Hemnet Group AB (publ)

STO:HEM

Earnings Call Analysis

Hemnet's Q2 2024 Shows Strong Growth Driven by Property Seller Demand

In Q2 2024, Hemnet achieved strong financial results driven by a 51% increase in net sales, reaching SEK 405 million. Revenue from property sellers surged by 68%, supported by a 10% rise in listings and a 52% growth in average revenue per listing (ARPL). The company introduced a fully digital listing flow in May and launched a new compensation model in July, contributing to these outcomes. EBITDA rose by 54% to SEK 216 million, with a margin of 53%. Hemnet continues to experience steady demand for its value-added services, despite macroeconomic challenges impacting business-to-business segments.

Strong Market Positioning Drives Growth

Hemnet continues to solidify its place as Sweden's leading property portal, with the impressive statistic that 9 in 10 properties sold in the country are listed on its platform. This market dominance not only reflects the brand's established trust and value but also suggests a sustainable revenue stream. In the second quarter, the company experienced a robust 68% increase in revenue from property sellers, attributed mainly to a shift towards value-added service packages, including Plus and Premium listings.

Encouraging Financial Performance

For the second quarter of 2024, Hemnet reported a significant net sales increase of 51%, bringing its total to SEK 405 million. The average revenue per listing (ARPL) saw a remarkable growth of 52%, delivering a strong EBITDA of SEK 216 million, up 54% year-over-year. The EBITDA margin improved slightly to 53%, showcasing efficient cost management amid rising revenues. This reflects both high user engagement and strategic pricing adjustments across their service offerings.

Strategic Investments and Future Growth

Hemnet's recent investment in a new digital flow and a revamped compensation model aims to enhance user experience and align incentives more closely with real estate agents. Although the new model launched on July 1, early feedback has yet to be fully assessed. However, the leadership remains optimistic about its potential to drive agent engagement and conversion rates. The combination of increased engagement and higher-value service adoption positions Hemnet for continued success.

Strong Cash Flow and Shareholder Returns

The company reported a strong cash conversion rate of 91%, highlighting its operational efficiency. Free cash flow for the last twelve months grew from SEK 500 million to SEK 578 million. Hemnet has actively pursued shareholder returns through a SEK 450 million share buyback program, signaling confidence in its robust financial position. This commitment to returning capital enhances shareholder value while maintaining a conservative leverage ratio of 0.7x EBITDA.

Market Conditions and Outlook

The positive trends in the property market are reflected in a healthy increase in published listings by 10% and transactions by 16%. Market expectations indicate stability, with half of all market participants expecting property prices to rise over the next six months. This anticipated growth combined with improvements in listings and the digital sales flow suggests that Hemnet is well-positioned to capitalize on favorable market dynamics and continue its growth trajectory.

Addressing Business-to-Business Challenges

Despite the encouraging consumer growth, Hemnet's business-to-business segment faced challenges with a 6.2% decline in net sales from other customers. The company acknowledges the need for more transactions among agents and property developers to stimulate discretionary spending. Nonetheless, Hemnet is strategically focused on product innovations to enhance offerings to this segment, aiming to invigorate its B2B relationships moving forward.

Conclusion: A Promising Future

Hemnet's successful execution of its business strategy, combined with solid financial results, positions it strongly for the future. Initiatives such as the rebranding efforts, digital enhancements, and commitment to shareholder returns not only enhance its current market standing but also equip the company to sustain growth in a competitive landscape. Investors looking for a stable growth trajectory in the real estate market should consider Hemnet a compelling opportunity moving forward.

Earnings Call Transcript 2024-Q2

[Operator]

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

[Cecilia Beck-Friis, executive]

Good morning, and welcome to the presentation of Hemnet Group's results for the second quarter of 2024. My name is Cecilia Beck-Friis, and I'm the CEO of Hemnet. And today, I'm joined by Anders Ornulf, Chief Financial Officer; and Nick Lundvall, our IR Manager.

And as always, there will be an opportunity to ask questions at the end of the presentation. Please follow the operator's instructions to ask this through the provider telephone dial-in. Before going to the financial summary, I'd like to spend some time on Page 2 to share some thoughts on our market position. Hemnet is Sweden's largest property portal and has been since our inception in 1998.

