Hello, and welcome to this Q1 presentation with Albert. With us today we have CEO and co-founder Arta Mandegari, co-CEO and co-founder Salman Eskandari, and CFO Martin Dahlgren. My name is Christopher Berggren, and I work for Finwire Media. After the presentation, there will be a Q and A session, so if you have any questions, please visit finwire.tv, click on this webcast, and on that page you will find a question form. With that said, I hand over the word to you guys. Please take us through the Q1 report.
Thank you very much, Christopher. Good morning, everyone, and thank you for calling in. Welcome to this conference call, where we're presenting Albert's Q1 report. Today, we will walk you through the following agenda. Like always, we will start with reiterating a short introduction to the company and our reason for existence, including our vision statement. Today in this introduction, we will also highlight the importance of the subsequent events up until 18th of April, where the Easter campaign that was run during Q1 is included. Thereafter, Salman will walk you through our journey towards an EdTech group consisting of both our direct to consumer business unit, but also the new establishment of the B2B selling to schools business unit.
Thereafter, Martin will go through the Q1 financials, and at the end, we will have some short concluding remarks before ending this presentation with the Q and A. Today's presenters are myself, Arta, one of two founders. We also have the other half in the founder duo, Salman Eskandari, and our CFO, Martin Dahlgren.
Reiterating our vision, which also is our reason for existence. I mean, our vision is to give every child in Europe a custom learning experience, and the way we do this is by eliminating the human element in the learning experience, which also enables us to offer a pricing model at a level which makes learning and high quality education available for the many, for the many. This way, we are contributing to democratizing education and learning for the children in Europe.
Before we dig into the Q1 numbers, we believe it's important to highlight some special Q1 circumstances regarding the Easter campaign, which was stretched over Q1. I mean, for us, it's nothing new for the company. Historically, it has always been like this in Q1 due to the every year Easter campaign that we run operationally. The Easter and the Easter holidays, it actually lands post-closing of Q1, post the 31st of March, which also was highlighted in the prospectus for the full year of 2020. Since this is our first Q1 report as a listed company, we believe it makes sense to reiterate this. We actually started the Easter campaign on 23rd of January, and the campaign was run throughout the Q1 until the 18th of April.
It's not until April 18 where the actual subscribers, paying subscribers, convert from the free trial period that they were offered during the Easter campaign period. This means that we are booking all our incurred marketing costs for the campaign up until March 31 in our Q1 closing report and numbers, but all the paying subscribers and the ARR, Annual Recurring Revenue, are included as per April 18 as a subsequent event. Sales contribution from the campaign are not included in any numbers in this report. This will be shown and presented as part of the financial report in Q2. All right. Giving you some history, we started as a math-only service selling to schools actually.
We switched to a direct-to-consumer model mid-2017, and since 2019, we've been basically only focusing on growth, both in terms of number of subscribers, geographical expansion, but also from a product portfolio perspective, where we're moving into a one-stop shop offering with a broader range of subjects and a target audience. Now we're addressing the audiences for families with children from the age of one up until 16 years old. Now we also are selling to schools through the acquisition of Sumdog in the U.K.. Since our switch to direct-to-consumer model, we have helped over 380,000 families whom together have solved more than 60 million exercises, and we are present in five main markets in Europe today. The group includes total approximately 70 full-time employees.
As of April 18, we had a total of 781,000 paying subscribers, whereof 88,000 are stemming from the consumer business, and 693,000 are from the B2B segment. Our annual recurring revenues, ARR, reached just below SEK 131 million, which includes also the negative British pound involvement during the period. This is 173% growth year-over-year, whereof 100% is organic and 73% is added through M&A. Sales grew 122%, year-over-year, where 86% stems from organic growth and 36% was added through M&A. Again, worth to mention, the sales from Easter Campaign is not included in the reported sales numbers.
Thank you. Now we will walk you through a bit what it means that we're expanding into a group consisting of both B2B and a B2C offering, both from a conceptual point of view, but also from a financial point of view and what it means for the business, short-term and long-term. Historically, we have been with our family products supporting parents and children in their learning at home, not having involved the teacher up until now with the acquisition of Sumdog. This triangle is important because these are the three key stakeholders when it comes to children's learning.
