Hello, and welcome to the SIGNA Sports United third quarter fiscal 2022 financial results call. My name is Alex. I'll be coordinating the call today. If you'd like to ask a question at the end of the presentation, you can press star one on your telephone keypad. If you'd like to withdraw your question, you may press star two. I'll now hand over to your host, Alima Levy, Head of Investor Relations. Alima, please go ahead.
Good morning, and thank you everyone for joining us. Today, we will review our third quarter fiscal year 2022 results. With me are Stephan Zoll, Chief Executive Officer, and Alex Johnstone, Chief Financial Officer. I would like to remind you that we will make forward-looking statements during this call regarding future events and financial performance, including guidance for the pro forma consolidated fiscal year 2022, inclusive of the recently closed acquisitions of WiggleCRC, Midwest Sports, and Tennis Express. We cannot guarantee that any forward-looking statements will be accurate, although we believe that we have been reasonable in our expectations and assumptions. Our 20-F filing identifies certain factors that could cause the company's actual results to differ materially from those projected in any forward-looking statements made today.
Except as required by law, we undertake no obligation to publicly update or revise any of these statements, whether as a result of any new information, future events or otherwise. Also, please note that during this call, we will discuss certain non-IFRS financial measures as we review the company's performance, including adjusted EBITDA. These non-IFRS financial measures should not be considered replacements for, and should be read together with, the IFRS results. Please refer to the investor relations section of our website to obtain a copy of our investor presentation, which contains descriptions of our non-IFRS financial measures and reconciliations of our non-IFRS measures to the nearest comparable IFRS measure. This call is being recorded and a webcast will be available for replay on our investor relations website. I would now like to turn the call over to Stephan.
Thanks, Alima, and good morning, everyone. For today's agenda, I'm happy to provide an overview of our third quarter fiscal year 2022 results and share the progress we have made towards our strategic priorities throughout the quarter. Before we start, I would like to thank all of our employees across the organization for their continuous support and kind donations, as our thoughts remain with everyone impacted by the crisis in Ukraine. As we turn towards our operating environment, you're well aware of the macroeconomic challenges present in today's market and extending well beyond our industry. Numerous factors have contributed to a continued challenge since we last spoke at the end of our second quarter. As supply constraints were starting to somewhat ease on the lower end of our range, they remained on the higher end of our range with continued inbound shortage, especially in e-bike inventory, affecting growth potential.
In addition, consumer sentiment was strongly hit by heightened inflationary pressures and the worsening geopolitical situation, especially in our core markets in Europe, materially impacting discretionary spending. In the face of these prolonged macroeconomic challenges, the company adapted its operations with a focused approach to growth and emphasis on the existing customer base, as well as enhanced cost discipline while prioritizing projects around our three pillar strategy to accelerate competitive advantages and come off more agile and stronger position from the current environment. Indeed, despite these continued headwinds, SSU has consistently gained market share organically and scaled inorganically in Q3 2022. When available, e-bikes were still in high demand and turning within days. Let me give you some more examples of this quarter's achievements on the operational side.
We continued localizing inventory to serve our customers faster and more efficiently with our new Hockenheim state-of-the-art logistics facility serving DACH and Southern European customers going into full execution after most target product lines and SKUs were successfully and smoothly transferred to the warehouse. Our U.S. tennis business concluded successful partnerships to expand its reach with the ITA and the PTR and will have on-site presence at the U.S. Open this year, bringing the first pro shop ever to over 800,000 U.S. Open visitors in tennis centers. I'm also pleased to share that two of our renowned own bike brands, Vitus and Nukeproof, won multiple awards such as the MBUK BikeRadar 2022 Bike of the Year award, the road.cc Editors' Choice Award, and the Cycling Weekly Editors' Choice Award as testimony to the superior quality and customer-centric approach of our in-house bike brands.