We have significantly more unique users. This is an engagement per listing that is the second closest player in the market. Our leading user listing is especially important as we consider the value we provide to property sellers. No other portal can offer a more cost-effective way for sellers to reach the largest number of potential buyers for their property.

Furthermore, we estimate that [ 60% ] of our visitors are in an active search process, meaning they are likely to transact if they find the right property. This means that we can create unparalleled value to sellers looking to market their property to the largest number of potential buyers and the agents, property developers and other advertisers looking to be seen buy a large number of active property buyers.

Turning to Page 3 for a quick word on Hemnet share of properties sold. We sometimes refer to the fact that 9 in 10 properties sold in Sweden are listed on Hemnet in a given year. This is a key statistic as it highlights the importance of Hemnet in the Swedish property market, illustrating that even though they have been talked about off-market or premarket, most transactions occur through Hemnet. New data published by Statistics Sweden confirms that also in 2023, 9 in 10 properties sold in Sweden were listed on Hemnet. This is based on preliminary figures from Statistics Sweden that will be ratified in 2025.

Important to note that this percentage may fluctuate over time, especially in hot or cold market, but for back -- as we have data the figures have been stable around the current level.

Now turning to Page 4 and the summary of Q2. Hemnet strong results for the second quarter were mainly driven by higher demand for our value-added services from property sellers.

We also benefited from a steady increase in the number of published listing as the positive trends in the property market continued with more properties for sale, more transactions and increasing property prices.

Revenue from property sellers increased 68%. This is largely demand-driven as more sellers choose a Plus or Premium package for their listing driven not only by the value that these products provide, but also the launch of the full digital flow, ability to pay for a listing money has been removed from Hemnet, and of course, our win-win relationship with the agent industry.

We've also seen a 10% listing growth in the quarter, further supporting our net sales growth. The portion of ARPL coming from our value-added services more than doubled compared to last year. I'm underscoring that our growth is demand driven as opposed to reliance on price adjustments.

The new compensation model was launched on July 1 with the launch going as planned. That, coupled with the launch of our full digital flow in May will be a key driver for future ARPL growth as we continue executing on our strategy. Many of our business-to-business customers, initially property developers are still impacted by macroeconomic factors, we are still seeing some positive development in the property market, but we need time for this development to convert into interest sales and commissions for property developers and agents, respectively, before we see a higher willingness to invest in product and branding from those groups.

Nonetheless, we continue to see potential to use our unique data and market position to develop products for those customers. The prevalence of 50% on this page is not a title, but a testament to the strong financial quarter that we deliver. We delivered 51% net sales growth, a growth in average revenue per listing of 52%, a growth in EBITDA of 54% and an EBITDA margin of 53.4%.

And I'm very proud of these results as it underscores the fantastic business model of Hemnet and our ability to execute as we continue to expand our product offering, in particular to property sellers and real estate agent.

Now turning to Page 5 to dive into our main growth driver, ARPL. Growth this quarter came mainly from more property sellers choose to buy a Plus or Premium listing than last year, resulting in an ARPL growth of 52%.

On the right of this page, you can see a reference to the product and purchasing flow in the first bullet point, and I would like to expand on what we mean by this. With regards to investments, improving the product and purchasing experience of this is due to our ARPL growth strategy. Since last year, we have launched the ability to pay for a listing after sale through re-publishing of a listing, including in Premium. And soon, we will launch the ability to purchase value-added services on invoice or to upgrade listing from Plus to Premium.

The purchasing flow was completely overhauled in mid of this year, meaning that now almost all property sellers have to make an active package choice before the listing is published on Hemnet. As seen in the quarter, strong financial, this was an important contributor to our ARPL growth.

Finally, it's just as necessary that the majority of our property sellers buying Plus or Premium are satisfied with the product meaning that we are still in a very good place when it comes to the return on your -- Hemnet investments for property sellers.

Now turning to Page 6 for an update on the property market. This quarter, we benefited from a steady increase in the number of published listings as the positive trends in the property market continued with more properties for sale, more transactions and increasing property prices. The number of listings published on Hemnet grew 10% in Q2. At the same time, the number of transactions grew 16%.

