Hemnet Group AB (publ) (HEM) Earnings Call Transcript & Summary

Welcome to the Hemnet Q4 conference call. Find the presentation on Hemnet's website. [Operator Instructions] Now I will hand the conference over to the speakers: CEO, Cecilia Beck-Friis; CFO, Jens Melin; and CPO, Francesca Cortesi. Please go ahead.

Good morning, and welcome to this teleconference of Hemnet Group's presentation of the year-end report and the fourth quarter results. My name is Cecilia Beck-Friis, and I am the CEO of Hemnet. And to begin, let's jump to Page 2, where I will introduce my colleagues that join me today. So today, I'm happy that I have a special guest, our Chief Product Officer, Francesca Cortesi, who I have invited to present an update on our product plan for this year. The purpose of this is to give you a better understanding of what product areas we will spend time on this coming year in order to secure the future net sales growth of 15% to 20% for Hemnet. And as always, our Interim CFO, Jens as well as IR Manager, Nick, are also participating, but this time only during Q&A. Let's have a look at the agenda on Page 3. Today will be a slightly different agenda and a bit longer than usual, as we aim to give you, not only an update of the year-end numbers, but also an update of our strategy and product plan for 2023. We'll spend less time focusing on the Q4 report. And for those of you who want in more details of the Q4 financials, this can be found in the quarterly report published this morning. We have an hour together, and we will finish off with a Q&A session before ending the call no later than 11 a.m. And with that, let's jump to Page 5 and an overview of Hemnet's 2022. I want to begin the summary by saying that this has been a great year for Hemnet. We exceeded all our financial targets for the full year, and we've made important progress in accelerating the development of new business-to-business products, something that I will talk about later. In terms of seller revenue, our main growth driver, given the market, we have some tailwinds in the first half of the year that turned into headwinds in the second half. Overall, volumes were in line with 2021, and Hemnet grew net sales by 22.1% as more sellers choose to upgrade their listings. I think that this is a testament that Hemnet has a product offering that is attractive to our consumers and our partners regardless of the sake of the property market. And finally, our strong cash generation has enabled us to return a substantial amount of capital through dividends and buybacks during the year. I think that we're in a very good position and with strong product development momentum as we head into this year. Moving on to Page 6. This year's results are above our financial target of 15% to 20% for net sales and 45% to 50% adjusted EBITDA margin. This is a testament that our strategy to constantly invest in products that we anticipate will generate future growth works. We have invested in broadening our product offering, expanding our pricing capacity and improving our packaging, which has paid off. I include this page to remind you that Hemnet is a company with a history of delivering stable and consistent growth of net sales and adjusted EBITDA, and this year is not an exception. I would now like to take some time to talk about the most important product changes during last year. So let's turn to Page 7 and take a look at what we have achieved for our consumers to begin with. Hemnet brand and the preference is really at the core of our strategy and underpins everything we do. We have a clear goal towards our consumers, and that is to broaden our offering to empower consumers through the property journey, not only when selling and buying. And by increasing the value Hemnet provides our consumers, we build loyalty, preference and brand strength, which can in turn be used to further develop our business offering to property sellers and our business partners. For example, this year, we launched My Home, a service where users can register their properties on Hemnet to receive the valuation based on the most current sales data. My Home can then act as an important funnel to capture those consumers that are preparing for a sale, enabling us to connect them with relevant real estate agents. During last year, we made great progress in connecting real estate agents with sellers by launching the agents and office search list. This product makes it easier for prospective sellers to find and contact a potential agent for their sale. On the other side of this new feature, we are monetizing real estate agents by enabling them to get more exposure to potential sellers in our agent search list as well as sold price list. Finally, we have also improved search recommendations to drive user loyalties through relevant content and make simply and more rewarding for consumers to create an account. All of these initiatives are examples of how we improve the property journey for our users through a more efficient, transparent and mobile housing market. Let's turn to next page, Page 8 and our business-to-business update. Last year, we said that we wanted to accelerate the focus on business-to-business by developing new products and broadening our offering beyond display advertising. We want to do this because the real estate agent advertising market is worth up to SEK 1 billion, a large portion of which is still spent off-line. We want to create products for agents that can meet their needs in a more effective way than other online and off-line marketing used today in order to capture more of this spend. This year, we made important strides in our products that connect sellers and real estate agents by building a brand-new section on Hemnet where consumers can search for real estate agents and offices as just mentioned. And I'm very happy to say that our agent search function is now amongst the largest in Sweden with over 70,000 weekly visits. During the year, we improved the search function by adding a short bio to agent profile pages and by adding an office search. We had very positive response from our consumers who we were -- who previously were missing the ability to find real estate agents on Hemnet. The first trial -- our first trial, which monetizes the agent search is, Syns mer for saljare, something I've talked about previously. This is an effective way for participating agents to stand out in the search result list, and we can see that agents with the product gets more traffic to their profiles than those without. We'll continue working with awareness and campaigns to increase the uptake of this product. With regards to Hemnet business, 90% of listings on Hemnet come from an office with the Hamlet business, it's another testament that the product works and delivers value to our business partners. So with this, I'm overall very happy to see that Hemnet now has established an ecosystem for brokers and sellers to find each other, and we look forward to continuing, improving and monetizing this going forward. Let's turn to Page 9 to talk about seller revenue and ARPL. Seller revenue for the year is up 33%, driven by a 33% increase in ARPL since the listing volumes were flat compared to last year. The graph on the left shows annual ARPL, while the graph on the right shows ARPL contribution by quarter from Plus and Premium. And as you can see, both have steadily increased as a result of product and pricing. More sellers are willing to update their listings as they see a clear benefit in doing so. We can see that listings with Plus and Premium sell faster and with a higher price premium than our base product. We often get questions about conversion to our Plus and Premium products, but I would argue that conversion is not our end game here. Instead, the overall ARPL, the combination of product and price is the main engine that will drive us to the 15% to 20% net sales growth target that we