Schibsted ASA

OSE:SCHA

Earnings Call Transcript

[Jann-Boje Meinecke, executive]

Good morning, everyone, and welcome to the presentation of our Q2 results. As usual, Kristin, our CEO; and Ragnar, our CFO, will present results and progress in the quarter. [Operator Instructions]

And with this, please let me hand over to Kristin. The floor is yours.

[Kristin Lund, executive]

Thank you, Jann-Boje, and a very good morning to everyone. I will start with the highlights before we have a closer look at the development in the second quarter. Against a backdrop of the current macroeconomic environment, Schibsted delivered a solid quarter with an underlying revenue growth of 2% and a group EBITDA of NOK 670 million, which is 8% up from the same period last year.

Despite the current market headwinds in the Job vertical, Nordic Marketplaces delivered resilient underlying revenue growth of 9% in Q2 due to strong top line growth in the Mobility, Real Estate and Recommerce verticals. This was a result of increased volumes in all of the 3 latter verticals and the generally positive ARPA development, demonstrating once again the value that we create for our customers and the strength of our marketplaces.

EBITDA in Nordic Marketplaces ended at NOK 526 million, that's 4% down from last year, driven by revenue mix and increased costs from new hires last year before we started to further tighten cost focus in the organization. Following a financially weak first quarter in 2023, our News Media operations achieved an EBITDA of NOK 133 million in the second quarter, which is a significant quarter-on-quarter improvement.

Revenues, which declined by an underlying 4%, and profitability continue to be affected by a tough volatile advertising market and lower volumes within casual sales and print subscriptions. However, effects from the ongoing cost program, which we announced in January this year, are starting to materialize, leading to a stable cost level compared to last year despite the current high inflationary environment.

Growth & Investments improved its profitability significantly once again in the second quarter. This improvement was driven by a refocus on Scandinavia in Lendo and a strong quarterly performance in Prisjakt. Activity in early-stage investments are focused close to our core and remained low in the second quarter.

Finally, we have, together with our Board of Directors, used the second quarter to further explore and develop our options, as outlined at our Capital Markets Day in March, to reduce our ownership in Adevinta in a value-creating way for our shareholders. Our ambition is still to come back with an update on a preferred solution at our Q3 results presentation in October at the latest.

Now let's have a look at our ESG highlights in the second quarter, and we'll start with the environmental impact. We are very pleased to inform you that the EU Commission has recently approved the inclusion of Marketplaces for the trade of secondhand goods for use in the recent expansion of the taxonomy, which now includes the circular economy. This means that our Recommerce Marketplaces' enablement of B2B, B2C and C2C trade of certain secondhand products ranging from electrical equipment to furniture will, under the taxonomy, be recognized as economic activities significantly contributing to the circular economy.

Looking ahead, the taxonomy's recent expansion, including the circular economy, is scheduled to apply from January 1, 2024, subject to any potential objections from the European Parliament and Council.

Let's then move on to social impact. In Q4, I told you about how VG has created a tool to visualize more transparency around their journalism. And I'm happy to say that, that tool got an international prize this quarter. Our newspapers have also won several prizes lately for their high-quality journalism. As a great example of the impact, we saw during this quarter how an investigative piece in Aftonbladet on H&M's failures of fashion recycle resulted in millions of reads, international attention and an intensive debate in Sweden about the environmental consequences of fast fashion.

Schibsted is one of several industrial partners for the Norwegian Research Center for AI Innovation, contributing with competence and data. One of the big projects at NorwAI is to build a generative language model for the Norwegian language, and we are also chairing up this initiative. The work has been ongoing for 2 years, and the first version will be launched this summer. Schibsted will be among the first to test how well it performs compared to the big American models.

And we think this is needed for several reasons. Firstly, a model trained primarily on content in Norwegian language will likely also be much better in Norwegian. Secondly, it is important to have control over our own infrastructure. Artificial intelligence is already turning into a global industrial political race, and it is not obvious that the technology will be democratized. Therefore, we must develop our own infrastructure in the Nordic countries to stay in control. And thirdly, it will be essential to ensure that the language models are consistent with the values and societies that they are built upon.

Moving to governance. Schibsted needs to be compliant with the Corporate Sustainability Reporting Directive from the financial year of '24 and report according to the European Sustainability Reporting Standards. CSRD requires comprehensive and detailed sustainability reporting and information quality on the same level as financial reporting. This will be demanding, but we have started the work in a structured and proactive way to ensure compliance by 2024.

Let me then start with presenting the development of our businesses in more detail, and we start, as usual, with Nordic Marketplaces. Driven by resilient double-digit growth in classifieds revenues, Nordic Marketplaces delivered a foreign exchange neutral revenue growth of 9% in Q2. This was primarily driven by the Mobility and Real Estate verticals in all markets and solid growth in transactional revenues in Recommerce. This was partly offset by the Job vertical, which saw an accelerated volume decline due to the market headwinds.

