Hemnet Group AB (publ)

STO:HEM

Earnings Call Transcript 2023-Q2

[Operator]

This call is being recorded. Welcome to the Hemnet Q2 2023 Conference Call. [Operator Instructions] Now I will hand the conference over to the speakers. CEO, Cecilia Beck-Friis; CFO, Anders Ornulf; and IR Manager, Nick Lundvall. Please go ahead.

[Cecilia Beck-Friis, executive]

Good morning, and welcome to the teleconference where we will go over the results of Hemnet Group's second quarter of 2023. My name is Cecilia Beck-Friis and I am the CEO of Hemnet. And today, I am joined by Anders Ornulf, our CFO, who joined Hemnet in May; as well as our IR manager, Nick Lundvall, who will be assisting with the Q&A.

I will start, as usual, with a summary of the key updates on Page 3. This quarter, we grew our ARPL 30.8%, driven by continued increased demand for our value-added services as well as our ongoing pricing work. This is despite continued hesitation among buyers and sellers that led to yet another quarter of weak listing volumes, coming in at almost 22% less than last year. I would particularly like to note that the investments we have made in product over the past year, such as enhancing Hemnet Premium and introducing a new model for renewals, are paying off as the sales from Hemnet Renewal have doubled since last year.

The sum of these 2 factors, listing volumes and ARPL, resulted in 4% growth in revenue from property sellers underscoring the resilience of our business model and our growth potential. On an aggregate level, however, net sales decreased marginally by 0.8%. By far, the biggest driver of the net sales decrease is the decline in listing volumes. However, and as communicated before, we are also seeing our business-to-business partners being impacted by a weaker economic climate and are, therefore, having to review their discretionary investments. We continue to see demand for our value-added products for real estate agents as well as an increased spending among our bank customers.

Profitability continues to be high, thanks in part to high operating leverage and continued cost control, and EBITDA margin came in at 52.6% for the quarter. In terms of product news, we reached an important milestone by becoming the first and only Swedish property portal to enable images on sold properties. One of the most sought-after features by our consumers and one that will strengthen Hemnet's position in sales price and amongst users looking to educate themselves on the market or simply be inspired.

Finally, we announced and recruited a new role in the management team, the Chief Operating Officer. This is a strategic step to further strengthen our commercial operations, centralizing responsibility for our products, pricing, packaging customer relationship and new growth areas under this new role.

Now turning to Page 4 and an update on our market position. Statistics Sweden recently published data on sold properties for 2022. This data reconfirmed that 9 in 10 properties sold in Sweden are listed on Hemnet. This is a confirmation of what will have known for a long time that Hemnet is the property market in Sweden and that this position has been stable over time. I find this data to be encouraging as it is a testament to the success of our recent product launches, our ability to cater to the various needs for our -- of our different customer groups as well as of our pricing strategy. And to be clear, we are maintaining our market share despite the changes to our products and pricing over the years.

Now turning to Page 5 and the review of the ARPL development. Q2 ARPL grew by 31% and balances the 22% decline in listing volumes. On the product side, we have seen continued high demand for Hemnet Premium, our product that maximizes the exposure of a listing; and Renewal, the ability to restart a listing. Package recommendations continue to be an effective driver of conversion and the key product focus area for the year is to increase the number of agents that actively provide their seller with the recommendation. A new feature is that in the cases where there is no recommendation given by the agent, Hemnet will now recommend Plus to the property seller.

We continue working with pricing with a long-term ambition to find a correct price for every property on Hemnet, taking careful consideration for the demand of each product as well as taking into account the various product improvements and launches over time. We believe that through our iterative pricing approach and with a clear focus on further segmentation on price and customer level, we can continue growing monetization to levels closer with international peers with a similar stellar business model to Hemnet.

Now turning to Page 6 to talk about the listing volumes and property market. As you know by now, this is another quarter with listing volumes significantly below the previous year. You can also see a clear correlation between a rising interest rate and its impact on listing volumes in the chart on the left. Based on historical listing volumes, we have good reasons to believe that the market will turn at some point. We do not speculate as to when the market will turn, but as long as there is a lack of clarity around affordability, driven mainly by rising cost of mortgages, the market will likely continue to be uncertain for buyers and sellers. When rates stabilize, buyers and sellers should be more comfortable in transacting.

