Earnings call transcript: Adtraction Q4 2024 sees stable margins amid challenges

Adtraction Group AB reported its fourth-quarter and full-year 2024 financial results, highlighting stable gross margins but facing challenges in growth and profitability. According to InvestingPro analysis, the company’s overall financial health score stands at 1.23, indicating weak fundamentals. The company saw a modest 0.32% increase in its stock price following the announcement, with shares trading at 31.3, reflecting investor caution amid mixed financial results and strategic shifts.

Key Takeaways

• Adtraction’s Q4 2024 net sales declined by 8%, with gross profit also decreasing by 8%.
• The company maintained a stable gross margin of 19% for five consecutive quarters.
• Strategic acquisition of AdRecord aims to expand the advertising portfolio.
• Adtraction expects to return to growth by Q2 2025 with a 20% growth target.

Company Performance

Adtraction’s performance in Q4 2024 was marked by an 8% decline in both net sales and gross profit, reflecting challenging market conditions, particularly in the Nordic region. Despite these setbacks, the company maintained a stable gross margin of 19%, consistent over the past five quarters. The acquisition of AdRecord is expected to bolster its advertising portfolio and support future growth.

Financial Highlights

• Full Year 2024 Net Sales: 1.2 billion
• Full Year 2024 Gross Profit: 230 million
• Full Year 2024 EBITDA: 50 million
• Q4 2024 Net Sales: 344 million (8% decline)
• Q4 2024 Gross Profit: 66 million (8% decline)
• Q4 2024 EBITDA: 18.4 million (28% decrease)

Market Reaction

Following the earnings release, Adtraction’s stock experienced a modest increase of 0.32%, trading at 31.3. This movement reflects a cautious investor sentiment, balancing the company’s stable margins and strategic acquisitions against the backdrop of declining sales and profitability. InvestingPro analysis shows the stock is trading at a low revenue valuation multiple, with additional ProTips available for subscribers seeking deeper insights into the company’s valuation metrics.

Outlook & Guidance

Looking ahead, Adtraction is optimistic about returning to growth in Q2 2025. The company has set ambitious targets, including a 20% growth rate, a 7% EBITDA margin, and a proposed dividend of NOK 2 per share. These goals are supported by a focus on expanding service offerings and optimizing partner marketing strategies. InvestingPro analysts expect net income growth this year, though sales are predicted to decline in the current year. For comprehensive analysis, including detailed financial projections and expert insights, investors can access the Pro Research Report, available for over 1,400 US equities.

Executive Commentary

CEO’s statements emphasized the company’s commitment to returning to growth, highlighting the complexity and need for optimization in partner marketing. The CEO also addressed the company’s approach to privacy-friendly marketing, critiquing over-reliance on major platforms like Google (NASDAQ:GOOGL) and Meta.

Risks and Challenges

• Market Conditions: Continued challenges in the Nordic region could impact future growth.
• Profitability: Declining EBITDA margins may pressure financial performance.
• Regulatory Changes: New consumer credit regulations could affect operations.
• Competition: Increasing competition in the partner marketing space.
• Technological Shifts: Potential impacts from AI-driven search engines.

Q&A

During the earnings call, analysts inquired about the impact of new consumer credit regulations, to which the company expressed minimal expected impact. Questions also addressed M&A opportunities, with the company indicating limited prospects. The management showed confidence in handling current volumes without significant headcount increases and is closely monitoring potential impacts from AI search engines.

Full transcript - Adtraction Group AB (ADTR) Q4 2024:

CEO, Attraction: Good morning and welcome to the presentation of attractions twenty twenty four results, Q4 results and presentation of a little bit of an outlook for Q1 and Q2.

If you have any questions, please post them online and we will do our best to answer them in the Q and A session right after the presentation. Please leave your e mail if you want us to get back to you in case we don’t have a chance to answer your question. We founded Attraction in 02/2007. We developed our proprietary platform for eighteen to twenty four months and then we launched the service in 02/2009. In the first couple of years, we were only active in Sweden, but fairly soon our services were requested also in our neighboring countries.

We started by establishing an office in Finland in 2014. We had a local team, a local company, a local office and above all local relationships. This worked out great. So we used the Finnish experience as a blueprint in the rest of Europe and we’re currently present in 12 different markets with local presence and local relationships. In 2021, we listed our company on NASDAQ First North.