Price expectations remain high with approximately half of all buyers and sellers expecting prices to increase in the next 6 months. The rest expect prices to remain unchanged as only 1 in 10 expected decline. Last time, we had such positive expectations was in the winter of 2020 and the spring of 2021. In terms of macro inflation measured as inflation came in below both Riksbank target of 2% and below consensus at 1.3%.

We've already seen the first rate decrease in May of this year, but the rate depreciation numbers paved the way for further decreases and a more confident and active property market.

Now on to Page 7 for net sales per customer group. Net sales from property sellers is up almost 70% and continues to be the main growth driver of the business. We've covered the drivers already, more demand for our value-added products in combination with the 10% listing volume growth.

So let's talk about the business-to-business net sales,. Net sales from other customers decreased by 6.2%, which is primarily due to lower display revenue. While we are seeing some positive signals in the market, we believe that more transactions need to happen both for agents and property developers to be comfortable in increasing the discretionary marketing spend.

Revenue from bank integration on the other hand, continued to increase as did revenue from value-added services for real estate agent in part, this is due to our new products that help agents connect with potential sellers.

Okay. Let's shift focus to some product and company updates, starting with Page 8. We successfully launched our new compensation model on July 1, and the first quarter where commission will be base of the new model, is therefore, this quarter and Q3 with the first payout based on the new model happening shortly after the end of Q3.

The new model further strengthened the alignment between Hemnet and our most active partners to create the win-win situation. In order to make it easier for agent, specifically office managers to track their historical and future compensation, we have launched a new dashboard. Some of these features will be launched in the near future.

On the left and right side of this page, you can see examples of our new commission dashboard that is available to our office managers through the Hemnet customer portal. On the left is an example of what an office manager sees to track the progress to the next commission level.

Top right is an example of how an office manager can track the performance of individual agents belonging to that office when it comes to listing recommendations and upgrades. Bottom right, the chart showing historical commission and administration repayment to remind office managers of the total compensation that Hemnet has recently paid out to them. We strongly believe that the new compensation model is a win-win for real estate agents in Hemnet. The new model is designed to give agent offices who are active partners even better possibilities to earn more from their partnership with Hemnet and we see this as one of many opportunities to strengthen our relations with the industry.

Now let's turn to Page 9 for a brief product update. This is a non-exhaustive list of a number of key initiatives where we are investing time and money this past quarter. The purpose of this is to give you a sense of some of the areas that we are currently prioritizing in product development, especially when it comes to usability and consumer improvement.

First of all, we have rebuilt our map experiences from the ground. At first glance, this might not be a significant change. But over time, users should appreciate the smoother, faster and more responsive search experience. The apps [ with code ] will also allow us to add layers, such as new functions and products on top of the existing map search in the future.

Secondly, we have retained a team of app developers to make some significant changes to the scalability and pace of our app development. Apps drive a large portion of our traffic, but we need to do some more work to get visibility and development pace up. Going forward, we expect that this will enable us to work faster in our app development to bring product and new features to apps faster than before.

Finally, we are investing in fixing some of the pain points that real estate agents may experience on Hemnet. This is an important initiative as we continue focusing on building a critical partner to the real estate agent community. Some examples here include the new commission dashboard that I showed earlier, we're also integrating sellers straight into the agent own CRM and some changes to Plus & Premium that have been requested by a number of agents especially when it comes to payment and purchase inflow.

And I want to emphasize again that this is a non-exhaustive list of some of the product initiatives and investment areas we are focusing on today. Beyond this, we continue to work on making Hemnet's best property portal for our visitors, improving our value-added products for property sellers and leveraging our uniqueness and brand to create products for our business-to-business customers.

Turning to Page 10 for my last slide that covers brand and marketing. While we enjoy one of the strongest brands in Sweden and the top 5 brands in the media category, we consider it's important to keep investing in building our brand, both through product and marketing investments. Not only is based on marketing spend, best practice in the industry, but we have also made significant changes to our product offering in the past few years, and so we need to remind our consumers about our update to offering and the value that we deliver.

Thus, we have updated some of our marketing efforts during the spring. Firstly, we did an outdoor campaign in Stockholm with the intention of expanding it to more cities after the summer. Secondly, we upgraded our social media work by updating our existing channels such as Instagram and Facebook, but also adding new channels such as TikTok to younger audience.