We continue to see comfort in the fact that Sweden -- the Swedish market is driven by a need to live rather than by speculation, and annual volumes of published properties have historically been stable. While we are seeing declining listing and transaction volumes, we are also seeing prices stabilizing and price expectations in Hemnet buyer's barometer are at the highest level since May 2022.

Turning to Page 7 and revenue per customer group. Overall, net sales are marginally below last year, having declined by 0.8%. However, we have seen a 4% increase in seller revenue, demonstrating the strength of our core business model. As a result of the weaker, more uncertain property markets, some of our business-to-business customers, property developers, in particular, have had to review their marketing investments and allocations which has naturally had an impact on our financial results.

The result of this development is a 14.2% decline in revenue from our business-to-business customers. Because of this, we are tweaking our product development focus for the remainder of this year to be less on property developers and more on sellers and agent products as those are revenue items that are closest to our core and include the largest contribution to our overall sales. Furthermore, fewer listings on Hemnet means consumers spend less time on Hemnet, which translates into less advertising inventory available for us to sell.

We continue to see demand for our products from banks and real estate agents, especially the value-added services, as Hemnet continues to be an important marketing channel for both groups. The fact remains that property developers spend approximately 5% of their total marketing budget at the Hemnet, whereas real estate agents spend approximately 10% and that Hemnet only in recent years began developing products other than display advertising for our business-to-business customers with most progress having been with agent products.

This investment should be higher given the importance of Hemnet to their business. And despite weak revenue from these customer groups, we continue to develop products for our business-to-business partners, real estate agents, in particular, that generate clear value and provide a pass-through increased monetization for Hemnet once the market turns to the better.

Now turning to Page 8 for an update on the organization. We continue to invest in talent to optimize our organization through which we will execute our growth strategy. That said, we continue to maintain careful cost control and to focus on scalable growth with clear ROI. This quarter, we added 7 head counts, mostly in roles that are some exceptionally difficult to recruit in the past including app development. Some of these recruitments are replacement for consultants or replacements for employees on long-term leave.

Hemnet is in a unique position to strengthen the 2, while some other Swedish tech companies are downsizing. And we aim to leverage this opportunity to recruit key talent that will help us generate sustainable top line growth, while at the same time, keeping our cost in control, in line with what we have communicated earlier.

In the middle of the page, you can see a picture of Lisa Farrar, our new Chief Operating Officer, who joins Hemnet later this year. This is a new role for Hemnet that will combine the responsibility of our commercial operations, including product, packaging, pricing, go-to-market as well as exploring new growth opportunities. Lisa is a senior leader, and she brings extensive experience and knowledge from growing and transforming digital businesses. Her contributions to our continued work of strengthening our customer experience and relationships are much sought after.

Finally, I want to recognize the amazing achievements of our corporate culture team that have resulted in Hemnet being recognized for our employer branding efforts by Universum. It gives me great pleasure to say that investment into culture and employee brand have paid off, and we can leverage this success in our recruiting efforts to attract top-tier individuals with key specializations that will have a positive impact on Hemnet's long-term growth.

With that, let's move to Page 10 and an update on product. Starting off with a quick summary of our product road map, which remains unchanged since our CPO, Francesca, shared this with you during the year-end report presentation. We have 3 priorities for this year: engaging our consumers to ensure we offer the best tools and inventory through which our users can navigate the Swedish property market; growing our seller business through ARPL through continued pricing and segmentation and leveraging agent recommendations; and transforming business to business by creating and developing products that help agents find sellers.

As I mentioned earlier in the presentation, we will focus less on new value-added products for property developers near term given that this customer group has been forced to cut discretionary marketing spend as a result of a significantly weaker market for new developments.

With that quick overview done, I will now turn to Page 11 for an update on the pay-later project. We have been receiving some questions about our pay-later test that we announced earlier this year, and I wanted to take this opportunity to provide you with an update, starting off with a reminder of why we're testing pay-later on the left side of the page.

We believe that by moving the timing of the payment closer to when the seller receives their sales proceeds, we can lower the threshold to list on Hemnet. Secondly, by delaying the payment, we can ensure that sellers opt for the value-added product that is most relevant for them, not just most affordable. We can also work with pricing to drive ARPL of consumers wanting to delay the payment or reward consumers looking to pay right away. Finally, this is a highly requested feature, especially by real estate agents, and we believe that it could have a beneficial effect of our customer satisfaction from agents as well as sellers.

