Ladies and gentlemen, thank you for standing by. Welcome, thank you for joining the fourth quarter of the 2022 earnings call of Bike24. Throughout today's recorded presentation, all participants will be in listening mode. The presentation will follow with the traditional announcement session. If you would like to ask a question, you may click the Q&A button on the left side of your screen and then click the Raise Your Hand button. If you're connected via phone, please press star followed by one on your telephone keypad. I would now like to turn the meeting over to Moritz Verleger , Head of Investor Relations. Please go ahead.
Thank you, operator. Good evening, good afternoon, good morning to wherever you are joining us virtually today, and welcome to our Q4 and full year 2022 results conference call. Following the release of preliminary results in mid-February, we would now like to give you a detailed P&L overview, update on our strategic initiatives, highlight the ongoing structural mega trends in the cycling industry, as well as giving guidance for this transitional year, 2023. Our presenters today are Founder and CEO, Andres Martin Diener, and CFO, Timm Armbrust. Andres, the stage is yours.
Thank you, Moritz. Also a warm welcome from my side. As always, please allow me to start with the general update on the quarter before I hand over to Tim for the business update, finishing with an overview of the current mega trends in the cycling space, the outlook, and a general summary. From a macroeconomic standpoint, Q4 was as challenging as the previous quarter. With the German consumer sentiment reaching new all-time lows and inflation rates being as high as never before, customers are more conscious with their spending. This also takes its toll on the cycling industry as a whole. However, the high number of newly acquired customers shows that the cycling trend is still intact and expected to continue. Our active customer base reached a new all-time high with more than 954,000 active customers during the last year.
This was mainly driven by the increase of 32% to 131,000 new customers that we won during the quarter, thanks to our successful marketing campaigns, especially in the localized markets, France and Italy. Our total quarterly sales grew by 3% year-over-year, primarily driven by full bike sales, almost doubling during the quarter, despite being winter season. Full bike sales made up 13% of total sales during the quarter and clearly shows that Bike24 has become the go-to shop for everything around cycling, not just for parts, accessories and clothing. It also shows that we are clearly taking market share here, thanks to the largest brand assortment in the market, whether online or offline. While increasing the full picture was one of the strategic incentive during the IPO, localization was another.
It therefore gives me great pride to see that our international team managed to accelerate growth rates here again. From 209% sales growth during the third quarter, we now managed to grow 226% during the fourth. France was up 446%, followed by Italy and Spain with 317% and 88% respectively. The hiring of local customer service agents as well as country-specific marketing campaigns is clearly paying off. Our adjusted EBITDA margin for the fourth quarter was at -3.1%. This was already expected given the expanded Black Friday sales period to support the sales through of excess inventory. Across all retail categories, customers became more used to so-called smart shopping and wait for special deals, especially during today's difficult times.
Lastly, our proactive approach in inventory management allowed to reduce overstock from September 2022 as planned. All year, still being elevated, we managed to do our homework here by liquidating EUR 12 million of excess stock. This was a short intro from my side. Tim, now over for you to the financials.
Yeah. Thanks, Andres. I would like to share some details on the financials and non-financial KPIs of this fourth quarter and the financial year 2022 with you. As Andres already mentioned, our active customer base increased by 16% and reached an all-time high at 945,000 customers. Our marketing international team did a great job in attracting new customers, especially in France, Italy and Spain. While the number of new customers in Spain more than doubled with the fourth quarter, in France and Italy, we generated more than 10 times as many new customers as during the fourth quarter of 2021. This confirms the functioning of our international playbook, and we are excited to have launched local online shops for the Netherlands, Belgium and Luxembourg as well. More on that during the Q1 results in May.
Needless to say, due to the high number of new customers, the repeat order rate declined by 4.4 percentage points because less orders as a percentage of total orders were made by existing customers. In line with the KPIs of the third quarter, other active customer KPIs, namely revenue and average number of orders per active customer, declined by -10% and -11%. The main reason is again, the strong growth in the new markets and the resulting high proportion of new customers. On average, an existing customers orders more than 3 times a year, and a new customer about 1.3 times. This is simply because a new customer only joins Bike24 within the year. On the other hand, average order value was slightly up by 2%, driven by more beneficial product mix towards full bikes and especially e-bikes.