Moving to our second pillar of inorganic growth, we continued gaining significant scale and unlocking synergies thanks to our recent acquisitions. As a result, our active customer base substantially increased by 42% versus Q3 of last year. The cross-selling of owned brands across the group, integration of IT platforms, and alignment of procurement terms for the bike and tennis businesses are underway and will offer material benefits on a group level starting to unfold next fiscal year. As we look towards future inorganic growth, we continue to monitor the market in a disciplined way as we believe current dislocations will create opportunities for SSU as a natural consolidator.
We continue to believe M&A will play a key role in the company's future, both in broadening our reach and gaining market share in key geographies, as well as further developing our own brand portfolio. Lastly, we were able to continue our momentum in leveraging our assets to extend into complementary 3P business models as per our third strategic pillar. Throughout the quarter, we remained focused on accelerating the retail media sales activity and delivering successful sponsored ad campaigns with great outcomes for our brand partners. The operational and financial KPIs we have seen with this business are very promising and we look forward to expanding campaigns to further brand partners across more SSU online shops in the near future.
Additionally, we continue developing our marketplace functionality that we expect to come online in fiscal year 2023 and saw additional connected retail momentum as our partner network grew by more than 50 stores in the bike business over the quarter. Before we turn towards this quarter's financial performance, I would like to reiterate that despite the temporary shift in supply and demand patterns and a certain degree of uncertainty around the timing of the following market improvement, we are confident that our current disciplined approach to growth and investments combined with our strategy, meaningful scale, and unique position among competitors are powerful driving forces behind the company's long-term profitable growth trajectory. We are focused more than ever on leveraging on our deep relationships with our new and existing customers and long-term suppliers as customer satisfaction and a wide selection of products is crucially important in moments like these.
Being in an industry where scale matters and in an expanding addressable market supported by several positive mega trends, we are truly excited about the opportunities lying ahead for SSU. As the turbulent environment drives further consolidation and structural mega trends of health and fitness, e-mobility, and digitization accelerate, SSU will leverage its scale to emerge from this period in a winning position and best suited to capture meaningful value in the years to come. With that, I would like to thank you all for your time this morning. Now I will hand over to Alex to walk you through our financial performance.
Thanks, Stephan, and good morning everyone. Today, I'll take you through our Q3 fiscal year 2022 results and offer some additional insight on the key factors affecting our financial performance. Let me remind you that Q3 2022 represents the second quarter of full contribution of our recently acquired businesses, Wiggle Chain Reaction Cycles and Tennis Express, which closed on December fourteenth and December thirty-first last year, respectively. As you may have seen in our materials released this morning, Q3 2022 net revenue was EUR 324 million, and nine months 2022 revenue was EUR 806 million, both a 29% increase year-over-year. This reported performance reflects the enhanced scale of our operations and the beneficial effect of our recent acquisitions.
However, on a pro forma basis, our financial performance was impacted by difficult market dynamics on an industry and macro level, both from the supply as well as on the demand side, as outlined by Stephan already. On the operating level, which is a meaningful step forward thanks to our recently closed transactions as of Q3 2022 and on a reported basis year-over-year, active customers grew 42% to 7 million, visits grew 16% to 84 million, and net orders grew 29% to 2.6 million. Net average order value declined 4% due to a lower contribution of higher priced items including full bikes. These KPIs declined on a pro forma basis year-over-year due to the softening consumer demand combined with lingering supply constraints.
I would like to highlight that active customers, net orders, and conversion grew strongly versus pre-COVID despite a stable net average order value, indicating SSU's ability to effectively take advantage of the underlying mega trends despite higher price inventory shortage. Active customers increased by 27%, net orders by 11%, and conversion by 99 basis points versus Q3 fiscal year 2019. Next, I would like to discuss our performance further down the P&L. Despite being hit by the current environment, the company has adapted to the prolonged challenges and focused on actionable measures in order to drive growth while restoring margins and preserving our cash. In Q3 2022, gross margin declined just over 500 basis points year over year to 35.5% as per the anticipated normalization after the exceptionally high levels seen last year during the pandemic boom.
