elumeo SE (ELB) Earnings Call Transcript & Summary

Good morning. Welcome to the Half Year Financial Earnings Call of elumeo SE for the first half year of 2021. First, just to be sure, can you hear me?

Yes, we can hear you.

Okay. Perfect. So a very warm welcome to all of you. I would like to guide you through the presentation for the first half year financial results of elumeo SE. I'm here together with my colleagues, Boris Kirn, Riad Nourallah and Florian Spatz, and we will guide you through the presentation that we have prepared. Riad, now, you will have to continue with the slides?

Yes.

In summary, we have had a very successful first half year, also a very successful Q2 in 2021. We continued to grow significantly also in the second quarter of 2021 and even slightly faster than in the first quarter, which led to a total growth of more than 30% for the first half of 2021. Clearly, the first half of 2020 was a little bit more impacted by corona product supply shortages, in particular, the first quarter of 2020. So this has helped us with the growth. But in total, this was a very successful first half year. Also in our profitability, we could make a very substantial step forward, coming to an adjusted EBITDA of EUR 1.8 million in the first half year, which has also helped us to substantially increase our equity to now, again, more than EUR 5.5 million and also a strong cash position of EUR 3.6 million. Customer acquisition and also customer retention mainly were the drivers for this growth. We have been able to continue to scale our online business substantially. We have increased our investments in online customer growth very significantly, which Florian is going to show to you later on. And also, we have been able to raise the share of guest shows in our airtime, which has resulted in more attractive product mixes, premieres and that in a total has led us to be able to grow this fast. Florian will also show you that in the first 2 weeks of June, which is traditionally the so-called birthday week of Juwelo, we have had more successful birthday in the history of our company. As I reported already in the first quarter, we have launched a new functionality in our app we call, Mein Juwelo. This functionality continues to gain customer interest and continues to -- hang on for 1 second. Boris has just informed me that he forgot to start the recording of the call. So we'll start the recording right now. As you know, this is the first time we do this via zoom. This saves the company EUR 2,000 per year, which I think we have many ways to spend this better, but we will have to learn a little bit how to do this because we have no operator anymore, who takes care of all of this. So please excuse the little break. So Mein Juwelo has launched in the first quarter. It continues to attract customers. We are now in a process of ironing out all of the issues that we face with the app. We have chosen a very agile approach. So we chose -- we launched the app or the feature in a beta version, and now kind of working on number of features that need to be done better. I will explain you a little bit more in detail once we come to that point. More importantly, based on this functionality, we've also launched a fully brand new app, which is called jooli. And jooli is a real extension of our business model because jooli is an app that is completely open to external producers and external partners and offers the full range of products, not only jewelry. I will explain to you that a little bit more in detail because this is, to my mind, a very interesting and also very promising approach for the further growth of the company. I will explain to you the outlook a little bit more in detail. We will maintain -- we currently maintain our outlook for the full year 2021. In particular, due to the fact that we do not think that we will be able to continue at a 30% growth rate in the third and the fourth quarter of this year. In particular, fourth quarter of 2020 was a complete lockdown quarter with a complete lockdown Christmas, which has helped obviously our sales very dramatically. And currently, we do not foresee that level of a lockdown in 2021 again. So there is still potential for growth. We will also most likely continue to grow in the fourth quarter of this year, but the dynamics of the growth will probably come down to a little bit more conventional growth rates. But I will explain you that a little bit more in detail when I come to the outlook.

