elumeo SE (ELB) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. As always, this call will be recorded. Yes, good morning, and welcome to our full year 2023 financial earnings call, together with Wolfgang Boye and Dr. Riad Nourallah. I would like to guide you through the key developments of 2023 and give you a strategic outlook of -- on our core projects of 2024 and the following years. And as we have stated in our corporate news from yesterday, the publication of our consolidated financial statements will take place this afternoon, evening, therefore, the figures in this presentation are preliminary. Let me start on Slide 2 with a summary of key developments. I'm happy to report that despite the very challenging market environment and the low consumer sentiment that we have seen throughout the whole 2023, elumeo was able to keep the revenue on a stable level, outperforming the market, which went down by 15% in '23. So we delivered on our 2023 guidance for revenue with EUR 45.4 million, previous year EUR 45.8 million; and one the gross profit margin at 50%, previous year 54.9%. With our webshop, we finished 2023 above our guidance with a growth of 8.4% to EUR 14.5 million. Our adjusted EBITDA went down from EUR 2.2 million in 2022 to minus EUR 0.4 million. The main reasons for this are increased future investments in online marketing optimization, as I'm going to show you on one of the next slides and investments into our new multi-language platform and the reduced gross profit margin due to inflation pressure. Our operating cash flow improved from minus EUR 1.4 million in '22 to minus EUR 49,000 in '23, thanks to optimized working capital management. And I think, in general, we can say that 2023 was a good example for the strength of our video shopping based business model in challenging times. Of course, we have been hit by the low consumer sentiment, which resulted in a decreased revenue per customer. But we have been able to perform significantly better than the market. And I think one of the main factors here was the unique shopping experience offered by Juwelo, which focuses on emotional video-based product shows and which results in high customer loyalty and a good customer retention. In fact, in 2023, we have been able to grow our active customer base by 9%. And as I will also show you on one of the next slides. So why we are unable to change the general market environment, we focused on our strengths. And moreover, we used this difficult year 2023 to heavily invest into our platforms, laying the basis for returning to profitable growth in 2024. A very important milestone of our #Juwelo100 program was the creation of our new multi-language platform, our lean and tech-driven internationalization 2.0. It will allow us to leverage our content and to start international video shopping shows in the second half of this year. Also with Jooli, we continue to make good progress. The successful launch of Jooli Pay resulted in an increase of the gross merchandise value from INR 27.366 INR to INR 407.122. As for the outlook, in 2024, we are finally seeing a slow but constant recovery in consumer sentiment. With the consumer sentiment value improving since February month by month according to give [Indiscernible]. So income expectations, general economic expectations and the willingness to buy are increasing slowly, but constantly. In the context of this general market recovery, we expect to be able to benefit from this in a very strong way. Therefore, and we project to return to profitable growth with revenue increasing by 4% to 8% and an adjusted EBITDA improving disproportionally to EUR 2 million to EUR 4 million. On this Slide #4, I would like to give you a quick overview on our brands, elumeo, Juwelo and Jooli and how these brands are connected. Legally, elumeo is the listed group company. And we could maybe say that it is the brain behind our general strategy. At elumeo, we believe that emotion is the driving force behind successful e-commerce. To achieve this, we believe in the power of video shopping and see it as a key success factor to generate a next-gen shopping experience. Now our tech-driven platforms lay the basis for this emotional shopping experience. Currently, we run 2 video shopping platforms, Juwelo and Jooli. Juwelo is what we so far often called our core jewelry business with our live show TV program, our webshop and our mobile app. And with Juwelo, as you know, we have created a whole video shopping marketplace that goes beyond the specialized segment of real gemstone jewelry. So let's come to the key developments in 2023 and to our strategic outlook on this year and the following years. As I have said in my introduction, we have a business model that outperforms our competitors and that puts us into a strong position for tech-driven growth. So on this slide, I would like to provide you some details about our strong position. One of the most important strengths is the way we sell our product, emotional video shopping. It makes us unique. It makes us different from the many static webshop retailers. It allows us to transport both facts information about gemstone, jewelry and emotion, creating a special intimacy with our customers that results in a very loyal customer base. Our customers rate us with 4.8 out of 5 stars and very high customer lifetime values. Clearly, higher compared to traditional static webshops. And thanks to this position of strength, we have been able to once again outperform the market. A market that was massively impacted by negative consumer sentiment, inflation pressure and the generally weak willingness to buy. And as a result, the revenue of German multichannel retailer decreased by 18% year-over-year, as you can see on the left and in the chart in the middle, you see that the German online jewelry and watches market went down by 15%. And compared to these double-digit declines, Juwelo instead was able to keep a stable revenue of EUR 45.4 million with adjusted decrease of just 1% share. The chart on the right side, you can also see that our web business was able to grow while our live business recorded a slight decline. And just to give you little outlook for Q1, which we are going to report already in 2 weeks. I'm happy to say that we see a clear improvement and the return to the path of growth also for our Live TV business. On this Chart #9, we can see how Juwelo was able to increase its customer base by 9%. The reason why this does not translate into a proportionately high revenue growth is not surprisingly low consumer sentiment, which resulted in a lower revenue per customer that decreased, as you can see by 12%. If customers would have spent their usual amount of money and the comparison here is the year 2022, which was not an outstanding revenue per customer year at all. This would have increased our revenue by EUR 5 million. So there's a massive potential. We are well positioned to benefit in a significant way once consumer sentiment improves. On Slide #10, you can see the development of revenues of our web shop business quarter-by-quarter. After a decrease of revenue in Q1 2023, we returned to double-digit growth in Q2 and further increased growth rates in Q3 to 16% in Q4 where we reached 18% of revenue growth. Moreover, in Q4, we significantly increased our online marketing budget in order to determine the most cost-efficient and profitable campaigns. And as you can see in the graph, we invested 945,000 into research and development campaigns. It was a huge investment where we have accepted longer marketing amortization periods of 2 to 3 years for these customer cohorts. But we will benefit very much from these optimized campaigns, and we already see this in the first quarter of 2024. It will be very useful for this year and also for upcoming years in terms of profitable growth. In 2024, Juwelo is continuing to make the platform more efficient. And to achieve this target, we are implementing optimizations in 4 main areas. On this slide, I wanted to give you some examples of these optimizations. All numbers you can see on the chart are estimates of the annualized EBIT effect. So the first area is the area of supply chain. And this is mainly a merchandise process automation project. So some processes we currently have such as the reordering of well-performing articles, the data check of articles is still a semi manual process that requires a certain amount of resources, and we will automate this. The second project in this area, for example, is drop shipment with selected products out of India. If you look in the area of logistics, we have identified a significant EBIT potential and optimization of shipping, switching to the so-called Warenpost, which is a way to ship products to customers at clearly lower packaging fees and postage fees while keeping at the same time the package tracking information, which is very relevant for our customers, of course. Also, we will update our return policy. Currently, we are offering free returns to all customers for all price points. Our new return policy will be more restrictive in line with what our competitors do and offer. In the field, in the area of sales, in terms of optimization of our existing German Live TV show and the most significant improvement comes from our live programming -- live scheduling optimization. We will decrease airtime for product with price points below EUR 19 and use this time for more profitable products with price points above EUR 50 and above EUR 100. We know that our customers love special events. So we call this here Juwelo Live from, and we will increase the number of these events and have plans and scheduled live shows from Bangkok. New York City, Tucson and Munich. Munich for example, with the [Indiscernible] that has 40,000 visitors and is one of the biggest fairs in the Gemstone business in the world. Finally, in the area of service, we will automate customer service using an AI bot and automated ordering in our TV shows and also special customer requests will become paid services, for example, jewelry boxes that we give currently for free, special packaging or shipping and also the payment from Nachnahme which is quite cost intensive for us becomes a paid service for our customers. Let's turn to Slide 13. We have already started to speak about this project of internationalization in our Q3 2023 presentation. It's a major project of #Juwelo100, our growth program, and we have heavily invested in the past months into our new multi-language platform. In Q3, I presented you the main strategic areas of development for #Juwelo100, among them was video shopping artificial intelligence, cross-border commerce. And in this project of internationalization 2.0, all of these 3 areas play a significant role. Our new platform will record the German Live show and will then translate and adapt our show into all foreign languages that we define. The platform uses AI translation and lip sync to create very authentic local language shows that we can then distribute internationally with our Gamerobot which is our automated shopping robot. Some of you have already seen some examples for the translation videos at our meetings, for example, at the Eigenkapital forum. And I think it was quite impressive how good these translations were already at this stage back in November. In the past months, the quality of the translations has further improved in a very significant way. So this allows us, from our position of strength to leverage our video shopping content and to create international shopping shows at very low production costs. And as you can see on this slide, there's a huge growth potential that this new multi-language platform is offering us. With our current live TV shows, we are covering only 22% of European households: Germany, Italy, Switzerland and Austria. So as you can see and as you can imagine, the revenue growth potential that is now offered to us is really significant. We will start with translated shows in France, Spain, Netherlands and Belgium, countries where we already have a static webshop and a certain customer base, but where the visibility of our brands Juwelo and the revenue per customer is significantly lower compared to what would be possible with a video shopping program in these countries. And here, you see the progress of implementation of our internationalization 2.0 project. We focused on our Italian markets as a frankly test market as we already have a TV program here. In March and April, we successfully completed technology tests for parallel shows in our system. In May, we will distribute the first AI translated show based on our Gamerobot technology, which will then be implemented into the regular program in Italy in June. And then -- for the second half of 2024, we scheduled the rollout in France, Spain, Netherlands and Belgium and potentially more countries to come. We are really looking forward to this, and we are very excited about this tech-driven internationalization.