Also, advertising revenues, while being a minor part of the revenue mix, continued to decline in the quarter, affected by market headwinds. EBITDA decreased compared to Q2 last year due to a change in revenue mix and increased costs from new hires last year to drive new business models.

Let's then take a closer look at our 4 verticals, starting with Mobility, which is the biggest one in terms of revenue and EBITDA. First, we will review the underlying classified revenue drivers in all markets. Transactional models like Nettbil and AutoVex are excluded from these KPIs as they have different business models.

In Norway, the volume development for professionals continued its solid growth, and we are pleased to see that also private volumes are back to growth after a soft first quarter. Regular price adjustments drove the positive ARPA development.

In Sweden, the volume development continues to be more volatile. Q2 had a slow start for professionals, but volumes grew steadily in May and June, resulting in a 3% growth for the quarter. For privates, we saw a bounce-back of volumes in April, but the quarter in total has shown a soft development resulting in a decline of 1%. The increase in ARPU was due to regular price adjustments, somewhat offset by lower adoption of the upselling product bump.

Denmark has a different business model where we monetize listings per day. And I'm pleased to see the continued strong volume growth in Denmark showing the strength of our Danish business. The positive ARPA development was driven by price increases and product mix.

The Mobility vertical saw good revenue growth across all markets in the quarter, and foreign exchange neutral revenues increased 15% compared to last year. There is continued good revenue growth in Nettbil, driven by increased volumes, and I'm pleased to report that Nettbil had an all-time high revenue in June. Also, AutoVex is part of the reported figures now in Q2 '23, and the development is according to plan even if the macroeconomic environment is more challenging in Finland.

Mobility and Recommerce have the highest share of advertising revenues in our Marketplace business. The macroeconomic conditions continue to impact the advertising market, but we are seeing some improvements in Q2 compared to Q1. Advertising revenues declined 5% year-on-year on a foreign exchange neutral basis in the Mobility vertical. Total costs increased year-on-year, driven by the new hires during '22 and investments in new initiatives such as Nettbil and AutoVex. And EBITDA increased 16% compared to Q2 last year, driven by the higher revenues, and margin was strong at 53%.

We then move on to Jobs. The Job vertical in Norway is progressing well in providing more job opportunities to candidates through sourced ads. The volumes generated from sourced ads are not part of the NAA displayed on this slide. We continue to see an accelerated decline in the volume of paid ads across all countries this quarter. That's driven by market headwinds. I also want to point out that Q2 last year had exceptional volume growth.

Sweden and Finland are more affected by the macroeconomic environment. Both countries show higher unemployment rates than Norway, so the volume decline is particularly challenging in these 2 markets. ARPA growth in Norway and Finland was driven by regular price increases and upsell products; while in Sweden, ARPA growth was purely driven by upsell products.

The weaker macroeconomic environment predominantly affects the jobs, as previously mentioned. Price adjustments and increased revenues from upselling products led to a solid ARPA increase that softened the volume effect somewhat. But market headwinds, combined with strong comparables from last year, resulted in a foreign exchange neutral revenue decline of 12%.

Norway is the leading revenue contributor to the Jobs vertical, representing more than 80% of the classifieds revenues in the quarter. Due to strong ARPA development, revenues in Norway decreased only 10% year-on-year despite the high volume decline. EBITDA for Jobs was impacted by lower revenues and cost increases from new hires and decreased by 26% compared to last year.

Then next up is Real Estate. And historically, we have seen that listings are countercyclical as, for example, republications increase during economic downturns. As such, the business model for Real Estate is rather resilient in a challenging macroeconomic environment. We see a strong volume development in Norway, driven by favorable market conditions. ARPA continues to show solid growth in Norway due to regular price adjustments on top of some effects from the new package models that we released in early '22.

In Finland, we are happy to see continuous healthy growth in volumes. As in Q1, the increase in rental ads is stronger than sales ads due to the current macroeconomics. As in the previous quarter, price adjustments drive ARPA in Finland, while the mix of houses for sale versus rental ads neutralizes this effect.

Real Estate is yet again delivering an exceptionally strong quarter with 28% foreign exchange neutral revenue growth, driven by good volume development and continued ARPA growth in Norway. Norway is the foremost revenue contributor to the Real Estate vertical, representing more than 80% of the classifieds revenues in the quarter.

In Finland, we are pleased to see a positive development in brand awareness and traffic as a result of increased marketing efforts. In rentals, Oikotie is the clear #1 brand. And in buying and selling, Oikotie is on par with the competitor for the country as a whole. But looking at the 3 largest cities in Finland, I am pleased to say that Oikotie is the clear #1 brand in the capital region and has now surpassed the competitor as the #1 in Turku.