Thirdly, we are investing in SEO and SEM using external [ encryptions ] to ensure our investment yields the highest ROI. And finally, we invest time and money into physical events, especially those focused on real estate agents, such as annual meeting, roadshows of the works and so forth to get our message across to the agent in a less formal setting and strengthening our relationship with the industry.

And that is -- it's from my section, and I will now hand over to you, Anders, to dive into the financials.

[Anders Ornulf, executive]

Thank you, Cecilia, and good morning, everyone. Let's turn to Page 12 with the financial highlights for the second quarter. As you have heard, we see a similar development in public listings in Q2 as we did in Q1. We started the year with an 11% high number of listings compared to the first quarter of 2023. This trend continues in Q2 with a 10% increase in public listings. With double-digit underlying volume growth, we are experiencing a strong financial impact in our core business, with a solid Q1 behind us, growth accelerate further into Q1 -- into Q2, sorry, and we will take you through the [ what and why ].

Starting on the left-hand side of this page, we have net sales increasing by over 50% to SEK 405 million. As Cecilia mentioned earlier, we want to highlight the strong development in our property sellers revenue, which increased by 68%, driven by the ARPL growth, of course. It is also worth noting that due to the increased average time our listings are active, we moved from 42 days in Q1 to 43 days in Q2.

And remember, this is a rolling 12-month number. So in a normalized market, it doesn't change that quickly. There are 2 effects to consider with the increase in listing time. One, the revenues in Q2 are recognized over 43 days, meaning more revenues are moved into next quarter compared to last year, but also more revenue also shifted into Q2 from March 2024 compared to March 2023.

And since March is significantly larger month than June, the overall effect becomes positive. The net effect of the increased listing time is plus SEK 6 million for Q2. It is worth noting also that with increase listing times, the seasonal effect is strengthened in our quarters.

As always, we communicate this effect all else being equal, so we don't take into account that with our strong growth, which itself means that the larger net sales, a larger proportion of revenues moved to the coming quarter compared to previous year.

I would recommend looking at the quarterly ARPL growth as an LTM value to smooth out some of the seasonal effect. I refer to Page 5 in the presentation and in the report as well. Moving then to the right, we saw ARPL increasing by 52% in the quarter. The drivers to our combination of conversion to our more expensive value-added services, price adjustments across all seller products and a small effect of the increase in listing time.

Our EBITDA came in at SEK 216 million, up 54% from last year. We will dive into the EBITDA development on the following slide. The combination of underlying volume growth and our ARPL result in a very favorable profit development in the quarter. The EBITDA margin came in at 53%, up 1 percentage point from last year, and we will discuss the cost side later.

As expected, we continue to see a high cash conversion, which was 91%. LTM in the quarter, in line with the [ CAGR ] of Q4 2023. Cash conversion was impacted by negative change in working capital for the last 12-month period. That change work capital is mainly due to the availability to pay when listing is removed, we still lay the time of a payment from the property seller. That's leading to higher working capital all as being equal.

Leverage came in at 0.7x rolling 12-month EBITDA, which is an improvement versus the previous quarter and well below the financial target. This is an expected development with the current earnings, and it's also due to our dividend and the continued return of capital to shareholders through our share buyback program. Now will raise at that topic in a few slides.

Let's move to our EBITDA based on Page 13. As we have mentioned, there's been a very strong EBITDA development in the quarter with an increase of SEK 76 million. We have already discussed the drivers of revenue earlier in the presentation. So now let's turn our attention to the cost side.

Compensation to real estate agents continues to grow, up by SEK 48 million quarter-on-quarter. It's worth noting that share is increasing as a result of higher conversion, meaning more upselling from agents but also because more and more agents offices have commissioned agreements. This is very promising ahead of the new compensation model that was launched 18 days ago actually. This represents an incremental increase of 2 percentage points in effective commission, which is important to keep in mind.

In total, this amounted to a cost of SEK 107 million in the quarter. Other external expenses including compensation to ages, increased by SEK 5 million. This increase is due to high marketing activities, both digitally and off-line as well as slightly higher consulting. You saw some examples earlier in the presentation, what we invested in Q2 will be continued up in the summer without destabilizing our [ payment ] of course.

