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Edited Transcript of QLRO.ST earnings conference call or presentation 22-Oct-19 8:00am GMT

Q3 2019 Qliro Group AB (publ) Earnings Call

Oct 23, 2019 (Thomson StreetEvents) -- Edited Transcript of Qliro Group AB (publ) earnings conference call or presentation Tuesday, October 22, 2019 at 8:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Marcus Lindqvist

Qliro Group AB (publ) - CEO, President & Chairman of Nelly

* Mathias Pedersen

Qliro Group AB (publ) - CFO

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Conference Call Participants

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* Daniel Ovin

Nordea Markets, Research Division - Senior Analyst

* Nicklas Fhärm

SEB, Research Division - Country Head of Sweden Research & Analyst

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Presentation

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Operator [1]

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Good morning, ladies and gentlemen, thank you for holding. Welcome to Qliro Group Q3 2019 Conference Call. (Operator Instructions) Today's conference is being recorded. I will now hand the call over to Marcus Lindqvist, Chief Executive Officer of Qliro Group, who is joined by Mathias Pedersen, Chief Financial Officer. Please go ahead.

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Marcus Lindqvist, Qliro Group AB (publ) - CEO, President & Chairman of Nelly [2]

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Thank you, operator, and good morning, everyone, and welcome to this conference call regarding Qliro Group's third quarter results. Let's start the call by taking a look at our strategic direction and some progress made during the last quarter.

As you all know, our strategy is to operate Qliro, CDON and Nelly as 3 independent companies. We believe that this will create the best prospects for the companies, and thereby, increased shareholder value.

And in the third quarter, Qliro continued to expand its loan book and increase its profits and has connected new merchants to their platform.

CDON continued their transition to marketplace and that transition is soon completed and has proven that this business model is attractive and profitable. Nelly showed continued growth but lower margins in a challenging market.

With that said, let us take a look at our businesses and their performance during the third quarter, starting with Qliro.

Qliro offers digital financial services to merchants and consumers. And during the year, our key focus have been to attract more merchants and further strengthen our offering while preparing for an IPO in the first half of 2020. Business volumes increased by 12% in the quarter to SEK 1.3 billion. Since year-end, Qliro has signed contracts with several new merchants that will gradually be connected to our platform. As the new merchants are connected to the platform, business volume will increase, driving growth in the loan book and in turn, generating interest income and profitability.

Total operating income increased by 12% to SEK 86 million and the loan book increased by 49% to SEK 1.9 billion, delivering an EBTDA increase of 85% to SEK 19 million in the quarter.

Moving onto the next slide where we can follow the loan book development in more detail. As mentioned, our loan book grew 49% to SEK 1.9 billion while SEK 1.2 billion was for invoices, part payments and installments and SEK 653 million was for personal loans, all financed through banks, savings accounts, equity and a newly launched SEK 100 million corporate bond.

Growth within personal loans is driven by our digital marketing to existing customers, and we continue to see that over 95% of our borrowers have had an existing relationship with Qliro. This results in low customer acquisition costs and a chance for us to restrict credit granting by identifying people with good creditworthiness. Our credit assessments are automated and are based on a combination of internal and external data that we analyze in real time.

We clearly can see that Qliro now has the scale to cost effectively manage significant growth in the loan book.

Let's move to the next slide for a brief summary of our key value drivers in Qliro during the quarter. And as you can see, Qliro are on the right track as the total loan book increased with 49% and that the sales finance part show solid growth with more new merchants still signed but not yet onboarded.

Furthermore, when we leverage our existing consumer relations, we have been able to grow our personal loans with nearly 170% with solid credit scores. This, in combination with clear signs of OpEx scalability, means that we can report a healthy growth in total income and an EBTDA improvement of 84% (sic) [85%] year-on-year.

And finally, in line with the strategy, the Board of Qliro Group intends to list Qliro on Nasdaq Stockholm's main market in the first half of 2020. We believe that this provides the company with the best conditions for growth and value creation over time.

The company has grown rapidly over the last few years and is now in a good position to continue its journey as an independent company and take advantage of future opportunities in financial services for merchants and consumers.

In addition from the pure commercial aspects, the financially regulated business needs to be separated from our other activities to lift the constraints and cumbersome processes for our e-commerce businesses that comes from the consolidated situation in the group.

And as announced yesterday, this also means that Qliro is no longer being run to meet the financial targets of 2019. Instead, Qliro will continue to invest in technology and commercial capabilities in order to further expand the offering and attract more merchants.

