The quarter in brief July – September 2022 (July – September 2021)

• Total operating income increased by 7 percent to SEK 106.7 million (99.5)
• Total operating expenses increased by 15 percent to SEK –103.4 million (–90.3). Operating expenses excluding items affecting comparability increased by 1 percent to SEK –90.7 million (–90.3)
• Net credit losses amounted to SEK –30.1 million (–18.9)
• Operating profit was SEK –26.9 million (–9.7). Operating profit excluding items affecting comparability amounted to SEK –14.1 million (–9.7)
• Net profit for the period was SEK –21.8 million (–8.1) and earnings per share amounted to SEK –1.18 (–0.45)

The period in brief January – September 2022 (January – September 2021)

• Total operating income increased by 8 percent to SEK 318.1 million (294.1)
• Total operating expenses increased by 11 percent to SEK –294.3 million (–265.6). Adjusted for items affecting comparability, expenses increased by 4 percent to SEK –276.2 million (265.6)
• Net credit losses amounted to SEK –93.2 million (–58.3)
• Operating profit was SEK –69.3 million (–29.8). Operating profit excluding items affecting comparability amounted to SEK –64.0 million (–29.8)
• Net profit for the period was SEK –56.4 million (–24.8) and earnings per share amounted to SEK –3.04 (–1.38)

Important events in the third quarter 2022

• Qliro AB’s Extraordinary General Meeting on July 1, 2022, approved the Board of Directors’ decision to carry out a directed share issue and issue of warrants to the incoming CEO Christoffer Rutgersson. Subscription takes place after a management assessment is approved by the Swedish Financial Supervisory Authority
• The directed share issue to Chairman of the Board Patrik Enblad was finalized on August 30, 2022. The new issue provided Qliro with proceeds of SEK 9.7 million

Important events after the end of the period

• Christoffer Rutgersson took office as the new CEO of Qliro on October 1, 2022. He succeeded Jonas Arlebäck, who had served as Acting CEO since February 2022

Comment from Christoffer Rutgersson, CEO of Qliro AB

I am very pleased to have taken on the role of leading Qliro to profitability and growth. With my extensive experience from the global payment industry, I have a clear vision of how we can enhance our offering to further strengthen Qliro’s position among e-merchants. In the third quarter we grew income by 7 percent, despite a declining e-commerce. We also continue to take important steps to reach profitability in 2023, where we, as part of the profitability program, launched several initiatives and incurred expenses of SEK 12.8 million in the third quarter.

Growth in a declining market and stable underlying expenses
In the third quarter income rose by 7 percent, and in the first nine months of the year growth was 9 percent. The growth was primarily driven by our position in Payment solutions, where we saw an increased in the number of active accounts by 9 percent, compensating for the decrease in volume of 11 percent and demonstrating the resilience of Qliro’s business model. It is worth noting that this growth was achieved in a Swedish e-commerce market that, according to Svensk Handel’s (Swedish Trade Federation) e-commerce indicator, shrunk by 10 percent in the period January-September 2022.

As we announced, the profitability program we are undertaking will initially entail additional costs. In the third quarter that meant a total of SEK 12.8 million, which was recognized as items affecting comparability. Of this amount, SEK 8.3 million was tied to accelerated amortization of earlier technology investments, which have been partly replaced by a new, modern data platform in Snowflake. The remainder primarily relates to consulting expenses. Adjusted for these items affecting comparability, expenses amounted to SEK 90.7 million (90.3), which means that we are still delivering on our financial target to grow income faster than costs. We will continue to invest in the profitability program, which will mean additional costs in the fourth quarter. The costs of the measures will amount to a maximum of SEK 42 million for the remainder of 2022, in line with our previous communication.

Credit losses driven by increased provisions
Reported credit losses amounted to SEK 30.0 million (18,9). This is partly explained by increased macroeconomic uncertainty in the third quarter of 2022, which led to an increase in provisions by SEK 1.6 million, as well as the fact that Qliro during the comparison period released provisions previously made related to the pandemic, which contributed to the credit losses decreasing by SEK 4 million in the third quarter last year. Adjusted for this, credit losses amounted to SEK 28.4 million in the quarter, and SEK 22.9 million for the corresponding period last year. At the same time, parts of the credit portfolio not covered by ongoing sales agreements with external parties such as debt collection agencies have grown over the past year. This has been reflected in the third quarter through increased provisions in these parts of the credit portfolio, which together with a growing loan book in Payment solutions explains the increase in credit losses.

