Hello, and welcome to this interim report presentation with Albert. With us today is CEO and co-founder Arta Mandegari, co-CEO and co-founder Salman Eskandari, and CFO Martin Dahlgren. My name is Fredrik Hansson, and I work for Finwire. After the presentation, there will be a Q&A session. If you have any questions, please visit finwire.tv and click on this webcast, and on the page you'll find a question form. Gentlemen, walk us through this quarter, please.
Thank you very much. Good morning everyone, and thank you for calling in to the presentation of the interim report for Albert's Q2 2022 period. This is our fourth report as a public company, and we're happy to welcome you here today to share our Q2 activities. The agenda for today will be as follows. Since we're still relatively new on the market, we believe it's relevant to continue to reiterate our vision with Albert and why we exist in a short introduction to the company. We will thereafter give you a short glance and summary of how the Albert Group is evolving and growing, and give you an introduction to our different business units, which are B2B and B2C.
Thereafter, we will dig into the Q2 financials, and at last, we will close with a short summary and the key takeaways before we end the presentation with opening up for a Q&A session. The ones presenting today are the three members from the management team, me, Arta Mandegari, co-founder and CEO. We also have Salman Eskandari, co-CEO, and the other co-founder in the founder duo. At last, but not least, we have Martin Dahlgren, our CFO, who will walk you through the financials. As mentioned, starting the presentation, we believe it's important to reiterate what we're building here at Albert and why we actually exist. We believe the best way of doing this is to explain our vision, which is to give every child in Europe a custom learning experience throughout our products, apps, and services.
The way we're doing it is that we, through technology, are eliminating the human element in the learning experience. Doing this, it enables us to offer quality, curriculum-aligned learning experience at the price affordable to the many. This also makes us being one of the leading actors that democratize learning. We started Albert with mathematics, but we're now moving more and more into a one-stop shop and the learning platform for kids aged one to 16. In the platforms, we are offering mathematics, basic programming, English, Swedish, reading and writing, geography, physics and biology. We're active in five core markets. We started off in Sweden, but now we have five markets, Sweden, Norway, Denmark, Poland, and U.K.
We have helped around 400,000 households in our business-to-consumer offering and millions of students in our B2B offering. These children have solved more than 60 million exercises in our products combined. We are approximately 70 full-time employees across the group, and it's a very diverse team. I think we speak 14 different languages. What's common with the team is that everyone has the common goal of helping children to reach their full potential. Digging in a little bit into the numbers, we had, as per Q2 closing, a paying customer base at around 754,000 subscribers in the B2B and the B2C offering combined.
This customer base generates just below SEK 131 million in annual recurring revenue or ARR, which is, as per Q2 closing, 89% growth year-over-year. Where 40% stems from organic growth and 49% stems from acquired growth. Net sales in the quarter ended up at SEK 31.2 million, which is 102% year-over-year growth. If you look at the quarter isolated compared to the quarter before, it's approximately 26% growth. Out of these 102% growth, 32% stems from organic, and 70% is coming from acquired growth.
If we move on to us expanding into being a EdTech group, we talked about it briefly during our previous conf call as well. Albert today, with the acquisition of Sumdog, has an offering with curriculum-based products targeting both schools and families. That's in line with our ambition to connect the teacher and parent and student within the same ecosystem. Sumdog has been the core brand when it comes to B2B products for schools, and Albert has been the core brand when it comes to consumer products for families. One of the things that we have focused quite a lot on in this quarter, and that we will dig into a bit more in the slide to come, is to validate some of the hypothesis we have around
Connecting the teacher, parent, and student. This shows a brief overview of the different products and brands that we have for the different business areas. There are two areas that we would particularly like to highlight. It's the family offering in Sweden and the family offering in U.K. One of the things we have done in the quarter is to integrate customer acquisition within the group for all the three brands and drive that customer acquisition from the Albert team with very positive results. The reason it's promising is that previously we have shown that the acquisition engine works in Sweden. It works outside of Sweden, outside of the Nordics, but now also that it works with other brands than just Albert, and that we can leverage some of those synergies that are between the products.
