Rugvista Group AB (publ)

Thank you very much. Good morning everyone and welcome to our second quarter earnings call. We're happy to see so many participants this time around as well. This is Michael and I got Joakim here with me as well. Let's kick it off. And with a quick highlight regarding Q2, I think overall what we see is that our order growth continues at healthy levels, but that the market remains quite challenging from multiple perspectives. I think I want to start off talking a little bit about the strategic initiatives we've been working on over the past couple of years and the effect that we're starting to see of those. So we still are able to maintain a very high level of customer satisfaction, which is quite good. We are also in a position to grow our order volumes more than double digits. This is in a market where the consumer sentiment, albeit in some of the major markets, improved during the quarter, but remains at quite low levels. And we also see that the inflation has made the purchasing power of the European households quite weak. And I also want to highlight the outdoor rug season, which primarily constitutes the second quarter, and where we saw more than a 50% increase year over year in the sales contribution from that subcategory. From a revenue perspective, we essentially were flat, minus 1% versus less, or half a percent actually, versus last year. organically minus 1%. The reason the net revenue was a tad bit lower is due to the decrease in the average order value where the customer price sensitive behavior is negatively impacting growth. On the profitability side, the positive thing is that the variable profitability, so the major costs associated with orders or sales actually decreased year over year and quarter over quarter. So the items part of gross margin in addition to marketing being the variable costs. However, the EBIT margin was significantly lower versus last year and to a large extent driven by a one-off cost related to reorganizations, as well as a negative outcome in the line item operation expenses, which is very much related to currency effects. To note also, of course, is that the second quarter is our seasonally smallest. And then, like I mentioned, we're quite proud and continue to see our high customer satisfaction ratings as something proving that we're doing the right things for our customer. So with that being said, let's do a few quick deep dives. If we look at the strategic KPIs that we follow in terms of customer satisfaction, market penetration and attracting new customers on the MPS and Trustpilot, we still maintained very strong ratings. Order count and new customer count both grew in the lower double digits. despite, like I mentioned, the quite tough market conditions. We see, highlighting a couple of markets here on this slide, that the consumer sentiment did improve slightly, especially in Germany, and remained flat in a couple of markets, highlighted here by France. but still at low levels when looking at from a slightly longer time series. And on the topic of average order value, on the left-hand part of the slide, we want to highlight how our price group of mixed offering has developed over time. So essentially it's showing, okay, what do the consumers have available to purchase from us by price group, article price group. And what we can see here is that we, during the course of the last year, have actually slightly increased our offering within the higher price ranges. and have remained relatively flat when it comes to our offering within the price range below 2000 SEK. Despite this, we see a clear and have seen during the past four quarters, essentially, a clear AOV, average order value decline, which is very much driven by consumers to a much higher degree compared to historically selecting the lower priced items. And I think the order growth that we've seen during this period does reflect that we have an assortment that is attractive for the consumers we try to reach. And of course, we will continue to develop our assortment offering over time in one of the key areas that we're working on. And that being said, looking a little bit into the outdoor assortment, where last year was the first year we made a specific or concerted effort to ensure that we improved that portion of our offering. We did further improvements for this season and can really see the impact of those efforts. where we actually grew sales within the subcategory by more than or about 50 to 70% compared to last year. So with that being said, let me hand it over to Joakim.