One of the main reasons for doing that was that we wanted to do more on M and A. I think that most people would agree that the past three years or so have been challenging from an M and A point of view, but we have still managed to acquire two companies, AdService in 2023 and AdRecord in 2024. Before we were listed, we acquired Konext in Switzerland and Digital Advisor in Denmark. I would say that we are by far the most active acquirer in our industry and we’re also far from done when it comes to M and A. I will comment upon the M and A situation a little later on in the presentation.

Also, I would like to highlight that our focus now is to get back to growth and an important part of that is of course to grow in Europe. So the short story of the fourth quarter and twenty twenty four is this. We have seen a weak market, especially in The Nordics and Nordics is attraction as home market that’s 75 of our growth gross profit. And when we have negative growth in The Nordics, we will also have negative growth for the group. We have performed better in Europe, I would say.

Attraction remains profitable. We deliver healthy EBITDA and we also have very strong cash flow. The Board of Directors has suggested a dividend of NOK2 per share for the year. And I think that this is pretty good considering that we have acquired a company in the year. Our EBIT is actually lower than the last year.

So this is a testament to the strength of our ability the strength of our balance sheet and our ability to generate cash flow. I would also like to remind everyone that we did divest the Chora Loan in March and this still impacts our growth rates of course and I will illustrate that a bit later on in the presentation. Our focus now is super clear, super clear. We need to get back to growth and we currently expect that to happen in the second quarter of twenty twenty five. In my opinion, the markets have picked up a little bit and we think it’s a realistic assessment to see growth in the second quarter twenty twenty five.

So attraction is interested in growth profitability and cash flows. And by now everyone should know that we have not performed when it comes to growth. Sales in the fourth quarter dropped by 8%. Gross profit dropped also by 8%. When gross profit drops, EBITDA will typically drop even more because we have fixed costs to cover.

So EBITDA in the quarter dropped by 28%. Cash flow was very strong. Andreas will talk a little bit more about that. We don’t expect to have this cash flow every quarter of course that will fluctuate a little bit. But what we do know is that over time, we will convert a significant share of EBITDA to cash flow.

So the dividend again, 2 kroner per share and that will be paid in two tranches. The first one is expected to be paid in April and the second tranche in October. Of course, this is subject to the approval of the shareholders meeting in April. So let us take a little bit of a look at 2024 and what’s been going on here. Here’s a graph that shows the sales development of attraction.

And there’s two things that stand out here, I think. The first one is that we’ve grown every single year since we started the company except for 2024. When you look at this graph, you can see it still looks like attraction has growth momentum. I believe that we do, but obviously we need to demonstrate that by returning to growth on a quarterly basis. This slide shows the gross profit.

The decline in gross profit is less dramatic than it is for sales. And it’s even less dramatic if we add back Chiralon, which was divested. So if we divest the business, of course, that’s going to impact our growth rates going forward. And if we add back Kvaer alone here, then development from a gross profit point of view looks almost stable. And please remember that internally we are much more concerned about gross profit than we are about sales because gross profit is money that belongs to the company and the company’s shareholders.

So summarizing 2024, it looks like this. We had sales of 1,200,000,000.0, a gross profit of $230,000,000, EBITA of 50,000,000 and actually amazing cash flows of 50,000,000. So this is a summary, a quick summary of the fourth quarter and 2024. Andreas will dig into the details of the fourth quarter in a minute. And first, I’d just like to share my worldview a little bit.

So we have two major insights that I have talked about before and I want to reiterate those insights and talk a little bit more about that. The first insight is that many brands rely too heavily on the big platforms. And by big platforms, we mean Google, Meta and to some extent Amazon (NASDAQ:AMZN). Relying on a single supplier for customer acquisition or a single customer is always a super risky business, but it’s even more risky if the supplier is a monopolist. I’ll get back to this in a moment.

Our view is that partner marketing is needed here. Partner marketing is a great way to diversify your business. We, of course, talk to our customers at all times, and we like to ask them. So what share of your traffic do you get from Google, we ask? And they often say around 60%.

And to me, that actually doesn’t make sense at all. Getting 60% of your traffic from Google is a risky proposition. And here’s why. Google is a monopolist. They have a 90% market share on search, and they’re especially powerful on product search.

Sure, maybe that is changing with GPT and other platforms, but we really haven’t seen that yet. So Google is a monopolist. But what’s more, they behave like a monopolist. So if you ask a random e commerce company what’s happened to your Google invoice in the past four or five years and they will say, you know what, my Google invoice keeps increasing without the corresponding increase in the value provided by Google. So the invoice increase a lot more than the number of clicks or number of transactions.

