Rugvista Group AB (publ)

Good morning everyone and welcome to our Q2 2026 earnings call. My name is Ebba Ljungrur and I'm CEO of Valvista and I also have Joakim Tuvner with me who is our CFO. Before we kick this off, I would like to as per usual point out that the images in this presentation, they come from one of our fall campaigns. So this is a sneak peek that you're getting. The campaign is called Urban Reflections. and it has primarily handmade rugs in it. It's very beautiful. I think this one that you see in the image now is one of my favorites. It's a wool and viscose rug that I hope will be a top seller for us going forward. The structure is as we usually do it. So we start with a bit of a business update and then Joakim will go more into the numbers. And then of course we finish with a Q&A. So if we pop over to the business update. Very proud of this quarter, I have to say, double-digit organic growth and a lot tougher comparables than before. Net revenue was 174 million compared to 150.5 last year. That is a 15.6% growth and organic, it was almost the same, 15.8. And if we move over to the orders, they were 77,000 compared to 74,000 really last year. And if you look here, you can see that that represents 4.1% year-over-year growth. But we are facing quite tough comparables. If we look at the year before, it was 26.3% growth. And so we're happy with this, but I think it's worth pointing out that we are up against tougher comparables going forward as well when it comes to order growth. Moving over to new customers, almost 56,000 compared to 52,000 last year. So that's 11.2% up, which means that new customers in this quarter represented almost 75%. That's quite high. But as we have said before, this fluctuates over time. I would say it tends to be around 30%. So this is 30% reoccurring customers. So this is a little bit higher than the average quarter. And then AOV, average order value, we came in at 3,115 compared to 2,833 last year. So that's a substantial jump actually on almost 10%. And if we look at the development over time, you see that it's been flat for a while and now we are seeing it going up here. I think We have talked about this many times and it does come from several different sources and it's really not a silver bullet here, which I've said many times before. But the start really is all the changes that we've done on site that we started with well over a year ago. We show larger rugs, which means we sell more large rugs, which drives AOV up. Handmade has performed very well in the quarter. We have lower discounts. As you might remember, we did a big sellout last year ahead of the move. So that also affects AOV. And then, as we said as well in the Q1 reports, we have made some price adjustments to mitigate increases we see from the suppliers during the spring. And while those haven't really come through in the cokes, we know that they are coming in the fall. But all in all, if we look at the quarter, the growth came then from almost two thirds from AOV and around one third from the order growth. Moving further down the P&L then, we have a very strong gross margin this quarter, 67.1. It was 62.5 last year, but I think it's worth remembering that in Q1, it was 64.9. We have this in spite of the increased freight costs that we have seen, but we are helped by both discount mix and price increases. And I think there's also a bit of an exchange rate factor in this as well. Marketing spend. That landed on a more normalized level this quarter than in Q1, 29% flat. Again, this continues to fluctuate, and it's not something that we really look too much on a quarter by quarter level, but rather rolling. But of course, as I've said before, we aim to slowly, slowly, slowly, slowly, slowly drive this down over time. And in general, both Q2 and Q3 are lower than Q4 and Q1. So this just supports that. Sessions then on site that increased by 6%. It's much more like for like comparables these days. If you look at last year, it was up 49%. But then you remember that we had a big shift in how we spend our marketing money and what channels we invest in. So now it's much more similar to what we did a year ago. We actually think sessions might go down a bit over time because the AI traffic, at least early indications, is that it tends to be lower, but then with slightly better conversion. We're not quite there yet, so we need to see how things pan out, but that's how we see it going forward. And then EBIT was 20.5 million, which is a large increase from last year when it was 7.1. That represents a margin of 11.8 versus almost 5 last year. Many contributing factors here, starting with that we had better sales, which drives the economies of scale. Of course, the mentioned gross margin. And then we also had a few one-offs from the move last year. Then if we move over to looking a bit at the markets, the customer and also commercial development, the market development as per usual also remains very mixed across different geographies. So we continue to be flexible in how we move money from channels and also countries. I think one example is Germany, for instance, that grew almost 26% this quarter compared to, I think it was 10.5% in Q1. So they do fluctuate a lot. And then, of course, we continue to have a challenging world situation. Fuel charges is an example. First, they went up a lot, then they went down a lot. Now we see some tendencies to going up again. So we really try to mitigate this by being as flexible as we can. And looking at consumer sentiment, it's actually continued quite low. We had almost a very low measurement for Germany, for instance, in the middle of the quarter. And all of the countries that we follow are low in the quarter. So we do see that every time we see tendencies that things go up, It tends to drop again, unfortunately. On a slightly happier note, we have a stable and high trust pilot score that we're very proud of. 4.6 in the quarter. As you know, we are actively working with this. I would like it to be a little bit higher. So that's something we are working on. Again, something that is not a quick fix and it's many different factors that contributes to this. But since we are a small brand in a lot of different markets, we know that this is an important indication that our customers both like what we do and like our products and they like our delivery, but also that it's a good or almost a necessary thing for people to be able to trust us and make sure that we are a company that delivers on its promises. And then if we just look quickly at the assortment for the quarter, actually all lines within the assortment performed well. So machine-made, handmade and unique all grew. We had several new designs also that we have launched during the spring that took off in a very nice way. So that for us, of course, that means that they live on for many years and we add colors and we add sizes to the products. And last but not least, I think it's worth mentioning that AI, of course, continues to be a very, very big topic for us. We continue to progress in this area and just as an example, well over 90% of our development these days is done either completely by AI agents or with the majority of it being done with that help. And we are also continuously really working very hard on improving the structure around both product data and all our content, etc. So both customers and the AI-driven services both understand and really find what they need on the site. With that, I hand over to you Joakim for the financial deep dive.

