Hemnet Group AB (publ)

STO:HEM

Earnings Call Transcript 2023-Q1

[Operator]

Welcome to the Hemnet Q1 2023 Conference Call. [Operator Instructions] Now I will hand the conference over to the speakers. CEO, Cecilia Beck-Friis; CFO, Jens Melin; and IR Manager, Nick Lundvall. Please go ahead.

[Cecilia Beck-Friis, executive]

Good morning, and welcome to this teleconference of Hemnet Group's presentation of the results for the first quarter of 2023. My name is Cecilia Beck-Friis, and I am the CEO of Hemnet. And before I introduce my colleagues, I wanted to take a moment to briefly talk about this fantastic picture that decorate the cover of the report. This is the photo from the fourth installment of Guldhemmet Gala that took place in March this year. This is an annual gala that Hemnet organizes to recognize the [indiscernible] of the real estate industry and has since its inception become an essential part of the annual calendar for many agents, [indiscernible] owners and property developers.It was an entertaining and important meeting and a great opportunity, both for myself and many colleagues to mingle with some of the most important to our -- with some of our most important business partners. With that, let's turn to page 2, so I can introduce my colleagues who participate in this call together with me. With me today, I have, for the last time as Interim CFO, Jens Melin as well as Nick Lundvall, our IR Manager, who will be assisting with the Q&A. Now turning to page 4 for a summary of the quarter; Q1 was a challenging quarter for the Swedish property market.Concerns and uncertainty over interest rates and cost of living have contributed to some consumers [ shielding ] to hold off on selling and buying a home. Despite this, I'm happy to say that Hemnet grew revenue from sellers by 11.7% and total net sales by 5.8% all while [indiscernible] decrease almost 20%. This is a great decrease in listing volume that we have recorded in our [indiscernible] which is why I had [indiscernible] that demand for our product, especially the seller products and our ability to execute our strategy out with the macro-economic challenges present before us.This quarterly result is also clear testament that our product remains attractive even in a weaker market. Our ARPL, the Average Revenue per Listing continues to be the main driver for our growth with growing demand for our value-added services as well as ongoing pricing work being the new contributors to ARPL growth. EBITDA grew 2%, resulting in a margin of 45.9%. This moderate growth is partially a result of significantly lower listing volumes as well as our continued investment into product. Overall, I am pleased with this result, especially given the circumstances in the property market.Turning now to page 5 and the ARPL development; ARPL grew 38% during Q1, driven by a combination of product, conversion and pricing. This growth offset the 19% decline in listing volumes. The growth in ARPL is a result of increased [indiscernible] of our larger packages, especially premium and of the value-added service renewals as well as continued work on pricing. This shows that our investments in product development are treating the desired demand and added value for our customers. For example, the interest rate of renewals are a direct result of the changes we made to make restarting the listing of Hemnet [indiscernible].By working in an agile and adaptive manner, we can make sure that we meet our customers' needs and build more relevant and impactful products. Moving now to page 6 and net sales by customers; let's dig deeper into where the 5.8% growth in net sales comes from. The predominant driver is revenue from property sellers, which despite the all-time low listing volumes grew 12% this quarter. Our continued work with product and pricing can be attributed to this growth. Real estate agent revenue grew 3% despite continued high uncertainty in the real estate market.Agents continue spending on Hemnet in order to secure an [indiscernible] strength in their branding and gain an advantage over the competition. This growth is especially encouraging given our many product improvement since last year and specifically at real estate agent. Property developers continue to struggle as the market uncertainty means the consumers are less willing to buy properties under construction and material cost increases are impacting public budget for property developers leading to necessary reviews of the overall customers, including marketing investments.Net sales from advertisers declined 11%, partially due to decline in traffic as well as widespread reviews of company's cost base due to the uncertain macroeconomic environment. We attribute the traffic loss to fewer listing, fewer visits from our so-called power users and tough comparables in 2022 when the property market was more active. Banks are a clear exception with increased demand and marketing spend from this customer group. As Sweden's fifth largest web platform in terms of reach and with high relevance and affinity, we are well-positioned as the best option for companies looking to reach audiences interested in the housing market.Let's turn to page 7 and a quick update on our 2023 road map. During the previous quarter report, our [ studio ] and my colleague, Francesca Cortesi, walked us through the two initiatives in product roadmap for this year 2023. I