In the quarter we welcomed Stefan Sjöström as the new permanent Chief Credit Risk Officer for Qliro. Stefan comes from PwC and with his extensive experience in credit risk and the modern modelling methods that Qliro uses, he will make an important contribution to our credit loss management going forward.

Good prospects of accelerated growth
Qliro is one of the few companies that combines (i) a complete focus on e-merchants in need of digital payments, with (ii) our own payment methods for partial payments. Our goal is to be the natural choice for merchants based on a combination of a leading offering, consumer experience, flexibility in technology and design, expertise in payment optimization, and attractive business cases tied to our credit products. Qliro’s products are flexible, and the company is guided by a customer focus based on a unique history of having been part of the same group as several leading Nordic e-merchants, which were also part in starting the company.

We are now increasing our commercial focus and our investments to accelerate growth in both large (“Enterprise”) and small and medium-sized e-merchants (“SME”), both through direct sales and through partners. We are planning to triple our sales capacity, and at the end of the third quarter more than 70 percent of the planned capacity was in place. One early indication that the commercial initiatives we are now driving have been successful is that we added three new merchants – all in SME – in the quarter.

Technology investments in an improved customer offering and operational efficiency
As part of Qliro’s profitability program we are increasing our investments in technology to (i) strengthen our offering for SME, which includes broadening the offering to include all relevant payment methods, (ii) a modernization of our PAD platform to increase scalability and flexibility, and (iii) automation and digitization of operational processes, e.g., by launching a digital mailbox. As part of this, we are also upgrading and consolidating our systems in customer service and finance to increase efficiency. This also means a scheduled increase in capex in 2023-2024.

New macroeconomic environment
I also want to address the new macroeconomic environment we find ourselves in with rising interest rates, inflation and energy prices, which are creating more challenging conditions for households, and thus consumers. In Qliro’s case, we have demonstrated our resilience during the year. That said, I am cognizant of this development, at the same time that I am confident in our ability to continue to deliver on the profitability program and the goal of reaching profitability in 2023, even in a market where consumption is declining.

Cost savings are beginning to materialize
We are now addressing the company’s costs and creating clearer internal ownership of costs by function while also renegotiating with our external suppliers. During the year we have, among others renegotiated with our providers of credit assessments and implemented more efficient processes for using these services, thereby reducing variable costs in this area by approximately 36 percent. We have also adapted our office space based on the organization’s needs and current circumstances, which will help to reduce rental costs.

The progress we have made in our profitability program makes us comfortable that we will reach our profitability targets in 2023 regardless of our success in selling to new, large merchants and the current macroeconomic conditions.

Jump-starting Qliro’s transformation
This past summer I led the launch of our transformation for accelerated growth, efficiency, and profitability. At the same time we have strengthened the internal team, where more than half of all leaders in the company are in new roles in the last six months with a good balance of internal promotions and external recruitments, which has given our teams a strong injection of positive energy and ambition. We welcomed four new permanent members to management in the quarter, better equipping us for our future journey, and we will welcome more new members to the team beginning in 2023.

I look forward together with the team at Qliro and the management we are now building to continue to refine the strategy that ensures we are the best partner for merchants.

Presentation of the interim report

Media, analysts and investors are invited to a conference call on the 25th of October 2022 at 10 am when CEO Christoffer Rutgersson and CFO Robert Stambro will present the results. After the presentation there will be a Q&A session:

Telephone:
Sweden: +46 850 516 386
United Kingdom: +44 203 198 488 4
United States: +14 123 176 300
Code for telephone conference: 8215890#

Länk till ljudsändningen: https://tv.streamfabriken.com/qliro-q3-2022

You can also follow the presentation on:
www.qliro.com/en-se/investor-relations/presentations