Cdon AB

STO:CDON

Earnings Call Transcript 2022-Q1

[Peter Kjellberg, executive]

Thank you, operator, and good afternoon, everyone. Slide 2, please. Today's presentation will be conducted by myself, Peter Kjellberg, CEO at CDON; and by our new CFO, Thomas Pehrsson. Slide 3, please. The agenda for today contains a quick introduction to CDON followed by a Q1 update, Thomas will then present our financial performance and I will end the presentation with a summary and an overview of our priorities going forward. After that, we will open up for the Q&A session. Slide 4, please. So let me first give a quick introduction to CDON. Slide 5, please. Globally, more than 50% of all e-commerce goes through marketplaces. This has resulted that in Europe the majority of the market-leading companies within e-commerce are our marketplaces. CDON is the leading Nordic marketplace where we have attractive products at the best prices enabled for our marketplace business model in the Nordic markets with 360 marketing on a model scalable platform to loyal customers.

We offer approximately 12 million products in core categories on our site. It's everything from simple everyday products to premium capture goods, well-known and respected brands like Apple, Samsung, LEGO, et cetera. We have about 1,500 active merchants operating on one or several of the Nordic markets. Sweden is our biggest market, but we aim to grow on all Nordic markets. We work with -- enter into campaigns with focused messaging spread across multiple points of customer contracts. The brand CDON is very well known. CDON has the highest brand awareness in the Nordics compared to our closest marketplace competitor. We have stronger overall levels throughout the brand funnel and we managed to convert a higher share of consumers in the loyal funnel. We have today about 90 million visits per year and 2 million active customers. It's impressive numbers, but our scalable platform is prepared and designed for further product merchants and customer growth.

Slide 6, please. I think this slide sums up our offering in a very good way. Our aim is to become a starting point of shopping in the Nordics and the sales engine for merchants. To the consumers, we offer the widest assortment in one place at the best prices with a great customer experience, including a single checkout and convenient delivery. To the merchant, we give access to millions of consumers with an improved customer experience and access to tech and to data. Next slide, please. In the next slides, we will go through a summary of the quarter. Slide 8, please. During the first quarter, CDON Marketplace GMV grew by 4%. We are performing better than the Swedish e-commerce market as a whole, which decreased by 4% in January, 17% in February and 17% in March compared with the same months of last year. Altogether, the market decreased with 13% during Q1. I think this showcases strength in our business model and the attractiveness of our offering.

Electronics was the category with the largest decrease in the overall market, about 25%. Electronics is one of our core categories and we grew 11% in the quarter. Net sales for CDON Marketplace increased by 10%. Our strategy is to phase out 1P sales and prioritize our 3P business. The decrease of CDON Retail's net sales by 33% is therefore according to our plan. Our gross margin increased by 11.2 percentage points to 47.7%. In the quarter we laid the foundation for our growth journey and we took significant costs to keep up speed. Costs were related to recruitments aiming to strengthen the management team, the interim management leaving early Q1, our projects related to our brand repositioning, the incentive program for key employees and acquisition costs related to Commerce8 and Xales. We estimate that SEK 10 million of the costs are one-off nature. To keep a high transformation pace, we have engaged a number of consultants who will gradually be replaced by our regular employees during Q2 and Q3.

We expect the higher cost level to partly continue in Q2 and to be phased out from there. While we have challenging market environment, we also have significant room for improvement in our own market acquisition processes within SEM, SEO and CRM. The digital market function has been strengthened and we have intense focus on this area. All this is fundamental to be able to generate a positive operating cash flow in the foreseeable future. Slide 9, please. I'm very happy to announce that the group management now are complete. During the quarter we got Thomas Pehrsson onboard as Chief Financial Officer, Madeilene Södarv as Chief Customer Officer and Magnus Nanne as Chief People Officer. All are experienced and senior leaders with great track records. I'm also glad to welcome our new Head of Technology, Martin Lundhgren, who started in February.