On the right-hand side of the page, you can see the factors that we are currently testing. We do not share specific data on this test, but so far, the test has been very promising, and I look forward to providing you with a more concrete update in due course.

Now moving to Page 12 for what I think is the most important product update to our user experience in a long time. By launching the ability for agents to display photos on sold properties, Hemnet created a unique advantage as the only property portal in Sweden with this highly requested feature. In the past, users visiting a sold listing would only be shown a generic graphic, making it difficult to determine to what extent the attribute of that property impacted the sale price. This has been a hugely requested feature, especially from our users, as it gives them tools to become even more knowledgeable about the property market most relevant for them.

To make this happen, we have a strategic agreement with one of the major property photography chains in Sweden and have also launched a tool that allows agents connected to this specific chain to instantly add images of sold properties on their own. Doing so gives an even better contact point between the potential seller and the property agent as the seller might make a decision to contact an agent based on the quality [Technical Difficulty]. I'm especially proud of this product as this is a feature totally unique to Hemnet among the Swedish property portals.

Let's now move to Page 13 and an overview of another product change. On the right-hand side of this page, you can see a new feature called sticky bar. This sticky bar has been launched on all mobile devices and it is accessible to the vast majority of our traffic. The impassion of this product is to give users a better way to contact the responsible real estate broker by having their phone number and e-mail readily accessible, just one click away on any listings. For real estate agents, this is a great way to get additional leads as well as increased personal branding. The sticky bar is available to all brokers free of charge and it's a great example of a feature that adds value to several customer groups and improves the user experience of Hemnet despite the low investments to implement.

Now turning to Page 14 for a quick comment on My Home. My Home is a user's personalized hub on Hemnet, showing an indicative valuation of their property. This is a long-term initiative through which we hope to grow engagement as well as customer stickiness and loyalty over time, giving users more reasons to visit Hemnet. Over time, we will add more areas of contact with the consumer through which we can generate more business opportunities by, for example, showing personalized offers such as the ability to contact an agent for a more precise valuation. During this year, we have made several improvements to the valuation algorithm and we'll work to improve this over time.

So that is it from my side. And I will now turn over to Anders, who will present his first financial update as CFO of Hemnet on Page 15.

[Anders Ornulf, executive]

I will, thank you. Let's turn directly to Page 17 (sic) [ Page 16 ] and the financial highlights for the second quarter. As Cecilia talked about, 2023 has started challenging, which resulted in 22% fewer listings published during the quarter compared to same period last year. And this, of course, affects the financial performance. That said, I think this quarter again shows the resilience of Hemnet's business model as we can present the strong result in these tough market conditions.

So starting off on the left-hand side of this page, we have net sales decreasing the minus 1% to SEK 267 million. As we mentioned earlier, we want to highlight the strong development for the property sellers revenue, which increased 4%, though the listings volumes again down 22%. Reduced investments in marketing and display advertising from our business-to-business customers, particularly property developers, is behind the decline of 14% in B2B revenue over the quarter. However, we see continued strong demand for our products from banks and real estate agents, especially the value-added services.

It is also worth highlighting that due to the increased average time on our listings from 30 days in Q1 to 35 days in Q2, these are 12-month figures, we have an accrual effect on net sales of minus SEK 4 million in the quarter, all else being equal. This means that all of the listed objects' income is distributed over 35 days instead of 30 and are not fully recognized in Q2. That effect will return positively when the listing time comes down again.

Our EBITDA came in at SEK 141 million, down SEK 4.5 million or 3% from last year. We will dive into the EBITDA development on the next slide. The EBITDA margin came in at 52.6%, down 1.3 percentage points from last year. This is, again, with the current market conditions, a strong rating for the model -- business model to be able to maintain a profit margin roughly in line with previous years.

Moving then to the right-hand side, we see -- we saw ARPL increasing 35% (sic) [ 31% ] within the quarter. Cecilia talked about the drivers for this earlier on Page 5, which were a combination of product updates, conversion to more expensive value-added services and price adjustments across all set of products.

As expected, we continue to see high cash conversion, which was 99% in the quarter. This is the free cash flow in relation to EBITDA. It's in line with the full year 2022 and Q1, and is further proof of our strong business model and cash generation.

Leverage came in at 0.9x rolling 12-month EBITDA, which is a slight increase compared to '22 and the first quarter. This is an expected development with current earnings and an effect of our dividend and, of course, due to the continued return of capital to shareholders via our share buyback program. And I will come back to that topic, the buyback program, in a few slides.