want to refer back to this roadmap shown here to provide you with a brief update of the most important product launches during Q1. As this is a page we have talked about before I will not spend more time here, but instead turn to page 9 and our product update. For consumer, we have identified two key initiatives for 2023. These are secure listing content, content discovery and deeper personalized experience.During this quarter, we spent most effort working on the first and the last of this. With regards to securing listing content, this is important to strengthen and maintain Hemnet's position as the go-to property portal with the most comprehensive and relevant inventory. Starting off with an important update on how listings are renewed using our renewal product. Previously, a listing would have been taking off Hemnet for 23 days before being able to be renewed. We changed this rule during Q1 2023, so that now any listing all that are 30 days can be renewed with reset statistics. For Hemnet Premium, this service is included in the package whereas [indiscernible] and Plus packages per extra for renewals.We are also testing a [indiscernible], allowing sellers to pay for the listing once it has been sold or at a fixed amount of time. The purpose of this test is predominantly [indiscernible] the entry barriers to Hemnet and reduce the number of rentals for listing to the off market. This is a test to secure listing content, but if and when launched, such a product will be structured in a way to have a positive impact on ARPL and seller revenue. We are structuring the product to have a minimal impact on our net working capital, cash flow and credit risk yielding a [indiscernible] partner to manage these assets.Finally, we are working on [Technical Difficulty] so I'm sorry about this hiccup. We have some technical issues today, unfortunately. But coming back to the presentation, I was talking about our product improvement and development on our consumer side during the quarter. And I want to finish off on this slide also selling that we're working on providing consumers with a more personalized experience by developing our valuation product launched earlier this year. [Indiscernible] the prompt when the valuation for the tracked property changes giving users more reasons to come back to Hemnet.Now turning to page 10 and seller products; on the left side of this page, you can see our ARPL growth from value-added services. We are making good progress on this front as a result of interest sales of our larger packages and of the renewal product as well as continued work on pricing. The continued growth in ARPL is evident that our investment in product development are creating the desired demand and added value for our consumers. In addition to ARPL growth, a key focus is leveraging the agent both recommendation. Today, one in three agents recommend [indiscernible] to their sellers, the value-added services to their seller, that two in three sellers follow that recommendation.So here we see potentially growing the number of recommendations. We have, during this quarter, for example, added a new step in the listing package selection flow that prompts the seller to reconsider if they select another package than the one recommended by their agent. Now turning to page 11 and Business-to-Business; demand for Hemnet product from real estate agents remains consistent, and we are clear that traffic to our agent search flow launched in 2022 continues to grow. Furthermore, we continue to link conversion to Syns mer for saljare increase as more agents want to sell out in the agent search flow.We continue working with our attractive and diverse product portfolio for agents and are also working on new commercial products that we've been launching during the year. The market for property developers remains exceptionally tough. A high hesitant discourage the buyer for buying unfinished products or projects with high leverage. Despite the challenging market, there is demand for Hemnet products also from this customer category as to dispose of existing inventory stronger than ever. We have [indiscernible] the terms for our listing package in small and medium developers to be a subscription rather than a onetime service and have opened up unsold Maklartipset slots to developers.Now turning to page 12 for an overview of our organization. During Q1, we added six employees for a total of 141. This is a year-on-year increase of 20 employees compared to 121 in Q1 2022. As previously communicated, most of the joiners for Q1 were already signed during Q4 of 2022. We continue maintaining cost control across the business, an approach we consider [indiscernible] given the current financial climate despite the stable and cash-generative nature of our business. I want to reiterate that the recruitment phase for the remainder of the year is expected to be significantly slower than that of last year.On Tuesday next week, I look forward to welcoming Anders Ornulf as our new CFO. He will join earlier than previously communicated and replace Jens Melin who have served as Interim CFO August 2022 [indiscernible] now go on paternity leave before rejoining Hemnet as Head of Group Accounting and Control. I want to take the opportunity to thank [indiscernible] stepping up into this important role and doing a fantastic job during his time as Interim CFO. And we wish you the best