It's very satisfying to see that our internal work with creating Malmo's best workplace is starting to get results, that our eNPS score continues to develop in a positive trend. We have launched a long-term incentive program for CDON's management team and management of subsidiaries. The purpose of the proposed program is to create strong incentives for management to drive the long-term performance of CDON, to attract and retain key competence and to align the interest of the participant with the shareholders' interest. Slide 10, please. Our rebranding project progresses according to plan. The ambition is to develop CDON into a loved brand in the Nordic markets. A loved brand has more loyal consumers, increased pricing power, more advocates and lower consumer acquisition costs not to mention the ability to attract better talents. We are therefore looking forward to launch a more relevant and differentiated CDON brand towards the Nordic shoppers and merchants during the latter part of this year.

Slide 11, please. We are currently adding more resources to improve the capacity and structure of the marketplace assortment. This is according to our growth strategy, Winning the home, which includes the prioritized categories of Electronics, Home & Garden, Health & Beauty, Sports & Outdoor, Toys and Books. This will have a very positive impact on the customer experience on our site and the loyalty of our customers. in a turbulent world, consumer needs and behavior will shift over time. The wide assortment of CDON Marketplace makes it less vulnerable if demand shifts within a certain category. With 12 million available products, we have a unique opportunity to fast curate assortment and campaigns. The new category Prepping products I think is a very good example where we clearly showed our ability to act swiftly on a growing need. In a matter of hours did we curate an assortment of prepping products and made it available online to our customers.

I foresee that we will act a lot more like this going forward: quicker, more proactive, more agile. Slide 12, please. During the quarter, the number of selling merchants on CDON Marketplace increased to 1,529 merchants. It's an increase by 13% compared with last year. The first step toward our increased Nordic presence has been taken in Norway where we expect positive effects during Q2. Denmark and Finland will follow during the second half of the year. We have optimized the complete sales process towards merchants during the first quarter. Our lead identification efforts are now focused on the need assessments of Winning the home categories. We have improved the segmentation of the Nordic merchant market and the implementation of Salesforce CRM system is now ready to support efficient follow-up of every merchant account.

Our new business-to-business marketing team will assure that we reach and attract more merchants than ever before in all 4 markets. Our new international partner sales team onboarded 2 major European aggregators during Q1, making it easier for European brand owners and e-tailers to reach a Nordic market through our platform. Next slide, please. We have released a feature for subscription. Releasing monthly subscriptions on CDON+ is a first step in the direction for enabling subscriptions to selected products in certain categories. It will be further extended to more products in other categories going forward. Improved implementation of CDON Buy Box with CDON's unique identifier is taking our Buy Box functionality to the next level regarding user experience. This functionality will result in an improvement in SEO as we will only send our best version of a selected product from CDON to search engines and price comparison sites.

The customer value of this feature will be that customers will be able to see all of the same products on a single page with the most attractive ones having been placed directly on the page without needing an extra click to reach them. To increase consumer touch points and also brand visibility of course, we have developed a native CDON mobile app. With this, we will find an easy way to connect with our customers and introduce new traffic channel as approximately 80% of our customers use their mobile device for purchases. We are right now testing the functionality with focus groups. For better user experience when it comes to product recommendations on front and product pages, we have started an implementation with a third-party product. The goal is to personalize the front page for each individual customer and make it more easy and more personalized to find similar products related to what a customer is looking at.

An incremental improvement to product data was made during Q4 with the categorization technology delivered by Shopit. During the first quarter, 99% of CDON's 12 million SKUs have got enhanced categorization and product data. This results in a higher conversion rate and an improved on-site customer experience. With the improved product data, traffic acquisition for SEO and SEM will be more efficient and cost effective going forward. We have started a number of activities to improve traffic and increase funnel and conversion. These are results of the work we'll show later this year. Our customer loyalty program CDON+ was relaunched in Q4. It's developing according to plan and we work continuously to improve the program. We grew the number of members during Q1 with 165%. Next slide, please.