Our external expenses are composed of several components, but we're satisfied with the mix. The last declination points require some clarification to fully understand. The increase of SEK 10 million can be translated to 21% increase in personnel costs. The underlying factor behind the personnel cost increase is that the FTE increased by 15 quarter-on-quarter compared to the number of employees at the period end only increasing by 4.

The difference the FTE increase can be explained by a lower number of employees on parentally during 2024 as well as recruitments made in 2023. Additionally, part of the increase is also due to salary inflation.

In summary, regarding the cost side, we can note that 2023 was the year when we were careful with our cost and investment driven by the uncertainty at the moment. We see in the first half of the year. And the 2 conclusions are. First, we are facing relatively low cost levels in our comparison figures. But more importantly, we've been very successful in investments and privatizations we made in new products and features. And we look forward, of course, to continue that trend to meet our growth plans going forward. These are the drivers behind the SEK 216 million in Q2 EBITDA.

Moving on to Page 14 and some spotlight on the cash flow. If we start with the graph on the left, it shows a rolling 12-month figure for free cash flow. Being able to generate such a stable and increasing cash flow is a very strong endorsement for the business in the business model.

Close to SEK 0.5 billion LTM in Q1 '24 is now increasing to SEK 578 million in Q2. During Q2, we bought back 333,000 shares equaling SEK 104 million. The SEK 450 million share buyback program announced after the 2023 AGM was completed during the previous quarter and a new program was launched in May after decision by the 2024 AGM.

The new program also amounts to SEK 450 million and will run into 2025 AGM. Further, the 2024 AGM also decided on the cancellation of 2.1 million shares bought back under previous programs equal to [ 2.2 ] of outstanding shares at the launch of the previous period.

We have stated before that Hemnet's intention is to continue buying back shares and distribute excess cash to shareholders. Of course, we must keep an eye on our leverage ratio. Net debt should always be viewed in the light of our growing EBITDA, thus ensuring a stable net debt-to-EBITDA ratio.

As you can see, it has remained stable for some time, but it's now slowly decreasing, which is a consequence of a strong cash flow. It is, of course, clearly below the financial target of [ 2.0 ]. As a final remark, we are delivering a strong quarter presentation today. It is gratifying to see that a combination of volume and conversion is driving the revenues.

On the cost side, we have higher activity and that drive future results. Despite this, we achieved an EBITDA growth of 54% and SEK 76 million in absolute sale a very favorable equation indeed. With that, I will hand it over to Cecilia to wrap things up before the Q&A.

[Cecilia Beck-Friis, executive]

Thanks, Anders. And so this has been yet another strong set of results from Hemnet as we continue to execute on our strategy for consumer sellers and business to business. And I am particularly proud that this quarter's growth was supported by the results of our many initiatives to make our product offering as attractive for property sellers and agents as possible. With that, let's go straight into the Q&A.

[Operator]

[Operator Instructions] The next question comes from Nikola Kalanoski from ABG Sundal Collier.

[Nikola Kalanoski, analyst]

Just two quick questions on the new commission model. Firstly, have you received any early feedback from real estate agencies on the new model that you could share with us? And secondly, has the new model already resulted in any changes in terms of the mix of loss and premium ads that are promoted so far in July? Or is it too early to tell?

[Cecilia Beck-Friis, executive]

Thank you. So the first question on feedback. We have not received any specific feedback after the launch. We have spent a lot of time into dialogues with the agents community throughout the spring and got an input and having a dialogue and explaining the new model, but they have not received any other feedback. And on the second question, I would say it's too early to say.

[Operator]

The next question comes from Pete Kujala from Morgan Stanley.

[Pete-Veikko Kujala, analyst]

Three from me. So first two are on ARPL. Is there any way to quantify the impact of the new digital publishing flow into upsell because I'm pretty sure like there's clearly an impact, but is it possible to quantify it in any way? That's question number one.

Second question is, do you expect the announcement of the new agent compensation model or now that the launch of the new compensation model, has that driven upsell already in Q2, even though the model wasn't up and running it, but agents knew that it's coming. So where they already reacting and to what degree?