And this is how a monopolist behaves. They have pricing power and they will continue to increase prices as long as they can. I think that there are other problems with Google also. We see that maybe they don’t like a certain vertical, then they make sure that vertical stops receiving traffic. In the past couple of months, we’ve seen that happen to certain types of sites provided by big media houses.

So Google decides that these type of sites should not get traffic and then that’s what happens. This is a risky proposition. It’s risky to rely on Google for traffic when they behave like this. And I’m not saying that it’s always happening. Obviously, Google is providing a great service.

That’s why people use them. But I am saying that it is a super risky proposition. In the graph that we see here, this customer gets 10% of their customers from partner marketing. A much better idea is to get around 25 from partner marketing. And, you know a lot of our customers do exactly that and this is a much better way to distribute risk.

Then there’s another aspect of the platform companies that I like to highlight and that is privacy. So partner marketing, not only attraction, but all partner marketing companies are great from a privacy perspective. And the reason we say that is that whenever a transaction happens at an ecommerce company, we only ask for two things. We ask for order value and we ask for order number. And the order number can actually be anything.

It can be a randomized number. So we essentially do not know who our customer’s customer is and we also do not want to know that. We don’t need to know that to perform and before to deliver our service. So partner marketing is great from a privacy point of view. Of course, we need to comply with GDPR.

We need to have privacy policies. We need to have data transfer agreements and so on. Typically this is a fairly uncomplicated process. My personal view, just to be clear on this, is that a lot of companies who do not really handle sensitive information spend far too much time on this. They spend far too much time on this.

Small e commerce companies need to have GDPR policies even though they perhaps do not manage sensitive information at all. And in the meantime, the true privacy villains continue to do whatever they want. I think you can guess who the true privacy villains are. I’ll get back to that in a minute. First, I want to comment on another thing, and that is stuff that the EU is doing when it comes to cookie consent and so on.

In the last few years, we’ve seen the whole Internet in the European Union go crazy with cookie consent requirements. I think that it’s totally crazy to build a whole infrastructure under the assumption that people don’t understand how cookies work. If you don’t like cookies, well, erase them from your browser and get on with your life. The fact is that cookies are needed for a good user experience and the European Union is just making life more, more complicated. Of course, we can deal with this and we do deal with this.

I’m just very impressed by how the European Union is handling these matters. Perhaps we should focus on building companies rather than creating a complicated regulatory environment. And I think, I actually think that the European Union is missing the goal here also when it comes to privacy. So I said before that partner marketing is privacy friendly. It truly is.

As a reminder, we get order value and order number when a transaction happens. Facebook (NASDAQ:META), and you can take a look at their site, there’s something called the Facebook Pixel. So Facebook wants e commerce companies to report the following information when happens. They want let’s say that I go ahead and buy a toothbrush somewhere. I wanna get a toothbrush.

Then Facebook would like to know my email address, my phone number, my first name, my last name, my gender, my date of birth, my city, my state, my zip code. This is of course totally unreasonable. It’s not I just want a toothbrush. I don’t need Facebook to have all of this information. And the e commerce company just want to sell a toothbrush.

They are also not helped by giving this information to Facebook. I think this is actually quite crazy. And the reason that Facebook can can, can do this is that it’s pretty easy for them to get a consent. So users will give consent to it and and and tell Facebook that they can do whatever they want to, basically. And, and and that’s what they do.

So Google and Facebook know everything about us, and they want to know some more. And why am I talking about this? You know, I I’m talking about it because if I were an ecommerce company, I I would be a little bit careful to share data with Facebook and Google. Google also knows everything about pricing and they adapt their own pricing to grab as much as they can from the e commerce company’s margin. This is my opinion and I truly stand by this.

So to summarize, it’s a good idea to not work too much with these companies because it’s a risky proposition and it’s also not good at all from a privacy point of view. We have very strong views on this. So summarizing this section up a little bit, partner marketing is complex and optimization is needed. This is our core message. This is what we’ve been saying for a while and therefore attraction is needed.

The core features of partner marketing is that users only, or sorry. Ecommerce companies only pay for sales and actual order, and they can expand their reach. They can reach audiences that they cannot reach without partner marketing. They can be seen on sites that they cannot be seen on without partner marketing. These are the core features.

