Hello and welcome to today's webcast with Albert's CEO, Arta Mandegari, Co-CEO, Salman Eskandari, and Martin Dahlgren, Head of Finance. They will present the company's report for the third quarter. After their presentation, there will be a Q&A, and if you viewers have any questions, you can send them in via the form on the right. My name is Ludwig Sjöström, and I work for Finwire. With that said, I hand over the word to you guys.
Thank you, Ludwig, and good morning, everyone, and thank you for calling in to the presentation of our interim report for Albert Q3 2022 period. This is our fifth report as a public company, and we have now just passed our first year as a publicly traded company, and we're happy to welcome you here today and to share our Q3 numbers and activities. The agenda for today will be as follows. Since we're still relatively new on the market, we believe it's relevant to introduce you and to reiterate our vision with Albert and why we exist in the short introductions. Since it's almost exactly one year ago we listed the company, we also want to take this opportunity to give a short summary of what we said pre-IPO and what we have achieved since then.
We will thereafter give you a glance of how the Albert Group is evolving and highlight some key initiatives done in Q3. Thereafter, Martin will dig into and present the Q3 financials. At last, we will close with a short summary and key takeaways before we end the presentation with opening up for a Q&A session. Us presenting here today are three members from the management team. It's me, Arta Mandegari, Co-founder and Co-CEO. We also have Salman Eskandari, Co-founder and Co-CEO. 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 exist.
We believe that the best way of doing this is to explain our vision, which is to give every child in Europe a custom learning experience through 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 enable us to offer quality learning experience at a price affordable for the many, and being one of the leading actors who democratize learning. We started the company with mathematics, but we are now, moving into a one-stop shop and a learning platform for kids aged, one to sixteen, where we offer mathematics, basic programming, English, Swedish Reading and Writing. We also offer geography, physics, and biology. Today we're active in five core markets, which are Sweden, Norway, Denmark, Poland, and U.K.
As you saw, as a subsequent event to Q3, we also launched Finland recently, which would be our sixth market. Since start, we have had more than 400,000 households in the B2C offering and millions of students in our B2B offering. These children have solved more than 65 million exercises in our products. We are approximately 70 full-time employees across the group. When it comes to the numbers, we had, as per Q3 closing, a paying customer base of 723,000 subscribers in the B2C and B2B offering, combined. These paying subscribers generate SEK 152 million in annual recurring revenue, which is our ARR, which is an 88% growth year-over-year.
Out of this 88%, we have 46% stems from organic growth and 42% from acquired growth. During the quarter, the net sales grew 89%, and was summed up to SEK 33.1 million, which is an 89% growth, whereof 34% are coming from organic and 55% are acquired growth. Like we mentioned earlier, we have now just passed our first year as a publicly traded company. Hence, we would like to follow up or communicate the ambitions pre-IPO and what we have delivered and accomplished since then. If we start with from a European position point of view, we said that we want to increase the geographical footprint during over the region, and we communicated our short-term ambitions to successfully enter one new major European country.
Since then, we have successfully entered the U.K., which today is one of our absolute top contributing markets. We officially launched in the first quarter of 2021, and since then, like we mentioned, we just entered Finland as well two weeks ago. We also said that we were going to initiate and execute on a M&A agenda. Since the IPO, we have completed three transactions. Out of these three, two are B2C companies and one is B2B since the IPO a year ago. All three acquisitions are contributing to a great value to the group with the broadened customer segment and strengthening product offering with new subjects, and also establishment of a new B2B business unit, which has strengthened the financial profile of the company.
At present, we also have a well-filled M&A pipe with attractive opportunities for both growth and improved profitability. Our financial targets that we communicated was to reach a net sales of SEK 500 million, 2025, which means growing at least 50% per year on average. We IPO'd at SEK 69 million in annual recurring revenue. Today, we are hitting SEK 152 million and had delivered sales and ARR growth of More than 100%, which results that we are ahead of our communicated financial targets.