Good morning also from my side. I'm going to guide you through the development of our another shopping app, Jooli, which you're all very familiar with. Just to link back to what Florian has just said, the core belief of elumeo is that video shopping creates superior emotional shopping experiences. And when we launched Jooli in the very beginning, we said that we would like to leverage on our knowledge on how to create engaging video shopping experiences in order to launch a video shopping marketplace that allows merchants to present their product in a compelling video shopping format, which we have done. We have since then continuously developed. This platform until the point when in the third quarter of last year, we launched JooliPay. So we introduced a fully integrated checkout procedure into the app in order to really be able to drive customer growth. And since we launched this -- our gross merchandising value has been growing very fast. We have come to -- from 202 orders in October last year to 1,353 orders in March 2024, and our average selling price improved from INR 135 to INR 301. Now clearly, these numbers, if you translate them into real revenue numbers in euros are still fairly low. So in March, we made a total revenue of roughly EUR 5,000, which is not much. You have to take into consideration that our total marketing investment during that time was also fairly low because we only invested EUR 10,000 in marketing investment. And the reason for that is that we are still in the process of optimizing this platform and making sure that this platform runs smoothly and that the traffic that we acquire will become profitable, which is -- which you can see on the next slide. I think this can -- we can skip, which is when customer lifetime value will be higher than customer acquisition cost. We, in our current models foresee this to happen sometime in the year 2024. So sometime in 2024, we hope to be able to -- or we expect to be able to acquire customers at a lower cost than what the customer lifetime value is. And that will then enable elumeo to scale heavily with Jooli and to really improve growth of Jooli because then -- also with Jooli, we can generate growth that is profitable. So each individual invested marketing euro produces more to elumeo as a value than it has cost. In order to do that, we have in 2024, 3 main projects. The first has already been completed, which is we have created a fully new onboarding process that now integrates questions to the new users on their preferences, on their sex, on their age, so that we're able to tailor make the video feed that we display to these customers also according to their preferences. The second and this is foreseen to happen -- in the second quarter of 2024 is that we are going to release our real-time feed version 3.0. So it will be the third version of our real-time feed, which will now integrate both the recent shopping behavior and also present preferences and integrate that into the video feed better than before in order to make sure that we get a very, very tailor-made offering of videos to our customers. And then in Q3 2024 will be the last missing piece in order to have a full video shopping experience to our customers, which is we're going to move to a new e-commerce platform, which is going to enable us to use crucial features such as vouchers and rebate codes in order to improve retargeting and bring customers more frequently into the app. And with these 3 things, we hope that we will be able to achieve positive customer lifetime value. So customer lifetime values above the customer acquisition cost sometime in 2024, which is going to then be the base to really accelerate growth and drive this app to its full potential.