Thanks Eva. Just one note before I jump in on the numbers. I think many investors or analysts may use an AI tool like ChatGPT or Claude, et cetera, just to run these reports. And there are things that are highlighted as errors when you do that, very convincingly so with calculations, et cetera. And these things are not errors and can be explained. So if you run across that and are still in doubt, you are of course more than welcome to contact me. So, like Eva mentioned, we were up against a comparable of 22% organic growth of net revenue last year, and now we had a double-digit growth with 15.8%, excluding a minor currency impact of 0.2%. So, in DACH, we grew by 30.7%, whereas Germany grew by 25.7%, despite that decrease in consumer sentiment that Eva just showed. Nordics grew 15.4, Sweden grew 9, and the rest of the world grew by 10.5%. And then we had France to continue to grow very well with 21.9%. So again, quite varying performance within the markets. So on to the expense percentages as a share of net revenue. Just a comment here, we have added in the rolling 12 numbers. We think that adds a value to look at this over time. As you know, we have some seasons. For instance, in Q4, we had 35% of sales last year. We actually had 41% of our EBIT last year. So have a look at those numbers more than over interpreting each individual quarter. So two product expenses then. These were down by 3.8 percentage points. This was mainly due to the price increases and the lower discount levels, but also somewhat to the weaker US dollar versus the Euro. You know that we in quarter two last year had a lot of sellout of products just before the move that we were going to do in June. And that of course impacted last year's margin. Moving on to the other part of the gross margin here, shipping and other selling expenses, and this decrease also due to the same reason as the product cost, and this is despite that we had some increased fuel surcharges that impacted negatively, mainly in April and May. So this then sums up to a 4.6 percentage points better gross margin. And here we think moving forward, fuel surcharges is anybody's guess where those will end. But as we mentioned in the last earnings call, we did increase the prices in April. and this was because of a known product price increases that we will get that we think will kick in in a little bit in quarter three and then in quarter four. So other external expenses so in last year we had the moving cost for the first three quarters and we had a 4.2 million moving cost which is equivalent to 2.8 percentage points in last year. And that explains the decrease. Personnel expenses is quite stable, just a bit up in fixed amounts, but then due to the increased revenue, it's down by 1.8 percentage points. Moving into other operating expenses and here we have the effect from the valuation of the assets and liabilities that we carry in foreign currency. This goes up and down. Now it was an income in last year of one percentage point that became a cost this year. We do not hedge this and we try to work naturally with it, meaning that we try not to keep too high balances in foreign currency that we haven't planned to purchase something with. So depreciation and amortization is now stable. You can say this is then an effect from a higher net revenue again. in quarter two we have the fixed amount of our depreciation and amortization is what we expect more or less having going forward. So this then sums up to an EBIT margin that is 7.1 percentage points higher than last year arriving at 11.8 and the main factors contributing to that is of course the increase in net revenue and also the increase in gross margin. Plus then the fact that we had a 4.2 non-recurring costs in last year. Moving on to the balance sheet.