have defined. The high conversion is not always beneficial as it may reduce the impact of the product. Similarly, a high conversion may indicate that products are not accurately priced. However, what we have seen this year and especially towards the end of the year is that, when the market becomes more challenging, our VAS product become more attractive for sellers, which is a strong testament to their effect. The strong demand for Premium has in turn led to us being able to better drive pricing as demand remained high following the product changes were made to its earlier -- earlier this year. So we focus on ARPL when thinking about the success of the growth of seller products, and I would encourage you to do the same. Turning now to Page 10 to elaborate more on the work in pricing. Our pricing strategy rests on 2 key assumptions. Firstly, we believe that the price that consumers pay for Hemnet today does not reflect the value that Hemnet provides to the housing transaction. Secondly, we believe that every property and property seller has a correct price that they are willing to pay to get the most out of their housing transaction. Our pricing strategy is to find the right price for each listing and relies on further deepening the segmentation that we already started doing. As this illustration shows, we are expanding the available price points at Hemnet. And in doing so, we will significantly push the highest price point for every expensive properties and a very competitive market where we add high value. By doing this, we will get more personalized prices and become more successful in optimizing revenue for each listing as well as reducing the risk for pricing during a blocker to publish or listing for less competitive and inexpensive properties, where willingness to pay for advertising, the listing is lower. I want to highlight that the ranges shown here are illustrative and that we look to work with pricing and product to make sure that the value is always probably reflected in the price that the consumer pays for our products. Let's wrap up this section with some words on the property market that we've seen in 2022, starting with Page 11. This graph shows the 12-month moving sum of published properties on Hemnet since 2015. As you can see, this figure is stable over time with a 1% average growth rate year-on-year. And I want to remind you about some of the reasons why the Swedish market is stable. Firstly, we have a dysfunctional rental market, meaning that renting is not an alternative to buying. Secondly, the demand is driven to buy to live as opposed to buy to let, meaning that almost all housing transactions happen due to a change in life circumstances, such as the need for larger or smaller property. Finally, we have a highly efficient mobile housing market, much thanks to the fact that we have a professional real estate agent industry that intermediate over 90% of all transactions in Sweden. This, coupled with a relatively low cost transaction means that there are a few barriers preventing sellers from selling and buying. Although we have seen a volume drop of 10% in Q4 and the start of 2023 has also been challenging for listing volumes. We believe that despite the natural quarterly fluctuations that occur throughout the year, over time, the Swedish housing market is among the most stable globally. I now want to provide you with some commentary on the current state of the market turning to next page, Page 12. Here, we are showing 2 services conducted by Hemnet at the end of last year. On the left, you can see that 2/3 of all buyers and sellers indicate that they will eventually have to transact regardless of the sales of the market. This underscores the organic demand for housing as sellers can delay a sale for some time, but eventually, the change in their circumstance cannot wait, and they will have to transact. It is also important to keep in mind that since transactions occurred average 8 years apart, most seller will still make a nice profit from their sales, even the market is weaker now than a year ago. On the right, we have asked agents about their price expectations for the year. Here, 72% expects that the market will turn within the year. Of course, the short-term visibility is low, given the state of the current market, but I think this is to grab our further examples of the long-term stability of the Swedish housing market. On Page 13, we have summarized how the market has evolved in past times of the uncertainty, and I want to very quickly walk you through this analysis. Again, this is based on what we've seen in the past. It's not the blueprint for the future. And I will not read through this slide. I leave that for you to do on your own later on. But it is important to keep in mind that the housing market is similar to the economic market or the stock market also behaves secretly. And we are now seeing some of these effects in our data for listing volumes and property prices. Historically, at the times of lower listing volumes and uncertainty, we have some accelerated listing volumes and price increases as the organic demand from buying and selling housing catches up to the low supply. That is a very brief summary of the dynamic of the Swedish housing market cycle, and I will now finish talking about the year with a slide on our capital return program turning to Page 14. Dividend and buyback combined, we will return approximately SEK 506 million back to our shareholders ahead of the next AGM in April. The majority of this had already been returned through a dividend of SEK 56 million and through buyback totaling SEK 330 million to date. We have, at our disposal, SEK 100 million left to use in the buyback program, which is expected to finish ahead of the next AGM when the program will also be reviewed. For the AGM, the Board of Hemnet proposes a dividend of SEK 1 per share, up 82% from SEK 0.55 per share a year ago and in line with our dividend policy. With that, I conclude the year-end report. I will now turn to Page 16 to provide you with some details on the quarterly results for Q4. This will be a somewhat shorter quarterly overview than what we have done in the past to allow for Francesca to tell you more about the product plan for this year. And I want to remind you that historically, Q4 has always been the weakest quarter for Hemnet due to the fact that listing volumes tend to decrease during the holiday period. Similarly, Q1 is typically the second weakest quarter with Q2 and Q3 being the most -- when the most listings are published. So with regards to the quarter, net sales grew 13.4% to SEK 201 million. Looking at the drivers behind this, you can see that we continue to enjoy strong demand for our products from property sellers with seller revenue growing 21% despite lower listing volumes. We also saw continued demand for our business-to-business products from real estate agents with net sales up 9%. I believe that the growth in net sales from agents is very encouraging, especially given the state of the property market as it shows that our projects are in demand and that our new product development initiatives during the last year had yielded great results. On the contrary then, the market challenges for property developers and advertisers have resulted in a slight decrease in net sales for Q4. Again, I want to highlight that Q4 is our weakest financial quarter due to seasonality. So an absolute decrease in net sales is only about SEK 3 million for property developers and advertisers. We attribute this decrease partly to both groups having to review the marketing investments in times of increased uncertainty and partly to lower interest and overall lower interest in the property market, which is reflected in lower traffic to Hemnet and lower display inventory. We continue to see demand for our products from property developers and Francesca will tell you about our product