Good morning, everybody. Let's come to the review of 2023. First of all, let us take a look at the revenue and the gross profit. Revenue is nearly stable. So we declined by 1%. I think it's a very good remark and a very good result concerning the market decline of 15%. Gross profit in the times of inflation pressure went down by nearly 10% to EUR 22.7 million. Let's take a look at the margin and adjusted EBITDA and also at the operating cash flow. Adjusted EBITDA went down EUR 2.2 million to minus EUR 0.4 million. What are the points here? The first point is the reduced gross profit margin, which declined in the times of inflation. There are 2 further points. The first point are the marketing optimizations we made especially in the second half and especially in Q4 2023, we made heavy investments in marketing to really find out what are the way to optimize our marketing expenditures. Also, as Florian pointed out, we had investments in our multi-language platform to expand in 2024. Cash flow. It was quite important to manage our cash flow and thanks to optimized working capital management, we heavily improved our cash flow. In 2022, we had an operating cash flow of minus EUR 1.4 million. Right now, it's at minus EUR 94,000. Let's take a look at the selling and administration expenses. So overall, they got reduced by 3.3%. So the first points we made in really optimizing our expenses and reducing our expenses had an impact in 2023. Our main point also like in coherence with our marketing expenditures we made in 2023, we could see the heavy increase in customers. As you can see, especially our web customers, our new web customers increased heavily by 28%. So it was our goal to build up the foundation in 2023 for growth in 2024. When we see that inflation is reducing at interest rates and our macroeconomic environment are decreasing. Let's take a look at the FX from EBIT to adjusted EBITDA. Of course, like our EBIT is at minus EUR 2.9 million, we had the impact of depreciation, which leads to an EBITDA of minus EUR 2 million. We have certain FX, so I will focus on the most important FX. Core sale like currency stock options and also the stock program, but we have made strong investments in research and development in Jooli of EUR 1.6 million. And there were further points. The further point is that we took out the effect of deconsolidation of Juwelo Italia. And the second point are the marketing optimizations we made and as well as the internalization platform, the investments we made there to expand in 2024. Okay. But let me point out that the last 2 points, the marketing optimizations and the internalization platform, the investments we made there, so are not included within the adjusted EBITDA. So we -- so they are separate. Before this leads out to an adjusted EBITDA of minus EUR 0.4 million. Outlook. In 2024, we see revenue growth of 4% to 8%. We want an adjusted EBITDA of EUR 1.5 million to EUR 3.5 million and our gross profit margin should be in the environment of 50% from 49% to 51%.