And that's the move costs.

And that's the moving costs. So moving on to inventory, we are up 13 million versus the same quarter last year, which is not strange because we had that sellout. We have 140 million in stock. If we look at the right in the picture, we have this range, 7.5 to 22.5%. Some may think we are too low getting into the high season, but bear in mind that we now, since we came into our new warehouse and office building, can actually better receive inbound goods throughout the peak season as well. So 140 million up 13 million. Last but not least, into cash, so cash flow from operating activities up to the left top corner here were similar to last year, although with a higher EBITDA this year and a higher increase in working capital. So on the working capital here, we had a positive impact last year from this sellout of inventory that we didn't have this year. And we have also decreased the accounts payable pattern compared to prior year. Cash flow from investing activities at the bottom left here. You see that we had quite large investment for us in equipment to the new warehouse and office building last year. And as you can see now, this is more normalized at the lower levels. So cash position then to the right. We have decreased cash since year end with 111 million. which is a dividend that we paid in May to our shareholders, 104 million, and we are 27 million behind our cash balance last year despite that record dividend. So, Ebba, with a good cash position, that concludes the financial update, and I'll hand it back to you. Thank you.

All right. So just to summarize and give some Q2 highlights, both the top line and customer KPIs are all very strong. It's our best Q2 ever for top line orders, new customers. And we also think that average order value is on track. So we're very happy about that. I would also just like to mention that we are facing tougher comparables going forward. And this is a business that fluctuates a lot quarter by quarter, but this quarter we're very happy with. And then if we look at the growth, it comes from both the customer demand and the value per order. And of course also helped, the bottom line is helped by the stable marketing ratio, which still led to growth in sessions. What also makes me very happy is when all of our product lines develop nicely, which was the case in the quarter. And we also really like it when we launch new rugs that sell well and that we see will contribute for a long, long time. So that's been nice, and not only for Q2 actually, but the whole first half of the year. And then as Joakim mentioned, we had a record dividend payout in May, 5 kronor per share. So that was also nice to be able to do in the quarter. And with that, that concludes the presentation. So then we move over to the Q&A. And before we start, I can just mention that this rug here is a unique rug. So we always try to, in every campaign we do, we try to combine our own designs with unique rugs that we find. And this one comes from Rothko, for instance. So it's a nice way to make the campaigns very versatile and live. But with that, let's move over to questions.

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.

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

Good morning. Can you hear me? Firstly, on the growth, 16% organic growth was very solid without the excessive marketing spend as compared to Q1. What has changed there sequentially? Is it stronger on demand or some tweaking in your strategy or something else? Any call on here would be appreciated.

I feel like I say this a lot, but it's not one thing. It's many contributing factors. One thing that is driving the AOV, which of course helped this quarter quite a bit, is that over time we have... If you look at our site today, the rugs you see are bigger. There is also a trend to buy bigger rugs in general, and that helps the AOV, which then helps the top line. The discount is lower. The price increase, of course, helps. And then if we look at the customer side, it was, I would say, cheaper to acquire customers and acquire traffic this quarter than as we saw in Q1. So it's just a lot of contributing factors. But I think one thing that we don't talk about so much, but that also helps, is that in my very subjective, but still opinion, we are getting better and better at designing rugs, which also helps to drive the interest for us. And you can really see it in how new designs take off and how they grow. And then of course we have this huge advantage that we can build on that over time.

Do you want to add anything?