A year ago, we started this process and it has been successful with many new merchants signed, and based on this, we feel encouraged to further speeding this up.

Moving over to CDON. CDON has now reached the final stages of its transition into a marketplace for external merchants. External merchant sales increased by 66% and CDON's total gross merchandise value increased by 1% in the quarter.

Commission income increased by 39%, which helped us boost the gross margin by as much as 5.1 percentage points to 19.9%. The successful restructuring has led to an operating profit before depreciation, amortization and impairment of SEK 2.3 million for the quarter and SEK 11 million for the past 12 months. This proves that CDON's business is scalable and profitable.

The transition to marketplace and dropshipment business creates the conditions for future growth with lower inventory levels, which, over time, is expected to provide stronger cash flows and further decrease working capital needs in the business.

The phasing out of sales from own inventories is mainly being done in the consumer electronics segment, where margins are lower and consumer electronics are instead offered by external merchants, providing a wide range of products at affordable prices. Consequently, net sales decreased by 26% to SEK 212 million for the quarter.

On the next slide, we can follow the transition in more detail. Compared to the same quarter last year, our own inventory sales have dropped from 54% to 38% of total sales. This is driven by our strategy to reduce low-margin own inventory sales but also by the increase of sales for external merchants. It is important to note that we do not aim to reduce own sales completely. Instead, we plan to keep a portion of own inventory sales for tactical reasons or when we have a sourcing advantage. The portion of own sales will also vary depending on, for example, seasonality.

Except that the transformation will be fruitful for our merchants and help us achieve profitability, the transition also leaves room for continued growth with lower inventory levels, which were 46% lower at the end of the third quarter as compared year-on-year. CDON thus significantly reduced its working capital during the quarter.

Let's move to the next slide for a brief summary of the key value drivers for CDON. As you can see on the slide, all indicators in CDON are pointing in the right direction. Our external merchants grew their business significantly through our platform, reaching over 50% of the business from external merchants and dropshipment. And external sales growth has now amounted to 43% for the last 12 months.

The enlarged assortment following onboarding of new merchants generates more visitors and we see that our new business model is more capital efficient, lowering inventory levels and increases gross margins, which has increased 5 percentage points in the last 12 months as well as in the quarter.

Finally, we can see that we strengthened our market position. And in combination with the reduction in operational costs, we have made a strong profit improvement for the last 12 months.

Overall, we have a stellar team in place in CDON that has made a terrific work over the last year, delivering spot-on to their strategy to transform their business to a growing and profitable business.

And finally, let's take a look at Nelly. Nelly increased its sales by 7% in a generally weak market. The Swedish market has been challenging and Svensk Handel, which is an employer organization, reports that the entire fashion market shrank during the quarter. Nelly, however, which has struggled in Sweden the last quarters, returned to growth in Sweden. This is our biggest market, and therefore, a very strong contribution they have in the quarter.

The number of customers and orders declined slightly while the average shopping basket increased by 5%.

Inventory levels going into the fourth quarter was not optimal in terms of size or mix, and consequently, we had a high campaign activity during the quarter. And this has also continued into the fourth quarter and this, of course, affected our product margins. And together with the weak Swedish currency, product margin decreased to 47% in the quarter.

Higher sales but at lower product margin resulted in the gross profit decreasing somewhat compared to the last -- to the same period last year. And operating profit before depreciation, amortization and impairment was SEK 5 million in the quarter. Earnings were impacted by increased investments in marketing of SEK 5 million and nonrecurring effects of SEK 4.5 million. (sic) [SEK 4.6 million.]

We're happy to see that our return rates have stabilized over the last quarters and Nelly has benefited from having digitalized the return process. It is now easier for the customers to manage returns and buy replacements products and the company gets the product back faster to -- for resale.

As we also have announced previously, Nelly intends to move its warehouse facilities from Falkenberg to Borås in 2021. This is an important step to achieve a better customer experience, more efficient logistics and increased scalability.

Borås is also a strategic cluster for distribution, providing access to more transport options and possibilities for faster deliveries. There will be no need for a workforce in Falkenberg where our current facilities are located after the move but the employees will be given the opportunity to move with the company to Borås. The company continues to evaluate how logistics will be implemented in the new facility such as, for example, the degree of automation to provide the best balance of customer experience, quality and efficiency.

Also as previously announced, Nelly's CEO, Anna Ullman Sersé, has decided to leave Nelly after 3 years in the group and a strong management team, supported by me as working Chairman, will take over the daily business until a permanent solution is in place.