Our rental platform, Qasa, continues to show solid growth in its main KPIs with growth in signing value being the most important. EBITDA increased year-on-year, driven by the strong revenue growth, partly offset by increased costs from new hires and investments in Qasa.

Lastly then in Marketplaces, we have Recommerce. We currently have a transactional model in Norway with Fiks ferdig and in Sweden with Frakt and köpskydd. Two key metrics to follow in developing the transactional model are the number of transactions completed on the platform and the average order value of the transacted goods.

If we start with Norway, we launched Fiks ferdig in the summer of '22, and our users completed around 434,000 transactions through our platform during Q2. The volumes have stabilized, and the focus this year has shifted from building volumes to monetization. The average order value is at solid levels of NOK 667, which is somewhat lower than Q1, and that's due to the category mix.

In Sweden, we launched the transactional model in late '22, and the number of transactions continues to grow steadily. It's still early days, and the focus is on product improvement and experience to -- product's improvements and experience, sorry, to serve user needs better. The average order value is higher in Sweden than in Norway, reflecting more electronic goods transacted on the Swedish platform, while fashion is the most significant contributor to the transactions in Norway.

For Recommerce, the main driver for revenue growth is the transactional business where we continue to see substantial development in Norway. As previously communicated, we are experimenting with different monetization methods, and that's showing good results. Total foreign exchange neutral revenue growth for the quarter was 21% despite the removal of ad insertion fees in Sweden that happened in May last year. B2C revenues were growing across all markets, and I am pleased to see continued growth in professional revenues in both Finland and Denmark.

Recommerce, together with Mobility, has the highest advertising revenues in Marketplaces. In Q2, the advertising market was still affected by the challenging macroeconomic conditions, but with some improvements compared to Q1. Advertising revenues declined 16% in the vertical on a foreign exchange neutral basis. And finally, EBITDA for the quarter ended at a loss of NOK 88 million. That's in line with Q1 levels and reflects the continued investments in the new business model and the impact of costs from new hires last year.

All right, let's then move to News Media. In the past quarter, our brands have again excelled in creating journalism that captured public attention and ignites conversation across Sweden and Norway. This was also recognized by the International News Media Association, INMA, which is a leading provider of global best practices and insights for news media companies as it awarded our regional newspaper, Bergens Tidende, their most prestigious Best in Show Award at their annual event in New York in May.

And in addition to the Aftonbladet exposé on H&M that I mentioned, I want to highlight the following. VG's special report on Norway's changing weather has garnered over 4 million views, backed by an impressive 222 billion data points. The visually striking presentation showcased groundbreaking climate journalism.

Svenska Dagbladet has transformed business journalism with documentary podcasts, attracting new paying subscribers. And their series, Dynastin, about the Stenbeck family is SvD's most successful publication so far. Aftenposten continues to offer unique insights into the human stories of the war in Ukraine. Apart from the BBC, it is hard to find any other publication in Europe covering what is happening to Russian soldiers at the level that Aftenposten does.

If we then move to the figures, we see that driven by an improved cost development, News Media experienced a significant profitability improvement compared to the previous quarter. This was despite accelerated market headwinds within advertising and a continued volume decline within casual sales and print subscriptions. Foreign exchange neutral revenues declined 4% compared to last year.

On the cost side, measures from the cost program have started to materialize, and cost levels were stable in Q2 compared to last year despite the high inflationary environment. EBITDA decreased compared to last year, but like I mentioned earlier, improved significantly compared to the last quarter.

If we then take a closer look at the main revenue streams, we see that digital subscriptions delivered resilient double-digit revenue growth of 14% on a foreign exchange neutral basis, somewhat lower than in previous quarters. The increase was driven by both improved ARPU, combined with higher volumes, and continued growth in Podme and News Media's Full Tilgang bundle in Norway.

And moving to advertising, revenues were affected by a challenging and volatile advertising market in the quarter. Both markets experienced declining revenues, while the conditions were more challenging in Sweden with a foreign exchange neutral decline in digital advertising revenues of 11%. Norway, however, had a relatively solid quarter given the market situation, and digital revenues ended at a decline at only 1%, and that happened after a strong month of June.

Let's then move to Delivery. And sort of faded in the background here, you can see a picture from our new plant out in Vestby where operations in print and everything is now running. So that's exciting. We see that in this segment, revenues increased 4% in the quarter, driven by Helthjem Netthandel that grew 25% in the quarter. And that's due to increased volumes in B2C, also combined with higher C2C volumes related to FINN's transactional service, Fiks ferdig. This was partly offset by a continued decline in Morgenlevering, driven by changes in consumer shopping behavior. EBITDA was slightly negative in the quarter, driven by Morgenlevering and seasonality, but improved compared to last year due to higher revenues and combined with cost improvements.