Good morning, also from my side. I would like to guide you now through some of the key developments in our live TV business and in our classic web shops. And on Slide #6, I would like to start with 2 important optimizations we did in our live TV program. So one of the most important KPIs of our live TV business is the profit per show minute, the so-called PPM. For example, if I have a show from 6:00 p.m. to 8:00 p.m., I have a limited amount of minutes, so in this case, 120 minutes. And it's all about getting the best possible profit out of these 120 minutes. And from our experience and from historical data, we know that there are 2 important factors that have a very positive impact on the profit per minute. And this is shows with guests, besides the normal presenter, so what we call guest shows, guest specials and shows with a new -- so fresh product shown for the first time and newly arrived. So in the first half of 2021, knowing this, we increased the total airtime minutes with guest shows by 20%. This was also possible, thanks to our corona measures that allowed to bring guests via Skype from abroad into our live show. Also via our second studio in Berlin, so the corona distances could be kept. And we increased, as you can see, the total airtime minutes with premiers with a fresh stock by 35%. And these 2 measures led to a clear improvement of the profit per minutes, resulting in a total 53% increase of our PPM. On Slide #7, as Wolfgang has already told you, we can see how these 2 measures together really boosted the performance of the Juwelo birthday event in June. So as every year, in June, we celebrate the Juwelo birthday with our customers. This year, it was the 13th birthday of Juwelo, so we decided to do a 13-day event with 13 guests. So really high density of guest specials, every day a new guest, and also a high airtime share of premieres. We launched 2 totally new jewelry collections that were really -- well performed and -- yes. And this altogether generated the highest PPM in the history of the German TV business and therefore, also the highest total gross margin we ever had in June. So here, you can see the different performances in June from 2011 on and -- yes. We clearly reached the record level this year. I would also like to show you on Slide 8, another improvement we did to our broadcasting program that's contributed to the increase of 37% of new TV customers. So most of our TV customers, more than 70%, spent less than EUR 100 in their first purchased article at elumeo. So therefore, articles with a selling price below EUR 100 are highly important for our new customer acquisition. And for 2021, our merchandise team ordered a higher amount of these items with a selling price below EUR 100, allowing the sales team to give a higher airtime share for these articles. And as you can see, the higher airtime share resulted in a clearly increased number of new TV customers from 3,200 to 4,400 in total numbers. Let's take a look at the performance of our classic web shops on Slide #9. So classic web shop means our static web shops, so without the online bidding agent for the live show and without the bidding function for the Juwelo app. So this is not the total online sales, but we really look at the classic web shop sales. I'm really pleased to report that the web shop continue their strong growth in revenue with a plus 45% in gross margin, with a plus 73% compared to the first half year 2020. Based on several improvements we did with the e-commerce team, on one side, in the field of online marketing, we improved the campaigns that will be topping. We improved the retargeting of existing customers, bringing them back into the shop. And we also did a lot of 0 improvements, increasing the organic reach of our web shops for the relevant keywords in the field of jewelry. Also, we did improvements in the curation and presentation of our large product assortment, launching 2 new product categories that are mainly based on the preferences of the customers. And we also put a higher focus on high-value luxury products and thus increased the high value sales. And finally, we did also improvements in the technical aspect of the shop. For example, we improved the payment procedure, always a very critical moment for web shops, and making it easier for customers to change the payment option if they want and increasing the total conversion rate. And together with other optimizations, all these measures clearly contributed to the positive development. And on Slide #10, I would like you -- I would like to show you the successful scaling of our new web customer acquisition in H1 2021, which was mainly possible thanks to the increased online traffic for jewelry due to the COVID-19 crisis that pushed many customers to online alternatives, of course, but also due to several improvements we did in the search engine marketing. We improved our YouTube channel, where we created a platform-specific content videos that we promote and that bring customers to elumeo. We launched new marketing channels, such as Taboola and Pintrest and therefore, expanded our reach. And we're able to clearly -- yes, scale the online marketing increase new customers by 122%. While, at the same time, as you can see in the red line with the marketing cost, keeping the cost per new customer at a stable level. So we didn't increase much the cost for a new customer, it's around EUR 60, you can calculate, but it was possible to really dramatically increase new customers.