Let's then move to our EBITDA bridge on Page 18 (sic) [ Page 17 ]. As we have mentioned, we have slightly decreased EBITDA in the quarter. However, bear in mind that the accrual effect in net sales hits around SEK 3 million on EBITDA. So with the exception of that, results are well in line with the previous year.

We have covered the drivers for the revenue earlier in the presentation, so let's instead dive into the cost side. The compensation to real estate agents continues to grow at a pace similar to our seller revenue and is up SEK 2 million from last year. As the proportion of seller revenue, this meant that the compensation was around 29% for the quarter isolated.

Other external expenses, excluding compensation to agents, is down SEK 4 million. Despite increased costs for our new head office and other costs related to an increased organization, we succeed on cost control to maintain the controlled growth journey and hopefully increase profitability over time.

Personnel costs have increased SEK 3 million or 8% as we have continued to invest in product development for future growth, which we also mentioned earlier in the presentation today.

Then moving on to Page 19 (sic) [ Page 18 ] and a few additional words on the buyback program. As we already communicated, the SEK 450 million buyback programs initiated after the 2022 AGM is now completed and the shares are canceled. We now live with the 2023 AGM decision to buy back at maximum SEK 450 million for the coming period. And Hemnet's intention is still to continue buying back shares and distribute excess cash to shareholders.

During Q2 and including July to date, we have bought back 445,000 shares. Please note that the buyback started in the beginning of May, so it's not a full quarter of volumes we report. In total, we have bought back almost 3.6 million shares under the buyback programs, including the 2.8 million that were redeemed canceled after the AGM, which in total equals to 3.5% of total shares. As mentioned previously, the buybacks have also played a part of the increased leverage to the current level of 0.9x, again, net debt to EBITDA.

Before handing back to Cecilia to wrap things up, the final slide in this section is the financial targets perspective on Page 20 (sic) [ Page 19 ]. A short recap on the targets. The company's financial targets for net sales growth are 15% to 20%. When it comes to leverage, it's below 2x net debt to EBITDA. And in conjunction with our year-end report for '22, we introduced a new long-term EBITDA target of exceeding 55%, but at the same time, reiterated the old profitability target of 45% to 50% margin for 2023, considering the market conditions for this year.

In a more normalized market, the company believes that the investments that are made into future growth, combined with the operating leverage of the business, creates good opportunities for margin expansion going forward. Our growth rate measured as an LTM is now at 9%, our profitability measured as LTM EBITDA margin remains at 50% and leverage again was 0.9x.

Financial targets plays an important role to transparently follow performance versus ambition over time and a balanced assessment for me is that the second quarter is a good return on the core business and gratifying to maintain profitability in a very uncertain markets.

So that concludes my section today. And with that, over to you, Cecilia.

[Cecilia Beck-Friis, executive]

Thank you, Anders. I will now turn to Page 21 for a summary. So despite the challenging market, we delivered a stable report with solid profitability and strong ARPL growth in line with our strategy. The fact that we are able to grow our revenue from property sellers despite a 22% decline in listing volumes is a testament to the strength of our business model and shows the potential of Hemnet in a more normal market.

I'm proud to be leading the largest property platform in Sweden that increases effectiveness, transparency and trust of the property market, and that provides property sellers with the best possible tools to increase the exposure of their properties on a platform that captures 9 out of 10 sold properties in the country.

Thank you for your attention, and we will now move over to Q&A.

[Operator]

[Operator Instructions] The next question comes from Pete-Veikko Kujala from Morgan Stanley.

[Pete-Veikko Kujala, analyst]

It's Pete from Morgan Stanley. Two questions from me. The first one on ARPL and actually like renewal. So you mentioned that the renewals doubled year-over-year, but can you give any kind of idea how it compares to Q1 revenues? Basically, is demand for the renewal like accelerating or decelerating? Because I'm trying to understand how the ARPL behaves, especially versus Q1.

And then the second question is on employee costs because you have around 20% more employees now versus last year, but employee costs are up only 8%. And I doubt that's like underlying salaries are seeing deflation in this environment. So it would be interesting to hear some color on the employee costs as well.

