Qliro (Stockholm:QLIRO) Q3 2026 Earnings Call

0:00 Hi and welcome to our quarterly presentation for Q3. I'm Kristoffer Rutgersson, CEO of CLIRO since a bit more than four years. Today we walk through first some strategic highlights as usual, then some detailed financials, talk a bit about the outlook going forward, and then we'll move into our Q&A. So first of all, we still see a big opportunity to build a new European leader in Composable Payments and we're well on that journey on our mission to deliver a world leading experience for merchants and their customer journey. Secondly, Q3 marks the third profitable quarter in a row, lifting the profit significantly from the investments and losses we saw last year related to the international expansion.

0:48 Third, we are growing our volume growth by 18% in the quarter. That could be compared with growing 50% in Q3 last year, so we also have a quite strong comparable quarter. This growth was primarily driven by SME and our Nordic expansion, as well as driven by a strong growth in our PLAT product, especially on the DMPL volumes growing 27%. Our gross profit is increasing more than net revenue, growing 37% in the quarter, compared to net revenue growing 21% in the quarter, fueled by the reduction in credit losses that we see in parallel to the growth journey.

1:33 Fifth, we'll also talk about the new consumer credit directive. We're well prepared for the implementation happening across the Nordic markets in November. And we've also seen similar regulations in the past and it has not significantly impacted the business. historically, so we can have quite well prepared for what's coming. Sixth, we see profitability still for the full year and growth for the full year. However, we do see that we have some short term headwinds, especially in the enterprise segment. So we expect slightly growth in the short term. They expect to be back at above 50% at the latest from H2 next year. So first of all, on our vision to become the new European leader in composable payments, we have done significant product improvements during the quarter. So I just want to walk through some of them to give you a flavor of where we're heading. First of all, the checkout generation four that was launched just before summer still sees very strong results and are now out on most of our merchants.

2:47 For merchants that are shifting to Cliro to competitors, we typically do AB tests and we see strong conversion improvements for merchants upgrading to Cliro. And we're also doing a big conversion campaign on this now for new merchants. As part of that, we also have our kind of upsell module as well as kind of new validation of consumers and addresses, which is kind of driving this kind of conversion increase. Connected to the checkout generation four, we also launched a variant of a one-click checkout for returning consumers that's now live on a few of our top five merchants with very strong results. And that will be rolled out to more merchants during the coming quarter and for some merchants after the Christmas sales period.

3:34 Typically, we save the consumer preference for the consumers that are returning, enabling them a quicker checkout for the coming purchases. Third, we are expanding with new payment methods again. We have been a bit stable on this for a while as we have improved our solution in the Nordics but as you know we are enabling Nordic merchants to sell across the globe and we're now taking the next step with enabling more local payment methods across Europe to localize the experience for consumers and hence increasing the conversion in local markets. First out was two payment methods we launched in Q3. Blick, a local payment method popular in Poland, and Vero, a quite new bank-owned payment method that's launched in Germany, France, Belgium, and is supposed to be launched also in Netherlands as ideal is becoming part of Vero going forward.

4:29 So it is improving our competitiveness for all merchants selling cannabis outside the Nordics. And fourth, we announced during the summer a partnership with the P-Pro will be becoming the exclusive BNPL provider in P-Pro's networks for their merchants selling into the Nordics. That's progressing well, and we expect it to be live with the connection during early next year. So during the last two years. We have made significant growth investment to expand our sales across the Nordic markets. We launched Norway in Q3 2024. We launched Finland in Q2 2025.

5:15 And we see now that those investments have resulted in profit for 2026 so far for three quarters in a row. Volume growth is slightly declining compared to previous quarter but also meeting high comparables in kind of end of last year. We see a strong growth on gross profit driven by the volume growth. So we are growing gross profit to basically our net revenue after variable cost and credit losses by 37% in the quarter. And it's that profit growth that is now higher than our fixed cost. And we expect that also going forward as gross profit continue to grow. Even if the volume growth in total is declining in this and last quarter, we still see a very strong growth on the BNPL volume growth, which has been lagging a bit behind the total payments volume growth as new consumers are typically starting to pay with an invoice before they start using our BNPL products. So we expect the BNPL volume growth to be strong also going forward.

6:28 The share of the BNPL volume is still above 16%. which is an important metric to follow to see how the volume is converting into our most profitable part payment products. A very large share of the volume growth is now driven by the SME segment. In the quarter, our active merchants grow 90% compared to last year, and that's mostly driven by SMEs. We're now close to 900 active merchants on the platform. In contribution to our net revenue, the SME segment is contributing by more than 100% growth compared to last year, now representing 28 million in run rate in Q3, which is 26% of our total net revenue.