As we explained together with the Q1 numbers already, we have launched a new feature in our Juwelo app, which is called Mein Juwelo. It's an automated database, which generates videos out of our live program, and plays these videos to customers based on a curated artificial intelligence-based algorithm. This is a vastly complex project because not only do we have tens of thousands of videos in our database now, but we have also billions of data points that have to be calculated in order to be sure that the customer gets the perfect best recommendation for the videos that we show based on similarity between products, based on past purchasing performance, price points, gemstones, designs, metals, alloys, ring sizes. So there's a huge amount of data that needs to be digested in order to come up with a proper recommendation of a line of videos. As you can see, in the beginning, we were growing dramatically the number of views of videos in April, and that has slowed down a little bit in June as you can see. Currently, we're working on 2 main issues on the front. And the first is we need to improve the performance of the database, which has to compute a large number of data in order to come up with the best possible recommendation. It's already performing very good, but I think it can perform much better, and we do this in a cloud-based set up and we're currently updating our database in order to play our videos faster. And then the second and more important point is that we need to continuously optimize our artificial intelligence. Obviously, one of the most important factors in this artificial intelligence is also the behavior of the viewer in the app. So how do they swipe between products, and which videos are being watched longer, which videos are being watched shorter, which presenters are being liked, which presenters are maybe not being liked so much. And this will take time to make sure that the artificial intelligence comes up with the best possible recommendation. Clearly, with the recommendation based of the -- on the artificial intelligence at the moment, we're not yet at the point where the artificial intelligence comes up with the best possible result for our viewers. And therefore, we will have to continuously work on that. As I said already with the presentation of Mein Juwelo with the Q1 numbers, this is a crucially and very important project for the future of our business, but we also see this in a very long-term perspective. So I think that probably in the second half of 2022, we'll be in a position to say that now kind of this database performs the way we think it should perform just because of the vast number of data points that need to be calculated and the time the artificial intelligence requires in order to be able to determine the best possible video for each individual viewer. But in total, kind of customer feedback has been very good so far. We continue to increase our unique users in the app. So the app continues to grow. And I think once we get the artificial intelligence better than the growth rate of this feature in the app will even increase. Based on the functionality of Mein Juwelo, we have developed a fully new app, which we have spoken about already a number of times, which is called jooli. And jooli is a product open video shopping platform. So essentially, we run jooli together with partners. At the moment, we have, I think, 8 or 9 external channels in the app. And these channels play out videos on their proprietary products and the viewer of the app can also buy these products in the web shop of these new channels. The app has been launched in a beta version only a couple of weeks ago. So we're in the very, very first stages of the app. And also here, there is still a lot of optimization to be done and much more kind of to be ironed out. We see here that we will probably have a pretty stable version of the app going forward towards October, November this year. But the current functionality already shows quite clearly in which direction we are going. Essentially, it's the same as the feature Mein Juwelo in the Juwelo app, but it has a second dimension. So in jooli, you can swipe left and right, which results in you switching products within one channel. And you can swipe up and down. And with swiping up and down, you switch the channels. So here, for example, in the center, we have the channel, Jean & Len, which is a vegan cosmetics channel out of Cologne with their products. And if you swipe up, you come to a new channel, which is BrunchBag. It's a [indiscernible] that has produced a handbag, that's at the same time a cooling bag, or you can switch down to Freimeister Kollektiv, which is a company offering handcrafted spirits and liquors to customers. So you can switch the channels this way. This offers the opportunity for a very new and different social video commerce selling approach. And from the feedback that we have received so far from our partners and also from the first customers, this is extremely promising and can be a very, very promising new field of entertainment and offering for Juwelo as a business. Clearly, the question is always when to start to talk to investors about the project like that. As, at the moment, it's still in the first steps, we have, I think, a 3-digit number of customers in the app because we have started to bring Juwelo customers into this app and very carefully to make sure that we kind of can scale up the database. So even longer than Mein Juwelo, this will probably take into the second half of 2022 until this will be really kind of fully functional and where you can see the final buildup of this system. But at the same time, we are pushing this at the moment with the highest possible level of energy. And I can also say that we have been able to finance all of the investment into this app out of our current cash flow so far. So all of the expenses, developing the app have been paid already. And we have not activated any of the cost. And I think for the time being, we will probably also continue to grow the business based on this approach. So I very warmly welcome all of you as investors to also download jooli, have a look at the products. There is great products in there that are very entertaining to watch. You can have high-end watches, you can have spirits, you can have vegan cosmetics, you can have high-end tech handbags, even hats. So you have a great product assortment. And I think there is something for everybody of you. Also in case you need some presents, also that you can find there. And obviously, we would also be more than happy if you could also give the app a rating so that we can increase the amount of ratings that we have in the app shop and also in the Google Play store.

Good morning. Let's come to the financials. And let's take a look on the overall financials. And as already said so, revenues increased in quarter 2 to quarter 2 2020 by 33%. So that means so in Q2, we had revenues of EUR 12.8 million. Also, gross profit grew in the same amount and the same increase to EUR 7.1 million. Taking an overall picture on adjusted EBITDA, our steering key number, it increased from EUR 0.4 million to EUR 0.8 million. Let's take a look at H1. In H1, we generated an increase in revenue by EUR 30.3 million to EUR 26 million, and it's very good that gross profit increased over proportional by 41% to EUR 14.3 million. Taking a look at adjusted EBITDA, we made a turnaround. So in H1 2020, it was at minus EUR 0.7 million. Right now in H1 2021, it was EUR 1.8 million. Let's take a look at the most important KPIs. And as already said so, the revenues still increased. We had a strong EBITDA and also a strong EBIT. So we generated margin and EBIT of 4.8% in H1. Of course, like in times as corona, it was, for us, very important to have like a strong cash flow. And we generated a positive cash flow from operating activities by EUR 1.6 million. We invested by roughly EUR 0.2 million and had financing activities of roughly also minus EUR 0.2 million. So we generated overall a cash level of EUR 3.6 million by H1.