Pay for results and expand your reach. If I were a CMO or Head of Sales or something at an e commerce company and I had understood that it’s a great idea to do partner marketing, these are the factors I would look at when choosing networks. So there are many good networks out there and I would look at these factors. So how do I optimize my program or campaign? How do I make sure that I get the right volume at the right price?

And how do I make sure that I have the right mix of partners? How do I make sure that I get only work with quality partners with great sites and great content? And how can I make sure that I get the distribution that I need, that I reach the consumers that I need to reach in the markets that I need to work with? Well, obviously, Attraction has answers to all of these questions. And the answer is the number one answer is that we work with active partnership management.

This is the way to make sure that we get the right volume at the right price. So this optimization is what our account managers and partner managers do all day and it requires knowledge and a lot of information to get this right. We get it right all the time because we are sitting in the flow of information. It’s also important to work with quality partners. Each partner and each site is manually approved before we allow them in our network.

Finally, we have the idea of local presence and European reach. We think that relationships are local, so we need to be local to really optimize relationships. Then we’ve done something a little bit different this year. So Attraction is the Nordic market leader and the way we think is that it’s our responsibility to serve basically all customers, all e commerce companies, also smaller ones. AdRecord has a great track record of providing an amazing service to small and mid sized e commerce companies and AdRecord fits perfectly at attraction.

So what’s happening now is that we are broadening our servicing offering and we will also work with smaller advertisers. And one of the things that’s important to understand here is that for smaller advertisers, it’s possible to automate the service to a greater extent and have a little bit of less emphasis on active partnership management. So what we’re doing now is that we’re implementing this in Sweden and The Nordics, and then we’re rolling it out in Europe later on. But this is a bit of a change in our strategy and we think it makes sense to address the entire market. So we stick to our financial goals.

We want to grow by 20%. We want to have an EBITDA margin of 7% and we should pay a dividend of 30% to 60%. We are actually paying a little bit higher dividend this year and that’s because cash flows are very strong and because we have a strong balance sheet and it’s also of course related to, I would say, the lack of M and A activity that we see and I’ll get back to that in a little while here. So this is our growth rate the last couple of years and we’ve consistently beaten our sales goal and then we are clearly not doing that in 2024. Again, this is our top priority for next year.

So a break looking at gross profit and breaking things down a little bit, we are losing gross profit because of divestments, then we’re adding a little bit of gross profit from M and A that is at record. And then we are growing or rather not growing. We have negative growth of minus 8% in existing markets. I think it’s interesting to talk about the number of employees because that tells us a couple of things. First of all, this is the single most important cost item for attraction And it also tells us something about the direction of the business.

You will see a slight increase in the number of employees here in the fourth quarter, and this is mainly related or actually only related to the acquisition of ad record. We added, I think around nine employees. So here’s the cost base per quarter. We said before that that’s going to be fairly stable even after acquiring that record. I think this holds true.

So we had restructuring costs of $3,000,000 in the quarter and that is related to layoffs. So adjusting for that costs were $44,000,000 and that includes $2,000,000 that’s related to ad record. So that’s the cost base and EBITA margin was not great this year. It’s not that bad either. It’s sort of at the same levels that we’ve seen before, but obviously we have higher ambitions.

I will note that the margin was a little bit higher in the fourth quarter and this is an effect of the fact that gross profit typically is higher in the fourth quarter, whereas the cost base is essentially the same. So now Andreas will dig in a little bit deeper to the fourth quarter. All right.

Andreas, CFO, Attraction: And then we start with net sales, which ends up at $344,000,000 in the quarter, and that’s a negative growth of 8%. Looking at gross profit, we have 66,000,000. Also here, negative growth of 8%. If we were to look at only the core business, the platform to sort of say, we have slightly less negative growth of 3%. And here we also include ad record.

We can also look at our gross margin who has been stable for five consecutive quarters, slightly above 19%. We also expect this to be true going into ’25. Then looking at EBITDA, $18,400,000 is a decrease with 28% and EBITDA margin of 5.3%. The higher decrease in EBITDA than in growth rates, of course, is due to our operating leverage. However, when we get back to growth, which we expect to do in 2025, we will again start to enjoy the fruits of our operating leverage.