Let's now focus on top-line performance in our two segments, full bikes and PAC. It's encouraging to see that full bike sales almost double, with e-bike sales almost tripling. This rate has accelerated again quarter-over-quarter, and it's far above any industry average for fourth quarter. It again shows that when we are able to offer our full brand portfolio, the demand for high-quality bikes is there and customers are willing to buy. That said, full bikes now account for 13% total sales, up from 7% in Q4 in 2021. In terms of PAC sales, revenues were down -4% due to the ongoing depressed consumer sentiment and doubting for certain products. We have seen that customers are indeed willing to spend on PAC products.
However, in this macroeconomic environment, they are increasingly waiting for good deals like the Black Friday period, or only replace certain parts when really needed. In sum, Q4 sales were up 3%, in line with our expectations, in order to reach the updated full year 2022 guidance of -5% to +5%, right at the upper end at +5%. I would quickly like to show a pre-COVID comparison to highlight our previous statements of COVID pandemic being a step-up and not a one-off. Full year 2022 sales were not only constant, they also even increased by 5%. Customers around Europe continue buying bikes and accessories despite other sport restriction being lifted, public transport being operational, there are other ways to spend money, like traveling vacations.
That gives us great confidence that once the current external headwinds fade, customer will catch up with their postponed purchases, and new customers are less reluctant to buy. With returning customers in the DACH region and the continuously high growth rates in the international markets, we surely believe we can return to double-digit top-line growth rates. Also, in terms of full bikes, we managed to continue growing mid double-digits and rebut statements the cycling trend being over. With the industry posting significant slower growth rates, we are sure to have taken market share from both online and offline players. In addition, government and company-sponsored bike leasing schemes are gaining more and more traction among customers. While we have increased our share of these bikes in Germany from 6% to 14% year-over-year, we know from industry data that there's a lot more to take.
In looking at the different geographies, we posted a slight decrease of -2% during Q4 in the DACH regions. A depressed consumer sentiment and inflationary worries caused a certain reluctance to buy. Sales growth in our three localized markets, Italy and France, accelerated for the fourth quarter in a row to 226%, and now makes up 16% of total sales, up from 11% in the third quarter. Together with the newly localized countries, Netherlands, Belgium and Luxembourg, this share will increase even further and make us less dependent on the DACH market in the future. The rest of the European economic area shows a decline of -17%. In comparing the development to the one in the localized markets, this highlights the importance of a local expansion strategy and local content.
Revenues of rest of world were down -25%. On top of suspended sales to Russia, the EUR currency became stronger again and with that, made it less attractive for non-European customers to order with us. I would like to quickly touch on full-year localized sales in detail. While this journey is far from being over, it's impressive for me what we have achieved so far. With the macroeconomic struggles all over Europe, we have still almost tripled year-over-year sales growth. With Italy and France just being launched beginning of 2022, we expect very high double-digit growth rates in these countries for 2023 as well. The churn rate compared to the DACH market and the higher share of full bikes sales already offer margin benefits today and in the future.
Needless to say, once our Barcelona warehouse is running at full capacity, we will also benefit from being able to offer better service and favorable shipping rates. Bike24 was voted the second most feared competitor in the entire Spanish sports retail space by more than 7,700 retailers. Just two years after launching our Spanish shop, that's a great job by the whole team. Let's now turn to working capital and inventory in particular. Similar to the previous quarters, the increase in net working capital can primarily be attributed to the increase in inventory. Inventory increased by 24% year-over-year to EUR 84.3 million at December 2022. That is higher than normal and will reflect the overcapacity in the bike market. Let me remind you that the product lifetime in the bike industry is significantly longer than in the fashion industry.
On the other hand, you might recall that during our Q3 release in November, we promised to reduce inventory to below EUR 90 million by the end. With an inventory reduction of -12% or EUR 12 million versus September 2022, we managed to achieve this effectively through proactive management and promotional activities. As already mentioned in previous releases, some of our procurement decisions in the past were made on a strategic basis, so around 9 to 12 ahead. With normalizing supply chain, we expect the reorder period to shorten and ultimately inventory as a % of sales to decrease. Since the new season product coming during the first half of the year, please do expect inventory to slightly increase quarter-over-quarter.