You have the teacher that teaches and also evaluates the child, puts a grade on the child. You have the parent who supports at home, sometimes through teaching or through various products or tutoring services to help their children manage school and get the grades that they want. Between the parent and the teachers, there is communication about how the child is performing, areas of strength, weaknesses, and how they can set a plan, moving forward. One thing we would like to go through is the different characteristics of the school and the family businesses. What do they mean? How do they differentiate between them? The first one, and the most important one, is that both business units are targeting the same end user, with the purpose of helping the student or the child to learn.
From a business point of view, school sales are related to longer contracts, meaning lower churn, higher revenue retention, whereas the family offering is a short contract, easy to cancel, easy to purchase as well. Also from a scalability perspective, the B2B business is less scalable, especially if you look across multiple markets because the purchasing system for schools can look very different depending on which market you are at. In the schools business, there is a very high volume of users. And with that, it also means data. This is important to keep in mind since targeting the same end user, with the school sales with high volume of users, you get a possibility to actually evaluate, and test, and experiment on, features and gain good data from that.
ARPU is lower in school sales as a compensation for the high volumes, whereas it's higher in the family sales. One of the key differences is really that the school sales is sales-driven, sales force-driven, whereas the family offering is marketing and capital-driven. Some things are also in common. If we look at Sumdog, if we look at Albert Products, it's content based on the curriculum. We are both tech companies, which means that we are heavy in design and technology. A key thing for us will be to show the synergies between B2B and B2C over time.
I think one key thing here to have in mind is that we are targeting the same end user, meaning that there are from a cost point of view collaborations to be done on content creation, on design, on technology development. Also from a sales point of view, we will find the synergies between the B2B and the B2C model. Looking at what we have done in the B2B part of the business, during Q1, we launched Albert Teen, which was actually an integration of the content we acquired from Stairway Learning in Q4 last year. We acquired Stairway Learning in November, and in February, we launched Albert Teen, the platform for children aged 10 to 16.
We launched it initially in U.K. because the content was in English, offering mathematics, biology, and physics for the older children. We also launched Albert English for the children aged five to eight, nine in all markets where we have English as a second language, meaning all our markets except for U.K. The initial response is positive. We see an increase in user retention, but we also definitely see an increase of the number of new customers choosing our more expensive subscription plans, the standard and the plus plans. We have the ambition to harmonize the offering across all markets, meaning that we offer the same products at the same quality, with the same content in all our markets we're active in.
Perfect. Now we will jump into the Q1 financials.
If we start to look at the annual recurring revenue, we have grown that year-over-year by 142% between Q1 2021 and Q1 2022. As Arta mentioned prior in this presentation, we also want to look at the 18th of April 2022, given that the large intake of new subscribers in the first quarter converted into paying after the quarter has closed. Therefore, we would like to highlight those as well because that shows more of the growth in the quarter.
The growth is driven both by paying subscriber, but also the increase in ARPU. There has, however, been some slight negative effects in ARPU at the end of the period, due to subscribers using Jaramba, but also Sumdog's B2C. The growth is primarily outside of Sweden, and that makes sense given that both the B2C business is growing in Europe, but all of Sumdog's B2B business is outside of Sweden. As Salman mentioned, there are a little different characteristics in the B2B business, given that the B2B business has a higher number of subscribers but a lower ARPU. If we then look at the net sales for the quarter, we have grown that by 122% in Q1 2022 compared to Q1 2021, whereof 86% is organic.
Here I just want to highlight that the acquired net sales is Jaramba for the quarter, but also of course Sumdog, but Sumdog is only included during the end of February, so basically March. The growth here is also primarily driven outside of Sweden, and therefore Sumdog is 100% outside of Sweden. Here I just want to reiterate that the sales that we will get from the Easter campaign and the conversion of those trial to paying are not included in the Q1 period but will be included in Q2 and going forward. As discussed prior, the establishment of a new B2B business unit contributes to a more financially robust net sales profile where the revenue might not grow as fast, but it's more of a sticky product, so to speak.
If we dig down further into the financials, net sales here has already been discussed, but if we look at our adjusted gross margin, it continued to be high as prior periods. Our EBITDA is SEK -22.4 million , and this is due to the continued focus on growth. The marketing spend for the acquired customers in the quarter is included here, but the net sales will be when they have converted into paying. We have also had some expenses in the quarter of SEK 1.7 million due to the acquisition of Sumdog, so advisory fees, et cetera. The net sales split is 53% in Sweden and 67% in others. Given the operational metrics, the paying subscribers grew by 79%.