development plans for this year that are aimed specifically towards this customer group. Let's take a little look at the ARPL growth on Page 17. ARPL grew 34% during Q4, and I would like to point to 2 things. Firstly, we see a clear interest in demand from sellers to buy our VAS products. We have been very successful -- we've seen very successful results from the upgrades with the Premium in the summer, where we added a free renewal to the product, leading to an increased uptake during the quarter. Secondly, we continue to execute on our pricing strategy by adding more personalized price points, which I talked about earlier in this presentation. Through a combination of product improvement, awareness, agent recommendations and pricing, we will continue to execute on our strategy to increase ARPL over time. Now, let's take a look at listing volumes on Page 18. On the chart to the left, you will see that we've had some tailwinds in listing volumes during the start of the year. And after the summer, the market shifted to a more cautious and uncertain market, leading to headwinds from a 10% decrease in listings during Q4. Again, I want to note that the fourth quarter is the weakest quarter in terms of listing volumes. And in absolute terms, the decline resulted in annual listing volumes to be in line with last year, as you can see to the right. So we will, of course, track listing volumes closely. But in summary, I think 2022 was a strong year in terms of listing volumes, especially given how strong 2021 has been. Let's spend some time on financials and take a look at the EBITDA bridge on Page 19. We had lower EBITDA growth in Q4 than we are used to. Apart from the seasonality, the reasons behind the lower EBITDA are mainly 2 things: lower listing volumes, 10% decrease compared to last year, and continued investments in product development and future growth in line with previous communication. During the quarter, we welcomed 11 new colleagues, and we also needed to fill some open positions with consultants. We continue to see great opportunities ahead and still believe in investing for the future. But given the current market, we decided during Q4 to review our cost and timing our investment going forward. So let's turn to Page 20 to have a look at that. I want to say that the results in Q4 is not an effect of us overspending, not on market and timing. And -- but as many other responsible companies are doing at the moment, we have spent time reviewing our investments going forward during the quarter and have decided also to do some -- postponing some of our investments until we know where the market is going. This means that we are putting our external marketing and media investments on hold. We are postponing some recruitments. And here, I want to also emphasize that during the fall, we have recruited new colleagues that will also join during Q1. So 7 to 8 colleagues will join during this quarter. But after that, we are -- have a more cautious approach. We are also minimizing the use of consultants and postponing nonessential investments using a cost-effective approach, which we, of course, always do, but we are extra mindful during this time. Thus, you can expect us to continue growing the organization but at a significantly slower rate than last year. Let's now take a look at some other updates from the quarter by turning to Page 21. We strive to be among the best employer in Sweden and to attract and retain talent is key for our future growth. Therefore, I'm very proud that at the end of last year, we were awarded the Allbright prize given to Swedish public companies with a clear agenda for diversity, inclusion and gender equality. We were also recognized by Universum as one of Sweden's best employers coming in third place amongst middle-sized companies. This, too, is a testament of success in our employee, branding and talent investments. On a similar note, I want to spend a minute talking about the Science Based Target initiative on Page 22. In January 2023, Hemnet targets -- HEM targets to reduce carbon dioxide emissions by 42% by 2030, was approved by the Science Based Target initiative. This means that Hemnet now has a formal commitment to this important course to reduce emissions within Scope 1 and 2. And down the line, we also aim to review and set the target for reducing emissions in Scope 3. And now to briefly introduce 2 new colleagues that are joining Hemnet this year on Page 23. I'm very happy to present Anders Nilsson as our proposed Chair at the AGM in April and to welcome another Anders, Anders Ornulf, our new CFO, who joins in the beginning of June. Both of them will contribute to our continued journey with a respective experience and the relevant knowledge from other strong consumer brands. With that, I'm leaving Q4 and moving into the last part of this presentation, the strategy update and product plan for 2023, starting on Page 25. Hemnet has an outstanding position and brand. Approximately 90% of all sold properties in Sweden have been listed on Hemnet sometime during the sale process. Swedish consumers are familiar with the Hemnet brand, one of the strongest and most well-known brands in the country, and Hemnet is often referred to as building the housing market. Swede spend on average half an hour in Hemnet each month, more than any other property portal. This speaks, not only to our reach as a platform, but also to the stickiness of our users. With 19x more clicks than our closer competitor, Hemnet delivers unmatched value to sellers, real estate agents and other business partners. With this position comes, of course, great responsibility in how we develop and grow. We want to continue being the #1 choice and keeping our trustworthiness towards both our users and customers. And from this strong position and with this [ fairly ] strong financial, we also have great opportunities in growing our footprint and business over time. Moving on to Page 26 and our long-term vision for the company. Our vision is to be the key to your property journey. We want to increase efficiency, transparency and mobility in the housing market. To further clarify the vision, we've also added by becoming the destination for all things related to home. And what does happen? I mean, there are many steps in the property journey where we believe Hemnet has a role to fill. Over time, we are seeing a movement from being a listed platform to becoming more and more of a property platform, where you, as a user, can find more reasons to connect and engage with Hemnet throughout the property journey and for our customers and partners to use Hemnet in more ways to grow their business. This is, of course, a long-term vision, and we believe that [ this ] is achieved through a step-by-step approach and in executing wisely, as outlined on Page 27. Our journey started as an industry initiative, and we have in the last years focused on enhancing and commercializing the core business, the listing portal. This will continue that -- this will continue being our main focus in the coming years as well as setting sales for future growth beyond buy and sell. And Francesca will tell you more about our work with this in 2023 shortly. Over the longer term, we want to become the destination for all things related to homes. A key initiative relating to this goal is My Home, serving as a personalized [ way ] for our users to interact at Hemnet today and in the future. I will finish off my part of this section with a reminder of our 3 pillar strategy on Page 28. So we're moving now from the long-term vision and our ambition over time to our next 3 years. And as you know, we have a 3 pillar strategy and that we have also reviewed and clarified a bit. The next coming 3 years, we want to engage the consumers, we want to grow sellers, and we want to transform business-to-business. And to give some more color on this, Francesca, I hand it over to you.

