Synsam AB (publ) (SYNSAM) Earnings Call Transcript & Summary

Welcome, everyone, to Synsam Group's Q&A session as released the interim report for the second quarter 2025 this morning. My name is Frida Leim, and I'm Head of Investor Relations at Synsam Group, and the moderator of this Q&A today. I'm joined by our CFO, Per Hedblom; and our CCO, Jimmy Engstrom. Those of you watching this live, you can ask your question in the chat, and we'll try to answer as many questions as possible during this session. We have our analyst from Citi joining us. I would like to hand over to Giang Nguyen.

Hi, everyone, and thanks for having me on the call today. You know how I always start these questions. I would just like to -- just to begin with getting your latest thinking about the market that you guys are in. Is there any particular countries that you would like to flag?

Yes, what we have seen regarding the consumer confidence is that also the second quarter remained relatively weak as the previous quarters. But where we've seen a slight uptick now during the summer, whether that is sort of lasting or not, is still to be seen. But the second quarter was weak in similar levels than that Q1 and Q4.

And when you think of the uptick that you just mentioned, is it broad-based in all of your countries? Is there any one country that is standing out?

No. I mean the overall consumer sentiment is similar where we have seen an uptick in. When we read the statistics, the public statistics that it's Sweden and Norway and Finland, where Denmark maybe is a bit hesitant, but we will see where this will take us during the fall.

Okay. And now going into the different countries. And let's start where we just spoke about. So let's start with Sweden, very good growth in the quarter. Is there anything that, looking forward, we should be concerned about or we should be paying particular attention to when it comes to the growth momentum in this country?

Well, we are taking market shares, it's important. Going forward, I mean, we have communicated that we have rolled out Synsam EyeView as at the end of the quarter, which gives us the opportunity to add more capacity, actually regarding eye exams, which gives the potential for further growth. So that's the goal of the rollout of Synsam EyeView. So a better opportunity to grow more in Sweden, thanks to this.

And do you expect the benefits from EyeView to show as soon as Q3 in terms of sales?

I mean the fact that we have rolled it out at end of Q2, and rolling out means not just putting a machine in a store, but rather training our colleagues in the stores and so forth, means that it's up and running. So everything else being equal, there is potential for positive effect in the coming quarters already from Q3, if everything remains the same in all other aspects. But that effect in isolation would be positive, yes.

Okay. And is there any lesson or trend that you observed in Norway that you would expect to repeat in Sweden? Perhaps you could talk about after a quarter, after maybe a half year, how much of sales contribution do you see in Norway and whether it's reasonable to assume the same kind of trends to be shown in Sweden? Or is there any expectations about how long it would take to ramp up to a significant level of capacity from around 14% in Q2?

No, I think the dynamics is very similar. But in Norway, of course, EyeView is one part of the actions taken over the past years that has given a good momentum. But one could expect, I would say, a similar sort of dynamic when it comes to EyeView in both Norway and Sweden. And it is a store-by-store rollout and the training program, employee by employee. So basically, every store that gets Synsam EyeView gets trained, there you see sort of the capacity start to build up, the accessibility start to build up. And with that, of course, comes more customers and revenue opportunity.

Okay. Understood. And now if you look at Norway, also a very good quarter in Norway. Is there anything in particular that has been driving the strength that we have been seeing in Norway so far this year? And actually not even in the first half, but really in the last 3 quarters or so, the growth number has been very good. Would really be interested to learn more about these drivers.

No, I think -- I mean, in Norway, we have done very well, and the local management team has performed very well along all dimensions really. Of course, EyeView has helped with improving the capacity and accessibility. But I think overall, they are doing a fantastic job at the moment. And it's the same strategy as in all markets where it's solid tangible levers, with everything of having the best store in town, good assortment, but then how we work with the customers, how we ensure capacity, how we work with the subscription and the customer satisfaction and so on. And they are doing that very well, and that is giving results.

And is there any sort of best practice, like amongst the ones that you mentioned, that you are looking to implement also, say, in Finland and in Sweden?

Well, Finland is a growth case where we are targeting market leadership as we have communicated. And that involves quite fast rollout of new stores and increasing awareness in Finland to the levels we have in the rest of the -- in Sweden, Norway. So Finland is not really comparable to Norway, not -- it's also a different competitive environment. So we can always learn from each other between countries, I think, in all aspects. But it's not necessary that you can copy a Norway effect into Finland. We are progressing well in Finland and also this quarter, in line with our strategy for Finland specifically.

And maybe now we go to Denmark, which is still a soft spot for Synsam this quarter. So I understand that Q2 was still impacted by the credit regulations and particularly on the extensions, in addition to new sales. Can you talk about what has been done since last quarter to mitigate this sort of extra regulatory effects? And when should we expect to see an inflection point?

Well, it's very much about the coaching and training of our personnel on the one hand in the short term, and that takes a few quarters actually because it's about -- I mean, ensuring that dissatisfied customers, which are rejected in this creditworthiness assessment process, that they can actually be converted into a cash customer or lifestyle cash customer. That's the core. And we progressed quite well. But then this new interpretation of regulation, which came into effect this year, which affected then also prolongings, that took us back a little bit. So we just have to rebuild the methods. It'll take a few quarters. It's very much about training and working store by store. Then of course, we also look at other opportunities in Denmark, not related to subscription as such, but how we can improve our presence with assortment and so forth in stores. That's not related to subscription, but it can improve our market position as such. So such actions are being taken continuously. You want to add, Jimmy?