And then the last one is on marketing. So what size of marketing investment do you anticipate for the second half of this year and into 2025? And like any kind of color on why you decided to do it now? Because obviously, we know Booli has been doing active marketing. So it's basically your spending -- does it depend on how long Booli is going to do advertising and then if they tone it down? You're going to tone it down? Any color on that would be helpful.

[Cecilia Beck-Friis, executive]

I can start and maybe Anders can jump in if he wants to add something. But on the first question related to ARPL, I would say that during Q2, I would say, it's mix of several factors that drive the ARPL in Q2. The full digital flow that was launched fully in, I believe, some time in May, right? So it's not the full quarter, has definitely had 1 effect because we're reaching more people and that has grown, so has had an effect.

I also assume that the compensation model maybe some effect as well kind of loosing up to the launch, the 1st of July. A hard to quantify. I don't really disclose that. But I would say that those are the factors as well as happy customers buying the Premium products. I would say that those 3 and also maybe adding to the pay when listing is removed that we launched during Q4 last year, that also continues filling one in all those areas, I would say, maybe pointing most to full digital flow in Q2.

And then on marketing, I would say that regardless of competition, what we have said and communicated for some time, and we started communicating that I believe it was 2 years ago. We said that we are kind of moving into a sales where we want to come back to having kind of an ongoing -- put some investments in our marketing on an ongoing basis. Because that is kind of -- how we kind of run the business long term and also because we have done a lot of changes in our business and in our products for many years, and we haven't really communicated that.

So we said that -- I believe it was 2 years ago, we communicated that. And we also started with reviewing kind of the brand platform and so forth. Then last year, we said that we kind of -- we paused that a bit given the market uncertainty. And I think it was a good choice last year, that's where we kind of -- we were a bit more strict on prioritization in our product development and also not really pushing forward the marketing.

And we also said then that kind of coming back to what we said and then kind of following through on what we said last year is that, when we see the market coming back, where we'll kind of go also back into investing more in product and marketing, and that is what you're seeing.

So that is the main reason for us. And I can, of course, see that we will do a bit more active on marketing and marketing for us, it could be like branding like with we did during Q2, but also in making sure that we are on top of SEO and SEM, and social media as well. But when we talk about marketing, we're not talking about like big investments in that sense, but more or less kind of coming back to having a long-term view and ongoing view of kind of doing a bit more always on, I would say. I don't know, Anders, if you want to add anything or if that kind of answered your question, put your assessment.

[Anders Ornulf, executive]

You said it very well, but I can also stress really that this is in line with we said now for the last 1 year that when the market develops, we would kind expect that our run rates will grow, but it would not be -- you saw sort of SEK 3 million, SEK 5 million, you will not be that dramatic. So yes.

[Operator]

The next question comes from Will Packer with BNPP Exane.

[William Packer, analyst]

Firstly, ARPL growth was very impressive. Could you help us by disaggregating the drivers of the big beat? So for example, some of your peers talk to price product and other perhaps disaggregate that? Or alternatively, help us with the penetration of Premium or Plus listings. Clearly, consensus was wrong by a wide margin, so understanding the drive will be very helpful.

Secondly, in terms of the cost outlook, for the second half of the year. We have the new commission model. Should we think of downside or upside to the 30% of listing revenue paid out to agents in Q2? Or is it too early to say? And then finally, in terms of the non-commission costs such as personnel, personnel costs grew 20% in Q2. Is that the right number to think through for the second half of the year? Any commentary on the outlook for the second half cost base would be very helpful.

[Cecilia Beck-Friis, executive]

Thank you. I'll take the first question and then maybe Anders, you can talk about the cost side of the business. But we don't disclose the exact -- I mean -- we have different drivers that drive ARPL, we don't disclose exactly. What we said before is that came through product price at 50-50, that's kind of on a little over time kind of what we canceled during Q2 is that it's really a demand-driven growth.

And I'm very happy that the last quarter soon, more uptick to our value-added services, meaning that our customers really appreciate those products and give them a good grade as well and recommend this product and that we kind of reach a point now we're more and more tied this product and kind of more people convert to those products.