There has been quite a lot of focus on synergies in two dimensions, partly the synergies between B2B and B2C. How does a parent think about a product that is also used in school when they have a consumer subscription for it? Also synergies when it comes to the way we are organized and from a cost perspective, where we have now integrated marketing fully, for the family offering across all the three different brands. This is something that we are really excited about, for the future and what it can bring.
Excellent. I think it's time to jump into the Q2 financials. If we start looking at the annual recurring revenue, our ARR has grown 89% year-over-year between Q2 2021 and Q2 2022.
The ARR has grown both due to increase in subscribers, but also the increase in ARPU. This has been combined with the acquisition of both Jaramba and Sumdog during 2020. Regarding ARPU, it has increased year-over-year as well as quarter-over-quarter. We have, during the quarter, increased our pricing for new subscribers in Albert, which converts on web to reflect the price plan in-app. Quarter-over-quarter, our B2B business has decreased somewhat from SEK 28 million to SEK 26 million. Some of it can be explained by currency effects, but we have also noticed this as a pattern for schools, which are more keen to renew the subscription after summer vacation. Some schools has not renewed the subscription plan which ended in late Q2, but instead we have dialogue with them that they will renew them after the summer.
We don't see a downward trend in the B2B business, so to speak. If we then look at our net sales, we have increased the growth both year-over-year as well as quarter-over-quarter. The net sales grew from SEK 15.4 million in Q2 of 2021 to SEK 31.2 million in Q2 2020. The growth is primarily driven outside of Sweden, and Sumdog's net sales are the main factor which is now contributing for the full quarter. As I said, most of our net sales are now in market outside of Sweden, and that gives us effects in currencies.
Both the Norwegian crown as well as the British pound has had a negative effect during the quarter, and therefore has impacted our Albert business negatively between Q1 and Q2 of 2022. If we look at the overall financials, here we have touched on most of them. I just want to highlight the adjusted gross margin, which is now 93%. That is due to the fact that we develop most of the content in-house, especially Sumdog has 100% in-house development. The EBITDA has improved year-over-year, which is very good to see, and that is due to the fact that we have a lower marketing spend, but also see the synergies between the businesses.
Lastly, I just wanted to drill down and show the reported EBITDA for the period. Our operating result SEK -19.5 million for Q2 of 2020, but then we add back the amortization of acquired intangible assets of SEK 6.9 million to get the reported EBITDA of SEK -12.6 million. The amortization of acquired assets are tied to the acquisition of both Jaramba, but mostly Sumdog. Lastly, I just want to reiterate our financial targets and look forward. Those are combined in both growth but also profitability. Regarding growth, we target net sales of SEK 500 million for the full year of 2025, and we will get there by growing more than 50% per year.
This will be both organic as well as acquired growth. For the profitability, we target an EBITDA margin of 40% in the long term. Thank you.
Thank you very much, Martin. Going to the summary and the key takeaways of this report. We would like to highlight that we are still having a 100% focus on the long-term financial goals, and we're pacing well against them. However, in this little bit shaky financial times, and in short term, you could expect a little bit more cost control and responsibility and respect for the cash in bank from us.
That we are having 100% focus on the unit economics, which means that we are optimizing even more on the ROI on the customer levels and the new customers that we are acquiring going forward. We also would like to highlight Sumdog B2C, which is fully integrated now in the company and successfully centralized the customer acquisition with the promising results. This translates that the U.K. is a key market for us and we will continue investing in U.K. We have a good traction there. It doesn't mean that we will not explore new markets. We are having experiments live in new markets in Europe as well. At last, we would like to highlight that we are continuing our M&A agenda.
Even if we have not acquired a company in this quarter, we are having dialogues with the strategic partners that we have identified and that we believe can create good value for the group going forward. This just gives us another growth dimension for the company. This is something we will continue focusing on going forward. Now we can open up for Q&A.