[Cecilia Beck-Friis, executive]

Pete, thank you for your questions. I can take the first question and then Anders take the second question. So on ARPL, we don't disclose the exact conversion numbers. What we can say to put some more color on it that we have seen, since the fall, an increased demand for renewals. And the change that we made during Q1, I think it was in the mid -- like in February in Q1, has resulted in an increased uptake for the product.

[Anders Ornulf, executive]

And the second part of the question linked to the personnel cost. You have to remember that what we discussed was the -- what we presented was the head count for the period. So with the fact that the employees were mostly hired in late '22 and early '23, I would expect to that percentage point going up in the future.

[Operator]

The next question comes from Andrew Ross from Barclays.

[Andrew Ross, analyst]

I've got 2, if that's okay. The first one is on ARPL growth in Q2 against Q1. Can we just walk through why it slowed down? I know there can be quarterly volatility in May. We've had quarters in the past where it's been faster or slower, but it would be helpful to understand what the drivers of slower growth in Q2 versus Q1. And if there's anything you can say on pricing in Q3, that would be helpful.

And then the second question is on the impact on the accrual of listing revenue from a longer dwell time. So you called out on the SEK 4 million headwind in Q2. Can you just give us that number in Q1 as well, so we get a sense of how much of an impact that had on the growth?

[Cecilia Beck-Friis, executive]

Thank you, Andrew. And again, I'll take the first question and Anders takes the second question. So on ARPL growth, I mean we don't set -- I think it's important to note that we don't have a set target for ARPL growth on each month. We look at the ARPL growth over time. And what we can say on the ARPL growth is that -- I would say it's the same drivers behind the ARPL growth in Q1 and Q2, Hemnet Premium and Renewal. And it can vary depending on when we do price hikes, the uptake and so forth. And we have a long-term view of ARPL growth [Technical Difficulty] fixed target on ARPL to grow.

And I think that looking back, we had steady growth in ARPL and that is what we continue working for. And we also -- I mean also depending, I think, looking at the market -- I mean we're looking at the ARPL, it's uptick, it's when we do pricing, it's also being mindful when we do adjustments and so forth.

And on the second question, Anders?

[Anders Ornulf, executive]

Yes. Again, I highlighted that, that moving from 30 to 35 days is an LTM figure so that we have a situation with 5 days change among quarters are very huge. Again, those 5 days are translated into [Technical Difficulty] I think you can do the math yourself that the 5 days increase are higher than before. So I mean [Technical Difficulty] it will give you a view of this.

[Andrew Ross, analyst]

Okay. The line was a little bit unclear there, but I think I've got that. But maybe we can circle back after the call just to clarify that.

[Cecilia Beck-Friis, executive]

Absolutely.

[Operator]

The next question comes from Rikard Engberg from Erik Penser Bank.

[Rikard Engberg, analyst]

I have 2 questions, if I may. And the first one, with your initiative to have the buy now, pay at sale feature, how will that affect your cash conversion going forward?

[Cecilia Beck-Friis, executive]

Okay. So the test that we have been running during spring is a test -- like I said, is a test to make sure that we don't have any unnecessary threshold to list on Hemnet. And the test, what we're looking into is both, of course, the conversion, the interest, the different price points as well as how it will affect the cash conversion. But we're working with Klarna in this test. So it doesn't affect. I don't know, Anders, if you...

[Anders Ornulf, executive]

No, but it's good you started, Cecilia, bringing all the good things with the project. But -- I mean for us, all the aspects are valid when it comes to the decision of whether to launch or not. But -- I mean the projected change in working capital is one out of several. So we'll follow that, we'll monitor that. We'll see how that will affect our cash flow. That will be one part of the [Technical Difficulty] Cecilia said as well that, I mean, the credit risk and those kind of things are really important. We have a great operating model as it is, and we will not...

[Cecilia Beck-Friis, executive]

And I think it's also important to note that this test is not pay when sold, pay when renewed. So it's still -- even if you don't sell, you pay for the ad. So we're not changing the model, we're changing the payment timing.

[Anders Ornulf, executive]

And with the later cash flow conversion, that will also affect the commission. Of course, we will pay the agents later as well.

[Rikard Engberg, analyst]

Thank you for the clarification. And it's -- given that July is a slow month, have you seen any changes in the trend of listings during July?

[Cecilia Beck-Friis, executive]

I think it's a bit too early. We've seen somewhat of a positive sign. But I think, again, it's a slower month, and it will be very interesting now when we move into August and September to follow this, of course.