Then I would add coming back to the last quarter where we also talked about the 4 different drivers. We also talked about parts from products growth. We also talked about, for example, the publishing flow and the payment. And all those things that we're doing, for example, the full digital flow, that also helps us to drive ARPL.

Now we're almost -- almost everyone is now exposed to the different packages and are kind of prompted to make a choice. And that has an uplift as well during Q2. And we talked about, I believe, during Q1 that majority of the sellers are on the value-added services. And what we can say without disclosing number is that, that is kind of -- that has grown during Q2. I don't know, Anders if you want to say anything before going into the second question.

[Anders Ornulf, executive]

No, I think also adding that when we disclose some details along with the Q1, we gave you 12 months -- 12-month figures because we know that recommendation levers conversions to be uptick and so on that it tends to vary a bit during the quarters and there's no drama in that.

But still a positive momentum in ARPL growth. When it comes to compensation model, it is, of course, early to say, 18 days in a very July, it's a very slow month for obvious reason there aren't holiday. But remember that it is a paid-for-performance model. So it should drive top line.

So how it pans out on the effective commission [ 30, 28, 32, 26 ]. It's way too early to say, but hopefully, we will increase our payouts to agents and they've done a good job and also can do it. Coming back marketing, once again, as we have said now a couple of quarters that when the market develops, should anticipate higher run rates when it comes to marketing. And I would expect that to happen during the second half year as well. No, that matter as well.

[Cecilia Beck-Friis, executive]

Yes. But I think also the question was regarding the personnel.

[Anders Ornulf, executive]

Sorry, that's right. Yes, the effect 2023, 2024 will continue in Q3 and Q4. So our figures for Q2 and Q1 are the best forecast model for Q3, Q4. That's for sure.

[Operator]

The next question comes from Andrew Ross from Barclays.

[Andrew Ross, analyst]

I've got two if that's okay. First one, I just have to asked you how you're thinking about underlying pricing given how good progress you're making on Premium upsell and whether it changes, if you're thinking about kind of pricing adjustments on the core listings in the second half?

And I guess what I'm trying to weigh up as you think into the second half, potentially there are kind of additive factors around the full kind of annualization or full period of inclusion of digital flow migration plus the change of commission model. Should we kind of think about stacking that up potentially on the same underlying price increase that you're always going to do? Or are you thinking about kind of solving for an ARPL and you may be a bit more cautious on the base pricing in the second half as a result? That's the first question.

The second one is you about the medium-term plans about how you drive more Premium upsell? You've obviously had a lot of success in the last year around pay later, the digital flow, you're publishing commission model changes, presumably if you think about '25 and '26. Can you give us a bit more color in terms of the medium-term plan as to how you keep driving that on after super strong '24?

[Cecilia Beck-Friis, executive]

Thank you, Andrew. So I think I heard your question. It was a bit for our connection. But the first on underlying pricing. So to give some color on that, I would say that when we look at ARPL, we do see like we talked about several different levers for us to work on. And I would say that it would have a growth aspect now on some of the initiatives that we've done with the pay later and the digital flow, but also the compensation model.

I would -- just looking into that, that is where our focus will continue on working on price, obviously, I mean we have a great segmented [ property ] model, but we do see a lot of levers to pull that are kind of product improvement or enhancement in the publication. That's kind of the main focus for us right now.

I would say, versus pricing. And then on the medium-term plan, ultimately coming back to without disclosing anything. We'll still see a lot of growth potential, both low-hanging fruits and the bigger things that we can work with for the coming years.

And that is really when it comes to product and the offering we have and I have said that before also, we've had these product offerings for different time now. And I think in the coming years, I wouldn't be surprised if that kind of expanding to something else or developing to something else to case, therefore the different -- this is for our different customers. That's the one area but also with, of course, now we're -- like Anders said 18 days into the new compensation model.

Now it's live. Now we need to continue working and making sure that agents understand and sellers that there is a kind of optimizing that. I think that has also huge potential and hopefully be able to bring as many as people along with us as possible and also with the publication flow and the publishing flow on the payment timing, there are more things to do in those areas.

So for us, we really to kind of those levers and continue working on, without disclosing a specific initiative or something, but we have several things that we can work on.

[Operator]

The next question comes from Georg Attling from Pareto Securities.