7:21 We can also see the cohorts here in color. So every color is the cohort of when the merchant was onboarded. And we can see that most cohorts are actually still growing or stable in terms of net revenue. So a very strong kind of net revenue retention in the SME segment. As part of the SME expansion, we're also selling to SME in Norway and Finland, and of course also Enterprise. But our Nordic volumes are mostly driven by SME, given that the Enterprise segments are a bit slower in terms of sales process in new markets. So in total, our volume grow a bit more than 20% in Norway and a bit more than 30% in Finland in Q3.

8:10 Norway is now also profitable for the second quarter in a row on a standalone basis. If you look at the local sales and marketing and office cost compared to the gross profit contribution of the local merchants we signed since launch. So that's very positive that we are within two years profitable in a new market. We also have kind of strong dialogues with larger merchants and partners in both markets and we expect the Nordic market expansion to significantly contribute to our growth also going forward. The second part of our international strategy is also to support our local Nordic merchants to sell across the globe. That's something we have done for many years, but we're now taking the next step and launching more local payment methods for the markets that are most interesting for our existing merchant base.

9:05 So in this quarter, we launched Blick in Poland and we're launching Vero in Germany, France and Belgium. Those payment methods are now live with the first merchants. We're rolling that out on existing merchant base and also using this to be more competitive in new dialogues with new merchants. Given that most of our technology development is now also driven by AI, we foresee that it will be even quicker to launch new payment methods going forward. So we expect a fairly rapid expansion of payment methods across the European market in the coming quarters. And last but not least, during the summer, we launched or announced the partnership with P-PRO to become an exclusive provider of BNPL products in their network of PSPs, checkout providers, and global merchants.

9:52 And that's an important part of our strategy to enable European or global merchants to sell into the Nordics using CLIROS pay later products so we can process those volumes on our invoice and BNPL products. and that's expected to go live early next year. In terms of revenue and gross profit growth, our net revenue has been accelerated to 21% in the quarter. As part of that, we also see that credit losses are continuing to go down, and it's now on a rate of 0.52 in credit losses over volume, which is fueling the gross profit growth even more than the net revenue growth.

10:37 So we have a gross profit growth of 37% in the quarter. which is more in line also with the growth of our BNPL volumes. There is a new regulation coming. There's been a lot of news about this across the Nordics and Europe during 2026, the revised Consumer Credit Directive. CLIRO is well prepared and we are adapted for the new regulation coming to force on 20th of November. We're quite experienced also with similar regulation and most of the components in this regulation have already been enforced in bits and pieces across the Nordics. We've seen most of it before and it haven't really impacted the consumer and merchant experience. So we're quite comfortable with the change that's coming and we're now rolling out a couple of changes across our solutions both towards merchants and consumers across Sweden, Finland and Denmark.

11:38 Norway have not announced when they will adopt the regulation, but that will also probably come a bit later. The maybe most significant element of this is that we will have strictly stricter credit assessment by more external data. We're already doing credit assessment on all transactions, we're not buying the full data that the new regulation requires, which means we will probably have 5 to 10 million in additional variable cost going into next year compared to the past. And that may be the most significant financial impact that we expect from the regulation. However, you also see slightly longer sales cycles in the enterprise segment. So typically when a large enterprise merchants are choosing new providers, they want to be certain about everything. And CCD2 is introducing some uncertainty about both how different players are integrating the regulation and how that may affect the kind of the consumer experience and the merchants.

12:41 Most large merchants prefer to wait a bit until this is kind of fully certain and you can see everything. So probably we expect one or two more quarters before kind of a pickup in the enterprise segment for large merchants. So in terms of guidance, we're still guiding on profitability and growth for the full year 2026. But in the short term, we expect a slowdown on net revenue growth, both due to the previously announced churn in the enterprise segment, as well as that we see longer enterprise sales cycles due to the uncertainty around CCD2 that will probably stay here until kind of year end.

13:26 We also have some temporary positive effects from earlier this year. that kind of are tapering off and it has impacted comparables in the coming quarters. However, we expect net revenue growth to be back at at least 15% growth rate by the second half of next year. And that's basically only driven by our strong underlying momentum in SME. New enterprise agreements or platform and partner deals will kind of add further to that growth. But we're not accounting for that now before we see that that's kind of fully opening up again. So let's jump into the financial details. I mentioned a lot of this already. Our volume growth is growing 18% in the quarter, net revenue 21%, credit losses are fairly stable in absolute numbers, even if we're going down a credit loss rate of 15%.