Focusing on profitability, the development is in line with the Q3, and the drop in adjusted EBITDA margin was mainly caused by significantly lower gross margin. This fourth quarter was characterized by intense industry-wide promotional activities, especially during the Black Friday period, to clear the overcapacity that we've already mentioned. We expect this to continue at least until the second half of 2023. Additionally, last year's gross margin was on an extraordinary higher level. This year's gross margin is on an extraordinary low level, given the macroeconomic headwinds as well as already mentioned industry-wide overcapacities in inventory. While performance marketing spending was relatively constant, selling costs increased as a % of sales given higher domestic as well as international shipping rates, as well as higher packaging costs.
Personnel costs as a percentage of sales increased by 1.5 percentage points during Q4, giving general salary increases across all departments, especially due to the increased minimum wage in Germany. Higher miscellaneous expenses were caused by increased IT-related implementation costs, as well as increased tax and IFRS-related consultancy fees caused by the internationalization of the business. In total, we achieved an adjusted EBITDA margin of -3.1% for the fourth quarter. That's for my side. Now, Andrés, back to you.
Thank you, Tim Armbrust. Before we head into a detailed outlook for 2023, I would like to emphasize the ongoing mega trends that will support the cycling industry around Europe for years to come. First, increased government initiatives all over Europe. Whether tax incentives on bike leasing in Germany, subsidies for bike repairs in France, or a new ring road cycling highway in Italy, governmental support, whether through infrastructure projects or financial incentives, has never been stronger and expected to increase over the next couple of years. Second, new commuting habits. Especially during the pandemic, many commuters have found new ways of getting around. With the rising popularity of the e-bike, it's easier than never before to replace the car or public transport by an electric bike. Once people change a habit, like cycling to work, they are likely to stick to it.
Given the stickiness of our existing customers who order around three times per year, this offers great further potential for Bike24 in the future. Third point, higher e-bike share. E-bike sales grow significantly faster than sales of bikes. While this ultimately translates into higher average sales price, e-bike users are also likely to cycle longer distances and spend more on follow-up purchases. Fourth, premiumization across all product categories. Whether EUR 400 for Gore-Tex jacket, EUR 2,000 for an entry-level e-bike, regardless of current inflation rates, the demand for quality products with that higher average sales prices for bikes or cycling-related products has risen exponentially over the last couple of years. Fifth point, ongoing shift in mobility. With car ownership in larger cities becoming more expensive, people look for sustainable alternatives. Studies have shown that especially couples and families replace the second car to an e-bike.
With that in mind, I am more than excited for the next couple of years for Bike24 to come. 2023 will be a year of transition for Bike24, but we will make sure we put the company on a solid foundation to benefit from the above-mentioned initiatives. Let's now turn to the short term, and with that, to the 2023 full-year guidance. The current macroeconomic environment is something we have never experienced in more than 20 years of Bike24. However, I'm confident that we will still achieve a modest revenue growth of 0%-10% and continue to grow for the 22nd year in a row. Additionally, in terms of adjusted EBITDA margin, I'm also confident that we continue to stay profitable on an operating basis and achieve a margin of between 0% and 3.5%.
We have been doing this for more than 20 years, profitability has always been a focus for Bike24. It also is in this challenging environment. However, the quarterly split will be rather uneven. We expect sequential improvement on both top and bottom line over the course of the year. As I said, the current depressed consumer sentiment and pricing pressures during the first quarter of 2023 are already factored in the full-year outlook. For Q1 2023, we expect a contraction in total sales compared to the previous year, leading to a negative EBITDA margin. Nonetheless, given liquidations of inventory and order cancellation across the industry.
We expect healthy inventories by the end of the year and with that, improving margins. On the other hand, we are very confident to return to positive cash flow generation as inventory is converted into cash, and with that, improving our liquidity position. Please allow me to quickly summarize what we promised earlier during the year and managed to achieve. Despite a significantly worsening environment with +5% revenue growth, we managed to come in the upper end of our guidance range. Also, in terms of adjusted EBITDA margin, we managed to deliver within expectations. In November, we promised that our inventory will be reduced from an all-time high of above EUR 96 million to something below EUR 90 million. With EUR 84 million at the end of December, we managed to achieve this.
Lastly, I cannot repeat it often enough, but it's always great to see the efforts we made with our localization strategy so far. It's not only about the triple digit growth rates over there, but also seeing the very dynamic and motivated international team in Barcelona developing. I personally visit our Barcelona office and the warehouse earlier this month, and it's really incredible what we achieved in this short time over there. Now we are coming to the end. Thank you for your attention, and we are now open for questions.
