Rugvista Group AB (publ)

Welcome to the RugVista Q2 2025 conference call. For the first part of the conference call, the participants will be in listen-only mode. During the questions and answers session, participants are able to ask questions by dialing pound key 5 on their telephone keypad. Now I will hand the conference over to the speakers. CEO Ebba Langerid and CFO Joachim Tuvner, please go ahead.

Hi everyone and good morning. Welcome to this second quarter earnings call. My name is Ebba Ljungrud and I am CEO and I have Joakim Tuvner who is our CFO with us. Good morning. The structure will be as we normally do it. So I will start with the business update a bit more high level and then Joakim will dive into the numbers. And last, of course, we will have a Q&A for any questions. I would also like to point out that the images you'll see in this presentation comes from a campaign that we just kicked off in our Rustic collection. It's a bit more autumny in the look and feel, a lot of cosiness and lit candles, even though this is probably the warmest day we've had in Stockholm for a long time. But we are slowly moving into the fall, so we have already kicked off the fall campaigns. And this campaign actually has a lot of a mix of designs, both new designs for the season, including this rug you see here, and also some of our previous top sellers that we have made new versions of for this season. Anyway, so start with the business update. We had a very Good quarter, we think, and we're very proud of that. Our net revenue landed on 150.5 million, which is a growth of 17.2%. And organically, if we take in exchange rates, it's actually 22.3%. And by some margin, this is for a long time our best Q2, actually, in almost all of the KPIs. It was a pretty even quarter when it comes to top line. It started off a bit slower because Easter was in the beginning of April and the year before it was in March. But otherwise, it's been a fairly even quarter. If we look at the orders, they are up from 59K to 74K. And if we look here, you see the quarterly development. So it's a 26% increase compared to 2024. And then if you look at the rolling, the bottom chart there is the rolling 12-month quarter development. And there you see that it does continue to grow over time, even when you look at it in this manner. When we talk about customers, we had 52,000 new customers compared to 41,000 last year. So that's a 26% increase, which is again an all-time high for the quarter. If we look at the AOV, the average order value, that was down a little bit this quarter. It declined by 7%, which in part... I'll move over to the next slide so you can see the quarterly development here. In part, it's driven by that we... And I think we mentioned this already in the Q1 report that we have been driving a lot of sales in the quarter due to our warehouse move. But there is also some FX effect in this. So if you remove the FX effect, it is not quite flat, but I think it's down around 2% if you include that. And this is an area that I think we need to continue to work with. I think and I believe that the average order value, we have more work to do. It's not a silver bullet. It's a lot of small changes and we do it all the time. We work a lot with how we plan our campaigns. We work a lot with how we make the algorithms for the site etc etc so this work will continue and we don't want it to keep on declining so i think that's very worth pointing out and of course it fluctuates quarter over quarter so it's not going to be a consistent move but it's still it's important for us Moving over to the profitability, the gross margin landed on 62.5% compared to 63% from last year. This is actually almost solely driven by the clearance sale where the product cost percentage was a little bit higher than before. Our freight costs are still looking really good and we're down just as they've been for the past couple of quarters. And if we look at the first six months of this year, so January to June, the gross margin actually increased to 63.4% compared to 62.2% last year. Marketing spend, this is a big investment for us, and it decreased by 0.6%. And I think it's just worth pointing out that we, even with this increase, managed to grow organically by 22%. So that's a trajectory that we're very happy with. We have done this shift trying to catch customers earlier in their buying process and we do see that it continues to look good for us. The volumes in branded search are increasing as well quite substantially. So basically when you search for the name Rug Vista rather than a product. And one of the sort of side effects of being earlier in the process for the customer and being more visual in the ads is that we want to build the awareness of the brand over time. And through the increase in organic search, we believe that we are succeeding in that as well. I would again like to point out that this fluctuates a lot, quarter by quarter, since we are spending a lot with the search engines. It depends a bit on how our competitors are doing and how much keywords