Thank you so much, Cecilia, and Hi, everyone. I'm Francesca Cortesi, CPO at Hemnet. And I'm really excited to join you today to give you more details on how in 2023, we will execute on our 3 pillar strategy. What I will walk you through is our execution plan for this year and the value that we will create for consumer and partners. I will start you by giving an overview of our product road map that we can start seeing on Slide 29. Our product road map is based on our 3 strategic pillars and shows the areas that we will work on to engage consumer, grow seller and transform B2B. I will now give you an overview of the road map and then dig deeper in the single area in the following slides. Let's start to the left of this slide with consumer engagement. Consumer engagement is key for developing our #1 position and create consumer value. In 2023, we will focus on strengthening our network effect by working with content and with expanding our position by creating a more personalized Hemnet experience. At the center of the page, we see property sellers. In 2023, we will grow the seller business by continuing to develop our existing product portfolio. We still see tremendous potential in improving this product, and we will work with repackaging current feature with segmented pricing as well as maintaining our close relationship with agents. The third area of focus is B2B growth that you see on the right. In 2022, we have invested in creating a solid foundation from which we will build our B2B business in 2023. We have a completely new section on Hemnet to search for an agent, and we also have built a foundation of our listing offering for new construction. 2023 will be the year when we build forward and capitalize on both of these areas. Let me give you now a more in-depth detail on our plans, and let's start with see how we will engage consumer on Slide 30. Our business and our position builds on our ability to engage consumer and make sure that they come to Hemnet first and that they repeatedly choose us as the main partner in their housing journey. This is the way that we deliver the most efficient platform to buy and sell properties in Sweden with 19x more clicks on a listing than the second player in the market. To reinforce this #1 position, in 2023, we will work with content and personalization. Content is the fuel of our network effect. To secure the content on our platform, we will work on initiatives that focus on having the listing as soon as possible and throughout the entire life cycle. One concrete thing that we're working on is removing our 23 days rule, which allows listing to be at Hemnet at all times. This will increase the amount of listing on the platform, create an opportunity for engagement with recommendations, and a possibility for further listing monetization. And also makes it rest relevant as a consumer to turn to other platform as all the relevant content will be present at Hemnet at all times. Another concrete step aimed at getting listing early is testing different payment timing. We will offer seller to pay when the listing is removed from Hemnet and with that, create extra flexibility and lower the barrier for listing. One last thing that I want to mention about content is the work that we are doing with recommendations. By working on improving our recommendation, we will be able to help consumer broaden their search for the next home. We will contribute to the mobility of the market as well as help real estate agent in their business by generating more potential buyers. Moving from content, we will now look at new growth possibilities to the right side of this slide. And I want to give you more detail on the work that we are doing with My Hemnet. My Hemnet is a new platform for logged in users. We have been building this throughout last year, and we will keep on investing on. With My Hemnet, we aim to collect unique data about our consumer, which we can create a personalized experience, but also open up possibility for deeper segmentation and targeting, which will be the -- which will unlock the future development of our B2B products. One concrete step that we have taken in this direction is the launch of My Home that Cecilia mentioned. With My Home, homeowners can register their property and get a value indication. They can follow their local market as well as having an overview of the active real estate agents in their area. What we are creating is a platform from homeowners to make informed decisions about their property. This will also contribute to mobility and create new business opportunities for real estate agents by helping them find more potential sellers. We have launched My Home in a beta version in 2022, and we're gradually rolling it out for the entire Sweden, and we see a positive trend in registrations. With My Home, we are taking a concrete step in the direction of broadening our position beyond this buy and sell moment. And we're opening up possibility of using Hemnet during the entire property journey, taking a step closer to become the destination of all things related to home as Cecilia said. From consumer engagement, we will now take a look at the plan to grow seller revenues and look at Slide 31. We have, over the last years, created a stable product portfolio for sellers that deliver clear value and keeps on growing. The ultimate proof is that, it's the growing share of seller that choose to upgrade the listing and that the value-added services we have are a significant driver for our ARPL growth. We believe in the product we have created. And we also believe that there is more value to be captured from this current product portfolio. This is why, in 2023, we will work further with the portfolio that we have. We will focus on optimizing and improving our feature bundling as well as continue with the journey with segmented pricing. This is the combination of product and pricing that we have successfully worked with during 2022. Additionally, we will also set an extra focus on agent recommendation as an ARPL driver. And this is the part that I want to give you a little bit more details on. One in 3 listings get a recommendation from an agent, and two, increased sellers follow the agent's recommendation when they get one. This really shows how the agents have an important role in the property sale as well as the opportunity that we have in front of us in 2023 to increase the number of sellers that upgrade. We will work with getting more agents to recommend by educating them on the extra value that our products provide. For example, we're making sure that agents have all the material and knowledge they need in order to talk about Hemnet product. We're doing this by meeting agents in various ways, educating them about our offering and improving the way we prepare our product material. We will also work on increasing awareness on the benefit of the commission agreement, which allows agent's offices to get a commission for every value-added services they sell. We will now go over to B2B business. This is an area we have accelerated product development during 2022. I'll walk you through how we plan to capitalize on that investment. Let's start with our most important partners, real estate agents and looking at Slide 32. Hemnet's focus area for growing the agent business in 2023 is helping agents finding sellers. One in 4 consumers expect to find an agent on Hemnet. And it's to meet this expectation as well as to create possibility for agents and offices to gain visibility to a highly relevant office -- audience that we, in 2022, have developed a new agent and office search. As you see on the right part of this slide, the agent search is composed of 3 brand new pages on Hemnet. We have a search page for both agents and offices. We have an agent profile page and an office profile page. Our goal is that by looking at these 3 pages combined, consumers will get the information they need to make an informed decision on their next agents, and agents will get new possibilities for marketing themselves in front of a highly relevant audience. We have launched this section on Hemnet just a few months ago, yet we already have clear result that both consumer and customer appreciate this new product. Our agent search is already one of the top [ places ] in Sweden to look for an agent, and it's growing, which really show the strength of our platform. And our first commercial product in this area, Syns mer for saljare, is getting interest from customers and having an uptick, indicating that there is an interest and a high potential in building further and helping agents find the sellers. In 2023, we will continue to develop these 3 pages. We will add to the value they deliver. We will work on awareness, and we will introduce new products in this [ floor ] to drive agent growth. And broadening our commercial products is also what we will do for property developers, which we will go through on Slide 33. Property developers are an important partner to us. They are key for having listing content and they're also key for growing our B2B business. We see a lot of potential in creating products that better adapt both to the need of property developers and to the longer sales cycles of new construction. And our journey in this direction has just begun. During 2022, we have worked on laying the foundation of a solid listing product portfolio. And let me give you a little bit more detail on this offering by looking at the left side of this slide. We have projects, which allow access to Hemnet consumers throughout the sales cycle. They are paid through a monthly subscription and have baked in an on how to renewal of visibility in the result list. This is to reach new buyers throughout the 2, 3 years life cycle when the project is active. We then have project units that give visibility to a single property that is part of a project, and they are both unit by unit. And we have an all-inclusive package for property developers that list many products and units at Hemnet. This includes an unlimited number of projects and units. This package is optimized for bigger property developers and allows them to foresee the yearly cost, it lowers their administration burden and also unlock at a discount. This portfolio is the foundation on which we have built. And in 2023, what we will do is introducing value-added services for property developers. Even for our value-added services, we are thinking on how we can cater for specific needs of property developers. To help property developers sell the properties that they have already invested in, we are looking into creating exposure products for projects and units. This will help them stand out and succeed with the sales. On the other hand, to have property developers understand the interest before they start building, we are looking into different solutions to capture the unique demand assets that we have. We now went through all the in-depth slides, and we are approaching the end of this presentation and the Q&A session. But before I leave the word to Cecilia to walk you through the financial targets, I will round up by [indiscernible] creation plan for 2023 in Slide [ 34 ]. To summarize the concrete initiatives that we will work on in 2023. We will engage consumers and reinforce our #1 position by strengthening our network effect and expanding the user experience. Core areas here are working with content and My Hemnet. We will grow seller and increase seller revenues by creating growth from our current portfolio. This is done by optimizing product and pricing as well as getting more agents to recommend. And we will transform our B2B business, grow and differentiate our revenues by building and capitalizing our investment. Areas we will work on are agents and offices search as well as value-added services for property developers. With this, I leave the word back to Cecilia, then we'll wrap up this presentation with financial targets on Slide 35.