That was my comments on the businesses. Mathias, could you please take us through our financials and balance sheet, please?

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Mathias Pedersen, Qliro Group AB (publ) - CFO [3]

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Thank you, Marcus. So having been through each subsidiary, I'd like to direct your attention to the overall group numbers, starting with the combined results. So the total level group sales declined 6% in this quarter as the growth within Qliro, Nelly and external merchants volumes in CDON as the [former] offset by the decline in net sales in CDON. And as Marcus said and we've said before, this has been the result of a conscious decision to phase out inventory-based sales in less profitable categories within CDON.

This is before continuing to have a very favorable impact on gross margins, which rose 2.6% for the group.

Net sales -- or percentage point, I should say. Net sales were boosted 0.4% due to exchange rate fluctuations, which, however, had a slight negative effect on the margins.

Bottom line, the net loss for the quarter amounted to SEK 13 million compared to SEK 5 million last year, which brings us to the next slide for a combined look at the e-commerce cash flow.

So the non-financial businesses had a negative cash flow during the third quarter, partly due to the seasonal pattern within e-commerce, which usually includes outflows in the first and the third quarters of the year.

Nelly increased its inventory in preparation for the fourth quarter sale season while CDON continued its business transformation, which had a positive impact where inventory will lower.

Other network and capital increased in the period following the seasonal pattern. The company spent SEK 8 million in capital expenditure in Nelly and CDON and SEK 25 million were put to work through equity contributions to Qliro.

Moving onto the balance sheet on the next slide for the nonfinancial part of the business. We had a cash position of SEK 139 million at the end of the quarter. Net cash amounted to SEK 119 million and Nelly partly utilized its overdraft facility.

On the inventory side, as been mentioned before, CDON succeeded in decreasing its need for inventory with 46% compared to last year while Nelly's inventory was higher than last year and as Marcus mentioned, Nelly right now has an inventory, which is not optimized in terms of size or mix.

Finally, if you look at the balance sheet of Qliro where we on the asset side had net lending of SEK 1.9 billion, SEK 1.2 billion in sales finance and about SEK 650 million in personal loans. This was funded mainly by the public deposits of SEK 1.5 billion. And we also have a bank multicurrency credit facility, which we used to fund the loan book denominated in other Nordic currencies, and this is still [within] the currency risks. And we also had an additional SEK 539 million in undrawn commitments.

From a regulatory capital perspective, the risk-weighted assets was SEK 1.9 billion and the own funds or the capital base amounted to SEK 372 million of which SEK 326 million was what we call Common Equity Tier 1 and the balance was made up of the newly launched Tier 2 bond capital. And the capital adequacy ratio for the CET capital -- CET1 capital was 16.9%. And if we looked on the consolidated situation, including the parent company, it was 27%. So Qliro remains well positioned for further loan book growth, supported by its savings accounts, unused credit facility commitments and its parent company.

And with that, back to you, Marcus.

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Marcus Lindqvist, Qliro Group AB (publ) - CEO, President & Chairman of Nelly [4]

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Thank you, Mathias. So with that, we are now ready to answer your questions. Operator, do we have any questions on the line?

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Questions and Answers

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Operator [1]

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(Operator Instructions) We will now take our first question. Please go ahead, caller. Your line is open.

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Nicklas Fhärm, SEB, Research Division - Country Head of Sweden Research & Analyst [2]

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This is Nicklas Fhärm with SEB Equities. My first question would actually be to -- let's just focus a bit on the actual results for the quarter. Looking at Qliro, I was wondering, where is the impact in Q3 earnings from the sale -- the gain on sale of bad debt portfolios, please?

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Mathias Pedersen, Qliro Group AB (publ) - CFO [3]

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Okay. So the -- we had a lower credit losses in the quarter due to sale of bad debt portfolios, so that's a bit of one-off in the quarter, which is -- let's see, I think it's a little bit more than SEK 1 million.

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Nicklas Fhärm, SEB, Research Division - Country Head of Sweden Research & Analyst [4]

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All right, all right. And would you say this is something that you would do like once a year, or every second year or is that something that we should expect to pop up in Q4 as well?

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Mathias Pedersen, Qliro Group AB (publ) - CFO [5]

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I think it's not something that one should see in a regular pattern but rather expect to come every once in a while. So it's hard to see that pattern but it's part of the natural variation. Sometimes, we sell off these portfolios, and in this case, it was sold off at a value that was higher than what we had in the books, and therefore, the credit losses were slightly lower. Credit quality of the sales finance portfolio also contributed to the lower credit losses for the quarter.