of your leave and look forward to welcome you back during the call. I want to finish by saying that we are currently looking into how to best organize our commercial operations going forward.This is to optimize the strength of our talent pool and to leverage our investments in future growth. Now turning to page 14 and an update on the market. Well, of course, received a lot of questions on the property market, even more so in the past few months given the development in listing volumes. This is totally understandable as we are faced with an unprecedented drop in listing volumes. While we do not have a crystal ball for when the situation will turn we have prepared some slides to provide you with an understanding of some of the drivers behind the current market environment as well as potential [indiscernible] a more normalized market going forward.I think that the word uncertainty and hesitant underwrite the current state of the Swedish property market, uncertainty both around interest rates as well as affordability. Consumers are uncertain around the direction of interest rates and mortgage costs as well as inflation, cost of living and affordability. This hesitance in turn has a direct impact on both buyers and sellers and lead to fewer listings and transactions. We consider transactions are being done and there is a balance in the market but at a lower pace than before. 19% is the largest drop in the new property listing for any quarter for a long back as we have comparable EBITDA, which is why particularly Hemnet during this time grew its revenue for property sales by over 12% despite the difficult market conditions.Turning now to page 15 for an overview of historical listing data. Looking at historical quarterly data for as far back as we can, we see the fluctuation has varied from approximately minus 14% to almost plus 30% for any given quarter. Q1 2023 is clearly an outliner as we have not clearly seen any quarter with a sharper drop in listing volumes. What we can observe however is that most periods of uncertainty in recent times have both positive and negative quarters. Negative quarters are usually followed by some sort of catch-up effect. However, it is difficult to predict exactly when this effect comes into place.Looking on the right-hand side of this page, we can say that annual listing volumes tend to be stable despite quarterly variances, and we remain confident in the stability of the Swedish housing market driven by [indiscernible]. Turning to page 16 and the potential catalysts that could impact the market going forward. We are still in a hesitant market when it comes to listing volumes. However, we have identified a number of events that are potential catalysts to a more fluid and normalized property market. With regards to interest rates, there is some expectation that rates will peak at some point in the near future, perhaps during this year 2023.Once the trajectory of interest rates becomes clear we believe that the decreased uncertainty around the portability and higher willingness to transact could have a positive impact on listing volumes and market sentiments. During 2023, during the high months of mortgages up for refinancing according to the Swedish financial institution refinancing of mortgages may drive homeowners to reconsider living situation in order to manage living expenses, which could also have a positive impact on listing and transaction volumes. In our entire data, we said that sale prices and asking prices are converging, while sales times are going down from the [indiscernible] saw during Q4.This is evident that there is greater alignment in the expectations among buyers and sellers and heads well to a more fluid property market. Finally, our buyer barometer survey, a survey we conduct on a monthly basis to measure price sentiment in the market is showing the most positive price expectations since mid-2022. 62% of respondents expect prices to remain unchanged or increase. This too is a sign that expectations are aligning and transaction volume may pick up. During 2022, I spoke about the grid lock effect during the greatest [indiscernible] the mobility of the Swedish market if buyers and sellers become locked into their property because transactions have frozen.It is therefore positive that expectation by moving closely between buyers and sellers, as this significantly reduces the risk for a grid lock effect. Now turning to page 17 for some closing thoughts on the market chatter. Despite the challenging property market, we remain confident in the long-term outlook of the Swedish property market and of our business. The factors that will have control over are progressing well, and we continue to invest in products and in our turns in order to build in the best possible position for when the market normalizes. This includes maintaining Hemnet position as the number one property portal.It is important here to note that despite the drop in listing volumes, we have not seen a material effect on our market share of transactions. Those are not happening off-hand but instead happening at lower volumes. Focus on updating product and pricing in our seller portfolio and continuing development and commercializing the agent cash flow that was launched in 2022.I will now hand over to Jens, who will provide us with a financial update on page 19 for the last time before handing over to [indiscernible].