Now I would like to give the word to Thomas to present the financial performance.

[Thomas Pehrsson, executive]

Thank you, Peter. I am pleased to present my first report as CFO at CDON. I've been with the company since the beginning of March so it has been around 6 weeks so far. Let's move to the financial performance. Next slide, please. Group income statement. Despite a market that decreased during the first quarter, CDON Marketplace GMV grew by 4%. Together with increased commission levels, this led to a gross profit which was 12% higher than the corresponding period last year. According to plan, we are phasing out our retail business and as a consequence of that, the net sales and gross profit for this segment decreased. Because we are investing in activities for future growth such as marketing, product categorization and attracting key resources; we have recognized higher expenses specifically in this quarter compared to the same period last year. This means a lower EBITDA than the first quarter last year. However, now we are building for future growth.

Next slide, please. Group balance sheet. Last year we acquired shares in the associated company Shopit as well as a minority stake in Xales and Commerce8 so our fixed assets have increased compared to the same period last year. As I said, we are phasing out our Retail business and this leads to a lower inventory. The total equity is higher than end of first quarter last year due to the rights issue that took place in the third quarter of last year. Next slide, please. Group cash flow statement. We recognized a lower operating result versus the same period last year mainly due to specific initiatives to enable growth. However, due to an improved working capital with regards to decreased short-term liabilities versus last year, we're ending up with an improved cash flow versus the same period last year. The operating loss together with the decrease in operating liabilities, however, means a negative cash flow for the period. Next slide, please.

Thank you and over to you again, Peter.

[Peter Kjellberg, executive]

Thank you, Thomas. Next slide, please. So to sum Q1 up, we grew 4% during the quarter despite challenging underlying market. We show growth in our core categories like in electronics. In the quarter, we laid foundation for our growth journey. We took significant cost to keep up speed. We expect the higher cost level to partly continue into Q2, but to be phased out from there. We have now a complete and competent management team in place. The repositioning of CDON progresses according to plan. The number of selling merchants on CDON Marketplace increased with 13% during Q1. Our Norway expansion is ready to be launched. The digital marketing function has been strengthened and we have intense focus on this area. 99% of CDON's 12 million SKUs have been enhanced with a categorization of product data resulting in higher conversion rates and improved on-site customer experience.

Next slide, please. So we have a lot of activities going on to continue to develop CDON's business. It's a mix of course short-term, long-term initiatives that goes only in our daily work. But we also have a very clear set of priorities that we shall deliver upon. We will strengthen the perception and the attractiveness of the CDON brand, we will deliver a better customer experience that we are doing today, we will win the homes with our core categories, we will expand the number of merchants in the Nordic region, we will develop additional revenue streams and we will become the best place to work in the Malmo region. Next slide, please.

So thank you all for listening. And with that, I would like to open up to the Q&A. Next slide, please.

[Operator]

[Operator Instructions] Our first question comes from the line of Brad Hathaway from Far View.

[Brad Hathaway, analyst]

Peter, thank you for a very informative report. I wanted to dig a little bit on to the SEO and SEM traffic issues. Specifically, kind of as you mentioned the challenges in the past with categorization and duplicate pages and where you're at with that kind of now you mentioned a step on categorization. But I'm curious with all those things that have hampered SEO and SEM, how the progress has been and how you see the potential impact of that progress on traffic going forward?

[Peter Kjellberg, executive]

We don't give predictions on future traffic and [ footfall ]. We have a -- in Q1 we had a decrease of 10%, which was 5% was due to technical issues related to last year and then of course the lower market demand was also impacting us. But we have put this as our, I would say, probably highest priority among many priorities to fix the digital marketing issues. So there's a lot of investments and projects. I wouldn't say investments, a lot of projects go on and are focused on increasing both regarding the paid and nonpaid traffic going forward.