[Operator]

The next question comes from Giles Thorne from Jefferies.

[Giles Thorne, analyst]

My first question is on the impact of the incoming COO. And Cecilia, it would be useful to have a sense or a KPI of the impact she could have on product development and product cadence as we move forward.

And secondly -- in fact, second and third questions are on the pay-later product. Firstly, I appreciate your reluctance to give a sense of the impact. But nonetheless, I'm sure you're out there doing some A/B testing around the willingness of the consumer to list under the new product versus the old product. Any insights to likely conversion would be useful there.

And then moving to pay later is obviously a huge change. You could say it might radically alter the way an average Swedish householder thinks about selling their property. So with such a big change -- and you've touched on a couple of these things already, but with such a big change, I'd be interested to hear your thinking on the potential negative unintended consequences of moving to a pay-later product.

[Cecilia Beck-Friis, executive]

I can start off and Anders and Nick can jump in. But first on the COO, so we are in a phase, I would say, when we have grown the organization and we work with 7 different product teams. I could also say that up until now, we've been able because we are -- I mean we're still a small company, but we're growing -- that we've been able to handle the commercial and product and sales in different parts of the organization. And it's very clear for me that the next phase, we need to make sure that we are aligned in between the product, packaging, the pricing and go-to-market.

So that will be Lisa's primary focus and responsibility to make sure that we combine and work in a better way actually to improve the way we work and cater for a growing organization. So it's not only about the cadence in the product development per se, it's also about how we actually take the product to the market, how we continue strengthening the customer relationship and the customer experience.

We do have -- I mean there really is a super important both partner and customer, and we have products where there are resellers, we have -- they are paying and so forth. So we need also to make sure that we have -- that we are aligned and continue working with that. So that is a very -- for me, it is a very natural step in the organization to upgrade with a COO. And also to help me and to drive the business on a daily basis. So that's on the first.

On the second, I think -- I mean we do absolutely test -- we do a test, and we've been running this test for a couple of -- maybe 2, 3 months during the spring, and they are still underway. we do see very positive signals from the customers, that I can say, and we are very positive to this. We don't think that -- we rather see the positive side than the negative side. But as Anders said, obviously, we need to follow and track and make sure that we don't do anything that will change anything or that we will have any negative surprises.

I don't know if you want to add anything to that, Anders?

[Anders Ornulf, executive]

I think it was a good summary. But I mean -- it's not -- we're not -- it's not that radical. It's not that we're going from pay now to pay later. We're introducing new ways to maybe introducing the possibility to pay later. But again, look to the payment solution we have today, working with Klarna [indiscernible] today can pay on all different type directly or through invoice, i.e., pay later.

So it's not a dramatic change. We will -- if we introduced it, we will do it with all the learnings from the test. It's too early to, of course, publish today. But -- so it's not -- I will not describe it as a radical change to the market or the business model.

[Cecilia Beck-Friis, executive]

Maybe I can also add. And I think it's -- maybe it's our fault a bit, because we early on communicated this test. We normally don't communicate tests in this way, but we did, and we have had a lot of follow-up questions. I think it's really important to emphasize that we're not changing the model. We're not changing to pay when sold. We're not changing, like Anders said, it's just another option for sellers to pay at a later stage and pay another -- you can postpone your payment. But we are testing it and we see positive signals and -- this is something that we'll continue monitoring and hopefully continue developing for the future.

[Operator]

The next question comes from Eirik Rafdal from Carnegie.

[Eirik Rafdal, analyst]

This is Eirik from Carnegie. I've got a couple. In the Q1 report, you pointed to a couple of factors influencing the short-term market in terms of volumes. You gave a brief update on some of those catalysts today. But could you give us an update on the number of fixed rate loans that are coming up for refinancing in the second half of this year or early next year, which could trigger more sellers back to the market?

[Cecilia Beck-Friis, executive]

So -- I mean we don't have any more updates on that. I think we can only say that, that might be a factor. It's a factor in the market, but no update since Q1.

[Eirik Rafdal, analyst]

And just 1 note on the SEB data that was published in July as well, showing 9 out of 10 properties sold in Sweden still listed on Hemnet, which was stable from last year and, I guess, the last couple of years as well. Are you seeing any of your competitors kind of growing their share last year versus '21, so more sellers dual listing?