are, etc. So this is not a clear downward trend, but it's something that we want to make sure that over time we are always in control of this. Looking at sessions, again, to a large extent, based on the fact that we have switched in our marketing mix, we have a large increase in sessions, 49% from almost 6 million to almost 9 million. And just as previous quarters, this does affect the conversion rate. But when we look at the total economics for the marketing investment, we see that it's actually very worth it. Looking then at EBIT, we landed on 7.1% compared to 2.4 last quarter, almost three times better than the last year. The margin ended at 4.7, and this includes one-off moving costs of just north of 4 million. So we have a chunk there that we've also been quite clear on to a large extent coming in Q2. And then if we look at the market climate, we do see that consumer sentiment continues to fluctuate a lot. And if we go into this slide, we can look at some of our bigger markets. Even though we've had a strong quarter, you see here that Sweden is the top one, quite low on consumer confidence. Germany is a tiny bit better and France is also actually quite low. It doesn't always reflect in our results. I don't think you can draw too many conclusions, but of course, it's important for us to know how the total market is doing. And for us, this really means that we need to optimize our spend for return on investment even more. And we must be good at growing in smaller markets to balance when the bigger markets aren't performing as well as they have previously. And I think it's worth pointing out, I actually see this as a strength for us, that since we have our total market share in any given market is quite small, that also gives us opportunity to move and be a bit more nimble than if we were very dependent on just a few markets. And then if we look a little bit at the fall ahead, Of course, a very, very big thing for us in Q2 has been to move our warehouse. And it has, I'm happy to say, gone really well. Amazing work by all our teams there. Even though the move itself is coming to an end quite soon, we will continue to optimize. And this we see as really a continuous area for improvement in our company. We will continue to build on automation and we will fine tune. And of course, we have peak coming up in a couple of months. And ahead of that, we want to make sure that our processes are really, really strong. We are also building buffer stock at the moment, basically building up for peak and for later seasons. And for that reason, we've actually decided to keep one of our old warehouses to make sure that we have the space we need for this. So. And then the assortment, our rugs. Here we are also developing a lot for the fall. I already mentioned the rustic collection that you see here, but most of our news will actually come a little bit later. They will be in the more classic collection and also modern collection. Classic looks much more as the oriental rugs and modern are, as the name implies, modern in their design. Actually quite a lot of color this fall coming, so we see a lot of color in all the interior trends. We do all of our design in-house, so that design process has already happened and now all of the news are actually coming into the warehouse, which is very exciting to see. If we look at the assortment overall, we are slowly trying to shift a little bit away from some of the very cheap rugs and find the sweet spot in value for money and having quality no matter what price range we're in. We are in many different price ranges, so it's just about being qualitative in that price range. And we also see that outdoor has performed very well in Q2. And actually Q1, but now it's calming down a little bit, which is normal for fall and winter. And that also leads for us, it leads to that we can push a little bit more handmade rugs. Outdoor tend to be machine made and handmade rugs tend to be somewhat more expensive, which we hope will also help us a little bit with our average order value. One thing you've heard me talk a lot about that we continue to work on during the fall is the personalized customer journey. Because of that, we have such a wide assortment within the rug vertical. It is important that the customers find what they want on site. So there's a lot of things that are happening during the fall around this, and this will continue to be a big focus area for us. And then I would also, of course, like to just brag a little bit about our Trustpilot score. We are super proud that we managed to keep this high score 44.73 in Q2. And this is including the move, which even though it's been very, very smooth, there have been a couple of customers where there's been hiccups in the deliveries. So we're very proud of this. And I think it's our purpose for the company as a whole is we help people to a home they love. And I think that's very important to remember in this context that it's for the whole company and for anyone who invests in us as well. Yeah. And with that, I hand over to you Joakim.