[Brad Hathaway, analyst]

Okay. I'm not necessarily asking for specific numbers here. I'm just curious kind of more qualitatively. My understanding is it's Google has challenges when there are duplicate pages and challenges when the categorization is bad and that hurts traffic and continued to kind of hurt it recently because it hadn't been fixed until very recently. Is that a fair assessment?

[Peter Kjellberg, executive]

That is of course an ongoing work, Brad. As I said, we have categorized 99% now. So it's -- I can't say anything else than it's work in progress, Brad.

[Brad Hathaway, analyst]

Okay. Great. And obviously CDON+ still got good growth there. Is there anything you can say about, I guess, the behavior of customers on CDON+ and how it kind of differs from your other customers at this point?

[Peter Kjellberg, executive]

We grew CDON+ from quite small label to be very honest, but this is super interesting for us of course because we have in between like 4 to 5 higher purchase volume from our members than the average other consumer.

[Brad Hathaway, analyst]

Got it. So 4x to 5x higher purchase so almost a little closer to kind of habitual purchasing. Okay. Great. Looking forward to seeing the expansion into the other Nordics and the new brand later this year. Thank you for all the efforts.

[Operator]

And the next question comes from the line of Nick Fharm from SEB.

[Nicklas Fhärm, analyst]

So my first question will be on the take rate. So I guess just thinking loud to be honest, but I guess because of the weaker main category sales within electronics, that's probably a main driver for the take rate ultimately. And my follow-up question is if you could give us any idea of what you're thinking in terms of underlying changes to or development in the take rate going forward, if you understand the question? So to separate the question into mix versus the sort of active strategic changes to the way you charge commissions, please?

[Peter Kjellberg, executive]

Could you specify a little bit what you mean?

[Nicklas Fhärm, analyst]

We can't hear you, Peter.

[Peter Kjellberg, executive]

Can you hear me now?

[Nicklas Fhärm, analyst]

Now it's much better.

[Peter Kjellberg, executive]

Sorry for that. Could you specify it a little bit what you're after?

[Nicklas Fhärm, analyst]

Sure. So my question is really since let's say electronic sales are typically big ticket items, the commissions for take rates are rather low compared to the average mix. Is that a fair assumption?

[Peter Kjellberg, executive]

Yes.

[Nicklas Fhärm, analyst]

I can't hear you.

[Peter Kjellberg, executive]

Yes, it's a fair assumption.

[Nicklas Fhärm, analyst]

So my question is really how should we look upon the gross margin development in this quarter given that I understand most likely that the -- a significant explanation for the substantial increase year-on-year in gross margins is probably because of mix effects in your GMV, right? So my question is can you confirm that? And secondly, my question is how do you look upon in more fundamental terms where your take rates should be going forward? Is there any discussions internally to try to charge a higher commission or is the market not there yet, et cetera? Some kind of discussion around the take rate would be very appreciated.

[Peter Kjellberg, executive]

We have not actually adjusted our commission rates during last year. As I foresee it now, I don't see that we will adjust it more during this year.

[Nicklas Fhärm, analyst]

Okay. All right. But last year, it was lower, right? Actually at least the outcome was lower than in 2020. So should we contemplate that these levels are not going to change from a structural point of view going forward? Is that what you're saying, Peter?

[Peter Kjellberg, executive]

No, it's a mix question. It's all related to the product mix.

[Nicklas Fhärm, analyst]

Okay. So it is mix, right? So then my follow-up question is do you see any reason to change your take rate given Amazon, given the competitive environment, given the market? Any other reason to actually change the take rate other than mix in 2022 onwards?

[Peter Kjellberg, executive]

Not as we can foresee now, no.

[Nicklas Fhärm, analyst]

Okay. Sorry for complicating the question. My final question, if I may, goes to the partly I guess investment-driven cost development in Q1. Now if we assume that you have say SEK 10-ish million in cost that's not necessarily going to reappear in the upcoming quarters or in Q1 next year. Still how should we look upon the need for actually taking on more costs and growing costs in Q2 onwards as well apart from the SEK 10 million if I may say so?