We don't really see it, to be honest. And it also differs a lot from market to market. I mean, Germany, for instance, performed super well in this quarter for us, and it's not really... The consumer sentiment isn't really going up in Germany. in the numbers that we track in a way. But I've said this before as well, that since we are quite small in any given market, if we manage to do things just a little bit better, then we can also grow even if the consumer sentiment isn't really there.

Got it, thank you. And a question on margin, if I may. So it was close to 5% year-on-year. driven by what I assume is the weaker US dollar over this pricing and price adjustments as you said. How much of these improvements is rupture rather than transitory and how should we think about margin going forward given your price increases and AUV growth versus a USDXP headwind?

Yeah, I think, I mean, a lot of this is driven by the two main factors is the price increase that we have done. We have actually done a couple of price increases in last year, and we did one in April. And the other one is generally not only in quarter two, but generally we have lower discount levels, particularly then in quarter two, where we in last year had this sellout. How should we think about it going forward? Well, on the fuel surcharges, the freight cost out to the customer, I think it's anybody's guess. Like Eva mentioned, April and May, we had very high fuel surcharges. That's why we increased the prices quite quickly. And then those came down a lot in June. And then we had some tweets from the president. We don't know where that will go. On the product expenses, we have some price increases coming up. First, they have to be delivered, which they are not yet. They are more pricier products. And then it will take some time before the inventory turnover kicks them into the P&L. So that'll be like in end of quarter three or more so in quarter four.

Got it. Thank you. Those were all of my questions. Thank you so much for taking the time.

Thank you.

Thanks Johan.

The next question comes from Emanuel Janssen from Dansky Bank. Please go ahead.

Good morning, Emanuel. I have a couple of questions from my side as well. Regarding the demand here and the strong figures that we've seen during the quarter, can you elaborate a bit on how you've experienced the demand throughout the quarter, giving that to your man who... Yes, it has been quite stable throughout the quarter. So maybe a little bit of a slowdown at the end, which is normal. The weather was amazing at the end of June.

the World Cup in football. So maybe a little bit, a tiny bit slower, but fairly stable over the quarter.

Perfect. Thank you. Going forward as well, you've been going double digits for six quarters now. And I believe that the quarter last year's quarter was What is your view that you are being able to continue to grow in this high space going forward? Is it tough or is it very likely to continue to be in this high growth given your new like more strategy and approach strategy etc.? ?

quite tough, to be honest, to continue to grow this way. We have said that our aim is to grow double-digit over time, but it will fluctuate quarter over quarter, and I think it's a long-term goal rather than a quarter-by-quarter goal. I don't know, would you like to add something Joachim?

No, perfect. Thank you. As well, going forward, I mean, I'm giving that two-thirds of the growth from the average order value. Is it fair to assume that the average order value will continue?

We used to be but we wanted to grow with at least with inflation over time and then it depends a little bit on what we push and you know if handmade sells better than machine made for instance that will that will continue. So we're not expecting it to grow over like quarter over quarter, but of course now when we're comparing to low numbers, which we've had for a couple of years, ideally we see that more on a new stable level.

Yes. So shall we take, was it Benjamin on the line now?

Yes, I am on the line. And I think the sound is working a bit better now as well. I'm actually not sure if you've replied to this question already, but the gross margin is super strong, obviously. I was wondering if you could split the improvement between lower average discounts, price adjustments, and the weaker dollar, i.e., how much is structural versus how much is sort of FX dependent going into H2?

Yeah, the main part are the first two. The main parts are the price increase and the lower discounts. Then it was quite some time ago where the US dollar got weaker versus the euro. So that's not the main part. It's a smaller part than the other two.

All right. I was wondering as well if you could give us some more color on the AOV improvement here. I mean, I understand the price increase helps, obviously, but is there a mixed effect here in the AOV?

Absolutely a mixed effect. And I think it's You know, we started already more than a year ago, we started pushing slightly differently on site where we have one image representing all sizes, for instance, of a rug. And that image is now larger than what we pushed before, which helps AOV. In this particular quarter, Handmade has performed very well, which tends to push AOV. Also, we don't have the discounts we had last year. There is a little bit of FX in there. And what else? There's just something more.

