Elektroimportøren AS (ELIMP) Earnings Call Transcript & Summary

Welcome to Elektroimportøren Q3 official webcast. With us today is Andreas Niss, CEO; and Petter Bjornstad, CFO. The floor is yours, when you are ready.

Thank you very much, Andrea, and welcome. Yes, we'll take you through a short presentation of our results of the third quarter. Starting with an operational update, we managed to grow our business in all months of the quarter. August was the toughest one in terms of growth, but we had growth in August as well. B2B still drives our growth, but we see that B2C is improving in terms of performance versus last year in this quarter than we have seen in the previous quarters. And the same goes for online where in Norway, the decline going from double digits in the first 2 quarters is now down to 0.9% behind last year. So almost on track of last year online sales. It's been very challenging to generate growth in Sweden. We had growth in July. But in August and September, it was tougher. We have moved our central warehouse in Sweden, and we'll come back to that a bit, but there's also a tougher market in Sweden than it seems to be in Norway right now. We're increasing our gross margin percentage in all customer segments, which we're quite happy about. And we continue to have good cost control. Our stores used less money this year than they did in the same quarter last year. We had an opening of store #27 in Drammen in August -- in 10th of August. We have also, during the quarter, conducted an internal training event, which we call Elektroakademiet, which means every employee that works in our stores go through a 2-day training together with our sales team and with our suppliers. We also did an event for our partner customers, our installer customers, which was very successful. And as I said, we have relocated the Swedish warehouse. We did that in September, and I will come back a bit about that. Our new replenishment system, RELEX, is now rolled out across all stores, and we're continuing with the implementation for the central warehouse in Q4. Key financials. Our revenues ended at NOK 398 million, up from NOK 359 million, NOK 360 million last year, which is just about 10% increase in sales. Like-for-like is reduced with 1.4 percentage. Online share of total sales is 17.2%, excluding pickup in store. If we add that, it's about 24%. B2B increased with 9.8% and B2C increased with 11.4%. Of course, then the increase in B2C is mainly driven by the acquisition of Elbutik, which is more or less only B2C. B2C share -- B2B share was 47.8%, which is down from 48.2% last year. Overall gross margin percentage at 37.6%, which is 0.9%, down from 2021. And it's mainly because of the Swedish business having a lower margin percentage than the Norwegian. OpEx to sales ratio is at 26.6%, which is up from 25.3% last year. Our EBITDA then ended at almost NOK 45 million compared to almost NOK 48 million last year and the EBITDA margin of 11.3%. In Sweden, the sales ended at NOK 27.7 million. We've had some disruptions due to the move of the warehouse, which has made -- left us with almost NOK 3 million in sold -- goods that are sold but not delivered yet, which we cannot then put into our cards. The EBITDA ended at NOK 0.5 million. We have relocated the warehouse, implementing a new WMS system, and that has been our main focus over the last 2 months in Elbutik. We have let our Swedish colleagues join us in this product training I was talking about, and the first store opening is going according to plan. I should mention that we are focusing on setting Elbutik up with the structure that we need to be able to roll out stores. We're investing in people, in the stores and in logistics facilities. And I must say that we have not been fully focused on the commercial side of the business in Q3, but we are preparing and putting ourselves in a great place so that we can focus on the commercial part and growth going forward. Electrical vehicle chargers. We have increased our range with one new brand, which is Zaptec, probably well known to a lot of you. Sales grew with 27% up to NOK 50.7 million in the quarter. The supply is good. And as I said, we're expanding the range, and the range is actually what you're looking at. It's Centech, QUDO, Easee and Zaptec that we're now offering to our customers. Namron continues to deliver good levels. The share of business in the third quarter is at 32%, in Norway, that is. In Sweden, it's about 2%. Our target is 5%, the running rate when we go into December this year for Sweden. Increase in B2B sales is driving a gross margin improvement in B2B. We have launched a new Zigbee panel heater, which is we are first in the market. We launched it in September, and we have now a very good lineup for B2B products in Q3 and Q4 -- Q3 and Q1 2023. Moving on to SpotOn. More and more customers happy enough, happy for us, finding their way to this service offering. 9 out of 10 customers that use it say they will recommend it to a friend or a colleague. We made more than 1,000 installations in Q3. And total sales ended at NOK 9.4 million, which is up from NOK 3.9 million last year. We're continuously adding new installation partners and inspectors. I would just like to show you a 30-second video how super easy this service is. You go into spoton.no. You find the job that you would like to have made. In this case, I'd like 6 new downlights in my house. You choose which kind of room you have. You actually choose the downlight, then the number of products. And then you choose the actual product that you like. You can choose from a variety of products. You put it in your basket, and you can get the price. It's NOK 6,710. You choose the point -- the time and date you want it installed, 11:00 on Wednesday. You fill in your name, your e-mail and your mobile number, and there you are. You've just made an order of 6 new downlights that will be mounted in your home on the 9th of November for NOK 6,710, and that's it. Super easy, fully digital, multiple choice of products, fixed price, confirmation of time and appointment. We have, of course, only certified electricians. And if we do not deliver as promised, we will not charge you. And very nice to see that some of our customers now -- we're starting to get a bit more volume and more customers. We see that customers are actually coming back. So we have customers ordering SpotOn installation, bought 2, 3 and 4 times in 2022. And here, you can see the revenue development that we've had since we launched it in Q1 2021. Petter, over to you. Thank you.