14:23 Our gross profit too is growing 37% so gross profit is still above our fixed cost. We're making a small profit in the quarter and the operating profit is hence increasing quite significantly compared to the losses we made last year when we were still investing aggressively in growth across the Nordics. The loan book is growing 9% so we see a small acceleration in the loan book growth but the loan book is still growing slower than our pay later and especially the BNPL volume growth given that we see slightly shorter duration in the loan book. both given the current product mix as well as that as more consumers are paying on time and we see less credit losses that also builds up slightly lower loan book and overall that is increasing also kind of the gross margin on the loan book which is very positive so the loan book is now more profitable than before on average we also said that the BNPL volume as share of TPV is on kind of a higher level than we've seen in a long time which is very positive because these are the most profitable part of our kind of transaction volume As mentioned, net revenue is growing 21%. It looks fairly stable over the last few quarters, but typically we see a big uplift with the seasonal sales in Q4 and kind of building up also the profits and net revenue into Q1.

15:56 on credit losses, as mentioned in absolute numbers, stable compared to last year. But our debt collection ratio is also kind of declining 13% compared to last year. And the debt loss ratio compared to volume is declining 15%. It's very positive that we still see kind of depth collection rate also kind of coming down further was that we expect to materialize into kind of lower average losses kind of going forward. So we still have expectations for any further improved credit loss performance also from a financial perspective going forward. the cost side we've been very disciplined on cost control the total cost in the quarter is 93 million sales and marketing is slightly up so we're very effective on kind of our other fixed cost and we expect also to continue to be very strict on cost control until we see kind of larger profits going forward And this is also very much driven by our kind of AI investments internally. So we are implementing AI across all teams, all processes. And we see large gains from this, especially on the product and technology side, where we reduced capex very significantly last year.

17:12 But we also see kind of the impact on that now in a lot of processes across the organization. And that's enabling us to scale without adding a lot of fixed cost. From a profit perspective, profitable three quarters in a row. Fairly small profit, but a big difference compared to the losses we were seeing last year, given the investment we were then making in the expansion. From a CapEx perspective, as mentioned, we're now very effective on CapEx. We're down from 33 million last year in Q3 to 21 million this year, very much driven by a rollout of AI tools across our product and tech teams.

17:59 We actually see a larger output from our tech teams now than a year ago, despite the lower CapEx. And on the capital side, we still well capitalized given the rights issue we did during the spring and that we're now profitable. So let's move back to the outlook. So if you look ahead, we're working hard to continue to accelerate our SME sales engine and get the enterprise kind of processes moving forward. we want to continue to build our growth momentum on the early success in our launch in Norway and Finland and we're also expanding with more local platform partners which is expanding our addressable market in both Norway and Finland initially we have been selling mostly towards merchants that using either kind of global e-commerce platforms or Swedish e-commerce platforms that we've already been integrated to in the past. But we're now getting connected to more and more local platforms, which is significantly expanding our opportunity to sell in the local markets.

19:09 And we are also continue to focus on initiatives accelerate income generation improve scalability and efficiency and we're still guiding on profitability and growth for the full year 2026. short term however we expect a slowdown in the net revenue growth as mentioned and we expect to be back to at least 15 net revenue growth by the second half of next year thank you If you wish to ask a question, please dial 5 on your telephone keypad. To enter the queue, if you wish to withdraw your question, please dial 6 on your telephone keypad. As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad.

20:27 There are no more phone questions at this time. So I hand the conference back to the speakers for any written questions and closing comments.

20:47 Okay we have a few written questions so first of all are you still expecting SME growth to remain solid given that your guidance for 50% growth in HR next year seems to exclude larger enterprise deals and yes we see a very strong momentum in our SME sales engine across all Nordic markets and we expect that to continue or accelerate. We also have a question regarding regulatory reductions on our core tier 1 capital. That's primarily on prudent amortization of inter-annual assets as well as the cost of our additional tier 1 capital. And we also have one question about the development of stage three loans. And that is primarily a difference between how much of the stage three portfolios we're selling in the quarter compared to previous quarters.

21:55 Thank you. If there's any other questions, don't hesitate to reach out to our investor relations. Wish you all a nice day and we'll get back after next quarter. Thank you.