Simon also mentioned that the cost base have been stable. The minor increase we’ve seen in the fourth quarter is due to the acquisition of that record, which added 2,000,000 and the one off items mentioned of 2.7 Looking at adjusted net result per share, it’s at 0.93 Swedish kronor. That’s a decrease of 27%. Then turning to verticals and starting with the e commerce vertical, we can see that gross profit is at par with last year 43,000,000. We can also see that ad record contributes with 9% to the growth of this vertical.

We also grow on seven out of 12 markets. And what’s really interesting to see here is that we have growth on really important markets like the Norwegian market where we can see both organically and acquire growth. But maybe even more importantly, we have only slight negative growth on the Swedish market and positive growth when we add the acquired growth. And of course, it’s important that the bigger markets grow if we’re gonna get back to growth. So we have good momentum here.

In the finance vertical, we can see 22,300,000.0. That’s a decrease with 8% and here we grow on two out of 12 markets. In the other vertical, we can see the results of the divestment of Clara Lon, and now we only have $300,000 in gross profit outside of our core business to platform. Then turning to geographies, starting with The Nordics, we can see 49,500,000.0 gross profit. That’s a negative growth of 11%.

Looking at the core business again, we can see less negative growth of 5% and we grow on two out of four markets. It’s the previously mentioned Norwegian and Swedish market. Turning to Europe, we have $16,300,000 in gross profit as 3% growth. Here we grow on three out of eight markets. Then looking at the operational operating cash flow in the blue bars here, in a longer period, you can see that seasonality is also true in the fourth quarter of twenty twenty four.

We have a really good result here. Also good to look at is that the process improvements that we started with in the q in q three and have continued to work on in q four and q one of twenty five has also given good results. And we expect good results also here in in Q1 twenty twenty five. Breaking down the cash flow to its different components starting with operating cash flow, as previously mentioning really good result 30,500,000.0 in operating cash flow. Investing activities, here we can see an outflow of SEK 24,000,000, that is the result of the acquisition of AdRecord.

In the financing activities, we have paid dividend of SEK 16,600,000.0 to the shareholders of Adraction Group. Meanwhile, also receiving the last dividend from Clara Loewen, who were in the quarter of 2,000,000. This gives us a total cash flow of minus 8,000,000 in the quarter. And despite having made an acquisition and paying dividend, we have a really strong net cash position of 107,000,000 ending the year. This also gives comfort to the Board of Directors to propose and maintain the dividend of SEK 2 in the quarter sorry, for this year.

I end the financial part of the presentation with a snapshot of Clara Luen’s contribution to the EBITDA. We can see that Clara Luen had a meaningful contribution to the growth rates. However, when we look at the profitability, it was around 1% of the total EBITDA of the year of 2023.

CEO, Attraction: Thank you, Andreas. So we’re just going to comment on a new regulation for consumer credits that is being implemented in the Swedish market. And of course, consumer credits is an important product for attraction and we’re good at delivering customers. So the big picture here is that I am not very concerned about these regulatory changes. And the reason is that this is not a huge part of our gross profit.

So in a worst case scenario, we can lose a couple of percentage points of gross profit, but I am not certain that that will happen actually. So let me comment on the laws that are already put in place or will be put in place and then there’s also a proposed new law. So starting in January, interest rate interest deductions are being gradually phased out. That means that interest costs are not tax deductible anymore. We actually have not seen a big impact from this regulation.

Maybe there will be, we don’t know, but currently it doesn’t look like it has a big impact. Then in March, bigger changes will be implemented. We see an interest rate cap of 20% and also a cost cap. And obviously, we have talked to our customers about this. And it seems like most companies will simply adapt.

They will change their credit scoring. They will change their offering and continue to offer credits to consumers. My personal guess is that we will not see a big drop in credit volumes as a result of this regulation. I may be wrong about that, of course, but that’s my personal estimate. What I do know is that this the maximum negative effect for attraction is a couple of percentage points of gross profit.

Then there’s another strange animal on the scene here. So the government has proposed that if you are lending money to to consumers, you need to be a bank. And I’m saying that this is a strange animal for a couple of reasons. So first of all, the bank license is a heavy one. And the reason that a bank license is heavy is because it deals with consumer deposits.

So people actually take their money and give them to banks. And obviously, consumer needs protection and we need heavy regulation. But the weird thing here is that we are not seeing problems on the deposit side of things. We are seeing problems on the lending side of things according to the government. And then the government is is proposing a legislation that mainly deals with deposits.