If we then move to Growth & Investments that consists of brands like Lendo and Prisjakt and also other digital services where we either have majority or minority ownership. This segment reported a strong profitability improvement in the second quarter, driven by the refocus on Scandinavia in Lendo and continued strong performance in Prisjakt.

Total revenues in the second quarter grew 4% on a foreign exchange neutral basis, primarily due to continued double-digit revenue increase in Prisjakt, driven by volumes and higher earnings per click despite the tough e-commerce market. This was partly offset by a flat revenue development in Lendo due to a revenue decline in Sweden, which again is driven by changes in macro and microeconomic conditions, and I'll come back to that on the next slide.

EBITDA for the segment increased 79%, and margin improved by 5 percentage points compared to Q2 last year. This is driven by revenue growth and the continued profitability focus. Looking at our venture portfolio, we had low activity in the early-stage investments during this past quarter.

And then Lendo. Lendo experienced a record number of loan applications in Q2, and revenue growth in Norway and Denmark was strong. However, within consumer loans in Sweden, we have seen reduced conversion from application to payout as the macroeconomic environment causes banks and borrowers to be more cautious. As a consequence, Lendo's revenues declined in that segment in the quarter.

New products like credit cards in Norway and business loans in Sweden continued to perform well. So in total, revenues in Lendo Group was flat compared to last year on a foreign exchange neutral basis. And the revised strategy with refocus on Scandinavia led to strong growth in profitability and a solid increase in EBITDA margin compared to last year.

So with that, I will hand it over to Ragnar, and he is actually presenting our quarterly financials for the last time today as new CFO, Per Christian Mørland, will take over in October. So let me take this opportunity, Ragnar, to thank you so much for this part. Luckily for us, you will stay on in the company. So we will not lose sight of you, and we're very happy about that. The word is yours.

[Ragnar Kårhus, executive]

Good. Thank you, Kristin. I have to admit that I have some mixed feelings as I stand here today at my final quarterly presentation for Schibsted. But it helps to know that I will stay on board and will be part of the Schibsted story for a bit longer.

I would, as usual, start my part of the presentation today by giving some comments to the consolidated results for the group. Foreign exchange neutral revenues for the quarter ended 2 percentage points above Q2 last year despite a more challenging market caused by weaker macroeconomic environment. The revenue growth was mainly driven by Nordic Marketplaces with a foreign exchange neutral growth of 9%.

On the cost side, we are starting to see effects from our focus on profitability across the group. Group EBITDA ended at NOK 670 million, 8% up from the same period last year. You can see from the graph on the right that Growth & Investments, Delivery and Other/Headquarters were driving the EBITDA improvement in the quarter. But within Nordic Marketplaces, the strong revenue development in Mobility and Real Estate also contributed to the overall improved EBITDA for the group.

EBITDA in Growth & Investments increased year-on-year by NOK 26 million, and margin improved 5 percentage points compared to Q2 last year, thanks to strong revenue growth in Prisjakt and the revised strategy in Lendo with refocus on Scandinavia, leading to cost improvements in the quarter. Delivery's EBITDA was slightly negative in the quarter, driven by Morgenlevering and seasonality, but improved by NOK 24 million compared to last year due to higher revenues combined with lower costs.

Other/Headquarters had a negative EBITDA of NOK 51 million in the second quarter. This is in line with Q1, but an improvement from Q2 last year by NOK 56 million. The improved EBITDA deficit compared to last year was driven by generally lower cost levels and increased invoicing of services to other financial segments.

Looking at News Media, EBITDA decreased by NOK 35 million compared to last year, but improved significantly compared to last quarter. The year-on-year EBITDA decline was driven by the 4% foreign exchange neutral revenue decline. But as Kristin mentioned previously, measures from the cost program has started to materialize, and cost levels were stable in Q2 compared to last year despite the high inflationary environment.

Despite strong revenue growth and EBITDA improvements in Mobility and Real Estate, EBITDA for Nordic Marketplaces as a whole ended NOK 23 million below last year at NOK 526 million. The decline is a result of change in the revenue mix, as described by Kristin, and new hires from the end of last year in order to drive new business models and to support the transition to a new vertical-based operating model.

When looking closer at our income statement and items below EBITDA, a slight increase in depreciation and amortization costs and somewhat lower other expenses than last year contributed to an operating profit for the quarter at NOK 362 million, up 25% from NOK 289 million in 2022. Other income and expenses in the quarter is mainly related to the cost program in News Media.