Thanks a lot, Ebba. So starting to the left in this slide, Ebba has already been through that our net revenue growth was 17%. And after adjusting for the negative currency effect, we grew organically by 22%. And as you said, Ebba, that was 26% order growth and minus seven in average order value, of which five then was the currency impact, the negative currency impact. But we're happy to see that all regions are driving the growth. If we start with Dach, it grew by 18%, of which Germany, which is the biggest market in that region, grew by 10%. The Nordics grew by 32%. And there we've seen Sweden for the last couple of quarters being the driver of that region. But now Sweden grew less than the region, so it grew by 19%. And we see the same pattern in the rest of the world, which is mainly the rest of Europe. We see that the two main markets, UK and France, were actually in decline, smaller declines, but the region grew still by 11%. So all in all, you can say that we saw bigger fluctuations between the markets than usual, but still with a good growth in all regions. So I move on to the cost ratios and the EBIT margin. And I already touched that the product expenses are down or we lose 1.4 percentage points. So the cost is up by 1.4 percentage points. And this is driven by the stock clearance that we had planned in order to facilitate the move to a new warehouse. So a little bit higher discounts is driving that. shipping and other selling expenses which is then our shipping cost to our customers that continues to improve versus last year although somewhat higher than in quarter one so this is then due to lower freight cost and also due to some internal efficiency that we've been driving So that sums up to gross margin drop of 0.4%. You see that it doesn't sum up or add up 100%. But as we note at the bottom of this slide, there are some rounding differences in this slide as well. So moving on to other external expenses, as Eva mentioned here, we have moving costs of 4.2 million in this line, and that is equivalent to 2.8 percentage points. So that is explaining the the the slight increase we have there and this line also the big cost here is the marketing costs which as you saw earlier went down from 29.8 to 29.2 so there is a 0.6 percentage point reduction that I think you have to see in light of that 22 percent growth On to personnel expenses, these are down by 2.8 percentage points and there in last year we had some one-offs, we had two and a half million in one-offs and we have six fewer FTEs in this quarter compared to the quarter last year and we also have some economies of scale that drive down the percentage as we grow the top line. Other operating expenses is the FX effect from revaluing assets and liabilities that we carry in foreign currency. Last year that was a minus, this year it was a plus, so it's a 1.9% gain versus last year. Depreciation and amortization then has increased, and that's primarily due to the start of amortizing our webshop. We stopped capitalizing expenses on our webshop in June of last year, then started to write it off or amortize it. And that's the main explanation. But it's also that we have higher costs for our leased properties. And as of 1st of June, we have added then the new office and warehouse building. And when that is then adjusted in IFRS 16, it comes in this line and in the interest line. So all in all, we see an EBIT margin increase of 2.9 percentage points despite the moving costs of 2.8 percentage points. let's take a look at the invent inventory so you see here to the left that during the course of this year we have decreased our inventory with six million this was a planned decrease and also if we compare to prior year we have to increase the inventory by 19%. If we look to the right in the picture here, we are actually below now our targeted range, which is 17.5 to 22.5% of the last 12 months of net revenue. And we are at 17.3. And we have already quite some number of deliveries in July. And now we're beefing up the inventory to prepare for the high season in quarter four and not let the quarter four drain our inventory into quarter one. So last but not least, Improved cash flow. So we have changed this graph here to not only include the quarter, but the year to date, the quarter is quite a short period to analyze cash flow. You can see here that starting upper left, that the operating cash flow increased by 15 million and that is driven by the increased EBITDA. In the left bottom corner you see the cash flow from investing activities whereas we in prior year had very few tangible investments and we were investing 4 million in our web shop. Whereas we in quarter two of this year have 31 million going out for the investments to mostly equipment to the new warehouse. And as I earlier said, we have stopped capitalizing on our balance sheet, capitalizing development costs for our web shop as end of June last year. So we have no intangible investments during this quarter. So the cash position then, we are roughly at the same cash position as we were about a year ago. Despite the investments, we have paid the dividend during this quarter. we have a drop of 62 million since the year end and you can say that generally our year-end cash position is artificially high i mean of course we have a very good cash flow in quarter four it's high season but we have also most of the time decreased our stock levels and we also have quite a big payable of vat that we have gathered up during the quarter four that is paid in quarter one so it's artificially high i think you can say in in end of quarter four so 158 million and with that i think we have a strong balance sheet to finance this inventory build up that is coming up the final fixed assets purchases that we have to pay in in quarter three and i think we stand strong going forward so ebba with that i'll hand it back to you