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Nicklas Fhärm, SEB, Research Division - Country Head of Sweden Research & Analyst [6]

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Yes. Turning back to Nelly. I was just wondering if you could walk us through in slightly more detail the gross margin split -- or the gross margin bridge, I should say. In other words, what approximately at least, were the effect from markdowns? What approximately were the effect is from FX and potentially, something else in the bridge, please?

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Marcus Lindqvist, Qliro Group AB (publ) - CEO, President & Chairman of Nelly [7]

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Well, the main driver is, of course, we do more aggressive markdowns. So basically, it's on the product margins side of things where you see the impact. And this is then going back to that we have had for a while an overstock situation and also then giving us a mix in the inventory, which is not [the sign] where we have seen that we have had too much inventories coming in from previous seasons. So that is the kind of mix effect that we also write about in the report. So that's where you had the biggest impact.

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Nicklas Fhärm, SEB, Research Division - Country Head of Sweden Research & Analyst [8]

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Yes. And a follow-up question will be on the private label share of sales that has decreased by about 3 full percentage points from Q3 last year. And I was just wondering, to what extent is the, generally speaking now, the lower share of private label sales as sort of a strategic outcome? And to what extent does it actually reflect you marking down goods that sort of should not have been in new inventory? Just to get a feel for -- I guess, my question is really where you think the private label share of sales should be in going forward.

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Marcus Lindqvist, Qliro Group AB (publ) - CEO, President & Chairman of Nelly [9]

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Well, the part of the business, it should increase. That's in general. We have been varying somewhere around 40%, 45% on general when it comes to value. In terms of units, it's above 50%. So the own labels are somewhat lower priced than the external brands. And the effect that you see here is mainly driven by that we have had to mark down, especially and be more aggressive selling out external brands. So that drives the mix on external brands upwards. So that's where you have it. So the expectation is for us to see when we kind of get this on a normalized level is that own brands should increase upwards again against a kind of 4 to 5 percentage points mark.

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Operator [10]

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(Operator Instructions) And we will now take our next question, please go ahead.

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Daniel Ovin, Nordea Markets, Research Division - Senior Analyst [11]

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It's Daniel Ovin at Nordea. Yes, I had some more question around Nelly. I understand from talking to Boozt and Zalando that they see markdowns actually quite a lot down year-over-year in Q3. So I guess, the higher level then is due to you coming into the quarter with a high level of old goods. So can you say anything about the inventory position now when you go into Q4? You expect a similar impact or is it now more than clean going into the next quarter? That's the first question.

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Marcus Lindqvist, Qliro Group AB (publ) - CEO, President & Chairman of Nelly [12]

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Well, the main driver for increased markdown activities in the quarter is due to overstock that we caused ourselves. So that is kind of self-driven. And as we also wrote about in the report, we believe that we will have to continue these activities into the fourth quarter and we also say that because we need to normalize our inventory levels to be on the right level where we see it trying to have that as -- in as good as a position as possible going into the new year. So we expect it to continue. Then if you see on a general level, we actually see quite a lot of markdown in the market overall. And if you have a shrinking fashion market on a total level, offline and online combined, that's a very tough environment to work in.

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Daniel Ovin, Nordea Markets, Research Division - Senior Analyst [13]

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Great. Okay. Then also just a question on marketing expenses. Because I was a bit surprised that you pushed a lot of marketing in a quarter where markdowns are relatively high. And as I understood it, usually those kind of quarters you can be less aggressive on marketing. So just for me to better understand, how do you think around your marketing expenditure and if it's also to better understand if it's a one-off for this quarter or it's a permanently higher level of marketing you expect also going forward. That's the second question.

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Marcus Lindqvist, Qliro Group AB (publ) - CEO, President & Chairman of Nelly [14]

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Well, for us, increasing the marketing or decreasing marketing in a given quarter is always a tactical decision. In this case, we spent more when it comes to brand marketing. So we did a lot of brand-related activities because we believe that's good for the business, not only in the short term but also in the long run. Overall, we have an ambition to be more efficient in our marketing. So we will work quite intensely on increasing our marketing efficiency going forward. It's hard for me to say and [indiscernible] on a very detailed level how this will end up in the fourth quarter. Depends a little bit on the general activity in the market but we will try to kind of hold back a little bit on cost, of course.