Items below operating profit is, to a large degree, influenced by our ownership stake in Adevinta. Firstly, share of profit and loss from joint ventures and associates includes Schibsted's share of Adevinta's result for the first quarter of 2023 as well as their revision of Q4 results for 2022, adjusted for amortization of excess values and fair value differences. Schibsted's share of profits ends at minus NOK 1.1 billion with an impairment of the Brazilian joint venture as the main contributor to the negative result. Secondly, during the second quarter, we saw a decrease in the share price of Adevinta from around NOK 74 at the end of March to around NOK 70 at the end of June, which led to an impairment loss of NOK 800 million in the quarter.

And thirdly, the total return swap was also affected by the decrease in share price, leading to a loss of NOK 171 million recognized in financial expenses in the quarter. A loss of NOK 51 million was realized when the TRS was renewed in May. And financial expenses also include a loss from fair value adjustment of our investment in Tibber. In totality then, the net loss for the group ended at minus NOK 1.949 billion in Q2.

Operating cash flow in the quarter improved by NOK 45 million compared to last year, roughly equivalent to the increased EBITDA of NOK 51 million in the quarter. Capital expenditures were slightly up from Q2 last year and includes development of the new shared technical platform in Nordic Marketplaces, which also explain the slight increase from Q1 this year.

Schibsted has a solid financial position, and Scope Ratings restated its BBB/stable rating of Schibsted in June, confirming Schibsted as a solid investment-grade company. The ongoing share buyback program, buying back up to 4% of our outstanding shares, increased our financial gearing as planned in the quarter. And the plan is to complete the program within Q3 this year.

Then several financing activities has taken place during the second quarter. Schibsted has a term loan of NOK 2 billion, and NOK 1.8 billion of this loan was in April extended by 1 year to May 2025. In May, Schibsted also issued 2 new bond loans of, in total, NOK 1 billion, used partly to repay 2 other bonds that expired in June, and the remaining will support the repayment of our NOK 450 million bond expiring in October this year.

Schibsted also has a revolving credit facility of NOK 300 million. And the facility has, in June, been extended by 1 year, and the final maturity of the facility is now in July 2028. The facility is not drawn and secure a strong liquidity buffer going forward.

And in March and then again at the end of May, Schibsted extended the duration of its total return swap agreement with financial exposure to around 36.7 million shares in Adevinta. This was done by terminating the previous agreements and entering into a new 12-month term TRS agreement. The price in the current agreement is NOK 78.65 per share. The rollovers were made to increase the flexibility on timing of the final termination of the swap.

The cash balance at the end of 2023 was at -- at end of June 2023 was approximately NOK 1.5 billion, giving a net interest-bearing debt of NOK 4.7 billion. Including the undrawn facility, the liquidity reserve amounts to approximately NOK 5 billion. The dividend for 2022 totaling NOK 459 million was paid in May. And then a final comment on our financial gearing, I also have -- when we look at that, we also have to mention that our 28% stake in Adevinta contributes to a very solid financial position for Schibsted.

I will then end my presentation with a recap of our financial targets and some comments on the outlook. Our financial vertical focus targets for Nordic Marketplaces, which we introduced at our Capital Markets Day in March, remain unchanged. I will underline, though, that the presented targets are medium-term targets, meaning ambitions over a period of up to 3 years and that we do not give concrete guidance on the expected performance for the current year.

For News Media, the ambition is still that revenue should grow low single digit and that EBITDA margin should be in the 10% to 12% range. Like we have said previously this year, News Media will be below this EBITDA range in 2023, but the ongoing cost program should bring the margin back into the range in 2024.

Then some short comments on the revenue trends that we have seen so far in July. For Nordic Marketplaces, we continue to see good volume development within Real Estate. However, there is increased uncertainty in the Norwegian market after the double key policy rate increases in June.

For Mobility, we expect continued good development for listing volumes also for Nettbil, but we will meet tougher comparables in Q3 on volume in Norway and on ARPA in Sweden and Denmark due to the price adjustments made in August last year. For Jobs, we continue to see negative trends in all markets and still rather strong comparable figures from last year.

For News Media, we expect continued solid growth in digital subscriptions, in line with what we saw in the second quarter. But for advertising, we expect a continued challenging and volatile market going into Q3, especially in Sweden, also with continued decline in digital advertising revenues. However, it is expected that the relative decline will be at a somewhat lower level as market headwinds started to have an effect on our results in the second half last year.

Within Growth & Investments, we expect Lendo's financial performance to be affected by market headwinds in Sweden with more cautious banks and borrowers, while the exit of non-Scandinavian markets will be helpful looking at costs and profitability. In Prisjakt, we will meet higher comparables due to price changes made during the second half of 2022, and hence, revenue and profitability growth will come down somewhat.

And with that, I invite Kristin and Jann-Boje back on the stage to start our Q&A session.