Thank you. And just to sum up, we're proud to present our Q2 numbers with strong top line growth and also a quite decent EBIT, even including the moving costs. The fall assortment is starting to come in. We're very excited about this. We have lots of news coming and we hope to see strong sales. The move is coming to an end, but as I said before, we will continue to work with automation and improving our processes now when we have better conditions to be able to do that going forward. And our personalization projects are going to continue to be focus areas during the fall. So with that, I think it's time for a Q&A.

If you wish to ask a question, please dial pound key 5 on your telephone keypad. To enter the queue, if you wish to withdraw your question, please dial pound key 6 on your telephone keypad.

Good morning, Ebba and Joachim. Victor here from D&D, Carnegie. A couple of questions from my side. First one, Are there any positive sales effects here in Q2 from perhaps more aggressive marketing or discounting them compared to Norval and maybe related to your clearance sales? That will not be material going forward. Or would you say that your Q2 performance is representative of your underlying performance and thus sustainable?

I would say that there isn't any major impact by specific marketing drivers or the big sale that we had. It's also true that we do sales every quarter. So it was a little bit bigger in Q2 because we wanted to clear out some of the stock before the move. But in general, it's no. So yeah, long way of saying no. Do you agree Joakim?

I totally agree. I mean, the total volumes that went out in that clearance sale were mostly focused on slow moving products and where we had only few SKUs of each and hence there wasn't a big volume going out. So it was more like any other normal strong campaign, we can say.

Perfect. Very, very interesting. And then on your high web traffic growth, I'm curious here, how do you want to improve conversion going forward to catch all these new visitors that are finding Ruglista?

I think the personalization is very important here to make sure that, of course, I think it's normal to see lower conversions when you drive a lot more traffic, but we really want to make sure that people find what they want. And even though I love our website, I still see room for improvement, if I put it that way. Again, this is not something that we do very quickly. It's more slow changes and a lot of A-B testing over time and finding out what works. But I see that that is where we need to put a lot of effort going forward.

Yeah. And then some other questions on marketing. I'm curious what you are seeing here in the European market post the minimalist changes in tariffs in the U.S. You mentioned your Chinese competitors and others before. So I'm curious here what you are seeing in terms of competition on ad spend and marketing in your markets.

Joakim, do you want to?

I think the tariffs doesn't affect us directly so much. It's more like creating these uncertainties in the consumer sentiment. We saw that the consumer sentiment went down quite a lot in April, and that was when there was a lot of tariff discussions going on. So I think the tariffs affect us more in terms of how the whole economy moves. And we know that when consumer sentiment is down, what normally is hit the worst is then discretionary goods. So I think that is the impact we see from the tariffs.

Okay, but what about, my question was more about competition on digital marketing from large international players moving to Europe away from the US.

Yeah, it's Competition is always very fierce for us. And then you could argue that it fluctuates and it's higher in Q4 than in Q2, which is true. But we haven't seen any major shifts. Some keywords go up a lot. We have seen a couple of new competitors that we haven't had before that are coming in. But it does fluctuate all the time. So while... Yes, we know that some competitors have moved a lot of marketing spend to Europe from the US. It hasn't affected us majorly. And I think you see that in that we managed to keep the marketing spend under control, even in this quarter with that type of uncertainty.

Okay, perfect. A final question from my side, and it's also on marketing. So you spend roughly 29-30% of sales on marketing, a little bit lower in the lower end this quarter. And you've invested in your new website to drive more organic traffic. But what I'm curious about here is what do you expect the impact on your traffic from AI operators that are reshaping search engine optimization? What are your thoughts here for the future?