The ARPU by two, and therefore the ARR was SEK 87.7 million for the end of Q1. Yeah, given the Easter campaign, it has grown. As we discussed, the paying subscribers for the B2B business is significantly higher, but ARPU is lower. There have been some slight negative effects in the British pound in the quarter. Here I just want to take the opportunity to drill down in our reported EBITDA, given that we now have some changes or add back from the operating result to the reported EBITDA. Our operating result is SEK -25.1 million, and from that we have added back the amortization of our acquired intangible assets of SEK 2.7 million. Therefore our reported EBITDA is SEK 22.4 million.
The added back amortization of acquired intangible assets is basically amortization of assets acquired by both Jaramba but also Sumdog. At the end of the Q1 quarter, we had acquired assets of SEK 35.8 million of capitalized self-developed intangible assets, so basically self-developed software. The trademark is SEK 24.6 million. Goodwill, SEK 42.7 million . Customer relations, SEK 29.5 million . If we look ahead, I just want to look at our financial targets, and those are divided between growth and profitability. For the growth, we target to grow net sales on average by more than 50% per year in the medium term. There we see that the organic growth will constitute the majority of that.
That is to achieve net sales exceeding SEK 500 million for the full year of 2025. Here we see that we are going good against the targets so far. The profitability is to target an EBITDA margin of 40% in the long term. The EBITDA margin is chosen because we see that best representing the underlying profitability and cash generation of the business.
Thank you, Martin. I mean, it's always important for us as a management team and from the company side to actually deliver on what we've said that we're going to do. Since we've only been publicly traded for approximately six months, we believe it makes sense to reiterate our delivery since the IPO. In the prospectus, we said that we're going to enter more European markets and expand. We've entered the U.K. successfully since then. We said we're going to focus on improving the operational product KPIs, and the launch of the product platform in Albert Junior and Albert Teen has been very successful and has led to improved engagement numbers in the products. We have expanded into B2B through the acquisition of Sumdog in U.K..
We have also been active on the M&A market. We have completed three acquisitions since the IPO, Stairway Learning, Jaramba, and Sumdog. We have been focusing on growth. When we did the IPO, we had an ARR of SEK 69 million , and since then we have grew it to SEK 130.7 million , whereof the majority of the growth is stemming from organic activities and organic growth. We have continued the M&A agenda. We have several dialogues ongoing with high-quality companies in both the B2C and the B2B segment. We're ending this presentation with some key takeaways, which we would like to highlight. We have had and will have continued focus on growth and the delivery on the long-term financial goals. Here we are pacing well against the targets, and we feel comfortable with the goals.
The B2B business unit contributes to great growth opportunities, which we are looking to further evaluate and execute on. U.K. is a key market, but we are constantly looking into new markets, and we also have live experiments in new European markets that we are evaluating as we speak. We also have several dialogues ongoing with high-quality companies, as mentioned, and if price structure and potential synergies are right, we will continue delivering on the M&A agenda going forward as well. With that, we will open up for the Q and A session. Thank you.
Excellent. Great. Thank you for the presentation, and let's start with the Q and A session then. You mentioned the ARR and you had a strong organic growth as well during Q1. Could you please just summarize what are the key drivers for the organic growth and for ARR that made it so strong this quarter?
Yes. Thanks. It's a very good question. Thank you, Christopher. Yes, we could elaborate a little bit upon it. I mean, the ARR grew 173% year-over-year, which is very strong. And we are particularly proud over that, 100% of these were actually coming from organic activities. And if you look on the growth and the key drivers, it's easy to actually pinpoint the result of the Q1 campaign and highlight that as a key driver of the growth. I mean, it's mainly driven from a successful customer acquisition activities during Q1, which is translated basically to a good performance in marketing, which led to a high intake of new subscribers in Q1.
Okay. Thank you. Next question, it's related to the ARR, and it goes like this: Your run rate ARR of SEK 131 million in April is 172% year-on-year, which is impressive. But at the same time, I know your operating costs in the quarter grew at a similar or higher rate than that. Can you give us some thoughts on the cost dynamic and scalability in general? Is it too early for you to scale on costs even slightly today?
Yeah. I mean, we launched, now we're live in five markets, and the way we run the company operationally is that we constantly evaluate the ratio between the lifetime value and the acquisition cost. The lifetime value is less fluctuating than the acquisition cost. We continue to scale where we have a good ratio. In the markets we have a good ratio, and we reduce spend in the cases where the ratio is not optimal. I don't know if that answers the question, but that's how we operationally run.
