elumeo SE (ELB) Earnings Call Transcript

Good day, ladies and gentlemen, and a warm welcome to today's earnings call of the elumeo SE following the publication of the financial figures of Q1 2025. I'm delighted to welcome elumeo's Chairman of the Executive Board, Wolfgang Boye; the CEO, Florian Spatz; as well as the CFO, Dr. Riad Nourallah. The gentlemen will speak in a moment and guide us through the presentation and the results. [Operator Instructions] And having said this, let's start with the numbers and the presentation. Florian Spatz, the stage is yours.

Many thanks, and welcome to our Q1 2025 financial earnings call. And before we look at the main KPIs, let me start with just one sentence as a general remark: Q1 2025 is a quarter in the middle of our transition to an efficient and AI-based digital video commerce. And as you know, we have responded to the challenging market context in 2024 and in beginning of 2025 with 2 cost and efficiency programs, one that we launched in the middle of 2024 and one with further measures launched on April 1 of this year. And in this first quarter, we start to see the effects from the performance program of 2024 with costs decreasing by 5.3% to EUR 5.7 million. And the further restructuring program launched 6 weeks ago is, of course, not reflected in the Q1 numbers. It will show its effect in the upcoming months throughout the year 2025. On a 12-month run rate, we expect to bring the total savings to EUR 5.9 million, paving the way for return to profitability in 2025. Later in the presentation, I'm going to show you more in detail how the current KPIs are developing after the launch of the program on 1st April. But this much in advance, in this challenging context, I'm quite happy to report that the current development is in line with our plan. But let us first look at Q1 2025. The revenue moderately decreased by 2.2% to EUR 11.1 million coming from EUR 11.3 million in the first quarter of 2024. Our web business has been able to keep a stable revenue on previous year level and this despite online marketing reductions of 9%. Gross profit margin came in at 44.7% from previous year, 48.5%, due to the continued pressure of significantly increased gold prices on our margin and also an intensive sale we did in March. The adjusted EBITDA of Q1 is at minus EUR 0.6 million coming from EUR 0.1 million last year. Our internationalization continues to grow rapidly. In Q1 2025, we reached nearly EUR 250,000, which is a run rate of EUR 1 million per year. Moreover, the customer lifetime value of the new customers of the international channel continues to develop very nicely, and also this is something I would like to show you more in detail in the upcoming slides. Our #Juwelo100 strategy remains fully in force. But due to the reduced investments, the target of #Juwelo100, so EUR 100 million revenue annually, will be delayed by approximately 3 years. Regarding the outlook for 2025, we confirm what we have presented 2 weeks ago with our full year figures, a revenue decrease of minus 10% to minus 15%, which is in line with our restructuring plan; a gross profit margin between 47% and 49%; and an adjusted EBITDA of minus EUR 0.5 million to EUR 0 million. So I'm going to skip these slides, which you all know and come directly to the key developments. Yes, this is an updated slide on the market context that you will know from our previous presentations showing the increased gold price in Q1, the golden line in the chart on the left and the decrease of the consumer sentiment index according to the Gesellschaft für Konsumforschung, the gray line, which went down in Q1. And as you can see, the 2 lines show a gap that was widening throughout the first quarter and increasing the pressure on our margin. And the dramatic increase of the gold price becomes even more evident when comparing gold prices to last year. This is something you can see in the chart on the right side. Between March 2024 and March 2025, the gold price increased by 45%. But we also see, what I already said 2 weeks ago regarding the first weeks of Q2, stabilization of the gold price. And regarding the consumer sentiment index, the gray line, in May, a slight recovery of the consumer sentiment. And in general, regarding price increases and gross profit margin in the past 17 years, we have always succeeded in passing on price increases to our customers. It's just that in the context of the low consumer sentiment paired with these high increases, it takes some more time. Price increases cannot be passed on immediately. Regarding our TV business, another factor has played a significant role in Q1, the ending of the cable TV service charge privilege, so the Nebenkostenprivileg. It caused a loss of connected cable TV households of 29% if we compare data published from Vodafone reporting, so official data on German TV and cable customers between Q1 2024 and Q1 2025. The main negative effect on our TV business became visible in Q1 of this year and brought down our TV revenue by 8% in the first quarter. And here on this slide, we presented this effect a little bit more in detail. So we have the loss of cable TV households on the left side, which led to a massive drop in active customers in our German TV business of 27% in Q1 versus previous year quarter. At the same time, the impact on our TV revenue has been reduced to only 8%, thanks to the measures we have already taken in 2024 as part of last year's performance program, which is an increased airtime for higher price points and the focus on customers spending higher revenue per customer. Regarding our web business, we have been able to improve profitability, reducing the online marketing expenses in the first quarter of 2025 by 9% versus previous year quarter, and at the same time, keeping the revenue stable at EUR 4.1 million. And also here in line with our strategy of higher price points and more profitable customers, we have been able to increase the average revenue per piece sold by 14% from EUR 70 to EUR 80 and to improve the revenue per customer significantly by 26% from EUR 180 in the first quarter of 2024 to EUR 226 in Q1 of this year. So as I said 2 weeks ago, with our web business, we continue to make improvements with a smaller number of customers and a smaller number of pieces sold, but more profitable customers and more profitable pieces. And later on, when I'm going to present you an update on the current development in the second quarter of this year, you will see that web has returned to quite a substantial growth rate of 10% in the first 6 weeks of the second quarter. Now I would like to give you an update on our AI-based internationalization 2.0, so our AI multi-language platform that records our existing German live TV shows and then translates it and adapts the show to all foreign languages that we define and distribute the local language shows internationally via our "Gamerobot," so our system for automated shopping shows. You can see on this slide that despite the challenges in the market and the limited financial resources, we could invest in our international channels. We continued to be on a good track. The growth rate of our international channels in Spain and Italy improved from 11% Q3 to Q4 to 18% from the fourth quarter to Q1 of 2025, reaching a 12-month run rate of about EUR 1 million per year. And the next country will be Poland. We are currently negotiating with several -- with different Polish reach providers, network operators. And here, thanks to the multicurrency back end, we are now also ready to process foreign currencies such as the zloty. And we are preparing also to start distribution in the Netherlands throughout 2025. And as I said in the introduction, I would also like to give some insights on the development of the customer lifetime value. So the accumulated gross profit per new customer over the time, which is continuing to develop and to grow very nicely. In the first month, the international new customers make an average gross profit per customer of EUR 94. And after only 6 months, thanks to continuous purchases of the customers, the customer lifetime value goes up to close to EUR 300 gross profit per customer. And we see in this a proof that customers like to watch our international shows. They get inspired by the products that we present and they come back on a regular basis. Moreover, if we compare the international customers with customers of our main German TV program, which is the gray line in this development of the customer lifetime value, we can see that the international customers are in no way inferior to the German TV customers in terms of profitability. And in our view, this is all the more remarkable as our international shows are being generated at much lower cost than our German live TV production. So this development gives us a great basis to grow revenue and gross profit not only with new customers, but also with existing customer cohorts growing their lifetime value. With our international channels, we are currently reaching only 24% of European households. So the growth potential continues to be very high. And as I said, our financial resources are limited. Therefore, we have to be careful with our investments. And as I said, the #Juwelo100 target has been postponed by up to 3 years. However, the strategy remains the same and the internationalization remains a core pillar of our #Juwelo100 strategy. So far, we have looked at January to March of this year 2025. But of course, as we have done already in our full year 2024 earnings call, we would also like to give you an update on our further cost performance and efficiency program executed 6 weeks ago on April 1. Just as a reminder, a little summary of this program, which was based on 3 pillars. The first pillar is a reduction of live TV hours from 15 hours per day to 10 hours per day. The 5 hours switch from live TV to our fully automated "Gamerobot" shows, a system that we use also for our international channels. The second pillar is the company-wide implementation of artificial intelligence to increase platform efficiency and to reduce personnel costs in a significant way. And third, a reduction of products with a selling price below EUR 50, decreasing the number of pieces sold by 40% according to our plan and thus also decreasing all volume related, so all pieces-related costs from personnel costs in customer service, logistics department, merchandise, QC, article planning, et cetera, to shipping and packaging costs. And in total, we expect cost savings in the volume of EUR 5.9 million on a 12-month run rate compared to 2024. On this slide, we would like to give you an update on the main KPIs regarding the performance in the first weeks of our further cost performance program, comparing our planning and assumptions that we presented to you on April 1. On the left side in gray with the actuals of April; in the middle and May to date, on the right side. And as you can see, if you compare the plan with the actuals in April, the column in the middle, we have already been in April in line with most of the KPIs. So the decrease of pieces in April was exactly at minus 40% as planned. The revenue was very close to the minus 14% with minus 15%. Only the gross margin was lower than planned with minus 22%. If we now look on the right side at the development in May, all KPIs have improved and also the gross margin is now in line with our plan of minus 14% year-over-year. Of course, please keep in mind that this is just a preview based on less than 2 weeks of May. But because we have undertaken some very significant changes to our business, it was important to us to give you an insight into the current positive, and I think, quite promising development. And as I said 2 weeks ago, we are relieved that our strategy is working and our assumptions have been confirmed with the actual figures. And here, you can see the split of the total revenue decrease of minus 14% into the 2 main revenue streams, the German TV revenue in the middle and the online web revenue on the right side. And while we see for TV, not surprisingly, after such a significant restructuring, a decrease in revenue, our web business is back on growth track, increasing revenue by currently 10% comparing the first 6 weeks of Q2 2025 with the first 6 weeks of Q2 2024. So in summary, with our efficiency and cost performance program, we laid the basis for an accelerated transition to digital and automated commerce, which will be the basis for profitable growth. And now I would like to hand you over to Riad.