Very important shift I would say and that's something that we are both already doing a lot of work in that area and also keeping a very close track. We don't know exactly what the shift will be but we are sure that there will be a shift so for us it's important to to keep track of what's going on and what's moving where and how people, how our customers search and where our customers come from. So without saying that we see a clear direction to going to this platform or that platform, we are convinced that there is a shift that is happening. So it's more about keeping track and being very, nimble and also very attentive and not take things for granted.

Perfect. Yeah, it's going to be interesting. Thank you very much for those answers. That's all for me.

Thank you. The next question comes from Benjamin Wallstedt from ABGSC. Please go ahead.

Good morning. Well done on a strong quarter. I want to speak some more on the warehouse clearance. I was also wondering on the impact on the AOV from the warehouse clearance. Is it positive because you're selling mostly slow runners, large items, unique rugs, or is it negative, please?

Even though you're right that it is bigger, slow-moving rugs that tend to be a little bit more expensive that have been selling, it still has a little bit of a negative effect on the AOV because that type of stock otherwise brings up the AOV. I wouldn't say that it's a huge impact, but it tends more downwards than upwards with small movements.

Yeah. All right. Thank you. I was also wondering about Q3. You have been making some changes to your assortment when it comes to Q3, especially thinking of, for example, outdoor rugs here, which makes judging underlying comparable growth figures a bit more tricky. I was wondering if you could say anything about how you judge the comparable figures in Q3 versus Q2, please.

I think we had quite a poor quarter in Q2 of last year and the same in Q3. I think they are somewhat comparable in that sense.

All right, so somewhat comparable underlying in Q3. Perfect. And then finally from me, I was wondering if you could say anything about what

moving costs if any you expect in q3 please we are definitely expecting some movement moving costs in q3 yeah and having said that i think the big chunk we have taken in in quarter two we have some in quarter one uh but we we will have some moving costs in quarter three but um we are shipping the majority already end of july we're chipping the big majority, 90 plus percent from our new facility. And we have moved most of the goods. So most of the costs for the move is taken when we end quarter two. But there will be some in quarter three.

All right. But below the level seen in Q2, then I take it. Thank you. That's all for me.

Thank you.

Thanks, Benjamin.

The next question comes from Emanuel Jansen from Danske Bank. Please go ahead.

Good morning, Emanuel. I hope you can hear me.

Yes, good morning.

Great, good morning. I wonder if you can... Perhaps start with describing how the quarter in itself has developed throughout the month regarding sales momentum.

Yeah, so it started a little bit slow, mainly due to the fact that Easter, which is not a holiday when people buy a lot of rugs, was in the beginning of April. And last year was in the end of March. But then actually it's been fairly even throughout the quarter. of a little bit of a drop in June, it's fair to say June, like the warmer and more summary, the lower the sales, but, but not huge fluctuations.

Okay. Great. And looking also, correct me if I'm wrong here, but looking a bit on your marketing strategy, the last couple of waters uh it's at least my impression that you have been trying at least to to reach out to a broader customer group if i'm correct yes you are would you say that that has been one of the key drivers behind this volume growth that we have seen in in in terms of order growth or is it anything um or Is that the primary growth privacy, you would say, or is it the customer experience on the website or the updated assortments?

So it's a combination of all, I would say. The marketing, I think, helps. And we see that in the growing numbers of visits that come in, even with the lower conversion. But it's also a fact that today we're working in a very different way with CRM. We're working in a very different way with how we present on site. We're also clustering in a different way on site. So it's hard to pinpoint one specific thing, but the marketing is definitely helping. And I think long-term, what I'm very interested in is how can we, and this has to do with the previous questions around AI as well, how can we be better at building our brand in a cost-efficient way long-term? Because since we aren't that big in any market, it's hard for us to do very big above the line campaigns. So we want to make sure that we build our brand and pretty much any communication that we do with the customer. And there we think that the reason we see a very big increase in branded search on the search engines has to do with the fact that we are higher up in the funnels. Our ads are more visual, more appealing to, let's say, a more brand aware consumer than someone who is looking for a very specific type of rug. So that is our continued strategy to to try to continue to build on that yeah okay great that's uh that's very helpful and okay perhaps maybe uh when when did this start you would say with this kind of marketing strategy going i would say we started in q3 last year um a little bit and then it's been growing um quite a lot since uh yeah q4