[Thomas Pehrsson, executive]

This is Thomas. Apart from the SEK 10 million, as you say, those were more of a one-off character as you see. And then if you look ahead, we have not given -- as you know we have not given the financial projections for the future. But it wouldn't be at a higher level than today as we also state in the quarterly report.

[Nicklas Fhärm, analyst]

So just so I understand you, Thomas. In this quarter adjusting for the SEK 10 million, right, you would still have a SEK 10 million basically cost increase excluding D&A, right? So are you saying that the most probable outcome is another SEK 10 million increase per quarter for the rest of the year or should we expect rather flattish cost development? Is there a particular need that you see to hire more people, invest in more stuff, et cetera, et cetera, as you have been doing that for quite some time?

[Thomas Pehrsson, executive]

As we state in the quarterly report, in Q1 and partly in Q2 we are investing for future growth, but that's it as we see it right now.

[Operator]

And the next question comes from the line of Adam Wyden from ADW Capital.

[Adam Wyden, analyst]

Guys, can you hear me all right?

[Peter Kjellberg, executive]

Yes.

[Adam Wyden, analyst]

Well, look, this is a little bit of a follow-up on the SEB guy's. I mean the easiest way to have costs not to matter is to grow GMV 50% with a 95% gross margin. I mean costs aren't going to matter too much. So -- but I mean look, truly -- all kidding aside, truly spectacular result. You guys -- the market was down to whatever 13%, consumer electronics was down 25%, GMV 4% and a higher gross margin. You're clearly showing that you can beat the market. And if we look back at the evolution of this company, I mean it historically grew 50% to 60% against a market backdrop of 10% to 15%.

Now obviously we all remember that we had a platform transition, which was in the same quarter last year -- this first quarter last year against the 25% growth in the market and so clearly a tough comp from last year. As you look ahead, do you have increasing confidence or -- I mean do you have confidence that once Nordic e-commerce begins to grow at 10% to 15% again that you can replicate the result that you replicated in this quarter vis-a-vis doing demonstrably better than the market. I mean because -- I mean look, this is clearly an exceptional result in view of the market, but the market is not going to be down 13% for the rest of time. I mean e-commerce in the Nordics has grown 10% to 15%. I mean how do you think about the inverse of this quarter?

[Peter Kjellberg, executive]

As you know, I can't comment the future. I think it's important to look upon why did we accomplish the 4% as it is now? I think we have -- what we are very good at is to have some kind of real-time understanding of the market needs and then we can immediately push the right merchants so we get the right corresponding assortment to that need. So I think that is really a strength in our business model. And with the marketplace as we have now with plus 1,500 merchants, we can always assure that we have available products. That is really the strength in our business. I think also now with the new category, it's not really in place yet, but it starts to get there. I think what you see is a little bit of effect of the new category team that we have set up. I think it's the way now we do marketing in the category in another way than we've done before. So now we're just scratching the surface. This will be much better going forward, but you can already see that effect.

So I think if we can still utilize more than the rest, the possibility of the power of the marketplace. So I foresee that we will continue -- I think we have -- as I've shared before, we have the building blocks. It's quite fantastic. We have 12 million products, we have 1,500 merchants, we are the Nordic marketplace leader, we have 90 million visitors, we have 2 million customers who have the highest brand awareness and we have an experience as said before. We have been around now a couple of years, we have a very experienced organization. And now putting in the next gear, we are taking this to the next level. We are launching a stronger brand positioning. We will get more loyal customers. We will increase our pricing power. We will get more advocates. We will have a lower acquisition cost going forward. And also not to mention, as I said before also, it's not to really forget also. It will get us better also to get more talents into the organization.