Hello. Let us come to the financials and make then outlook there. Revenue decreased by minus 2%. So our margin is still under pressure. And as Florian pointed out, so that is quite stable, but overall, revenue decreased by 2%. We had to face increasing gold and silver prices, and especially in March, there was intentionally by intensive sale. So the gross profit margin decreased from 48.5% to 44.7% Overall, the gross profit decreased by 9.8%. Our clear target is to reduce our expenses, and this is also the reason why we initiated our program. Total expenses reduced by 5%, but we nevertheless faced an adjusted EBITDA, which decreased. Total expenses reduced from EUR 6 million to EUR 5.7 million, mainly driven by the decrease in personnel costs. Our adjusted EBITDA from EUR 148,000 decreased to minus EUR 551,000. The main point of adjustments are legal fees. Our outlook 2025 is confirmed and it show -- lay the basis for the return to profitable growth. Revenue decrease by minus 10% to minus 15%, adjusted EBITDA in the range of minus EUR 0.5 million to EUR 0 million and gross profit margin in the range between 47% and 49%.

Okay. So many thanks. This was the presentation of the Q1 2025 figures. And I think that now we are proceeding with the Q&A session, right?

That is absolutely right. And we now move on to the named Q&A session. [Operator Instructions] Well, it seems that everything looks pretty clear. Good on you. Very precise presentation and numbers. So well, we did not receive any questions, and therefore, come to the end of today's earnings call. Thank you for joining. And I, so to say, thank you to you, Mr. Spatz, Mr. Nourallah for the presentation and the numbers. I wish you all a very nice and lovely remaining week. Stay healthy and safe. And with this, I say goodbye. See you the next time.

Many thanks. Goodbye. Take care.