This is mainly due to the heightened promotional activity required to drive categories and offset supply chain constraints while managing inventory over stock as a result of the unanticipated sharp deterioration in consumer sentiment. Going forward, we will partly mitigate the downturn with a sharp focus on customer unit economics by targeting promotional activity towards our existing customer base, expanding our own brand offerings, and focusing on core markets with a lower cost to serve. We also expect to unlock significant acquisition synergies by leveraging our scale to improve supplier terms over the medium term. Our adjusted EBITDA for the quarter was a negative EUR 13 million as inflationary pressures impacted the majority of our cost lines.
Personnel costs increased 233 basis points year-over-year to 12.5% of net revenue due to warehouse inefficiencies in a lower top-line environment and to strategically hire to support the company's long-term profitable growth plan. Additionally, the lower top line adversely affected the cost ratio. As evidenced by the quarter-over-quarter 228 basis points improvement in staff cost ratio. We expect it to improve as logistics efficiencies will increase with revenue and strategic projects start contributing to the top line. Logistics expenses increased 74 basis points to 11.4% due to the mix effect impacting the level of returns and increases in carrier and packaging costs. Looking forward, we expect this cost line to normalize in line with the assortment.
We will also further optimize our fulfillment network and mitigate inflationary pressures by passing on much of the increase to our customers through updated shipping thresholds and return policies. Continuing down the P&L, we were disciplined in our approach to customer acquisition in Q3, focusing our efforts on targeted customer segments. Marketing costs represented 8.7% of net revenues for the period, moderate increase of 29 basis points versus the prior year. As a result of this investment, we saw net conversion increase by 32 basis points versus the prior year. IT and other expenses were up 80 basis points year-over-year to 7% in Q3, primarily due to IT integration projects and the run rate costs of being a public company and as the lower revenue base negatively impacting our cost ratios.
The benefits of IT synergies will start to accrue in 2023 as the integration will enable an even swifter rollout of various functionalities for enhanced customer experience. Moving on to the balance sheet and cash flow. We ended the quarter with EUR 55 million of cash and highly liquid investments. In Q3, net cash from operating activities was negative EUR 27 million and free cash flow was negative EUR 33 million after factoring in EUR 6 million of capital expenditures. Change in net working capital was positive EUR 2 million, supported by the company's inventory management policies to align stock with demand as well as the usual positive seasonality effects seen in Q3 as we stock up ahead of the high outdoor sports season in the summer months. Now turning towards the outlook for the rest of the year.
Since the latest outlook released on May third and confirmed on June second, consumer sentiment has strongly deteriorated to an unforeseen scale on the back of heightened inflation and geopolitical tensions in our core markets. While supply chain constraints, albeit improved, are still lingering. As such, the company updates its guidance for fiscal year 2022 and now anticipates that pro forma net revenue will be in the range of EUR 1.15 billion-EUR 1.2 billion and adjusted EBITDA margin will be between -4% and -5.5%. The company expects the current challenges to fade with wage growth and lower inflation in the medium term absent any exogenous events such as further lockdowns or escalation of the geopolitical situation.
In this environment, SSU will focus on a more prudent approach to customer unit economics and prioritize realizing the various transaction synergies to achieve run rate breakeven on an adjusted EBITDA basis from the second half of fiscal year 2023. We are confident that our focused approach to unit economics, targeted investments and disciplined strategy execution will enable SSU to emerge stronger from the current market and be well-positioned to take advantage of various opportunities. It is with this backdrop that the company secured EUR 150 million financing commitment to fund our organic growth. SIGNA Holding GmbH, an affiliate of our largest shareholder, agreed to provide SSU with EUR 150 million of liquidity, satisfying the company's requirements under the May revolving credit facility amendment.