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Daniel Ovin, Nordea Markets, Research Division - Senior Analyst [15]

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Great. Okay. Then just a more longer-term question here on CDON. So I now understand that you have more than 50% of sales from external merchants. And if I remember correctly, when we spoke, you said around 60%-something. So is that the level where you're now getting closer to where you actually want to be or do you see now the external merchant going significantly above that?

And also then follow-up question on the EBITDA margin. If I'm correct, you were talking about 2% to 3%. And now you're around 1% but you're kind of reaching that level with external merchants. So what do we expect from here on the margin? Is there more efficiency, cost cutting coming from that side, or it's higher margin, will that be due to external merchant [growing] much further? That's my third question.

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Marcus Lindqvist, Qliro Group AB (publ) - CEO, President & Chairman of Nelly [16]

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Let's see if I can sort this out, Dan. So the first question on the kind of level or the balance between external versus own sales. It is going to vary between seasons. So of course, a Q4, we might want to use our kind of purchasing advantage in some areas and therefore, increase own sales versus external sales, and in other quarters, we might reduce it. So it will vary between quarters, but on a total level, we believe that we can [indiscernible] the level that we are now and somewhat slightly lower. So in the 60% to 70% should most likely be dropshipment and external sales in total. And we still have -- when phasing out the kind of nonprofitable own inventory sales, a part of the business that is highly profitable when it comes to own inventory sales and we, of course, don't want to phase that out but the kind of market does that for us because some of that is media and that's a declining business over time. So that's that.

And then the second question was on the EBITDA margin and what can we see on that. Well, firstly, we want to achieve what we have said, so let's get the business to the 2% to 3% profitability and we believe that we are on a good track on that. And then it's, of course, all about the kind of mix in the business, so how much own inventory, how much external business will we have and what will the growth of the external business be. But of course, we will continue to work on efficiency in the company and automate more, so we will have an ambition to increase above that. But let's first get to that and we believe that we're in a very good track on that.

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Daniel Ovin, Nordea Markets, Research Division - Senior Analyst [17]

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Right, okay. Then just last question here then on QFS. So now after divesting this -- or divesting, listing, I just wonder how the cooperation after that will be with the merchant side and the CDON side because I know that one of your advantages has been low customer acquisition costs and also taking advantage of most of the QFS customers actually being through the e-commerce side. So is that something that could potentially change? Is that something that can raise your customer acquisition cost? Or do you think is there any way that the cooperation still will be very high between CDON and QFS also after divestiture? That's my last question.

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Marcus Lindqvist, Qliro Group AB (publ) - CEO, President & Chairman of Nelly [18]

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Yes. And the way we operate it today is on arm's length, so both Nelly and CDON has agreements on market terms. That is on the same levels that we have with our external partners. So -- and of course, we will continue to be sort of -- CDON will continue to be a customer or a partner to Qliro when or after a potential listing is done. And so we don't really see any change in this as the agreements are already on market terms and at arm's length distance. So you shouldn't see any kind of increased cost on that side.

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Daniel Ovin, Nordea Markets, Research Division - Senior Analyst [19]

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Okay. Great. Maybe one last question also. Actually, I just reminded myself if it's okay. I also remember a few weeks ago there was a lot of discussions in media about payment companies encouraging customers to sign up for consumer loans and there were government officials talking about that they were going to -- have an overlook of that, et cetera. Is that -- anything that you noticed? Do you see any regulation coming up or can that limit your ability to continue to grow QFS the way you grow now? That's my last question, for sure.

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Marcus Lindqvist, Qliro Group AB (publ) - CEO, President & Chairman of Nelly [20]

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We, of course, follow this closely and we are kind of well into what could be kind of discovered in this process and we see that some legislation will most likely land or come into place, kind of beginning or early spring. And we believe that, that will be something that we'll be able to mitigate in a good way in the business. So we don't see it as a major obstacle but something we will need to handle, and of course, meet when the regulators eventually put down their foot on this side. And it's not really for the consumer loan side, it's more on the [pay off] the delivery side that they are targeting or focusing, the rest [indiscernible] moment. So yes, we're well aware of it and we don't see that as a major obstacle for the business.

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Operator [21]

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(Operator Instructions) And we will now take our next question.

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Nicklas Fhärm, SEB, Research Division - Country Head of Sweden Research & Analyst [22]

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Yes. I was just going to ask a few more questions and my first one is on, let me see now, on CDON. You say that you basically have reached where you want to be after a fairly long sort of restructuring of how you sell and how you will make money in the future. Now I was just wondering, does that actually mean that we should expect this business to have net sales growth, say, in Q4 or somewhere in 2020 again?