Thank you, Michael. And as Michael mentioned here in the beginning, we saw a good quarter growth during the second quarter, but the drop in average order makers drop in net revenue 0.5%. or organically minus 1%. For the business units to the left in this slide here, our largest segment B2C is down by 0.7% and marketplaces and other, which mainly is Amazon, is up by 24.8%. B2B declined 3.7% in the quarter, where the larger drop was in smaller businesses. And that is a sub-segment that otherwise often replicate the trends in the B2C segment. In the graphics to the right, you can see the regional development in our B2C segments. So DACH dropped 1.4 percentage points, although with double digit growth in orders. The Nordic still performing better, growing by 8.6%. The rest of the world, which is mainly rest of Europe, we decreased by 4.2 percentage points. We see growth in Western Europe, but a higher drop in sales in the southern and eastern parts. So moving on to the gross margins. So we dropped the gross margin with 0.6 percentage points versus last year, but we improved 1.4 percentage points on quarter one this year. That came out on 61.6%. So the margin drop versus prior year was driven by a higher share of sales on discount and the improvement versus quarter one this year was mainly driven by a general price adjustment that we made in early April. And in the report, we say that the price increase was a few percentage points. So if we go to the segments, the margin decreases in all segments, and the main driving factor is the higher discounts this year. In marketplaces and other, the drop is a bit higher by 4%, and this is our smallest segment. And here we tested new campaigns during the quarter which negatively impacted margin, but as you saw, positively impacted the net turnover. The B2C and the B2B segments are with 0.6 and 0.7% drop respectively, which is explained by a higher share of sales on discounts. So moving on to cost ratios and the EBIT margin. So the second quarter is our low season historically. So cost increases and one offs get a higher impact with that lower volume. And I just spoke about the margin variances versus last year. And the same explanations apply to the goods for resale with higher discounts than prior year. And bear in mind here that the goods for resale percentage is not exactly 100 minus the gross margin. as the other income is included in the gross profit. There is a 0.4% difference here. In other external expenses, we have improved 0.8 percentage points, and this is due to our focus on marketing efficiency, resulting in lower marketing cost, which was 1.4 percentage points lower. And as a total improvement was 0.8, there are also cost increases, driven by expenses related to preparations for the move to a new warehouse and office in the summer of 2025. That is the smaller part of cost increases. And then we have increased IT costs. Personal costs increased by 5.6 percentage points. Organizational changes resulted in one-time costs of 2.5 million SEK. The remaining cost increases were driven by a higher number of employees, general salary increases and the transition of staff at the Berlin office from externally hired that were in the costs before to the employed personnel on our payroll. In other operating expenses, we have the foreign exchange effects on transactions from the revaluation of assets and liabilities in foreign currency. And this effect was negative this quarter versus positive last year, and hence sums up to a total of 1.1 percentage points cost increase. Last, depreciation and amortization has increased versus last year. It is driven by rent increases, the new warehouse that we contracted in quarter four, and the fact that we have started amortization of our intangible assets, our econ platform. And this also implies that as from now and as from the next quarter, any further development costs from our e-com platform will no longer be activated in the balance sheet, but directly expensed in the income statement. The bottom line here is dropped by 7.3 percentage points in EBIT margin. Moving on to inventory. So inventory increased. by 20 million versus the year end number and decreased by 25 million versus the same period close last year. So during this first half of the year, we are building inventory to be prepared for the high season in the second half. And this is a planned increase. And if you look at the right, we are within our target range of carrying inventory between 17.5 and 22.5% of the last 12 months of net revenue. So we ended the quarter with 21%. We move on to cash. So cash flow from operating activities decreased due to the lower earnings, but mainly decreased due to the working capital increase. So the inventory buildup for the high season is one part of that working capital increase, a planned increase. Another is decreased accounts payable to supplier, which could swing in a short period like this. Cash flow from investing activities is mainly the investment in our new e-commerce platform, and that was somewhat lower than prior year. So the net cash position that you can see to the right here at the end of quarter two was 138 million, an improvement of 56 million versus prior year. And during quarter two, we paid a dividend of 37 million versus prior year 31 million. And it's not in this slide, but our cash balance at the end of the quarter was 155 million compared to 104 million a year ago, an increase by 51 million. So all in all, we have a strong balance sheet. We have no interest bearing debt to financial institutions, and we have a good cash position. So I hand over to you, Michael.

Thank you, Joakim. So a little bit of a summary and outlook. And I think the key message is that we continue to focus on navigating the market conditions in combination with continuously improving our customer offering organization and, of course, here in the near term. also preparing for the peak season starting towards the end of Q3. And we are quite pleased to see that the efforts on our strategic initiatives are paying off. With the outdoor, we talked about outdoor assortment, we talked about continuous order and new customer growth. and maintaining a very high level of customer satisfaction. During the quarter, we also focus quite a bit on enhancing our onsite or web user experience in the webshop. In addition to implementing a new email marketing platform, which will intend to enable us to to drive even more organic traffic moving forward. Moving on to the second point, I think the one-offs, of course, greatly impacting the profitability, but financial position remains strong, and we are able to face the uncertain outlook. from a position of strength, so to speak. We of course see that the net revenue was essentially flat and very much driven by the price sensitive consumer behavior and its combination of multiple factors, but of course a bit of down trading Within categories, category mix in addition to a higher share of sales on discounts. The very profitability improving and then of course are the largest cost items within that metric. In addition to the personnel costs, of course, and that we stay efficient on the variable costs is very important because that ensures that once we get further order growth, that is something that will roll down all the way to the bottom line. EBIT was 2.4 million during the quarter, a significant decline profitability-wise or EBIT margin-wise versus last year and to a large extent driven by the one-off costs we mentioned. Worth noting, of course, is the dividend payout during the quarter based on the AGM decision, 1.8 per share. And in looking a little bit out, looking into the future a little bit, we see that the outlook remains uncertain. The development, with the development in the large economies in Central and Southern Europe being especially difficult to predict. Despite that, we continue to focus on navigating those conditions, of course, developing ourselves as an organization or customer offering, and preparing for the peak season, which we're very much looking forward to. And overall, we feel that we continue to improve our ability to capture demand. and satisfy a larger share of demand. So once the purchasing power of the household returns, we feel that we are in a very strong position. So with that being said, I'll thank you very much for the attention and hand it over for any potential questions.