The commitment is made up of a second EUR 50 million revolving credit agreement with Signa Holding signed on July 25 as per its previous commitment to make this amount available at the latest during our fiscal year 2023. For the second 100 million euro component of the commitment, SSU will issue EUR 100 million of senior convertible unsecured notes to Signa Holding to support its strategic initiatives as per the binding term sheet signed on August 15. The company is confident the EUR 150 million of new liquidity will be sufficient to fund its current organic growth plans through to the end of fiscal year 2023.
In addition, the company may receive up to EUR 200 million of incremental liquidity to pursue strategic inorganic growth opportunities by issuing incremental senior convertible notes to Signa Holding at the note holder's sole discretion as announced today. In such an event, the terms and conditions of the new notes under the upsize option would be aligned with those of the initial EUR 100 million convertible notes. To conclude, SSU is confident that it will emerge from this period of dislocation better positioned. We are focused on navigating the short term challenges and preparing for mid to long term success by continuing to invest against our strategic priorities to drive significant long term value, supported by the global mega trends of health and fitness, online shopping and e-mobility. Thank you all very much. With that, Stephan and I will be happy to take your questions.
Thank you. As a reminder, if you'd like to ask a question, that's star one on your telephone keypad. If you'd like to withdraw your question, that's star two. Please ensure you are unmuted locally when asking your question. Our first question for today comes from Jian Xu from BNP Paribas. Jian, your line is now open.
Hi, guys. Thanks for the question. Maybe first on the categories, could you give some more color on how you did maybe ex bikes? I know there was more issues with the bike category. Did the other categories fold in, like tennis, et cetera, or is the slowdown more broad-based now?
Hi, Jian. This is Alex. The other categories evidently performed materially better relative to bike. You know, those categories were also impacted harshly by lockdowns in Q3 in fiscal year 2021. They did comp pretty well year-over-year, but not as well as maybe we would've liked. Still up very strongly relative to the pre-pandemic period, but I would say that you know, as we think about what was in our guidance and then relative, there was certainly a slowdown you know, that really accelerated throughout the quarter. While the performance was good from a comp perspective, it was not as anticipated.
Okay. Got it. On gross margin, you know, it seems like there's tailwind accelerating. Sounds like it's mostly from promotions, maybe supply chain is getting a little bit better. Could you maybe, give us a bridge in terms of how much of the gross margin decline was due to promotions versus supply chain? That'd be helpful. Thank you.
Sure. I would say that, you know, just maybe firstly, as an industry, you saw, you know, what I would say is that you had the consumer in a pretty good place going into this fiscal year. As an industry, we tend to have to order quite far in advance. You know, ourselves and many other industry participants were ordering for, you know, growth in this period. Subsequently, there is, in the categories where there is supply, there tends to be an overstock. What we've seen is very promotional activity, as the season, you know, the summer season wore on. You know, what was really the season starts really in April.
Pretty early on, there was, you know, some large amounts of promotional activity by competitors in market where we evidently had to follow suit. I would say that while there is an overstock in market, there was going to be, you know, near-term margin pressures. However, I anticipate that this will normalize into the next fiscal year, where I think more maybe industry is now taking a more prudent view given the macroeconomic backdrop.
Okay. That helps.
Just to Stephan, maybe worth to add.
Yeah.
Sorry. Worth adding that as you were, right, the supply situation has eased up to a degree already, not to the degree necessary really, right? E-bike, high-value bikes are still constrained, but everything else is normalizing quite well. That's good. That's good light at the end of the tunnel I think looking into the next quarters from a supply perspective.
Okay. Got it. Yeah. Perfect. Thank you so much.
Thank you. As a reminder, if you'd like to ask a question, that's star one on your telephone keypad. Okay. We have no further questions for today, so I'll hand back to the speaker team for any further remarks.
No further remarks. Thanks everybody for joining, and looking forward to talk soon. Thank you. Bye-bye.
Thanks, everyone.
Thank you for joining today's call. You may now disconnect your lines.