Thanks, gentlemen, for this presentation. We have a question here from a bank, which is what is marketing as a share of other external expenses?
Yes, thank you. Historically, the marketing expense has been roughly 70% to 80% of our total other external expenses. Given the acquisition of Sumdog, so the B2B business doesn't really have marketing expenses as a large portion of the total. We don't give an exact figure of the marketing, but it's significantly lower than 70%, I would say. Yeah, ballpark 50%-60% roughly of the group's total other external expenses.
It seems like there was a negative delta on churn and in Q2 versus Q1. How does this things look so far in Q3 since the start of the summer campaign?
Yeah. What we did in Q2 initially was to reduce our investments in customer acquisition. As Arta mentioned, we will have more control over the cost, making sure that we grow with profitability on a customer level. Marketing expenses were reduced in the beginning of the quarter, as we saw prices for advertisement going up. Those investments have increased by end of Q2, and also now in the start of Q3.
And, and the question-
We can also give a little bit nuance to the summer campaign that you mentioned. We started it early this year, like last year, actually. We started it in June, and right now we see a good momentum in the campaign.
Will there be a deferral on some revenue in Q3, from the summer campaign similar to the dynamics we saw in Q1 with the Easter campaign?
A little bit, but not as much as in quarter one. I think the big difference comparing with the previous quarter is that, in Q1, the Easter campaign started already in January. This means that all the customers that we acquired throughout January, February, and March became paying subscribers in quarter two, since Easter was in quarter two. In the summer campaign, we started it mid-June, so it's basically only half a month, a little bit more than half of June that of the customers that will actually become paying in the next quarter. Not as much referrals.
We'll keep asking a little bit more about the summer campaign, which is ongoing. Perhaps, if it's possible for you to give us, even more updates on the summer campaigns.
I mean, we don't usually give specific numbers. But as you could see in the Q2 numbers and the other external expenses, you can see that we had significantly reduced the market spend during the quarter. One of the reasons is that we always want to be profitable on the customer level. If we see that a campaign drives up customer acquisition on the customer level, we don't want to spend just because of spending anymore. We really want to be responsible, especially in the financial times we are in right now. However, what we can say in the Q3 campaign or summer campaign is that it has started off very good. Right now we don't see any big need of decreasing the spend as per planned.
What is the growth focus in terms of investment and also expectations for next quarter, both business- to- business and business- to- consumer?
On a general level, the growth focus is in line with our financial targets. If we look more short term now today, we have,
More alternatives for growth than we had two quarters ago. We can either choose to invest in continued B2C growth, organic. We can choose to invest in B2B growth with Sumdog, and we also can choose to grow through acquisitions. We are constantly evaluating all these three dimensions of growth to see how do we grow more wisely, both short-term, but also mainly long-term, in what creates the best possible circumstances for the group to continue to grow.
How does your company affect the current economic situation with high inflation and increasing interest rates?
If from a marketing point of view or a customer acquisition point of view, the best way for us to measure the impact of a potential inflation in the household's financials is basically the conversion rates on the website. We acquire traffic to the site, and we analyze how the traffic is behaving on the website and what the conversion rate to actually create a subscription is. Looking at the current numbers and going back historically, we don't see any drastic change there. That's basically what we can say from a marketing or customer acquisition point of view at least.
You mentioned in the interim report this morning that even could be positive for you in some situations, right?
In what way? Which part of the world?
When you talk about the mergers and acquisitions or discussions you had?
Absolutely.
It was a positive situation perhaps.
Yes, absolutely. As we have an active M&A agenda, we see in our dialogues also that what is happening on the financial markets, it's affecting the ability to do new issue shares and bring in capital to companies. It affects the valuation of the companies that we talk to. As we have cash in the bank, it presents us with new opportunities or other opportunities to do acquisitions.
Okay. With that, we thank you for this Q&A session, and thank you for your presentation, guys. Looking forward to the next quarter then. Good luck.
Thank you very much.