[Jann-Boje Meinecke, executive]

Yes, quite some activity this morning here on the chat. So starting with Nordic Marketplaces, and also Christian is here, like I said, now connected by video. So in Q2 2023, Real Estate and Mobility delivered a strong revenue growth ahead of the medium-term targets. Christian, if you can comment, please, how sustainable is the growth you're looking at volume in ARPA? And how confident are we that also revenue growth will be double digit next year for these 2 important verticals for Nordic Marketplaces?

[Christian Halvorsen, executive]

Yes, I think we can say that we are confident in the medium-term guidance that we have given on these 2 verticals. That is, of course, dependent on somewhat better macroeconomic environment than we are in today. But we are confident in these targets.

[Jann-Boje Meinecke, executive]

And then maybe just following up also on advertising here. Advertising revenues with the Nordic Marketplaces declined at a smaller rate in Q2 compared to Q1. So maybe you can comment a little bit on the current trading so far in July on advertising in Nordic Marketplaces. And maybe Ragnar can also comment then on advertising in News Media where it's a much bigger part in comparison to Nordic Marketplaces.

[Christian Halvorsen, executive]

For Nordic Marketplaces, I can say that 2022 started out with a very strong advertising market last year. So we have had the tough comparables at the beginning of this year. They are going to be somewhat easier going into Q3. So as a result, we hope to be closer to the '22 levels in Q3, but that is again somewhat uncertain due to the macro. And we are most dependent on the advertising within automotive. And as you know, it's more uncertain new sales for new cars, so that might influence it, but hopefully, somewhat better.

[Ragnar Kårhus, executive]

And I think for News Media, I think the overall picture is very much similar for News Media as for Nordic Marketplaces. As I said and also in my presentation is that the advertising market is rather volatile, and the visibility, let's say, is still pretty short. So I just think we consider the risk and the -- around advertising development in the second half still to be quite high also for Nordic -- also for News Media.

[Kristin Lund, executive]

But fair to say that we see a stronger trend in Norway than in Sweden.

[Ragnar Kårhus, executive]

That's correct. So it's much more severe in development in Sweden.

[Jann-Boje Meinecke, executive]

And maybe staying a little bit with News Media. Looking at Q2, we saw like that the cost program starts to materialize in the business despite high inflation. How should we think about costs and cost trends for the rest of the year? Maybe you can also comment like how much of the program has been achieved so far and what will come in, in the second half? And then maybe also last comment, like what have you seen on paper prices lately impacting costs in News Media?

[Kristin Lund, executive]

So the cost program, we want -- or the aim is that between NOK 250 million and NOK 300 million will have gross effect this year. We had an effect of NOK 40 million in Q1 and NOK 50 million in Q2, so totaling NOK 90 million, and that means that the effect will accelerate in the second half. When it comes to paper prices, they are coming down somewhat. So I guess it's fair to say it will give a slight tailwind going forward. I wouldn't put it more than that.

[Jann-Boje Meinecke, executive]

And maybe staying with the cost program for one more question. I mean you said like in the beginning of the year, you aim for NOK 500 million gross costs over the next 2 years. Given like the development in advertising over the last quarters, is there any ambition to increase the program or to speed up the execution of the program?

[Kristin Lund, executive]

Let me just say that, that is something that we are monitoring very carefully. We want to be ahead of events and not behind them. So far, no concrete initiatives, but it is something that we are monitoring very carefully.

[Jann-Boje Meinecke, executive]

And then going to Lendo. Looking at the outlook statement, you seem a bit cautious on the development in Sweden here. Can you just like elaborate a little bit what has changed lately in Lendo Sweden? And is it different, for example, to what you've seen in Norway and Denmark?

And then also second question on Lendo, EBITDA was quite strong, and you said like the change in strategy to exit some markets in Europe had an impact. Maybe you can comment on that impact both on the EBITDA side or on the margin.

[Kristin Lund, executive]

Yes, I can do that. So for Lendo, Sweden makes up about 2/3 of the total business. And what we see in Sweden is what I said that there is now a reduced payout or conversion into payout rates, and it's due both to banks and consumers being more cautious. So that effect has led to somewhat a revenue decline in the Swedish business. But due to strong growth in both Denmark and Norway, where we don't see that same effect and also good growth in new concepts, the overall revenues were flat. So I think it's hard to say after 2 weeks into July how this is going to continue, but I guess that trend is likely to prevail for at least the short future.

When it comes to the effect of the downscaling of the international operations, they -- those international markets ran at an EBITDA loss of about NOK 50 million for the full year of '22. So the Q2 effect of that is NOK 15 million. And meaning that the margin we now report as 19%, it would have been 14% if we had not made those changes.