Thank you so much, Francesca, for that [ good start ] into our product plan for this year. And now I will finish off by giving you some color on the update of our financial targets. Turning to Page 36. Here are the targets that we've been working towards since the IPO. And as you may have seen in the press release this morning, we have reiterated the profitability target also for 2023 despite the current market conditions. However, we see good opportunities for margin expansion going forward. Turning to Page 37. Turning to the next slide, please. Thank you. Looking ahead and in a more normalized market, we believe that the investments we are making, combined with the operating leverage of our business creates good opportunities for margin expansion going forward. And we, therefore, introduced a new long-term profitability target of an adjusted EBITDA margin exceeding 55%. The financial target for growth, leverage and dividend are reiterated. So with that, I want to thank you for your attention in this longer and extended presentation of our annual accounts, the quarterly reports and the product plan for the year. And we will now open up for questions. Turning to Q&A.

[Operator Instructions] The next question comes from Giles Thorne from Jefferies.

My first question is on B2B revenue in 2023. We've seen more for sellers. I won't try and pronounce it in Swedish. I'm going to say in English. We've seen more for sellers products with a free trial and came off free trial from beginning of January. And the broker tip product, again, giving it an English name, you introduced a [ Syns mer for saljare ] for certain regions also from the 1st of January. So there's 2 clear levers of incremental monetization. It'd be interesting to know what their potential impact could be on B2B revenue growth in 2023? My second question is on seller monetization and agent compensation. You've just spoken about getting agents to be a stronger source of recommendations and upgrades. If you're throwing more compensation towards agents in absolute Swedish krona terms, is there scope to bring down the percentage of revenue that you're paying away? And then finally, on the Horizon 2 and Horizon 3 slide, it feels like you're joining others in the sector around shifting monetization away from a listing to be more of a networked marketplace. Is that a vision you share? Is that a fair characterization of what monetization of traffic will look like in Horizon 2 and 3?

Okay. Thank you for your questions. I'll start off by answering them. And then if my colleagues want to add, they can jump in. So the first question was on the business-to-business revenue for this year. I mean we don't provide any guidance on the revenue. What we've said is that we want to grow the business 15% to 20%. And we have clearly laid the foundation last year on the business-to-business, both for real estate agents and property developers. And we have a clear plan. As you said, we have already a few products, and we do also intend to launch new products, more products, and we see great momentum. I think the one thing maybe to take with you is also depending a bit on how the market evolves during the year. But as we said, we reiterate our targets for this year, and that's the only guidance or yes, yes, the only guidance that we give. On the second question, when you talk about recommendations, I would like to say that there are several ways of encouraging and creating compensation or -- to agents. One is that absolutely the compensation model in absolute terms when it comes to monetary terms, but there are also other things. I think the main thing that we should not forget is actually the value that the product itself actually delivers, meaning that it sells faster at a higher price. So that's the one thing. There are also other aspects in the product that also adds value and that we can also continue working with. I think over time, I mean, we are working with all these different elements to this. Maybe here, Francesca, you want to add?