But for sure, we will create a better customer experience going forward. I mean before purchase, during purchase, after purchase; all that will be in place. We are improving our offering that we're doing now. We have already said, as I said, you saw the light version of the category we set up. But we are really now improving our offering. We are focusing our core categories in winning the home. We are expanding our merchant base, really focused now on the Nordic markets. As I said before a little bit vaguely to Brad, but really we are putting a lot of focus right now on digital marketing and then also of course we are looking into growing additional revenue streams. So I think with the starting point, with all those building blocks, with the power of the marketplace in good times and bad times and now with all the initiatives we are doing; I think really we are doing the right things to create growth both in product and consumer.

[Adam Wyden, analyst]

The follow-up question, this is very quick. It was very helpful. My follow-up question is if you think about the ingredients of GMV -- sorry, of gross margin, right? It's take rate, it's products, it's basket size and merchants as a function of product. So at least based on our internal data, we're not that penetrated within Nordic merchants. I think we have 1,500 merchants and we've seen varying estimates anywhere from I'd say 30,000 merchants to 50,000 to 100,000 merchants. I mean merchants are such a key part of the ingredient because merchants basically give you more product and so when people -- if people -- if they go to Google SEO or SEM and they search for something, obviously we're going to get to the top of the funnel or at least have a shot to if we have the product.

And more importantly, if they're on the site and they're already buying something, having those other products allows them to increase their basket size. So we think that merchants and products are a really, really vital ingredient to the formula. Can you talk a little bit about the new countries and sort of the initiatives you've had and what your ambition around merchant growth is?

[Peter Kjellberg, executive]

Yes, of course. As I mentioned, we have -- we say we reorganized the sales let me say, but we have had optimized this complete process towards the merchants and that was launched now during the first quarter. So we have improved the segmentation and we have now built our leading identification again of focusing on winning the home. We have a much more efficient follow-up on every merchant account. We have built a new business to business marketing organization. So we are now contacting and establishing relationship going forward with more merchants than we've ever done before. That will -- I can't say volumes at this point. If that doesn't create a result, then I don't know what should do actually. Of course this will get a better result. I want -- I can't give you an actual number. You will see the Norway results start to be -- you can see that. That will be created all really during Q2. And then when we have established Norway, then we'll continue with our market in [ Finland and Denmark ].

[Adam Wyden, analyst]

Okay. Good. That's it for me. Congratulations, guys. I look forward to seeing the app and all the rebranding initiatives in the back half of the year.

[Operator]

And we have one more question from the line of David Li from Lizard Investors.

[David Liebowitz, analyst]

Just have a couple of questions. First being just the market weakness. Can you just talk about is this the data that you guys are using that paints a very different picture versus the overall e-commerce growth because I think in most of the countries, e-commerce is still growing, right? But just very surprised to see the Nordic e-commerce growth continued to decline. Obviously the decline is decelerating. Just talk a little bit about that like what's -- how is this different versus some of the other statistics if they're showing consistent decline as well?

[Peter Kjellberg, executive]

This is the official data representing that from the Swedish officials. It actually came yesterday. So we had a decrease then of I think it was 4% in January, 17% in February and then an additional 17% in March giving then the 13% in the Q1. So that is to the where we are right now.

[David Liebowitz, analyst]

Okay. But this is for Sweden or this is for the entire Nordic?

[Peter Kjellberg, executive]

This is for Sweden.

[David Liebowitz, analyst]

This is for Sweden. Okay. So on the gross profit dollars, looks like just the first quarter where you guys have seen gross profit dollar recovery driven by takeup rate. Can you just talk a little bit about the dynamic over there? What are you guys specifically doing? Is it simply increasing pricing, is it -- or maybe just a mix shift as well because I didn't get this earlier from the call? Maybe just explain a little bit about that and how should we think about sort of gross profit dollar projection going forward?

[Thomas Pehrsson, executive]

It's Thomas. I think if you look at the overall gross profit and gross margin, we could say that the mix of us selling more through the CDON Marketplace and less from the CDON Retail, which we are phasing out. That is one reason. The other one is the higher commission levels that we were speaking about earlier during the call. Those 2 factors are the main factors for the higher gross margin in this quarter compared to the previous year.