[Jann-Boje Meinecke, executive]

Thank you. And quite some questions on pricing in Nordic Marketplaces. So going back to you, Christian. First, maybe ARPA in Mobility in Denmark was up 13%, well ahead of the 7% which we've seen in Norway and Sweden. Can you just like comment what has happened here? Is it due to like a longer average duration of the cars on the site in Denmark? Or is it like a mix effect? And what should we also expect coming in the second half of 2023?

[Christian Halvorsen, executive]

Yes. In Denmark, it's due to both price increases that we did last year and into this year and due to mix effect, as you say. So it's worth noting that going into H2, we will not have -- we will have to have to compare both since we made the changes in August last year that we will not have it this year.

[Jann-Boje Meinecke, executive]

And if we think a bit like more longer term, looking at price, product and packaging in Mobility, let's say, in the next 6 to 12 months, are you planning for something along the lines what you did in Real Estate last year with a new package structure or how should we think given like the new operating model in Nordic Marketplaces?

[Christian Halvorsen, executive]

Yes. So there's definitely a potential for pricing and packaging within Mobility. So we are working actively on that. And we have also said before that as we move to this Nordic vertical operating model, we want to harmonize the models across the Nordics. So we are, for the time being, looking at that. But I don't think we will disclose any more detailed plans than that.

[Jann-Boje Meinecke, executive]

And going to Real Estate in Norway, Christian. ARPA here continued quite positive despite tougher comps this year. What is the reason for the good development of ARPA in Norway for Real Estate? And should we also continue a 20%-plus growth in the second half in that area?

[Christian Halvorsen, executive]

Yes. So one thing to be aware of is that in a slower market in Real Estate, usually, what sellers have to do is to repost their ads several times, and that is something that we have seen lately and especially now in July. So I think that is something that we can probably expect also going into the second half of the year. But again, there is a lot more uncertainty in this market now given that it was just a double rate hike. So it's more uncertain than usual in the real estate market, I would say. Yes.

[Jann-Boje Meinecke, executive]

Moving on to Recommerce, the other vertical. The growth here was partly offset in Q2 by decline in non-transactional revenues given that like ad insertion fees in Sweden were removed in May last year. Does it make sense, do you think, that there will be an acceleration in the revenue growth going forward given that, that effect lies behind us? Or how should we think here?

[Christian Halvorsen, executive]

Yes, that would be a correct assumption. We removed the listing fees at the end of May last year. So we have had 1 month of that effect now in Q2, and there will be more effect of that from Q3 onwards.

[Jann-Boje Meinecke, executive]

And then looking at Fiks ferdig, like the transactional product in Recommerce in Norway, can you give like any details on revenues or gross margin in the second quarter?

[Christian Halvorsen, executive]

We will not disclose any details on that. But what I can say is that we have a positive gross margin on Fiks ferdig.

[Jann-Boje Meinecke, executive]

And then maybe last question on Recommerce before we move on. I mean you had losses of roughly NOK 270 million in 2022. You aim for being breakeven in 2025. How should we think about the cost development here? I mean nominal costs increased quarter-on-quarter in Q2. Yes, what should we expect going forward? And what is the driver for the increased cost? Is it volume-driven? Is it more marketing? If you can provide some more details here.

[Christian Halvorsen, executive]

Well, there is an increase in cost of goods sold as a result of increased volumes. So that is a natural explanation. We are also investing in product development. But over time, we aim to improve both. I mean this year, we have said that we will work on monetization. So that is kind of getting the gross margin at a better level. And in addition to that, we are, I would say, more medium term looking also at increased efficiencies in the fixed cost base, for example, looking at ways to better use employees across the Nordics and such in Nordic Marketplaces and in Recommerce, in particular.

[Jann-Boje Meinecke, executive]

Thank you, Christian. Then Adevinta, you talked that you further explore and you view your options on the stake in Adevinta. How has your view developed since the update which you gave in the Q1 results, looking at the 3 alternatives which you presented at the Capital Markets Day?

[Kristin Lund, executive]

Right. We're not going to go into detail about that. We are -- what I can say is that we have very good discussions and progress with our Board, and we will communicate something most likely at our Q3 results.

[Jann-Boje Meinecke, executive]

And then a follow-up on the Adevinta stake. Do you have any update on your thinking on tax implications? If there would be a spin of the stake, what will happen on the tax side here?

[Kristin Lund, executive]

Yes. We expect to have some feedback from the tax authorities on that after summer, so I can't say yet.

[Jann-Boje Meinecke, executive]

Then going back a little bit to Nordic Marketplaces. Here, looking at the job volumes in Norway, which looked a bit better in June compared to the previous month of this year, can you comment a little bit like on the current trading in July? And also, what do you expect for job volumes in Norway in the second half of this year?