Yes. I mean worth adding could, of course, be that in Denmark, we are very good as well in meeting the customer and we have a very high customer satisfaction score in Denmark. So that one is very strong. But -- so it's more due to the factors that Per mentioned around the legislation impact. And then of course, ensuring that we have the best store in town, also in Denmark in all locations.

Okay. That is clear. I just want to ask the follow-up questions on Lifestyle Cash, for example, because that was -- you guys just mentioned it, but it was also in the press release as one of the measures to mitigate this impact. Is there any difference when it comes to convincing extensions customers to take up Lifestyle Cash versus the new sales customers? Trying to think whether this period of trying to convert extensions customer, whether it will take less or more time than the time that you spend working on the new sales conversions last year.

I think it's -- the main issue is not really the time it takes, it's whether it's possible at all, I would say, to convert the customer. And the thing is it's a bit larger challenge to mitigate the dissatisfaction when existing customers who have been with us 6, 7 years sometimes, when such a customer is suddenly rejected. Then you need to work your way back again. Of course, it's a problem also when you have new customers, but they don't have the same relationship with us. So it's a little bit more work to get back on track with such a renewal customer. So it's more work, I would say, but it's not the time it takes, whether it's possible at all or not. You would agree?

Yes.

Okay. That is actually very clear. And also, Jimmy, earlier, you talked about looking at slightly different assortment trying to encourage more people to come into your store. Exactly what kind of changes to assortment are you looking to make? Do you have more affordable options in stores? Or what other changes are going on there?

No, no. I mean the first thing is -- one important element for us always in all markets is to ensure that we have the best store in town. With that, we mean, of course, the store concept, the service levels, but also the assortment. And that means that we should have a broad assortment to pick and choose from, but also that covers different customer needs, both in terms of styles, in terms of brands, in terms of price points, but also in terms of sizes, for example. It's important, all of these needs for the consumers. And that is what we have worked on ensuring in all locations and still doing also in Denmark in many locations.

And okay. So now putting all of that together. And I'm also looking at the growth number from last year, you do have a tougher comparison base in the second half of the year. When do you expect to see Denmark organic growth back in the positive territory? Just putting all of these commentaries together.

We haven't communicated a time line for that. But I mean, it's, of course, we want that to materialize as soon as possible. But it will take a few quarters, we need to be aware of that. But I want to reiterate as well that, I mean Denmark is a profitable business. This is a bump in the curve, I would say, in the road, and we will overcome it, but it will take a few quarters. And we are working quite hard on the ground to rectify this.

Okay. Makes sense. I think I have sufficient information on the countries. Now I'm also looking at the churn rate. And I think on this call last quarter, we did speak about Synsam taking some measures to bring the churn rates down. And I look at the charts that you have in your press release that shows that the churn rate has been ticking up slightly, but consistently since the middle of 2023. What -- where are you focusing your efforts on? And what are you looking at in terms of mitigating or reversing this trend?

No, I mean, first of all, we see a mixed picture between the countries, also in Q2 where we see stabilization and a slight decline in a couple of markets, and of course, increasing a little bit in Denmark. But one thing is, of course, the cohort patents, how they develop. But then the measures we do take in -- I mean that is over the whole customer journey, of course, to find the right needs analysis and the right match in the beginning, but to work with the customer throughout the journey. And if they have some problems along the way, that we solve that. And if they want to churn, that we have a dialogue with the customer to see if that is really the need. But I think important also to mention in the context of churn is that in our business, we are, after all, taking care of a vision correction need. That will last. And that means that even if a customer churns from the subscription, it does not mean that the vision correction need is gone. So we see, of course, that these customers come back into the market eventually to buy new glasses and where some choose cash and some choose subscription again. So the sort of retention of the customer for Synsam is, of course, larger due to this sort of underlying behavior.

And is there a reason why specifically, at the group level, it has been ticking up since the middle of 2023? Is it a function of also your Lifestyle revenues base or like the Lifestyle subscription base growing? And so naturally, as part of a bigger pool of customers, you expect to see slightly higher churn rates? Like what would be the normalized churn rates reflecting the size of the subscription base that you have?

I mean we have this cohort effect, as Jimmy mentioned, which means that larger cohorts in previous years when they get out of the binding period after 2 years, even if each cohort would have the same percentage churn as before, more customers in the cohort mean more overall churn for the group. Maybe technical, but that's one effect indeed. We have the Denmark effect. That's one effect as well. Then we have an effect that we discussed sometimes that sort of is it possible to buy out spectacles after 2 years? Some people choose to do that even if they like the services they've got and so forth. Sometimes it's been a customer for a long time and are not prolonged. It can even be attractive for them. So a lot of aspects which are -- we need to face. On the other hand, we have started [ win back ] program, which is progressing well, to ensure that customers who have left us have done it for -- well, haven't done it for the wrong reasons. And sometimes, customers leave us because there has been a misunderstanding or something, and then we can rectify that. So we do take actions. We are looking at whether we can sort of give a projection of churn rate sort of where it will stabilize. We are not really there yet to give such a figure, but that's something we are looking at closely to see if we can do that in the future. The increase now is an increase sequentially from last quarter indeed, but we believe the increase is not dramatic sequentially. We need to say that. We are not really worried about -- at all about that sequential increase, although each lost customer is a bad thing. We are taking action and we have the situation under control. I hope to be able to come back on a sort of target for the churn rate at some later stage, although not now.