[David Liebowitz, analyst]

Okay. And on a higher commission rate like what are the value-add now like just like what are the merchants are getting for a higher commission rate. Is this mostly from the existing merchants or is this just from the new merchants are now paying a higher price than before? What's the dynamic in terms of the merchant rates or if there's a mix impact in there?

[Thomas Pehrsson, executive]

As we said before, it's very much due to the product mix why is higher. But it's also if you're looking back last year, we had lower commissions on purpose that we were lowering them, able to sell more. So that's one reason. Having more normal levels now, but it's also a mix factor between what products we are selling that makes up the higher commission. And as we said before, we don't see any reason for that not going forward in the same level.

[David Liebowitz, analyst]

Okay. How should we think about sort of going forward on this? Obviously GMV in itself has no meaning. Gross profit dollars is the real money that you guys can put in the pocket. Like how should we -- how do you guys look at sort of driving gross profit growth going forward? Is there more room to push this commission rate or is there more features? Obviously advertising a little bit far away, right? So -- or this is kind of something we should kind of expect going forward as a base rate?

[Thomas Pehrsson, executive]

Not really predict or talk about the future of the financial. But as said, commission levels as they are now, but the mix could always change. And as Peter was mentioning before with all initiatives we are doing right now with the organization, agility in marketing and so on, of course we are aiming for being more effective in getting out more sales of that. But we can't predict any more exact figures.

[David Liebowitz, analyst]

But just on a mix impact like you're saying the mix of products with higher commission. Can you just talk about what categories are we talking about exactly? At least like seems like the impact was obviously very significant.

[Thomas Pehrsson, executive]

We don't comment on specific products or merchants or their profitability for us. So sorry.

[David Liebowitz, analyst]

Maybe let me ask the question differently. Is there perhaps -- like when you came into the business, you realized the commission rate was maybe not under commission, but you feel like you guys are undercharging the merchants for the network you guys are offering to them? Is there an element of such?

[Thomas Pehrsson, executive]

Don't think I really got your question. Repeat it again, please?

[David Liebowitz, analyst]

No. My question is when you came into the business, the commission rate, is it possible as well that the commission rate perhaps was -- you guys were undercharging the merchants. Some of it is perhaps just simply price increase driven by, I don't know, now you have an excuse on inflation. I'm just kind of curious what that might be.

[Thomas Pehrsson, executive]

I think that's impossible to say. Of course every company is trying to increase their margins in one sense or another. If we were too low going into the business, hard to say. It's -- I think it's possible.

[David Liebowitz, analyst]

Okay. Maybe just talk about the traffic. When should we -- I know someone asked this earlier, I didn't quite catch that. When should we start seeing sort of traffic normalization versus whatever you guys are doing on SEO in general? Like is there a timeline for that?

[Thomas Pehrsson, executive]

So as I said, it's on our highest point of the radar and we are working on it very diligently right now. And as you know, you will see -- it takes time to get effects sometimes of it. So we think we will get better effect over time. I think that is everything we can just say right now.

[David Liebowitz, analyst]

Okay. And has the option -- by the way, has the compensation -- since you joined, has your compensation incentives already been disclosed or how should we -- because I don't see it in your annual report? If you can comment a little bit about how you're being incentivized for driving the business. Peter?

[Thomas Pehrsson, executive]

It's Thomas here. We don't do any comment about specific salary or internal incentives. The only one that are official is the management team's incentives that you can see in the press release earlier. And of course there will be a new one that also is mentioned in the press release for the Annual General Meeting, which will be the 11th of May. There will be a decision at that time. It's also stated in our Investor Relations page. But more specifically than that, we can't talk about right now.

[Operator]

And as there are no further questions, I will hand it back to the speakers.

[Peter Kjellberg, executive]

So thank you all. I say also thank you to Thomas sitting beside me. And I'm looking forward to seeing you in the next quarter again. Thank you.

[Operator]

This now concludes our conference call. Thank you all for attending. You may now disconnect.