Yes, I can add like a concrete example of this how to get more agents to recommend. One thing that we have done during the year, for example, is including free republishing on Premium. And we know that in really more this market where it's a bit more challenging, that is an extra value for the agents, it's a security, and that will be a way for them also to recommend that product because there's something in it for them that is not necessarily a monetary compensation from our side. Just to add the flavor of what Cecilia was saying that it's not necessarily all connected with monetary compensation.

And the third question you had on the kind of the next phase of the business. No, we're not really seeing that we're shifting well from the listing and the core. I would rather say that the core is kind of the builds of everything. And I think for the foreseeable future, and as you can see in the strategy, we put a lot of entities in continuing enhancing and commercializing the core because we strongly believe that we have more to do within that area. But over time, creating more reasons for the consumers and users to connect with Hemnet and also creating more opportunities to -- create opportunities for our business partners is definitely something that we are also setting some sense for. But I would not put it like that we're shifting. We're still at the business from that kind of expanding slowly but steady.

The next question comes from Daniel Ovin from Nordea.

Yes, Cecilia, Jens, and Francesca. The first question is on housing transactions for 2023. And I just have a few thoughts here after your update on how sellers see this that as much as 2/3 say that they would need to sell within the 6 months or 12 months or something like that? And then given that housing transaction actually fell by 16% during 2022, if you look at [indiscernible]. Does that mean in your view that it's very likely that we're going to see a quite big growth here sometimes during 2023 in the number of housing transaction that could potentially, I guess, also mean listing growth for you, how do you think around that? That's the first question.

I mean, this is -- it's a million-dollar question, right, in how things will evolve. I think that we -- what we rely on is historical data and how things have played out historically. And we have seen volumes and transaction, I would say, being very stable over a long period of time with absolutely ups and downs in the normal cycle, but overall. And I think that the 2 -- I mean, as you said, 2/3, I think that it comes back to the Swedish property market that underneath, it's a very -- it is -- there is a strong demand that's there, and you can kind of put it in a vacuum for some time, but then after a while, that will probably -- yes, that will shift. If that means that we will see growth this year or -- it's super hard to say. We're not predicting anything, but we feel confident that based on the historical data and the stability in the property market that over time, it will kind of even out, so to say.

Yes. Okay...

And I think maybe also to highlight, if I can give some more flavor, and I think the one thing that if we -- when we speak to real estate agents, for example, and what they are also saying is that, I mean, there are transactions in the market, right? So I think that it's a lot about price -- pricing and it's also a lot about what's going on in the media. People are a bit maybe hesitant at the moment. You can also say that you have a bit of a sham effect in the market, meaning that you can have a buyer and a seller that actually agreed on the price, but the buyer needs to sell before. So I think when you start feeling that people are actually [ transaction ] and agreeing on price, I think that you will see an uptake. And if that's a good curve or not, that's super hard to say.

Yes. Okay. No, I appreciate that. It's very hard to say, but I think it was a very good addition here on your thoughts. All right. Great. And then also, I wonder a bit about the conversion here to Plus and Premium, because I remember when we had the Q4 conference last year, I think you said that it was then above 30% for the combined. Now if I look at the slide that you showed here, it looked like the contribution from Plus and Premium or something like that almost doubled from Q4 '21. And I guess we should not see it as it doubled from 30%. But can you give some indication perhaps? What is the round terms, just anything on where conversion is at the moment?

Yes. Yes. So in a way, like I said in the presentation, we're trying to shift away a bit from conversion and talking more about the ARPL contribution. And what I -- what we can say is that the conversion has continued to increase during the year. And I would like to point to what we also said in the presentation that we've seen a great uptake especially on Premium, which is a more expensive product also contributing to the ARPL growth. And a big driver of that growth is the update we did to the products in the summer.

Yes. Okay. Great. All right. One final question also, and that's on the net debt EBITDA here. I see that came down to [ 0.5x ] last 12 months, something like that, and I think you have a leverage target below 2x. So it seems quite far away. And now given that you still bought back shares during last year and paid a good dividend and still your net debt ratio came down like this. How do you think about this going forward? I mean, are you going to operate a cash business or can you share any thoughts of how you think around the potential here maybe to increase even the number of buybacks? That's the last question.

Yes. So regarding buybacks, we have the current program of SEK 450 million. And as for year-end, we had around SEK 130 million left. So that is the plan to execute on until the AGM in 2023. And as for the net debt, what we said when we started with the share buybacks last year was that we would increase our net debt to EBITDA ratio slightly. And if we -- and that's what we have seen here during the year basically.

But I mean, would you be happy to operate around [ 0.5x ] or mainly in your view, is there a potential basically to even increase the mandate from last year and also have a similar mandate going forward, but even a bit larger? Would you say that it's possible in your view or would you feel uncomfortable with that?

I wouldn't want to preempt the AGM decision here. But what we see is that the current leverage ratio given the market conditions currently is fine, I'd say.

But over time, a bit too low, I guess?

Yes, we have the financial target of below 2.0x, but yes.

The next question comes from Pete-Veikko Kujala from Morgan Stanley.

It's Pete from Morgan Stanley. Firstly, on the conversion of Plus and Premium. You mentioned that kind of the high conversion is not necessarily the only kind of optimal outcome there. So -- and I understand that fully. So if conversion, let's say, like goes too high, what's your first thinking? Are you going to do like a relative pricing between the products or would you consider introducing new tiers of listings?

I would say that we have those 2 levers to work with. And I mean, we are all following the conversion and the pricing and [ as you still note ] on the segmented pricing, and then we have more things to do. So we follow and track. And I think over time, and that's something that we also communicated. We're not saying that we -- we will never introduce a new tier that might happen. As Francesca said, the focus this year, current year is more on the products that we have and more looking into the different cultures and packaging. But over time, that could be one thing that we look into.

I can also add, a really interesting question from a product development perspective, because I mean we also talk about the balance of product and pricing and the scenario you're describing, it's an imbalance. That is what we will be looking into. And that's why it's important for us to think about the upgraded products we have, because our journey is like to making sellers wanted to upgrade and then finding a portfolio in that, that can provide different kinds of values depending on the price point.