[Jens Melin, executive]

Thank you, Cecilia. Let's turn to page 19 and the financial highlights for Q1. As Cecilia has talked about, 2023 has seen a historically slow start to the year for the property market. This, of course, affects Hemnet's financial performance and especially so since we want to continue investing in our products. That said, I think that this quarter shows the resilience of Hemnet business model as we have continued to grow despite these challenging market conditions. So starting on the left-hand side on this page, we have net sales increasing 6% to SEK190 million. As Cecilia mentioned earlier, this is mainly driven by a strong development for our property seller revenue, which increased by 12% even though listing volumes were down 19%.Our adjusted EBITDA came in at SEK87.2 million, up 2% from last year. The adjusted EBITDA margin came in at 45.9%, down 1.7 percentage points from last year. This is, of course, a combined effect of the current challenging market conditions and that we have continued to invest in our product development capacity. Moving then to the right-hand side, we saw ARPL increasing 38% in the quarter. Cecilia talked about the drivers for this earlier on page 5, which were a combination of product updates, conversion to our more expensive value-added services and price adjustments. As expected, we continue to see a high cash conversion, which was 98% in the quarter.This was in line with the full year 2022 and follows that we have a favorable working capital dynamic as we grow our seller revenues. Finally, leverage came in at 0.7x rolling 12-month adjusted EBITDA, which is a slight increase compared to year-end 2022. And this is in part due to our leasing contract for our new head office and partly due to the continued return of capital to shareholders via our share buyback program. And I will come back to the topic of buybacks in a few slides. Let's move to our adjusted EBITDA bridge on page 20. We continue to grow our profit in Q1 from SEK85.5 million in 2022 to SEK87.2 million in 2023.We have covered the drivers for the SEK10.5 million growth in revenue earlier in the presentation so let's instead look at the cost side. A compensation to real estate agents continues to grow at a similar pace to our seller revenue and is up 8% from last year. As a proportion of seller revenue, this month the compensation was around 28% for the quarter. Other external expenses excluding compensation to agents is up SEK1.6 million. This mainly following increased costs for our new head office and other costs related to an increased organization. Otherwise, we continue to focus on cost control in order to maintain a controlled growth journey and increase profitability over time.Personnel costs have increased by SEK5.3 million or 14%, as we have continued to invest in product development capacity, which Cecilia talked about earlier in today's presentation. Moving on to page 21 and a few additional words on the buyback program; as we communicated yesterday, the SEK450 million buyback program initiated after the 2022 AGM is now completed. During Q1, we bought back 602,000 shares followed by another 220,000 shares in April. In total, we have bought back almost 3.1 million shares under the buyback program equal to around 3.1% of total shares. With this, Hemnet has in total distributed approximately SEK505 million to its shareholders in dividends and buybacks since the 2022 AGM. And in doing so, we are following our dividend policy to distribute excess cash back to our shareholders.As mentioned previously, the buybacks have also played a big part in the increased leverage, which has gone from 0.3x at Q1 2022 to the current level of 0.7x. Pending a decision by the 2023 AGM Hemnet's intention is to launch a new program in order to continue buying back shares and thereby distributing excess cash to shareholders. Before handing back to Cecilia to wrap tens up, the final slide in this section is our financial targets on page 22. Our growth rate measured as an LTM value is now at 18%. Our profitability measured as an LTM adjusted EBITDA margin remains at 50%.In conjunction with our year-end report for 2022, we introduced a new long-term profitability target of exceeding 55%. Leverage was 0.7x as previously mentioned. And as we have said before, the management team is looking to meet or exceed the target. So that concludes my section of me today. But before handing it back to Cecilia to wrap up, just wanted to take time to mention that this is my last report as Hemnet's Interim CFO and as Cecilia mentioned, next week, our new CFO, Anders joins the company and will be here for the Q2 report [indiscernible]. I myself will opt my parental leave and then go back to my usual role in finance team and look forward to working closely with Anders in the future.So with that, over to you, Cecilia.

[Cecilia Beck-Friis, executive]

Thank you again. I will now turn to page 24 for a summary. This has been a challenging quarter for the Swedish property market with an unprecedented 20% decrease in property listings on Hemnet. Despite this we saw a 12% growth in revenue from property sellers and a 6% net sales growth, a testament to the attractiveness of our product offering. We continue to invest in product development for the future for when the market normalizes to be in the best position we can to capture the opportunities that open up.Thank you for your attention, and we will now move to the Q&A.

[Operator]

[Operator Instructions] The next question comes from Daniel Ovin from Nordea.

[Daniel Ovin, analyst]

You mentioned that an important contributor to growing ARPL is the value-added service renewals. Can you give some indication of the penetration of this in the quarter and perhaps also how it's come up versus last year? And then also a follow-on question to that, and that is, is this mainly purchased by [indiscernible] and Plus customers, given that Premium, I think, has a free renewal for the first 7 days or is it also Premium customers buying that after those 7 days? That's the first question.

[Cecilia Beck-Friis, executive]

So we don't disclose the exact numbers, but I can maybe give some color on the renewal product. I think that the changes we've made is to move the demand from property sellers move the demand from property sellers and brokers as well to be able to restart and get on top of the listing in a quicker way. And what I can say is that we've seen a very positive effect on that product change. And what we have seen during the course, I would say over the year actually in the changing market is that the trend for this product has changed a bit. It is very clearly before a product that we sold both in January and in after summer. But now we have seen a bit of a shift where we're actually customers picking up this product throughout the year. And we're very happy with the change with many and we're also very happy with the [indiscernible] but the only thing I can say, we don't really disclose the exact numbers.

[Jens Melin, executive]

And adding to that, I think what we can also say is that just to clarify, these renewals are not included in our number of published listings that we disclose.

[Daniel Ovin, analyst]

Okay. Perfect. That's great. Also one question on the relationship here between Plus and the Premium. And I know previously that you said that Premium has been stronger, what you had expected, perhaps on the expense of Plus listings. And given the price changes that you did here in the beginning of the year where it appears that you raised prices on Premium quite much more. Have you seen that relationship change now back to going in the direction that you wish for, so to speak? That's the second question.

[Cecilia Beck-Friis, executive]

So, what we have seen during the quarter is the continued high demand for Premium, I would say. And I think that there is still [ sharing ] on the changes we did, well the changes we did to the product last year when we actually have the renewal into that product that have been well received, and that is, I will say, a key ingredient for that product, and that has continued [ doing because ] throughout this quarter as well. So if you look at the ARPU growth, the main drivers from a product perspective is Premium and Renewal.

