Verkkokauppa com Oyj : Interim report, January-September (unaudited) 22 October 2021

VERKKOKAUPPA.COM OYJ

INTERIM REPORT

January - September 2021

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INTERIM REPORT for 1 January - 30 September 2021

STRONG GROWTH IN ONLINE AND CORPORATE SALES

Verkkokauppa.com Oyj - Interim report 22 October 2021, 8:00 a.m. EEST

Unless otherwise stated, the comparison figures in brackets refer to the corresponding period in the previous year (reference period). Figures are unaudited.

July - September 2021 in brief

• Revenue was 141.0 million euros (129.3)
• Gross profit was 20.9 million euros (20.9) or 14.8% of revenue (16.2%)
• Operating profit (EBIT) was 4.7 million euros (5.6) or 3.3% of revenue (4.3%)
• Comparable operating profit was 4.7 million euros (5.6) or 3.3% of revenue (4.3%)
• Profit for the period was 3.5 million euros (4.2)
• Earnings per share was 0.08 euros (0.09)
• Investments were 0.8 million euros (0.3)
• Operating cash flow was 7.6 million euros (5.5)
• The Board of Directors decided, according to authorization, to pay the 3rd dividend installment of 0.059 euros per share on 2 November 2021.

January - September 2021 in brief

• Revenue was 405.6 million euros (377.6)
• Gross profit was 65.0 million euros (61.8) or 16.0% of revenue (16.4%)
• Operating profit (EBIT) was 15.0 million euros (13.4) or 3.7% of revenue (3.5%)
• Comparable operating profit was 15.0 million euros (14.2) or 3.7% of revenue (3.8%)
• Profit for the period was 11.1 million euros (10.0)
• Earnings per share was 0.25 euros (0.22)
• Investments were 3.0 million euros (0.9)
• Operating cash flow was 2.0 million euros (6.5)

			Change
KEY RATIOS	7-9/2021	7-9/2020	%	1-9/2021	1-9/2020	Change %	1-12/2020
Eur million
Revenue	141.0	129.3	9.1%	405.6	377.6	7.4%	553.6
Gross profit	20.9	20.9	-0.3%	65.0	61.8	5.3%	88.4
Gross margin, %	14.8%	16.2%		16.0%	16.4%		16.0%
EBITDA	5.9	6.8	-13.7%	18.7	17.1	9.3%	24.6
EBITDA, %	4.2%	5.3%		4.6%	4.5%		4.4%
Operating profit (EBIT)	4.7	5.6	-17.0%	15.0	13.4	11.8%	19.6
Operating margin, %	3.3%	4.3%		3.7%	3.5%		3.5%
Comparable operating profit	4.7	5.6	-17.0%	15.0	14.2	5.5%	20.4
Comparable operating margin, %	3.3%	4.3%		3.7%	3.8%		3.7%
Net profit	3.5	4.2	-17.9%	11.1	10.0	11.5%	14.6

Investments	0.8	0.3	199.2%	3.0
Operating cash flow	7.6	5.5	38.6%	2.0

0.9 213.3%

6.5 -68.6%

1.4

16.9

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FINANCIAL GUIDANCE FOR 2021 REMAINS UNCHANGED

The company expects the revenue to be between 570-620 million euros (554 million euros) and comparable operating profit to be between 20-26 million euros (20.4 million euros) in 2021.

CEO PANU PORKKA'S REVIEW

Verkkokauppa.com's growth continued in the third quarter of the year. Our market share grew substantially in a moderately growing market. Measures to promote sales, such as our exciting and strongly expanding assortment and fast delivery solutions, succeeded. There was strong growth thanks to consumers and business customers. In addition, the export business, which slowed during the pandemic picked up and is now on a growth path. Revenue for the quarter increased by 9.1 percent and totaled EUR 141.0 million.

Our work for a smooth and reliable online customer experience has made an excellent progress, and an increasing number of online visitors ended up shopping. Success during the back-to-school season boosted online sales, which grew by 19 percent in July to September. Growth came from almost all product categories, particularly popular were computers and games. In the evolving product categories, sports equipment, toys and home & lighting did well. The strategic growth area, corporate business (B2B), increased strongly - 22 percent in the quarter. Growth came from the customer segments of large as well as small and medium sized enterprises.

Verkkokauppa.com's gross profit in the third quarter was at the same level as the comparison period and was EUR 20.9 million representing 14.8 percent of total sales. The gross margin was weakened by the tight competitive environment, especially in large core product categories such as phones, computers and large and small household appliances. In addition, the share of low-margin product categories of total sales increased. The operating profit declined from the comparison period and was EUR 4.7 million.

In August, we announced that we were strengthening our management team to support strategy implementation and business development. Jyrki Tulokas was appointed Chief Technology Officer. Kalle Koutajoki, previously Verkkokauppa.com's Chief Sales Officer, was appointed Chief Strategy and Development Officer, and Pekka Litmanen was appointed Chief Experience Officer (CXO). With these reinforcements, we are investing in strategy execution and the company's key strategic development projects.

Promoting responsible working conditions and environmental practices have been priorities of Verkkokauppa.com's sustainability focus areas. In September, to contribute to this objective, the company joined an international amfori BSCI sustainability platform to help ensure and monitor human rights and labor rights in its own brand's procurement chains in cooperation with suppliers.