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Marcus Lindqvist, Qliro Group AB (publ) - CEO, President & Chairman of Nelly [23]

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No, you should not expect that. That's part -- so that part is tightly connected to the media business, which is still a rather substantial part of our own net sales and that business will continue to decline over time. It is not declining in the [indiscernible] on the levels that we are taking down the net sales today because some of this is, of course, artificially directed by us closing down categories. So it will flatten out but you will see that net sales will continue to decline over time. What is more important is that total gross merchandise value, which actually for the first quarter in a long time, grow with 1%. That number, you will -- or should expect to see us starting to grow on a total level.

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Nicklas Fhärm, SEB, Research Division - Country Head of Sweden Research & Analyst [24]

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Excellent. And secondly, this is quite far out but still, the [DC] move in 2021. Do you have any sort of initial thoughts to share with us on sort of CapEx and OpEx plans relating to that move to Borås, please?

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Marcus Lindqvist, Qliro Group AB (publ) - CEO, President & Chairman of Nelly [25]

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Well, unfortunately, not at this time. We will have to come back on it because that is something that we are currently investigating and, of course, looking into what level of automation will we aim for. The thing that we needed to start with was the actual facility, and of course, the kind of members' union discussions that you need to have in -- before even you take a decision to move. So that was kind of the first step on this process. We will, however, return as soon as possible on this and you should expect that to come within the next 2 quarters, at the latest.

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Nicklas Fhärm, SEB, Research Division - Country Head of Sweden Research & Analyst [26]

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Excellent. Two more questions, one going back to the Q3 results, and I was just wondering, did you actually spend your extra marketing costs geographically distributed or was it mainly skewed to the Swedish market, please? The SEK 5 million.

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Marcus Lindqvist, Qliro Group AB (publ) - CEO, President & Chairman of Nelly [27]

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Well, it wasn't due to -- no, no, the majority of that was, as I said earlier, brand related. And brand-related campaigns, they are typically evenly distributed in all of the countries because we reuse all branding activities in all our channels and in all of our countries. So that is something that you should see given an effect in all countries.

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Nicklas Fhärm, SEB, Research Division - Country Head of Sweden Research & Analyst [28]

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All right, all right. Excellent. And final question. Obviously, now we're moving the financial target for Qliro. I was just wondering, would you care to give us any sort of guidance for Qliro for Q4? I mean, you should know fairly well by now how the end of the year will look like.

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Marcus Lindqvist, Qliro Group AB (publ) - CEO, President & Chairman of Nelly [29]

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Well, no, not really. No, that's the short answer. We'll continue to grow, of course, and continue to try to improve results as much as possible but the majority of the kind of efforts and things that we do is, of course, to continue to kind of win new merchants and grow the business and onboard merchants. And that, of course, takes a lot of investments and costs at this current time. So that's also why we removed the financial targets because we believe that, that is more important long term to create shareholder value in this company.

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Nicklas Fhärm, SEB, Research Division - Country Head of Sweden Research & Analyst [30]

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Let me rephrase the question, final one. Do you think that OpEx to sales or any similar KPI will be sort of increased in 2020 compared to what you expect 2019 to be? Is that kind of the magnitude of increased investments, as you put it?

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Marcus Lindqvist, Qliro Group AB (publ) - CEO, President & Chairman of Nelly [31]

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No. We don't see that, that will kind of start to accelerate. We believe, as we also write in the report, that we are on the right level when it comes to kind of cost efficiently scale up the business. What we have not done is kind of driven very, very hard on reduction of costs, and therefore, kind of meeting the financial target, which would have been a possibility to kind of optimize the business in order to meet the very short-term target. And we believe that, that would be the wrong decision to do. So yes, so you should kind of continue to see scaling on the levels that we are now.

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Operator [32]

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(Operator Instructions) It appears there are no further questions at this time. So Mr. Marcus Lindqvist, I will turn the call back to you for any additional remarks.

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Marcus Lindqvist, Qliro Group AB (publ) - CEO, President & Chairman of Nelly [33]

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Okay. Thank you, operator, and thank you all for participating in the call today and for your interest in Qliro Group. We look forward to seeing you and speaking to you, again, soon. And may I also remind you that our Q4 report will be announced on February 5, 2020.

With that, thank you, and good day.

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Operator [34]

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Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.