Yes. Many thanks, Riad. This was the presentation of our full year 2023 figures. I would like now to open the microphone for your questions. And as always, it would be perfect if you could use the function in Zoom of raising your hand, and we will then give the microphone to you. I see your hand, Jorg Frey. Good morning.

I hope you can hear me.

Yes.

Just a bit curious with the microphone setting. Probably, first of all, could you elaborate a bit more on the inflationary effects that you are currently seeing? How much is your -- basically, your cost increasing and you -- and customers just not willing or able to accept higher costs and how is that going to play out in 2024? It looks a bit like you've assumed quite some cost inflation looking at the gross margin guidance. And a follow-up question, I would rather do it one by one, if it's okay for you.

Yes, sure. perfectly. Yes, of course, the main driving factor here was the low consumer sentiment. In the end, the consumer sees an end price, the final price is not -- is not into detail and does not see the gross profit margin behind that. But the limited budget or it's more the psychology of customers who did not want to spend the usual amount for jewelry as in the years before, this year was lower. And this, of course, was because of inflation because of generally higher prices and also because of a certain fear that things will get worse and worse. So this creates this reticence, this consumer reticence. And for us, it was a balance between revenue and margin, and therefore with of course, the effects that we also have increased costs for gold, silver and the product generation, we have to see, okay, how can we -- what's the good balance between passing this on to our customers and making revenue. And that's the consequence of this balance is what you can see in the full year results.