Okay. As I said in the beginning, I would now like quickly to guide you through our outlook, which is the same outlook as we had in Q1. So we maintain our outlook for the full year. As I explained already in the beginning, there is still a substantial level of uncertainty about how the second half of this year will perform in particular because we will run against a very strong second half year of 2020. In total, we continue to believe that we will grow substantially in 2021 in the low double-digit percentage range, which would mean that is in the region of 20% to 25%. And that is something that we are currently quite confident we will be able to achieve. We continue to see that our gross profit margin will continue to grow slightly faster than our revenues, which is a very fundamental decision for the business to place gross margin growth above revenue growth, and that is something that we have done over the last couple of years in order to be able to foster or to increase our profitability. We will always be able to sacrifice a little bit additional revenue growth for higher margin, which we will continue to do. At the same time, we see -- as we can see that in the first half year already, that adjusted EBITDA will continue to develop nicely and we see that the adjusted EBITDA will be likely in the low- to mid-single-digit million range in 2021. That was the presentation that we have prepared. We will now open the question-and-answer session. And my colleague, Boris Kirn, will explain you how we will manage the question-and-answer session.

[Operator Instructions] So at the moment, we have 2 raised hands, and we will start with the first one. And by doing this now, you should be able to speak, Mr. Bosse.

Congratulations to the great figures. Volker Bosse at Baader Bank. I have 3 questions. I would like to start with the growth in the TV business. Exciting to see that TV growth returns to double-digit growth. Any reasons for that? What have you changed, whether the growth comes for in regards to TV, some more details on that would be helpful. And the second question would be on the provisions of EUR 4.1 million. If I'm not mistaken, I mean congratulations that all lawsuits are cleared out now, and I think you made provisions of EUR 4.1 million, but you did not adjust the provisions to [ share ] yet. Does it mean that we can -- so first of all, it's the EUR 4.1 million, right, in regards to the lawsuit provisions? And can we expect a one-off gain out of the deletion of these provisions going forward? Or how do you think about that? And how do you look at that provisions at this point of time? And the final one, good to see that the growth comes from numbers of units as well as price effect. I would be curious to see how much new customers did you acquire or to give us a total number of number of active customers. As you said, you gained a lot of new customers, but you did not point out absolute figures in that regard. So also there some details would be helpful. Thank you.

Okay. I will start with the second question and then Florian can go into question #1 and question #3. We have maintained the provision that we have in our balance sheet at the moment for any possible effects coming out of the closure of the site in Chantaburi, just because of the fact that we would like to take to a little bit more time to see how the situation continues. As we have said in the past already, this lawsuit that [ SWM Treuhand AG ] has brought forward against elumeo has been a wrongful lawsuit. And as it turned out also during the lawsuit itself, there have been forged documents that were provided throughout the court case and coming up with a lawsuit in the region of EUR 10 million with potentially forged documents is pretty substantial course of action. So we are currently a little bit prudent to immediately resolve this provision just because of the fact that when we see that we have the people that are willing to engage in potentially clearly criminal activity, it would make sense to have a better understanding on how this will continue to evolve. At the same time, as we have said, now over the course of close to 3 years, we do not see any possible -- let's say, any possible outcome in which we will actually have to use this provision. So the real, real risk that we see, that any of potential additional activities against elumeo SE will actually be successful is to our minds and very small. And we also are enormously confident that any potential outcome will always be able to be covered by the provision that we currently have.

Okay. So I will continue with the other 2 questions. Maybe Riad, if we go to Slide #6, and that could be helpful to reply to your first question. So what did we do on TV in order to get the growth. And I focus very much on the PPMs, on the profits, but at the same -- all this applies also to the revenue. So revenue depends a lot on the amount of guest shows. It depends a lot on the amount of premieres on fresh stock. And yes, by optimizing our broadcasting program, so by trying to get most revenue and most profit out of our broadcasting minutes, we were able to increase both total margin and total revenue. As you can see, we had 20% more guest shows -- more guest show minutes. I also included the total amount of minutes from 33,000 minutes to 40,000 minutes. We had more minutes with premiers. And this, together with many other optimizations, of course, resulted in the improved performance. And regarding the question of new customers, maybe Riad, we go to slide -- first Slide #8. So in the column, you can see the total numbers, 3,200 was the number of new customers in H1 2020 and 4,400 was the number of new customers in 2021. These are only TV new customers. And also, we never count customers twice. So if a customer does the first purchase in TV, it will be a TV new customer. If a customer does his first purchase in the web, it will be a web new customer. If he then purchases in TV, it's not a new customer anymore, of course. It's just an existing customer, who is switching the channel. So we are really looking at unique new customers and you can sum them up. And this can be done with the next slide. Slide #9 shows you the total numbers. I don't know -- that's wrong. Next slide, probably Riad. Exactly. Here, we see the numbers -- the total numbers of new customers in the web shop. So 8,300 in H1 2020, which increased to 18,500 in 2021.

Is this the total number of customers or is it just the new customers, which is right? So which means is the total number of active customers?

No, this is new customers. I thought you were asking for new customers.