To me, this is a little bit strange and I am not sure that they are addressing the real problems in a proper way. A better way to look at this would be to look at the lending side of things and impose even stricter regulation and stricter rules and also have a better supervision of that side of things. Better supervision is needed. So I probably disagree with these measures, but again, it doesn’t matter what I think. We just need to adapt.

I think the strangest features of the new provost law is this, that if you’re a broker, that is if you’re a lender or a lender or a bank license here. This is clearly absolutely disproportionate. So this is, you know, an analogy here would be this. Let’s say that I take the subway to work every morning and all of a sudden, I need a pilot’s license to jump on the subway. This is essentially what, what the government is saying.

Brokers are fundamentally a very, very different business from banks. That’s not what they do. They don’t lend money. They don’t receive deposits. They are experts at managing leads.

So we have a number of great customers who are brokers, and we hope that we will continue to have a great relationship with them. But of course, there’s some uncertainty regarding this law. So what is not uncertain though is this. As long as there is a demand for consumer credits, there will also be a supply of consumer credits. And attraction has an important role to play when it comes to matching consumers with the loan providers.

That’s the fundamental truth of this business. We will keep working at that. Finance and consumer credits remains important, and we want to be there and we want to be there and in e commerce. So I hope that message is clear from our side. Then I’ve said earlier in the presentation that the M and A market is fairly tough right now.

Yes, we did a transaction last year. That was because AdRecard had managed to deliver growth and they were in a good position to sell their company in 2024. But I’m guessing that there’s gonna be a few sellers on the back of 2024 numbers. So if you’ve delivered negative growth, you probably don’t wanna sell your company. You wanna sell your company when there’s better momentum.

So there’s not a lot of activity in the market right now. Another challenge right now is that one of the things, one of the advantages of being listed is that typically you should trade at a higher multiple than private privately owned targets. And, you know, that’s probably not the case right now. I’m not going to comment on attractions valuation, but what I do see is that there’s not a multiple arbitrage to make. So we will wait a little bit until there are better opportunities for us.

And I think there actually will be more opportunities when the market recovers because this market needs some consolidation. I don’t think it makes sense to only work in one market when there are so many cross border opportunities and there’s certainly room for more international players in Europe and in other places. So finally, I want to comment a little bit on the outlook here. And I think it’s important to understand that Q1 twenty twenty four is the last quarter that we own Clara Luan. So when we look back and look at growth rates, that will still include Clara Loan also for Q1.

In Q1, we will also do a record migration. This is a lot of that work is already done. And I am not certain that we will finalize the migration in Q1, but it certainly looks like that. That means that we will, not report AdReCord separately going forward. So starting in Q2, it looks like everything that we report will be organic, and that is perhaps good to know.

Thanks to the acquisition of AdReckerd, we have a broader advertising portfolio and a broader service offering, and I’m really, really looking forward to see how that will develop. We will be able to do more things now. Internally, we talked about back to growth. This is the main goal for 2025. We’ve said that Q line growth wise is going to be in line with Q4.

And then we have to remember that everything was pretty good up until Q1 last year. So Q1 twenty twenty four was fairly strong and then Q2, Q3 and Q4 were weaker. So what we said in the report and what I reiterate now is that we expect to get back to growth in the second quarter. This is our current assumption and I believe that this will happen. So this was the presentation and I know that we have a few questions, so we’ll try to get into those.

So I will some I will answer some questions, and Andreas will answer some questions. And we’re doing this on Volley a little bit, so please excuse us if there’s a pause here and there. So the first question is to Andreas. If you exclude the number of added employees from the ad record acquisition, how did the number of employees change from Q3? And his answer is three to four people in Attraction excluding Ad Record.

So that means that we added I think we said before that we added nine people from Ad Record, and that means that three or four people left Attraction, right? You have announced one this is also for you, Andreas. You have announced one off costs linked to layoffs in Q3 and Q4. Are you planning to continue with this in Q1?

Andreas, CFO, Attraction: So the layoffs will be done. We’ve taken the costs for us now in Q4. And we do not expect the cost of these proportions to be happening again in in ’25. And any minor post like this will not be posted in the reports. Yeah.

So, yeah, no, we do not expect this to reiterate in or getting back in ’25.

CEO, Attraction: Yeah. All right. And and and and of course, the reason that this happened was that we had bigger costs. And going forward, we will not have bigger costs like that. Then here’s a question that I can actually answer because I listened to you Andreas.