Thank you, Andreas. As usual, we have prepared some bridges comparing the last quarter from last year to this year. First, on the revenue side. We had stronger sales online in the third quarter compared to last year than we had in the previous quarters. So it's almost flat year-on-year in this quarter. We had some decline in like-for-like total with 1.4%. In the second quarter, the reduction was 2.4%. And then of course, we have 4 new stores in Norway. We have Kristiansund opened in January, we have Jessheim opened last year, Stavanger and also Drammen 2. They are performing well and around NOK 50 million in sales higher than last year. And we also had some cannibalization effect on the like-for-like stores, especially on Jessheim side that will have some negative effect on the [indiscernible] store. And Drammen 2 will also have some negative effect on the [ Holsiem ] store in Drammen. Elbutik contributed with NOK 28 million in the period. No sales for Elbutik last year, of course. And as Andreas said, some negative effect due to the relocation process and the new WMS system in this quarter with sold not delivered increasing. We also see some effect in the accounts. It's very positive to sell more SpotOn, but that will also trigger that we have increase in sold not delivered to all the order reserves that will increase because as Andreas showed, he chose to have it installed in the 11th of November. And then, of course, we will not be able to recognize this income before it's installed. So as SpotOn increases, we will have some increase in sold not delivered during the period. Gross margin is higher than the last quarter. We have 37.6%. This is the Nordic. Actually, no, we have a little improvement. We have 38.6% in Norway, 38.5% last year. We believe it's a potential to increase the margin in Elbutik going forward, especially by implementing Namron, but also to get more supplier contracts in place. So we believe that there's good potential there. But we were able to increase the margin due to -- of course, we have higher B2C share of sales in the third quarter compared to the second quarter. And going into the fourth quarter, we will also have a very high B2C due to the Black Week campaigns and so on. And also, we had price increases in start of July, but we see some positive effects in the numbers. OpEx, we increased total OpEx from NOK 91 million last year to NOK 105 million this year. The big impact, of course, is the new stores mainly personnel costs. Actually, in the like-for-like physical stores, we are using 1 million less than last year. That's -- I think that's underlining that we have good cost control in the existing store base. Elbutik, of course, was not present last year with NOK 5 million cost. And then we have NOK 1.52 million higher energy costs in the existing store base due to the price increase on electricity. And then we have some other elements like little bit of marketing, distribution. It skewed a little bit and some training events and so on. So that gives us NOK 105 million in total cost. EBITDA, we are reporting NOK 45 million. We had NOK 48 million last year. And new stores are contributing positive. Like-for-like stores are a little bit down. But then, of course, there -- we have also the energy costs in there that are hurting this EBITDA from the stores online, more or less in line and then a little bit higher costs on trading events and marketing. And Elbutik has small positive contribution. So although we're happy -- pretty -- we believe that these are pretty good numbers to present, and we are looking forward to what we can do in the peak season. Andreas, over to you.

Yes. Well, I think you all feel the same. There's quite a big uncertainty in the market going forward. We expect a modest growth in Q4, and that's what we planned for. It's very strong sales of products that can help you lower your energy bill, both as stand-alone products but also installed through SpotOn. We are expanding our range of sustainability solutions and will soon launch our solar energy offering, both the consumers and professionals in Norway and Sweden. And the leasing contract for the new central warehouse that we've been talking about for quite some time and the new head office in Sweden is now signed, and we expect to move in September 2023. That's what we had. So yes, we open up for questions.

There's no questions now, but we'll give maybe a few more seconds and see if something shows up.

Yes.

[Operator Instructions] No question still, but it's possible to be -- to get in touch with ABG after the call, if you want to -- if you have any questions then or contact you directly. I guess.

Absolutely, absolutely. Let me just say thank you for listening.

Thank you.

Thank you so much.

Wait, sorry. While was -- Namron sales down in absolute terms year-on-year, to be honest, I think the share of business of Namron is quite stable. We are not -- well, we are selling a bit Namron in Sweden, but that's not the case. I have no good and direct answer to that question. If it's down, it must be very slightly down, to be honest, because it's not something we have reacted upon. So I'm very sorry about it. I don't have a very good answer to that. We've had quite good supply of Namron products throughout the quarter. So it has nothing to do with that. The slight shift in sales, it must be. No further questions?

Doesn't look like it.

No? Okay then. Thank you very much.

Thank you.

Thank you so much.