Yes. Understood. And then one question regarding the new products that you're launching towards the property developers. You spent some time on that in the presentation. I think you mentioned the subscription to these developers. So could you tell us how the subscription is priced? And how many [ developers ] are there typically in Sweden that could be subscribing to this type of service?

The subscription about -- for project is about to be launched. It will be launched next week actually, but we're not giving any detail on the pricing or the uptake of that. But we are -- if you look from a product perspective, that is meant to capture smaller and medium developers that will not benefit for our all-inclusive package. So that's our aim to create basically a product that answer to those kind of needs.

All right. Understood. And I can see the clock. So if there's one more question I'd like to ask like what is the listing duration that you're seeing right now? Because I think in November, it was -- I think it was 24 days or so, but where are we now, roughly speaking?

That's not a number that we disclose. I appreciate the time is 11, but we'll keep going for a few more minutes, given that we can see there are still some questions in the queue.

The next question comes from Catherine O'Neill from Citi.

Great. I've got questions a bit more margin focus. Firstly, on your long-term margin target of more than 50%, I just wondered if you could give us a better idea of time frame, is that 5 years, 10 years, some scale on that would be great? And then on marginal costs in 2023. Could you maybe go into a bit more detail on where you're seeing the cost pressures given your margin guidance for 2023 is 45% to 50%? And with the sort of cost freezes, I guess you're putting in place in marketing and maybe hiring, I just wondered why you're expecting the margin to soften like you are? And then finally, just on pricing. I think in the slides, you mentioned -- sorry about the noise, [indiscernible]. I think you mentioned the B2B pricing going through in February. Are you able to give us a bit more idea on what you're doing on the pricing increases this year that you either put through in January or plan to next month?

So maybe if I can just start by answering the last question on pricing. So we are on an annual basis reviewing the different products and packaging and pricing for the next year, and we don't disclose a specific number. We work with pricing in different ways, both by raising prices or adjusting prices we introduced in new tiers, and that is true to, I would say, most of our business-to-business products. So the one that you're referring to is one business-to-business, the broker product, Hemnet business, but we are over the line working with pricing. Coming back to the margin, I think talking long-term, I would say depending on the market because the market we cannot really steer over, but I would say like 4 years or 5 years is the longer term that we are looking into. And when we look the next question was on the cost for 2023, and I mean what we said is that we -- the plan is actually intact. So nothing has changed. What has changed is the market, but our plan to continue growing and investing in the business over time is still valid. But what we have said, give them the market is that we will kind of pushing forward some of the investments, and as you said, the investment is in product development and bringing in more talent but also in marketing. And here, we feel quite confident that the things that we decided during Q4, meaning that we'll continue to add a few people during the year in business critical roles. We have roles, for example, within app development that we really need to push forward, but in other areas, we might push forward into where the market is heading before actually pursuing. So having a bit of more cautious approach, maybe also coming back to what you said, we -- this is something that we talked about last year that we were a bit behind during a couple of months. So I would say that the effect in Q4 and also coming over to this year, given that we have colleagues coming in, in the Q -- first quarter is a bit a timing effect. But I expect us to be a bit more cautious on costs.

Okay. So would you say your margin guidance for 2023 is also may be conservative because you're just slightly nervous about the market at the moment?

No. But I would say that we cannot control the market. The only thing we can control is the thing that we can control, so to say, and that plan is intact. And we are reiterating despite the market -- I mean despite the hesitant market, we are reiterating our current profitability target. It's very early on and it's very hard to say. We have a plan of continue growing and investing a bit more in a lower pace, but we still have that turns out. So the only thing we can say about this year is that we are reiterating the 45% to 50%.

The next question comes from Andrew Ross from Barclays.

I've got a couple to ask. The first one is to ask about the change in payment model that allows people to pay when the listings removed from Hemnet. Can you talk a bit about the impact that may have on the soon to sell market and getting those listings on your platform? That's the first question. The second one is to follow up on Pete's question as to how long each property is staying on the site. I appreciate you don't want to give a number, but are we thinking there's any material impact on your revenue in '23 from listing staying on site for longer in terms of how you recognize those revenues? And then the third question is about advertising. Can you just talk us through as to why it's weak? I appreciate audience is a factor there, but are you now starting to see issues in terms of pricing as macro softens?

So I'll hand over to Francesca, if you can take the first question, and then Jens can take the second, and I'll come back with the third.

Yes, let's do that. I'll start with your question about the payment timing for listing on Hemnet. I want to start saying that what we're doing is a test. And the test is something that is mainly driven at helping our seller and giving flexibility in this uncertain market. And we are starting this test aiming in Q1 on a limited scale and we will then see how that pans out. And also the -- what we're going to follow is, of course, the amount of listing, but also how much that helps both seller and agents in this uncertain market. But the main point here is that it's a test to start with.

So regarding the question on listing duration and the effect on revenue in 2023. I think what we can say is that an increased duration quarter-over-quarter means that more revenue is pushed to the next quarter. So of course, that can have an effect, and if and what that effect would be for 2023, I think that's a tough question to answer.

And on the third, on advertising, I would like to start off with saying that we are still seeing great demand for advertising, which I think is great. So there is demand out there. And especially like I pointed out in the presentation that we see real estate agents having a very stable and increased demand. And property developers, I think coming back to what we said in Q3, that's the customer group that right now, I think are -- they are struggling a bit, that also kind of plays out in our numbers. But overall, I would say we have different types of products and some of them are traffic-related. And with lower traffic to Hemnet, we still -- we still have high traffic and high engagement. But we're coming in from a couple of years that saw a growth effect during the COVID, there came a overall turbo interest in the property market. So what we're seeing is lower traffic, and that kind of plays out in some part of the display advertising in the programmatic. And you spoke about pricing, I think that we have a relevant platform, and for those customers who want to reach out to property interested consumers, we are still strong and relevant. But I think the pricing example, as an example, on programmatic, for example, the pricing, the pricing pressure is quite high. So it's harder for us to work on pricing. But on the products we can control, we can continue working with pricing.