Ladies and gentlemen, at this time, we will begin the question-and-answer session. Anyone who wishes to ask a question may click the Q&A button on the left side of your screen and then click the Raise Your Hand button. If you're connected via phone, please press star followed by one on your telephone keypad. Anyone who has a question may click the Q&A and Raise Your Hand button or press star followed by one at this time. One moment for the first question, please. The first question is coming from Jean Fourica from JP Morgan. Please go ahead. Jean, you can ask your question right now if you want.
Hi, Tim. Can you hear me?
Yes.
Okay. Just a question on inventory. You just touched base on the outlook. When do you think they're going to go down on a year-on-year basis this year?
For sure. As I mentioned already in the first quarter, we will see a slightly increase because all the incoming goods are now for the summer season, and that's normally happened in the first quarter. It's compared to other quarters, much lower than normal. In the second quarter, we will see a drop in inventory because the summer season is over. The third quarter, again, a slightly increase. We expect that with the end of the year that we could at a normal level around about 25% of the total revenues.
Sorry, I didn't catch. What did you say over the summer in Q3? What should we expect?
Summer is Q3, the inventories will go down in, or in Q2, the inventories will go down. In Q3, it will go up again because then, the goods for the winter season coming in, and then end of the year, we will be at a healthy stock level of about 25% of the revenues.
Amazing. Thank you. Just a follow-up, if I can, on fragmentation of the industry. It's still very fragmented at the, at the beginning. Do you think it's still going to remain the case, or do you expect to see some consolidation? Do you know, like, how the small retailer are doing at the moment?
You're right. It's still a very fragmented market. We don't see any consolidation efforts in the market. Again, I think, it's for all market players, is it offline or online, very tough situation at the moment because everyone, is it an offline or an online retailer, has these overcapacities combined with customer sentiment that's going down. I think we could expect something, but so far, we don't see any efforts.
Thank you very much.
The next question is coming from Andreas Blom from Medium Invest. Please go ahead.
Hi, guys. Can you hear me?
Yes. Perfect.
Great. First off, thank you for taking my question and congratulations on your fiscal year results, even though you had some economic hardship. I wanted to know what kind of companies or countries are dominant in the rest of the European economic area segment.
Yeah. We are reporting last year. In that segment, the Nordics are very strong. Yeah. For sure, Benelux. Yeah. That was also the reason why we choose Benelux for the next step in localization. That's the two biggest regions, under rest of economic area.
All right. Thank you. In those two regions, where have you seen the largest decline in your demand and also. 'Cause this is the segment where we've seen the revenue gone down significantly.
It's really in all the regions, in all the countries, it's the same pattern, in the rest of European economic area. What we see or what we saw during the pandemic, that was also part of our communication, that in the pandemic, there was a lot of users from the countries where we are not localized. They're looking at the local dealers. There was no supply. They're looking around for European-wide players like Bike24. That gave us a boost during the pandemic in these countries. What we now see is that if you not offer a local service, a local language and local brands, then they're going back to the local dealers again. That's the reason also why our localization is so successful.
Again, if you look really the growth rates or the growth pattern between localized countries, Spanish, Italian, French and the other countries, that shows how important localization is and that initiative or the strategic initiatives is so important for Bike24 for the future.
All right. Thank you. Just a single question on your revenue growth that you have an outlook of 0%-10%. How much inflation do you account for that in your guidance?
We have in our guidance an AOV that's almost flat. Yeah. No big inflation rate, but that's the reason why we now see that the market price are so down. Yeah. There will be inflation in the second half of the year. Yeah. What we now see is that the market prices are down, and therefore we will don't see a significant increase in the AOV over the full year.
All right. Thank you. That was all for me.
Ladies and gentlemen, anyone who has a question may click the Q&A and raise your hand button or press star followed by one at this time. One moment for the next question. It seems like there are no further questions at this time. I hand back to Moritz Verleger for closing comments.
Yeah. Thank you, everyone for joining for our full year results conference call. Feel free to reach out to arrange follow-up meetings. Otherwise, see you on May third for the Q1 results. Thank you very much. Bye.
Thank you. Have a nice day.
Thank you. Bye-bye.