And I think many times, like you say, there are loads of smaller changes that we've done to our site and the customer journey, where we are better in trying to get the customer to trade up, and we are poorer in making them trade down, fortunately. And those are many, many small changes to the customer journey.

And I think also one last thing is that we are today, we have a lot more designs in bigger sizes, which also drives sales of bigger sizes.

All right, perfect. And then I was wondering if you could say anything about the margin ratio, which is obviously QOQ, but a bit lower. Is this a new normal, or ? I think that the...

The answer is really the same as it was in Q1, that it does fluctuate over time. We are a little bit opportunistic, both in how we move money from one country to another, but also when we see that we actually get traction in pushing a bit more. But our long-term aim is to slowly, slowly, slowly, slowly reduce the marketing percentage. Slowly, I repeat it one more time to be clear. But this is on a more normal level, I would say, than in Q1. And it is important to look at this over time rather than just one quarter.

And you will also continue to see, we presume, that quarter four is going to be the more expensive quarter.

Yeah, absolutely. It fluctuates a lot. Q1 and Q4 tend to be more expensive than Q2 and Q3 in general.

Perfect. And then finally, if you could say anything about the strong growth in DACH. 30% growth in what's biomechanical, then market to price to price.

Yeah, we saw very good traction in Germany primarily. So we invested more and continue to see good traction with that investment.

Perfect. Thank you.

Thank you. There are no more phone questions at this time. So I hand the conference back to the speakers for any written questions and closing comments. Great. Okay, then we have one question from Philip. How does your unit economics in the business change when the AOV increases? It's a little bit different depending on what you look at because things also tend to become more expensive with AOV increases like freight costs and just the COGS in general. So there is of course some unit economics further down the P&L, but the gross margin is, I would say, less affected by this.

Yes. I mean, there is a minor effect in more expensive carpets. It's generally a bigger carpet, a more heavier carpet, and it's more expensive to send, even though it's not 100% variable. But then, like Ebba said, in marketing, it gets a little bit easier to The customer has almost a fixed cost to get into our site. So the higher the AOV, the better for the marketing. And then we have, of course, economies of scale there. When net revenue goes up, the fixed costs stay pretty fixed.

And then from Emmanuel, one more question on AI and traffic. You mentioned that AI-driven traffic can be lower and that sessions may be under some pressure going forward. Can you say anything about how meaningful AI-driven traffic is for you today? And more broadly, how do you think about the risk that visibility in traditional search declines faster than you are able to build visibility in AI-based search and recommendation tools? Okay, so if we start with the first question, anything about how meaningful AI-driven traffic is for you today? The traffic is growing quite substantially. Sales from that traffic, however, is still very low. And that's, I think, to a large extent due to that the AI search tools, they don't have direct connection to sales in the same way that, for instance, Google does. So it's growing, but it's from very low levels. Of course, we think that this will shift. So it's much more about us making sure that we are searchable and crawlable by no matter who is looking to really. And then how do you think about the risk that visibility in traditional search declines faster than you are able to build visibility in AI-based search? Right now, It's very much about building the sites in similar ways, to be honest. The search engines that exist today, they change their algorithms continuously and there are big shifts and big jumps and they don't always tell us how they are gonna change, how they crawl, et cetera. So we have always had to be quite flexible and quite fast in changing how we do those things. So we think that this approach is important going forward as well. We also think that it's important to be a little bit open-minded. We don't know exactly how things will pan out. So it's more about keeping our eyes open and being quite flexible in how we build. So I think this That risk is always there, no matter who the search engine is, so to speak. But we are confident that we are in a fairly good place here and that we are working with this continuously and all the time, really. Do you want to add anything there?

No, just to add that it is very high up on our priority agenda. And you also commented on this. the CEO work. So it is very much on top of our agendas.

All right. I think that's the last question for today. With that, then I would like to say thank you to everyone listening in. And I would also like to say a special thank you to you Joakim, because this is your last quarterly report as the CFO. It's been a pleasure. And then our next quarterly report for Q3 will be on November 4th. And then I will be joined by our new CFO Gustav Arlund for his first report. So thank you Joachim and everyone. Bye-bye.