[Daniel Ovin, analyst]

Yes. Okay. Perfect. And then, a last question here, and that is on personnel expenses. So you're now taking in 7, 8 new employees like you have guided for before. And I just wonder on that number, then the kind of SEK43 million in personnel expenses, is that a good base to work on going forward with smaller or slightly increases this year? Or was it that many of these new employees came in perhaps end of the quarter or something like that? So the question is really, is the SEK43 million a good base? Or is there any kind of unusual one-offs there or anything? That's my last question.

[Jens Melin, executive]

So what we can say about the personnel cost is that most of the joiners for Q1 were signed already in Q4. So I would say that many of them joined early in the quarter. But of course, we have -- continued to have an inflow during the quarter as well. So basically, what we can say is also that what Cecilia mentioned in the presentation that we are expecting to keep a slower recruitment pace going forward in 2023, given the market conditions. So I think that's what we can say here now.

[Daniel Ovin, analyst]

Yes. Okay. Perfect. That's very helpful.

[Operator]

The next question comes from Andrew Ross from Barclays.

[Andrew Ross, analyst]

My first one is a short-term one around the new listing development. Obviously, it wasn't good in March. It looks like it's been quite volatile in April, and I guess you've had Easter moving around, some weather, et cetera. So what do you think is actually happening in the market right now? Do you think it is getting any better? What are you actually observing in terms of underlying new listing trends when you think about Q2?And then as an extension to that, you've given a medium-term growth guidance of 15% to 20%. Are you expecting to get into that range in 2023? And if not, could you give us some kind of more precise thinking for your revenue growth for this year, please, given the [ lower ] listing volumes.

[Cecilia Beck-Friis, executive]

Hi, Andrew. So on your first question, I mean, what we can say currently is that we are still in a hesitant market, because we confirm -- continue seeing assets and markets in the beginning of April. We're looking forward, I mean, there are a few factors here in the market because we get this question a lot. And it's, of course, super hard for us to predict the listing volumes going forward. But a few factors that I think are important visiting with you. First is, the historical data that we have. And as you know, the total data shows that the volume, the listing volumes as well, transaction volumes have been very stable over time, [ due to inflation ] quarter-by-quarter, but over time, it still doesn't sell. We still believe that, that's the case. So we believe that the listing volumes will over time stabilize.The second part here is the drivers behind the lower listing volumes. In our list there is, like I said in the presentation that the uncertainty is a key thing here. I mean there are transactions being done. So it's not a bad market at all. It is a market, and there are transactions being done. But there are some consumers that are hesitant because it's so hard to -- due to the uncertainty of trends to how the inflation will evolve, and the interest rates and so forth. So I think once this is -- once we have a better picture, more clear picture on the trends, going forward, I think that will put some more certainty, as with the consumers will be more certain and build more [ capital ], then I think that the volumes will kind of normalize.Also, if you look during the quarter, and I have to give some gist of what we were telling is while during the quarter. So -- last year, we spoke a lot about and I talked about the delta in between the sellers and buyers' expectations. So what happened last year was that we were going from a super hot seller market. And then suddenly, we fragmented in just a couple of months actually went from seller marker to buyers market, and it's taken some time for sellers and buyers to align on newer price levels. But what we've seen during the quarter is there seems to be happening more and more transactions that sellers and buyers are more aligned on price. That is a good signal, I would say. And we also, from our buyer barometers that more and more buyers list that prices will improve over time. So there are some, I would say, highlights or positive signals. I think it's too early to say what that means from a volume perspective.On your second question on our targets, because we don't have any guidance. So what we communicate are our targets of guidance. And we still believe in our targets. We haven't changed those targets. Obviously, given among this quarter, it will be a bit more challenging this year. But from our point of view, currently, we don't see any reasons to change the targets.

[Andrew Ross, analyst]

So just to be clear, do you still think that the target of 15% to 20% is durable for '23? Or are you saying that kind a sensible target in the medium term, but you may be below this year, just to be clear?

[Cecilia Beck-Friis, executive]

No, I think that we haven't changed the communication we did from the beginning of the year when we reiterated our financial targets, and we also communicated that we have long-term, I would say the margin target. And the targets remain, and it's driven by our belief that if you will look at the behavioral trends, historical behavior trends in the market, we can say that volumes will, over time, organize.

[Andrew Ross, analyst]

Okay. But you're expecting some volume recovery in the second half to get from 15% to 20% for this year, logically -- or is there something else I'm missing? Just to understand why you're confident in that?