The next question comes from Pete-Veikko Kujala from Morgan Stanley.

It's Pete again. I jump back on the line, given you allowed us to ask a little bit more questions.

Sure.

So one kind of follow-up on the payment solution update or test. So given this kind of limited scale test, would you then consider introducing some like maximum period of the listing to make sure that each listing will be monetized, whether it's sold or not or would this then mean that you would kind of move into a more transaction-based monetization?

So I think to clarify on this test. So no, we're not moving into the transaction business. What we are testing and still like Francesca said, the test is that you can postpone paying for the listing. So you will pay for the listing, maybe not upfront but later on. So this is not a test about pay if you sell, it's pay regardless, but you can pay later.

And just to add on this, this is basically a way to help like want to say like not to have the cost upfront, but every single listing will be paid once removed from Hemnet. That's how the model will look like still on the listing level.

Yes, right, right. Understood. And then one more question and then I'm done, I promise. On the agent visibility kind of product, are you now charging for these products again? And what has the feedback from agents been?

You're talking about [indiscernible], I assume.

Yes.

Yes, we are charging. Basically, we have started like kind of launch -- a soft launch of the product together with where we were developing the agent search after summer. We started with the free trial, but now the free trial stopped at the end of 2022. And we still -- we have paying customers, and we also are doing different types of campaigns, so that we see an uptake. So we see customers subscribing to this product and having interest. So yes, it's a paid product right now.

The next question comes from Daniel Ovin from Nordea.

Yes. Again, sorry, also I had a few more questions here, if it's okay for you, then I promise not to hop on again. But I also have a question here about price increases. And I noticed here in the beginning of the year, that seems that you raised prices quite significantly. I think it was on the 1st of Jan actually or 2nd. And also, you have been raising prices much faster than I thought at the time of the IPO since that time. And now you're mentioning that you're planning here to have more price points going forward. And maybe you can elaborate a bit more on what you think that means in terms of speed of the price increases? I mean are we going to continue to see the same speed of price increases that you have seen since the IPO or do you actually expect it to keep growing but perhaps at a bit slower rate? Maybe you can elaborate a little bit around that, that would be great?

So we're not setting and we're not communicating exact price adjustments. But what we can say is that, I mean, we view the pricing strategy and execution long-term. And given that we have a lot of different price points, one way of working with pricing is also to expand the price points and the more granular to learn more from the delta we get in order to really capture the value and find a wise price for that exact property, maybe we'll never end up and expect that, but that's kind of the vision. We are constantly improving and learning when it comes to pricing. And I think that we are following, like we said before, is pricing and products that are very linked together. So depending on what we see in the conversion and in the NPS and in pricing, there are different things that we take into consideration when looking at pricing. I think what we need to do this year depending on how the market evolves is to keep the year out there and listening in and making sure that we are a bit mindful also to what's going on in the market to give them the hesitation that's out there right now. What that means, I cannot say. I mean saying that that's something that we need to bring with us, given that it's a bit -- yes, it's a more challenging market out there from a seller and a consumer perspective.

Perfect. And then just also one question on this other external expenses line, which was up quite significantly. And I was just thinking, what is -- is there any particular cost there? Is that perhaps the consultants or maybe that's also on the personal line or is there anything else here? And also for 2023, when you talk about holding back costs, are you -- can you keep that line kind of flattish from here or is that something that you need to keep growing on that cost line also? Maybe you can elaborate a little bit around that?

What we can say on the cost side during Q4, it is a consultant, I would say, is the main driver behind that. And the 2 things to highlight there on the consultant side. So on -- first, on the app side. So we have been -- it's been challenging to recruit app developers, and that's something that has been a strategy for us for quite some time. It's a very competitive market, at least up until now. And that means that given that we have a very clear view on increasing the app focus and driving engagement and logged in future, we decided to expand and add product development competence in the form of consultants. We also added a shorter, I would say, project, and that is an upgrade of Google Analytics 4. It's very precise. But that's something that will be the migration on, and that also meant that we needed to push forward and bring in some consultants. And now we're on the other side of that, which we're very happy about. So now we're on Google Analytics 4. I think going forward without selling anything more than -- I think that we will always have some dependency on consultants on and off depending on what kind of initiatives we are working on. But we are -- overall, I would say, are being cost conscious and cost smart this year and making sure that we really take the right decision when to bring in consultants and not.

Yes. I would like to add to that, I think the main part of the other external expenses line is the agent compensation, and that is, of course, increasing in line with the seller revenues. So that's also something to keep in mind.

Yes, absolutely. No, I -- actually, I didn't list out that part. But on the -- and great that you actually brought up that because on that side, on the commission paid. So if I look at the total value that you pay out to the broker community in Sweden, it's been coming up quite fast since the IPO because you have been raising prices and better conversion, et cetera. So I'm thinking that is there going forward, you think a chance to see that ratio actually come down and still be growing as you plan to grow your top line 15% to 20%? I mean would it be possible perhaps to still keep increasing the payment to agents, but perhaps to take down the ratio? Is that something you think could be possible going forward? That's my last question.

For the last question, and this is seriously the last question. So, no, but the agents like Francesca said is a really important partner to us. So that's something that we take with us in the business we have today and tomorrow and the day after that as well. We strong -- we believe in the partnership we have and in the win-win partnership we have with the agent communities. We have a compensation model today that will reach -- not reach, we updated it 2 years ago. And of course, like every other investments and things we're working, we're willing to review and make sure that we have the right compensation model or yes, that applies to what we want to [ issue ], but we have no plans on changing that currently. But overall, I would say that we are constantly reviewing and making sure that things that we invest in are driving the right things. Thank you. And thank you, everyone, for participating at this extended presentation, and have a great weekend.

Bye-bye.