[Christian Halvorsen, executive]

Yes, it is correct that the volumes improved a bit in June, and they've also been looking okay in July, but it's very hard to interpret a lot from job numbers in the middle of the summer. So I wouldn't put too much into that. What's worth noting is that we are facing somewhat easier comparables in the second half of the year, but also the uncertainty and visibility is -- the visibility is quite low. So I think there is, yes, a certain level of uncertainty around these numbers. Yes.

[Jann-Boje Meinecke, executive]

I think you covered this slightly in your previous question, Christian, but can you just share your thoughts on further price increase or price possibilities in the second half Nordic Marketplaces? Anything you've planned here?

[Christian Halvorsen, executive]

We have made some changes in the first half of the year, of course, the CPI adjustment and also some adjustments in Mobility that will have effect in the second half of the year. We are continuously working on pricing, of course, so there might be some smaller adjustments, but I wouldn't expect anything major happening in the second half of the year.

[Jann-Boje Meinecke, executive]

And then Mobility, like the biggest vertical in terms of revenues and EBITDA, performed quite well in Q2. But do you see or expect any impact of weaker car sales or new cars sales on that vertical in Norway or Nordic Marketplaces going forward? And maybe also historically, can you share what's the relation between like new cars sales and then the development of listings on your platforms?

[Christian Halvorsen, executive]

Yes. So new car sales has an impact on revenue in our Mobility vertical. It's both on advertising because new cars is what's being advertised, of course, but it also has an impact on used cars sales because when you buy a new car, you usually have to sell your old car, right? So weaker new cars sales is not positive for our revenue development, of course. So that's something we are following quite closely.

[Jann-Boje Meinecke, executive]

And maybe a question for Ragnar. Can you provide some color around Finland Marketplaces on the EBITDA, which was negative in Q2? And maybe also in the outlook in the second half, how should we think about like the country dimension here for Nordic Marketplaces?

[Ragnar Kårhus, executive]

Yes. We don't give any sort of direct comment on the EBITDA development for the specific countries. I think for the second half, what we can say about Finland is that we still see that the macroeconomic development in Finland is challenging, on the one hand, so that is a continued negative. And then we also, within Real Estate in particular, are very focused on, let's say, continuing building our market position, meaning that we will continue to invest into that also in the second half this year.

[Jann-Boje Meinecke, executive]

And then looking at new hires, last year, Nordic Marketplaces, which had like an impact on the EBITDA or cost over the last quarters, can you provide some more details on when these new hire comparables will be getting easier going forward? Yes, like when will they annualize?

[Christian Halvorsen, executive]

Yes. A lot of hires were made in the last quarter last year, so they should annualize in Q4 most likely. Since then, we have been working a lot more on how to use our employees more effectively across the Nordics. So that's a big focus of ours right now. Also worth noting here is salary -- the annual salary increase, which will have effect from Q2 onwards, yes, partly Q2 and then Q3.

[Jann-Boje Meinecke, executive]

And then looking at inflation, we see like first signs, at least in the U.S., inflation is starting to come down. How should we think about Nordic Marketplaces? Is this lower inflation? Will there also be like less headroom for pricing? Or what's the connection between these 2 things here?

[Christian Halvorsen, executive]

I think you have to separate inflation and regular pricing and packaging. We have had the annual CPI increase, which is directly tied to inflation. So that will, of course, come down if inflation levels come down. But then you have the effects of product development and the improvement of packages and so on, and that is unrelated to inflation.

[Jann-Boje Meinecke, executive]

And then a question again on Recommerce. I mean we've seen like some weaker consumer sentiment looking at shopping behaviors, for example, in the delivery business on e-commerce in general. Do you think this will also impact like the Recommerce business in Nordic Marketplaces going forward? And if so, do you take any actions to curb losses? Or do you think the current loss rate is acceptable for the time being?

[Christian Halvorsen, executive]

Well, I mean weak consumer sentiment can work 2 ways. It can work in the sense that people consume less, but it can also mean that people consume more used goods, which would favor our Recommerce business. So that's quite important to know, but it's different from e-commerce in that sense. And as we've said before, we are working on profitability in Recommerce, both in increasing the gross margins and also in being more efficient in using our cost base. So -- but that is not something that will have immediate effect. It's more of a, let's say, medium-term impact of that.

[Jann-Boje Meinecke, executive]

I think so far, we have no new questions after like a lot of questions for you, Christian. I'll just wait a little bit to see if there's something new in my inbox or on Slido here. No, but it seems like we've covered all questions for now. So Kristin, the word is yours.

[Kristin Lund, executive]

Yes. No, thank you, everyone, for your interest. Happy that this turned out to be a solid quarter, and I'll see some of you later today. And for those who don't, have a great summer.