[Cecilia Beck-Friis, executive]

No. But I think -- I mean, we're only in April. And last quarter, we reiterated our targets. I think, that for right now, the targets remain as communicated. We haven't changed anything. And we're, again, looking at the different factors we're seeing. And then, if you look back at the targets of this and how the property market behaves normally we'll expect over time that the listing volumes will stabilize. But we don't have the crystal ball. We don't know exactly when. And our focus is to come back to our target is, what we can control. And I think that during Q1, we have excluded in mitigating a bit of the decrease by actually with the product investments and the product improvements with them, with the pricing work that we can also mitigate some of the recurrence in volumes with things that is within our control.And looking ahead and in this year, I think that I am quite excited for some of the things that we are doing right now, and what we are is also building a better and more improved product offering. So we will -- I mean, we've adjusted a bit too -- for this market that we will also do well, even the market turns.

[Andrew Ross, analyst]

Perfect.

[Operator]

The next question comes from Pete-Veikko Kujala from Morgan Stanley.

[Pete-Veikko Kujala, analyst]

Hi. It's Pete from Morgan Stanley. A couple from me, then I'll jump back to the queue. Firstly, on intangible asset CapEx, it's now at $9 million in Q1. Can you give any information on your kind of CapEx plans for the year? Is this level that we should like expect to continue? Or should it ramp up from here or not because there is a clear trend, an upwards trend. So what are your plans for intangible CapEx?

[Jens Melin, executive]

Yes. So what we can say is that as we have invested in product development capacity, it's a natural development that our capitalized development also increases. And as for Q1, we've also initiated a project for modernizing Hemnet Pay platform. So that is part of the increase year-over-year. And that project is, of course, going to continue throughout the year. But that said, I think in Q1, we had some projects running from Q4 or from last year as well. So I think the Q1 is probably a bit higher than what we will see in the coming quarters.

[Pete-Veikko Kujala, analyst]

Okay. Understood. And then just back on the tangible CapEx, I guess that's just relating to the new office or is there something else there?

[Jens Melin, executive]

Yeah. That is correct.

[Pete-Veikko Kujala, analyst]

Cool. All right. And then the second question on the Buy Now Pay Later, which I think you referred to as Pay After Sale in the presentation. Does that mean that you're kind of thinking about that the user could, in theory, remove the listing from the site without it triggering a payment? Or how should we think about this? And also just making sure that you're not taking credit risk on this or like the credit risk is carried by Krona or how does the model work?

[Cecilia Beck-Friis, executive]

Yes. So the test itself is Pay when removed, and it's a content test that we currently run and we will continue doing so during the spring. And the reason why we're doing the tests store looking into this is also that we want to make sure that we don't remove all potential hurdles when publishing your listing on Hemnet. So what we are testing is a pay when removed, meaning that you will pay, [ so we are ] not you will pay, but you will pay when you remove it. And most probably, I mean, most listing will be sold, but if not, if you haven't sold at you, but still pay. And it is tested again. So it's a bit too early to say but we will do with it. We'll learn along the way, so to say. And it's right, you're absolutely right, we don't take any credit risk. We use Krona as a provider in this test.

[Pete-Veikko Kujala, analyst]

All right. Very clear. I'll jump back to the queue.

[Operator]

The next question comes from Catherine O'Neill from Citi.

[Catherine O'Neill, analyst]

I just had a couple coming back to actually your thoughts on revenue growth trends this year in your target. And then sort of listing, I guess, is hard to predict. And presumably, you're expecting some recovery in the second half. But how are you thinking about ARPU growth? Do you see that 1Q trend as sustainable? Is that what gives you some confidence on the revenue target? And could you also maybe give us a bit more color on the revenue -- other revenue lines, so agents, developers, advertising and how you see those perhaps developing across the course of the year?

[Cecilia Beck-Friis, executive]

So, I think my answer, we will not -- I mean, we don't give guidance. As I think that's important to say we talk about targets, so we don't want to talk about how we view this exact year. But if I can put some color on how we view both the ARPU development as well as other revenues. And if you look at ARPU development and again, I think we were quite encouraged also soothing that, and that in the shifting market I mean, the relevance of this product has grown, I would say, and also the changes in adjustments that we've made to products that also be very well received. We continue working with product development, improving the products we have. We're adding new products. We're looking into the payment, so how you choose your products making that as good as possible. We'll continue working with pricing, and we will continue doing so. So we're focusing a lot on the things we can control. And we haven't changed our view in the potential we have in growing ARPU over time.And if you look at other advertisers, obviously, it is hard. I mean, from a market environment, currently, if you look at investments, again, I think hesitant is a good word, when it comes also to the business-to-business revenue. What we do see is, if we look into the group -- or into the different customer groups is that we continue selling consistent, I would say, demand from real estate has jumped. And that's encouraging as well given that we put some investment and effort into building a new, I would almost say an ecosystem we're finding an agent in place last year, and we have -- we started to commercialize and we'll continue during the year also to add products into that area. And we also see a great momentum with banks as advertised, they're also increasing their marketing spend.Whereas on the other hand, we continue seeing and we've seen that for some quarters now, property developers holding back on their marketing investments, and we will also seen -- and we saw that Q4, we continue seeing that Q-on-Q and that other advertisers are also hesitant in their marketing investments. And I think that coming back to -- I mean, we don't have the crystal ball. I think that one key thing here is that if the consumers and households will have a clearer view on the trends going forward. Once they have that, I think that the market will normalize. And when that happens, we don't know.