In the cash flow statement, there’s a received dividend of SEK 2,000,000 and this is from Clara Loan and that was part of the deal with Clara Loan that some of the shareholders’ equity that was sitting on Claro Loans balance sheet would be paid to attraction. So then we have a few questions from the activity feed. And the first one is, hi. You’ve founded and run a great company for almost twenty years. What is driving you to continue building this?

Well, thank you. And it’s not twenty years. It’s only seventeen. And we need to go for a couple of more years. There’s a lot of stuff that we need to do.

What is fun to us is that this company is constantly developing and we see an opportunity to continue to create value. We know where we’re going. And I guess the main reason here is that we simply enjoy what we’re doing. Thanks for that question. Is the $2,000,000 cost related to that record included in the total $2,700,000 restructuring cost?

I think I think that we’re talking about different things here. Please correct me if I’m wrong, Andreas.

Andreas, CFO, Attraction: I can answer that really. So SEK 2,000,000 is the cost base of that record. So that will be recurring in the future as well. The 2,700,000.0 we’re talking about here is due to layoffs in attraction. So those are not related.

So it’s really two plus 2.7.

CEO, Attraction: Yeah. Thank you. So here’s someone who says that it’s nice to hear our input on Google and Neta. Well, thank you. I’m happy that, that you’re listening.

And then here’s a conclusion, which I actually agree with to some extent. Basically, what you’re saying is that your customers are bad at using your services. So what are you doing to increase the spending for your customers? And also how much sales do you think part of marketing can be in three to five years? So I’m not gonna do a forecast of of of of that because it’s difficult when you don’t even know the base number.

But what I can say is that this is the message that we bring to advertisers. So we talk about their Google spend. We talk about whether that is reasonable or not. And some people actually think it’s yeah. We spend 63% on Google and we’re planning to increase that to 75.

I, as a CEO, would never ever run a company like that. I think it’s I don’t wanna say insane, but I really I really question that strategy. It’s much better to to diversify. And is that you’re right, dear dear questioner. It’s totally our job to talk about this and I think that our industry colleagues should talk about this too because it’s not a dominating position like this is not good.

If you get back to growth during 2025, will you be understaffed or can you handle increased volumes with your current headcount? So we can the main idea is that we can handle current volumes with our current headcount. With that said, we have started hiring a little bit here and there and I expect that to continue. But it’s not going to be anything like the massive changes that we did in 2022. We think that we can manage this stuff basically with the people that we have.

Here’s a tricky one. Roughly how many possible acquisition opportunities are there in Europe for attractions? So realistically realistically depending on on if you if you look at if you look at the the the the core, the core business, the core network business, I think there’s five or six very attractive companies out there. And the question is are they for sale? We want to buy them.

And then there are other opportunities. So we can do stuff in the influencer space. There’s other types of services that we can buy. So we’re not limited to only acquiring networks even if that’s our main strategy. So then we have a couple of other questions that I will try to address here.

And this is a good question that I love because it highlights the strength of our business model. So historically, how have your partners adapted to new conditions when something changes? For example, Google becomes dominating. How do partners adapt to that? And I guess what’s underlying this question here is how would partner adapt to ChargeGPT and other stuff like that?

Well, partners are great at doing this. They’re super innovative. They’re often small and quite flexible. And we’ve seen these transitions happen many times before that something changes in the market and our partners are there and they’re grabbing that traffic and they’re delivering that traffic to advertisers. This is actually one of the things that I love with our business model.

And then a follow-up question there is that can you say that your partners are getting traffic from the AI search engines? And the honest answer is that it’s not yet. This is not a significant part of our business. I’m sure that it will happening. We are monitoring this, but it’s currently not happen.

Then finally, there’s a question about migration. And it says you’ve done a number of migrations historically and you’ve started the migration of ad record. How comfortable are you today doing this stuff compared to how it was before? Well, I would say that we have a team that’s just amazing at doing this. That that does not include myself, but it’s a team that that is just amazing at doing migrations.

And I would say that, we are experts. We are experts and we are very confident in our ability to get this right. We’re good at balancing risks and automating stuff. I actually think that the team is so good at this that it’s I consider it an an easy process. So, and that’s, of course, easy for me to say, but this is this is how good they are.

Alright. Thanks for those questions. I think that’s it. So thank you everyone who who joined the call and thanks for posting questions and Thank you very much and goodbye.

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