Okay. Thank you. We have another question related to costs. Other external costs are up quite a bit compared to last quarter. Would you say the Easter campaign is one of the bigger campaigns of the year, or are we seeing CAC levels that have come up tangibly? Is it fair to assume Q1 levels will be higher than Q2 if you have no such campaigns in terms of marketing, I presume?
I think what we could say, it's one of our largest campaigns historically when it comes to marketing activities, and also it is one of the larger campaigns during the year. Giving some guidance on Q2, we would say on the cost side from the marketing, you could not expect the same levels as we've had during Q1.
Okay. Thank you. Regarding the campaign, we have a question. Despite the campaign running through most of the quarter, the number of subscribers essentially flat, quarter-over-quarter, it implies limited churn on existing subscriber. Was there a difference in the quarter, or was some churn offset by good intake prior to 23rd of January?
Yes, that we can elaborate on. We have two main flows of where the subscribers come in. One is through our website, and one is through our apps directly from Apple or Google. The way the infrastructure of Apple and Google works is that you can only assign a fixed number of free trial days. The Easter campaign was only run through our website. Customers that converted through the in-app flows. They have been added also to this paying subscriber base during the quarter.
Okay. Thank you. In the Q1 report, you write that priority is to expand to new markets. Can you tell us a bit on any specific markets you're looking at, and is it B2C, B2B, or maybe a combination of both?
Yeah, we could elaborate a little bit. I mean, when it comes to expanding the business, we are looking into expanding both the B2B and the B2C segment. However, we have more history in expanding the B2C segment. I mean, during the quarter, we can say that it's been a little bit more focused on testing new markets in the B2C segment. We are actually having experiments live, which we also mentioned in the report that in the report presentation. We are having experiments live in other European markets, and I mean, to mention some of them, we are having experiments live in France, Spain, and Italy right now.
We're just acquiring subscribers and experimenting on the cost level so we can hit the product market fit basically before we scale the business and operation in those countries. We are not 100% confident in communicating that we are entering a new market until we actually have a stable and positive LTV to CAC ratio, which we feel confident on scaling upon.
Okay. Thank you. When we look at expansions, the focus on new launches, will it be new geographical areas or new subjects, or it's a combination of both as well?
I would say the short answer would be a combination of both. Right now we are looking into geographical markets with a little bit higher priority, I would say.
Okay. Thank you. You mentioned the acquisition of Sumdog and Jaramba as well. Could you elaborate a bit on the integration of these two into the organization and how has that proceeded?
Yes, absolutely. Jaramba was the first of the two, where we started off by first and foremost driving acquisition to the Jaramba website. It gives us a good comparison between the B2C business for the Albert brand compared to the Jaramba brand. We also started the actual technical integration, so that we can offer Albert customers access to Jaramba and vice versa. That integration work will continue. For Sumdog, it's a totally different business. Here we have some key hypotheses that we have started to validate, key hypotheses in terms of the synergies you can find between a B2B and a B2C business. That work will continue throughout Q2 as well and also moving forward during 2022.
Okay. Thank you. Regarding the acquisition of Sumdog, you mentioned that they had sales of GBP 2.6 million. Thus, I'm curious. That's a lot, it's equal to SEK 32 million. The follow-up on the question is, thus, I'm curious if the SEK 28 million of ARR in B2B you report today means it has declined or if there are other revenues as well.
Yes. Regarding Sumdog, I think from the SEK 28 million, the difference is basically that Sumdog also has some business in the B2C, and there are some FX effects, basically. They are somewhat flat from the acquisition, I would say.
Okay. Thank you. Next question. I think this will be the last question if we don't receive any additional ones via the web. You're a growth-oriented company, and growth is a priority, of course. Do you have a timeline on when you're planning to be cash flow positive?
Yes. Good to end with a question like that, I think. We don't have a specific timeline when we want to be cash flow positive, but as long as we see a good ROI of our CAC, we will continue to deploy that and to make sure that the overall business is ready to be profitable when we need to, basically. We don't set a specific timeline on that, but keep it close to the market.
Okay. Thank you.
Thank you very much.
That was the final question then for this Q&A session. A big thank you to Arta, Salman, and Martin for the presentation and to answering all of your questions. A big thank you to all the viewers and to all of you who have sent in questions to us. I hope to see you again on the next presentation with Albert, and I wish you all a very good day. Thank you.
Thank you.
Thank you.
Thank you.