Great. And also, perhaps maybe a final question from my side. You were talking about the average order value, and you were mentioning that you hope to see maybe a bit more playthrough from handmade rugs in the second half year. Why should we expect that to happen now? Do you have any different tools now that you didn't have one year ago, and also perhaps Give us some colorings on the gross margin profile, etc. on handmade rugs compared to design rugs.

So I think there are two factors that are relevant. First, the one is that we are changing in what we actually produce in our assortment and that we have let go of some of the let's say, lower quality rugs and try to push. And again, it's not about being super premium and everything, but it's about good value for money, no matter what sort of price range you are in. We want to be qualitative in the relevant price range, so to speak. And then the shift that I mentioned is that outdoors, which is machine made tends to be stronger in the summer months. And then it's up to us what we push and how we plan our marketing and how we populate our sites and what we communicate in our campaigns and in our emails etc what type of rugs we push I don't think we disclose gross margin on product type level but so it's more on it's more on trying for us trying to control the assortment a little bit more from our end yeah

And would you say also that they have less moving parts now compared to a year ago, so you can put more effort and focus on selling these kind of products now versus a year ago?

Actually, we have a lot more versions of rugs today than we did a year ago. You know, it's a slow moving product. So what we designed a year ago was released in the spring. But I think we are better at making more conscious choices today. Having said that, I think just to add one thing, again, this is what the business is, I think, that it is about everyday making choices. We're both a design company and a trading company. We need to look at this on a daily basis, basically.

Yeah. Great. Well, I think that was all my questions for now. So thank you, Ebba and Joakim.

Thank you.

Thank you.

The next question comes from Johan Fred from Seb. Please go ahead.

Yeah, hi. Good morning, guys. Thanks for taking my question. I just have a quick follow-up question on the gross margin development. So I know in the conference call here that you highlight that the product margin fell by 1.4% year over year due to what you call that higher discount rate. Is there any kind of mix effect here, looking at the underlying comparables? As you mentioned, outdoor rugs sales have been strong during Q2 this year so it's my question is essentially is there a mix effect here as well or is this 1.4% decrease solely due to the higher campaign activity?

100% the latter part I mean it's driven by the clearance that was driving the average our average discount went up and that 100% explains or 100% but That explains most of this increase in product cost. So it's not the outdoor.

No, thank you. Very, very clear. Thank you so much for taking my questions.

Thank you. And we have a written question here that Victor Hansen has added in. Your Trust Pilot Score remains high, but it seems like you have stopped reporting your Net Promoter Score, NPS, this year. Is there any reason for this? Thanks.

yes uh we talked about this last quarter i believe we decided to go to because what we do is we split some customers get sent to one type of or we what we did i should say get sent to one type of question and some get sent to another type of question and we decided to focus on one of these uh tools to just to have more data really in the tool. And we decided to go with Trustpilot and we made the switch first of January, I believe.

Yeah. And then I think that, you know, the average person has much easier to relate to the Trustpilot score. Whereas the MPS value, not everyone knows it started as at minus 100. So some people think it's from zero to 100, etc. That's maybe a poor reason for not reporting it. But I think it's easier to understand the Trustpilot score, which is also the important score for us that we know drive conversion. when consumers feel confidence that other consumers have experienced a good experience on buying from us. So that was the only written question we got in, Ebba.

Thank you very much everyone for listening in. Hope you have a nice day in the sun and we will be back with Q3 on the 6th of November, right?

Yes.

Thanks a lot, everyone.