[Catherine O'Neill, analyst]

Okay. And just one other quick question. I'm not sure if I didn't catch it, but you've nearly completed your current buyback. Are you planning to put another buyback in place? And what kind of level or amount are you thinking if so?

[Jens Melin, executive]

So, what we can say is that as we communicated yesterday, the previous SEK450 million buyback program was completed on Monday. And it is up to the upcoming AGM here in -- later this week to decide if we get the mandate for another buyback program. And if so, the Board will have to take the decision on that.

[Operator]

The next question comes from Eirik Rafdal from Carnegie.

[Eirik Rafdal, analyst]

Yes. Just a couple of last ones here. On the recommendations from agents, it seems to be kind of among the lower-hanging fruits to continue to drive a added services penetration. And if I understood it correctly, you sent out kind of an educational package to the agent community earlier this year to kind of boost recommendations. Can you say anything about the percentage of recommendations in Q1 versus Q4 last year? And also, after you sent out that educational package? That would be my first question.

[Cecilia Beck-Friis, executive]

No, we don't disclose the result of tactical efforts doing -- that we do in the company. I could say that when it comes to recommendation, as you [ said it yourself ] that the potential and potential for low-hanging fruit in improving -- and improving the recommendation levels. And we're doing several things in order to increase the recommendation -- the communication, and we are doing that on an ongoing basis.And then in the product during Q1, we also added a picture within the flow, the publication of the payment flow where we think we prompt the seller to reconsider, if a seller hasn't bought the product that the broker recommended, we prompted and ask if they want to reconsider. So that's one example. We also added another picture where actually we can put an Hemnet recommendation if the brokers is recommending. So we're doing a lot of cooler things, I would say that altogether will have advantage. We believe will have a positive impact on the recommendation level.

[Eirik Rafdal, analyst]

Okay. Perfect. And just one final one for me, and I think this one for Jens. I think, it's said in the deck and you mentioned it as well as you laid out that listing durations are going down. Could you just remind us how this impacts revenue recognition now in the quarter kind of comparable to one that was rising? And is this a headwind and/or a tailwind this quarter?

[Jens Melin, executive]

Yes. So what we can say about listing duration is that we had an increase in duration during the second half of 2022, peaking during Q4. And after that, we have seen decreasing duration times. And what we can say in general about the listing duration and the effect on revenue is that an increase in listing duration, of course, means that more revenue gets pushed into the following period. And this then could amplify the seasonal pattern of Hemnet weakening Q1 and Q3, while improving Q2 and Q4, all other things are similar.

[Eirik Rafdal, analyst]

Okay. Perfect.

[Operator]

The next question comes from Giles Thorne from Jefferies.

[Giles Thorne, analyst]

It's a single question, please. I wanted to come back to the Hemnet buyers' barometer. And if I recall correctly, the March data point saw a big increase in the number of buyers expecting price increases over the next 6 months and a big reduction in the number of buyers expecting a price reduction. It was mentioned earlier -- in an earlier response to a question around the barometer as a lead indicator on potential listing developments. My question is, how good the indicator has historically been? On how development -- how listings have developed over any upcoming period?

[Cecilia Beck-Friis, executive]

Well Giles. I think the buyers' better has been historically quite a good barometer on the listing development overall. Of course, we don't know, but it doesn't [ have it works]. I think that, I would add the buyer barometer together also with -- I would add, yes, also to clarify that the buyer barometer is on price. So the price expectations, so we don't know. So with portfolio historically, the buyer barometer and the price have been very much aligned. That doesn't mean that the volumes will increase. And I think it's [ still not ] together also with that is that we have during Q1, where we saw the buyer and sellers actually are doing transactions and that's -- they aligning more on price, but that is. I mean, I would say it's some sort of signal at least, I think it's too early to say anything more, but you're seeing a bit of a shift now in the beginning of this year, compared to last year, both when it comes to a listing duration, buyers and sellers actually transactioning and the buyer barometer. And all those 3 data points, I would say, is going in the right direction.