[Cecilia Beck-Friis, executive]

No. So we don't see any indication. I mean we have our data, and now SEB has communicated their data and that kind of reconfirms what we have seen before that 9 out of 10 properties is sold through Hemnet and published on Hemnet sometime during the sales process.

[Eirik Rafdal, analyst]

Perfect. And just 1 last housekeeping question. In the quarter now, interest expense is running at something like SEK 20 million to SEK 25 million per year with gross debt that's around SEK 0.5 billion. Is it fair to say that you're paying around 4.5% debt now? Or are there other items in net financial items that affect debt in the quarter?

[Anders Ornulf, executive]

You mean the interest cost in the financial net?

[Eirik Rafdal, analyst]

Yes. Yes.

[Anders Ornulf, executive]

It's absolutely right.

[Operator]

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

[Pete-Veikko Kujala, analyst]

One more for me on the pay-later product. So -- because to me, the fact that you want to like secure content, it sounds like a defensive move with this pay-later product. But based on the questions here, it seems that people also see it like as a potential growth driver. So I guess my question is, which one do you see this product as? Because obviously, it will impact the way that you price it going forward.

So do you still want to drive like majority of people to the normal funnel? Or are you willing to kind of price it in a way that more and more people are going to take the pay-later option for some extra income? So this is the question.

[Cecilia Beck-Friis, executive]

So maybe I can say that in a way, it actually -- for us, it's about growth mainly and giving the options to the sellers so they can have -- they can choose if they want to pay now or pay at a later stage. We believe that by doing so, we will secure content, that's one thing, and making sure that we can have the content we have and maybe add more content to them and growing the content. So I wouldn't say it's a defensive move, it's more about growing. And obviously, also like you're selling, also looking at the different price points.

What we also want to test and what we're also seeing is that with -- like I also mentioned in the presentation is that we also want to see if the sellers are willing to opt for a higher package. Maybe paying late could trigger that you actually opt for a higher package. And you know how we work with the pricing strategy and the pricing metrics, it's not a steady state, it's an ongoing development, both on the current products but also in how we actually package and sell it, and that will continue.

So I foresee that if and when we kind of go ahead with this, we will continue working with a different price points in order to optimize and increase ARPL.

[Pete-Veikko Kujala, analyst]

Yes. Understood. So the main kind of growth driver you would see from this is through conversion, not necessarily like the direct pricing of the pay-later product itself?

[Cecilia Beck-Friis, executive]

Sorry, I missed you. Maybe, Nick...

[Nick Lundvall, executive]

Eirik, I think we would see both as drivers, both pricing potential as well as conversion potential.

[Operator]

The next question comes from Andrew Ross from Barclays.

[Andrew Ross, analyst]

I've got 1 more on the My Home hub and the valuation data that you're using to tell an owner of the home how much it's worth. Can you just talk through the actual house price data that you guys have? Obviously, a lot of listing place data, but how do you access the transaction data? And I guess I'm asking this in the context of one of your European peers having just made an acquisition in this space. But could you just talk us through how that kind of transaction data ecosystem looks in Sweden?

[Cecilia Beck-Friis, executive]

Yes. So you [Technical Difficulty] I don't know if I lost you now, Andrew?

[Andrew Ross, analyst]

Sorry, Cecilia, I think we've lost you there.

[Cecilia Beck-Friis, executive]

Yes. No. So we do -- I mean the agents do publish the sales data in our systems, so we do have the data and use it on an aggregated level [Technical Difficulty] if you look at the Property page of Hemnet, you can also see [Technical Difficulty] they also provide data that will help [Technical Difficulty] Did you get that, Andrew?

[Andrew Ross, analyst]

I'm having a few issues hearing you. I got about 1/3 of it.

[Cecilia Beck-Friis, executive]

Okay. I don't know -- it's quite noise -- I don't know if you hear me, but it's -- so the data that we use is the primary data that the agents -- they publish the sold prices on Hemnet. We use the data on an aggregated level, for example, on the Property page on Hemnet, you can see sales trends and so forth. That's the data that we use from our own data.

We also use it to build the algorithm for the valuation that we have in My Home. And apart from using our own data, we do cover most of it, we also can leverage this sales [indiscernible] data to make sure that we have the data we need.

[Operator]

There are no more questions at this time. So I hand the conference back to the speakers for any written questions.

[Cecilia Beck-Friis, executive]

Okay. So thank you for your attention and for your questions, and I wish you a very happy summer -- nice summer. Bye-bye.