[Georg Attling, analyst]

Congrats on the very strong quarter. I just have 2 questions, starting with the pay later product. We obviously saw a very swift adaption of that in especially in Q1. Has that continued up? Or are you sort of at a stable level now?

[Anders Ornulf, executive]

I can answer that with every time I've commented on the pay later or pay when listing is removed the feature that we launched in Q4 last year. It has varied over the quarters but not be it between 40% to 50%, and it continues to do that. But we cannot draw any clear conclusions on that.

So we don't see the we don't see a correct correlation with the market or anything else. So what we said in Q1 still stands.

[Georg Attling, analyst]

Okay. And my second question is on the other services revenues down 7% during Q2. Just wondering if this is something you worked actively to turn around, maybe especially on the advertising side or just awaiting a better market?

[Cecilia Beck-Friis, executive]

And we're definitely working actively on this that we definitely want to see a trend shift in this area, and we're working actively both in kind of how we work and with the product enhancements and so forth. And we are affected by the overall market, but we also believe that when the market kind of continued showing these positive signals, there will be bigger willingness for investments, and then we will definitely want to build there. So definitely working actively in this area.

[Operator]

The next question comes from Giles Thorne from Jefferies LLC.

[Giles Thorne, analyst]

The first question was on, I suppose, ultimately, ARPL. But note in your previous comment that you hadn't seen a big change in behavior by agents on recommendations ahead of the launch of the new compensation model. Can you tell us then instead what was the driver of the increase in payments, administration and commission costs paid to agents if it wasn't a change in behavior?

And secondly, I wanted to turn the conversation to B2B. It's an area where over the past couple of years, you've launched a number of products and spoken up about the opportunity, but ultimately, the trends that you're seeing within your B2B segment have just got worse. So I think just from Cecilia, maybe an update on where you are on B2B and how you expect it to evolve from here and with a view, especially on agents?

[Cecilia Beck-Friis, executive]

Sure. So on the first question, I don't know if...

[Anders Ornulf, executive]

Yes. I think it was me -- could give me understanding, I don't know. Let me know if this is an answer to another question, but there's quite a big change in the effective commission in Q2 as well. I'll try to be clear about that in my slide. So two main reasons why the effective commission has increased is that one, more agents have signed commission agreements. And that's, of course, a result of what we've done during this half year, been out in the market talking about the new compensation model and so on.

And the second one is as actually climb in the current tiers and the current commission tiers. So with a higher conversion, they get higher payouts as well today with the current model. So those are the two explanation points by the effective commission rates increased in the quarter. That was the first one.

[Cecilia Beck-Friis, executive]

And so on the business to business, and that is true. We have invested in new product launches for business to business, especially agents and also previously with the property developers. It's still a bit of a tricky market because the willingness to invest has been limited during this market. So the timing hasn't been that easy. That's one thing.

And we've also been a bit pressure then on the overall kind of display revenue. Our strategy is to expand -- continue to expand the products and go into more Hemnet's unique products, innovative products because then we can also reach the mobile audience in a better way. And that kind of still stands.

The strategy still stands. And we'll expect the market to be more positive going forward, but also coming back to what can we kind of do in order to make sure that we have the best product, potential adjustment, but also the way of working and how we handle seller packages products.

So all those areas we are working on right now to kind of coming back to an earlier question as well that this is not -- not only waiting for a market to change, but we're also working actively in the order. And our belief when it comes to this area, it still stands.

But then coming in both on agents, you asked specifically on young side of property developers, those two businesses, they have been quite affected in this lower market. So I expect kind of with the more positive signals that they will also their willingness we also come back, which is a good thing.

[Giles Thorne, analyst]

Okay. Very good. And thanks, Anders. I clearly missed that commentary from your prepared remarks. Just back on B2B and a follow-up. Are you going to start more aggressively selling some of your agent products into agents this year?

[Cecilia Beck-Friis, executive]

We continue to having a dialogue, and it still stands that we have developed some good products that we are selling to the market, and that kind of continues.

[Operator]

[Operator Instructions] There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.

[Cecilia Beck-Friis, executive]

So thank you, everyone, for checking in today, and I wish you all a good summer. Bye-bye.