At the end of September, the company held its first ever Capital Market Day. This event focused on strategy implementation, leverage of our wide assortment and the company's own technological backbone, which offers a competitive advantage. In addition, for the first time, we declared the CO2 emissions from our own activities; there is a significant downward trend thanks to energy efficiency measures and transition to renewable energy.

We are confident about our business at the end of the year. In-depth preparation for the upcoming campaign season, good availability of our wide assortment and versatile delivery services will support the growth. The company believes that it is well positioned and will be a relative winner in the "new normal" business environment. We believe that online shopping will continue to grow steadily even after the pandemic. Consumers found new product groups in online stores, which they are typically used to buying in physical stores. This change in consumer behavior is an essential contributor to the company's long-term goals and the strategic decision to expand its assortment.

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FINANCIAL DEVELOPMENT

REVENUE AND PROFITABILITY

	7-9/	7-9/		1-9/	1-9/		1-12/
EUR million	2021	2020	Change%	2021	2020	Change%	2020

Revenue	141.0	129.3	9.1%	405.6	377.6
Operating profit (EBIT)	4.7	5.6	-17.0%	15.0	13.4
Operating margin, %	3.3%	4.3%		3.7%	3.5%
- advisory costs related to transfer to
official list of Nasdaq Helsinki	-	-		-	0.8
Comparable operating profit	4.7	5.6	-17.0%	15.0	14.2
Comparable operating margin, %	3.3%	4.3%		3.7%	3.8%

7.4%	553.6
11.8%	19.6

3.5%

0.8

5.5%	20.4
	3.7%

Share of sales		7-9/		1-9/
	7-9/	1-9/	FY
Customer segments	2021	2020	2021	2020	2020
Consumer	72%	76%	72%	72%	74 %
B2B	22%	18%	21%	18%	18 %
Export	6%	7%	7%	10%	8 %
Sales channels
On-line	59%	54%	60%	53%	56 %
Off-line	35%	40%	33%	38%	36 %
Website visits, million	17.6	19.8	54.9	57.1	87.0

Sales includes orders and deliveries in transit. On-line and off-line sales exclude export sales.

July-September 2021

In July-September 2021, Verkkokauppa.com's revenue grew by 9.1 percent year on year, totaling 141.0 million euros (129.3). Sales of computers, games, sports, toys as well as home and lighting were particularly strong.

During the third quarter, Verkkokauppa.com's online sale increased 18.7 percent year on year, representing 59 percent of total sales (54%). Visits to the Verkkokauppa.com website declined year on year, totaling 17.6 million (19.8) during the third quarter. However, the company succeeded well in converting many online visitors to regular buying customers during the comparison period, with an improvement of conversion rate. Sales to corporate customers (B2B) increased 22.0 percent, representing 22 percent of total sales (18%). The export business returned to the growth path once travel restrictions were relieved, and export sales increased 4.5 percent during the period, representing 6 percent of total sales (7%). Revenue excluding exports, increased during July-September by 8.1 percent.

The company-financed customer financing proceeds were 1.1 million euros (0.9) including both interest income and fee income.

Personnel costs increased in July-September by 4.5 percent to 8.5 million euros (8.1). The increase resulted mainly from IT as well as purchasing and assortment handling functions. During the reporting period, other operating expenses increased slightly to 6.8 million euros (6.1).

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Operating profit (EBIT) in July-September decreased 1.0 million euros, totaling 4.7 million euros (5.6), representing 3.3 percent of revenue (4.3%). Profitability was impacted by the highly competitive environment, especially in core product categories such as phones, computers, and large and small household appliances. In addition, the share of low-margin product categories of total sales increased. Comparable operating profit was 4.7 million euros (5.6) and profit for the period 3.5 million euros (4.2).

Earnings per share were 0.08 euros (0.09) in July-September.

January-September 2021

In January-September, Verkkokauppa.com's revenue grew by 7.4 percent year on year, totaling 405.6 million euros (377.6).

The company-financed customer financing proceeds were 3.1 million euros (2.6) including both interest income and fee income. The credit loss allowance was 0.7 million euros (1.0) at the end of September.

Personnel costs increased in January-September by 7.0 percent to 26.9 million euros (25.1). The increase came mainly from IT as well as from purchasing and assortment handling functions. During the reporting period, other operating expenses increased slightly to 20.2 million euros (19.9).

In January-September, operating profit increased by 1.6 million euros, totaling 15.0 million euros (13.4), representing 3.7 percent of revenue (3.5%). Comparable operating profit was 15.0 million euros (14.2) and profit for the period 11.1 million euros (10.0).

Earnings per share were 0.25 euros (0.22) in January-September.

FINANCE AND INVESTMENTS

Operating cash flow was 2.0 million euros (6.5) in January-September 2021. Operating cash flow was impacted by change in working capital. Drivers for change in working capital were mainly growth in inventories when mitigating possible availability shortage, preparing for high season sales and campaigns.

Ordinary seasonal fluctuations are reflected in cash and cash equivalents, cash flow and accounts payable, which usually reach their highest points at the end of the fourth quarter and their lowest points at the end of the second quarter.

Investments totaled 3.0 million euros (0.9) in January-September 2021. Majority of investments are directed to the Jätkäsaari automation warehouse project. During the reporting period the company invested and capitalized 0.3 million euros (0.5) in salary costs. In January-September, a dividend of EUR 17.5 million (7.1) in total was distributed to shareholders.

Verkkokauppa.com has revolving credit facilities totaling 20 million euros, which have not been utilized. Of these credit facilities, 15 million euros are for three years, and five million euros for five years as of 1 July 2019.