[Giles Thorne, analyst]

Cecilia, are you happy to put a number of months or a time period between an inflection in the buyers' barometer and then the impact on listings? Or are you not comfortable with that?

[Cecilia Beck-Friis, executive]

No, I won't.

[Giles Thorne, analyst]

Okay. Fair enough. I tried.

[Operator]

The next question comes from Pete-Veikko Kujala from Morgan Stanley.

[Pete-Veikko Kujala, analyst]

Two questions, so on the developer revenue side, it looks to me like developer advertising is probably the main drag, but can you give any comments on that revenue line? And maybe also on the impact of the new products would also be helpful.And then the second question is, I think in the presentation, you showed that 1 in 3 agents recommend value-added services. Why do you think it's only 1 in 3 or did I misunderstand? Because I think agents are financially incentivized to benefit from upgrades. So why wouldn't -- basically everyone would try to upsell the value-added services.

[Cecilia Beck-Friis, executive]

So on the first question, I'm not sure I got the full question, but you asked about the effect of the adjustments we did towards the property developers and the uptick, I believe, right? And their investments. I would say that the property developers as a customer segment is the most challenging customer segment, and we assume that for some quarters now. And that affects both their overall marketing investments in this plan, but also their listing investments. We have invested in improving our product portfolio. And I think that, that has been very well received.We've been targeting small-and-mid size property developers during this quarter to make sure that we have a relevant product offering. But I think given the market environment today, we cannot really draw any conclusions on that. But if we have more long-term view in this customer segment. We know that at a certain point, that will not also to come back here and start investing, and then we are ready with our improved product offering.And on your second question on recommendations, yes, it's correct that one out of [ us, don't do ] recommendation. I think this is -- it's a journey, I would say, with the agents. We've done a lot of different things throughout the year in order to improve our product offering, but also the partnership we have with agents. I think, the risk that if you look at the dynamic, how it works, we do incentivize the office, but not necessarily the individual agents. It's the office that actually work in driving and then end up owning the work process in the office, and for the individual agents. That might be one aspect.We've also done a lot of improvements last year in how to recommend and make sure that they know and like we talked about earlier on this call also with communication and covering -- reminding about the value of the packages. So we're doing a lot of different things in order for the brokers to increase their recommendation levels. But I think there is a lot of potential in this area as we see said.

[Jens Melin, executive]

And just to clarify, when we give this data, this does not mean that 2 out of 3 do not recommend. It means that 1 out of 3 make a recommendation.

[Cecilia Beck-Friis, executive]

Yes, yes.

[Jens Melin, executive]

So a lot of the communication efforts are around actually getting the brokers to make a recognition in the first place.

[Cecilia Beck-Friis, executive]

Yes.

[Pete-Veikko Kujala, analyst]

Can you just repeat the last thing that you just said. So I understand everything that Cecilia was saying, but what was the clarification that you just made?

[Jens Melin, executive]

The clarification was that when we say 1 in 3 make a recommendation, this means -- this does not mean that the 2 and 3 that don't make a recommendation, they don't recommend a value-added service. It means, that they do not make the commendation at all. So they don't enter the flow to make a recommendation. So 1 in 3 agents actively make a recommendation to their seller, and our job is to of course, increase that number so that more recommendations are made. And hopefully, these recommendations will also be for Plus and Premium.

[Pete-Veikko Kujala, analyst]

All right. That's all from me.

[Operator]

The next question comes from Andrew Ross from Barclays.

[Andrew Ross, analyst]

Sorry, just one more small modeling one.

[Cecilia Beck-Friis, executive]

I think this will be the last one. Sorry, yes. Go on Andrew?

[Andrew Ross, analyst]

I'll be quick. So just on the other external expenses, which I think was $25.6 million in Q1 kind of up 6% or so, year-on-year. Is that kind of year-on-year increase, a good way to think about that line through the rest of the year, because the absolute spend has come down relative to the second half run rate last year. I know, there were some one-off consulting fees and stuff going on in that. But when we think about your cost base for the rest of the year, what do we need to know about that line?

[Jens Melin, executive]

Yes. So what we can say basically is that we are keeping a cost-conscious approach to our other external expenses. What we can say also for Q1 is that, and of course, the capitalization of development of consultants also affected this line lowering it for Q1. But I think going forward, we are not seeing any big increases coming in.

[Andrew Ross, analyst]

Okay. So a similar absolute number. Yes. Okay.

[Cecilia Beck-Friis, executive]

Okay, so with that. Sorry, Andrew. And I also want to apologize for the technical hiccup in this presentation and for running a bit over time. Thank you all for listening in and until next time.