts of the addressable market. Does that make sense?

Absolutely. Absolutely, very helpful. I understand the complexity of sort of both timing and questions at this stage. But thank you for a really good call and for taking all of these questions. That's it for me for now.

Thank you, Nicklas, and looking forward to talk more with you in the future.

There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.

Yes. I just want to say I'm very excited about this. I think all the questions have been very relevant and good, and I look forward to be able to -- or we look forward to be able to come back to you with more details on synergies and how this will work out after the completion of the deal. But for now, thank you very much.

Yes. Thank you from my part. Also looking forward to have more of this type of calls with all of you. Thank you.

Thank you.