Thank you. Now we will walk you through some highlights from the third quarter. Unfortunately, the time is not enough to go through all the highlights, but we picked out three areas to focus a bit more on. First of all is harmonization of prices across the sales channels. In the beginning of the quarter, we increased the prices on our website to align better with the prices we had in the apps and also launched so that we have the same product plans offered on both web and through the app flows for the Albert brand. That gives consistency in the offering and also simplifies for the customer not having to see different offers depending on where they choose to make the purchase.
Jaramba and Sumdog are both still offered as standalone products, Jaramba in Sweden and Sumdog in UK, but also as bundles together with Albert in those two markets. At the end of the quarter, we launched an experiment with annual subscription plans. This has been experiments we have done previously as well, and we launched it in the beginning of September. The results from the experiments were positive, which led to us rolling out annual subscriptions as default on the Swedish market now in October. Annual subscriptions are discounted approximately around 30% compared to the monthly price, paid up front after conversion from trial. The customer has the same free trial offering as in the monthly plans, but when that trial ends, they will pay for a full year in advance.
We see when we did the annual experiments, it brings quite good positive results, partly in terms of stability in the financial model, where you don't have the monthly fluctuations, but also from a cash flow perspective, it's very positive compared to monthly plans. We see good results from conversion to trial compared to monthly plans as well. We will continue to optimize in Q4 as well, and continue to experiment on other markets than Sweden. Finally, as Arta mentioned, we launched Finland a couple of weeks ago, but the preparations were done long before. Finland has been an interesting market for us for a long time. It has just been the need for a focus in other areas that made the launch a bit delayed.
Finland has also historically had quite good results in terms of mathematics, in PISA results, for example. Consumer behavior is quite similar to the Nordic markets, which are strong markets for us. Also important to mention that there is quite limited competition in the B2C space in Finland, with a broad product offering for children. We launched with Albert Junior platform initially, containing mathematics, English, and ABC Swedish learning in Finland. This will strengthen our position in the Nordics, as the number one option for families looking for digital educational products, aligned to the local curriculum.
Thank you. Good morning, everybody. I will now walk you through the financials in our Q3 report, as well as any highlights needed. If we start to look at our ARR, our ARR has grown 88% between Q3 2021 and Q3 2022. ARR has grown due to both an increase in subscribers, as well as ARPU, in combination with the acquisition of Jaramba and Sumdog. ARPU has increased year-over-year as well as quarter-over-quarter. We have, as Salman mentioned, introduced a subscription plan Standard and Plus in-app, which had a positive impact on our ARPU. Our B2B segment is new for 2022 and was started when we acquired Sumdog in the end of Q1 of 2022.
Quarter over quarter, our B2B business has increased from SEK 26 million to SEK 28 million, and is therefore back to pre-summer levels. The ARR has been increased mostly due to ARPU increase. This is due to the fact that more schools choose to use both grammar and math products, which we believe also will have a positive impact on churn going forward. Our B2B segment is currently focusing on larger deals with multi-academy trust in the U.K., which consists of several schools. The lead time between first meeting and assigned deal is much longer. We did, however, close one multi-academy trust during the quarter and therefore are optimistic about the future. If we look at the net sales for the isolated quarter, it grew from SEK 17.5 million to SEK 33.1 million. Growth is primarily outside of Sweden with Sumdog as a main factor.
Most of our net sales are now in market outside of Sweden, and the British pound have had a slightly negative FX effect during the quarter and therefore impacts our net sales quarter-over-quarter. I just want to show some overall financials, and dig deep on our adjusted gross margin. Our adjusted gross margin continued to stay north of 90%. There is a slight decrease quarter-over-quarter due to a change in mix between our B2C subscribers, web and in-app, where in-app increases some during the quarter and has a negative impact on the gross margin. Our EBITDA for the period was -SEK 21.4 million for the quarter.
This is due to the high marketing spend in the quarter, which is growing the ARR in our B2C business and is tied to the summer campaign that we have in the quarter. Lastly, there are some other key financial figures that I just want to jump into. Firstly, I just want to showcase how we get to our reported EBITDA. Our operating results for the period was -SEK 28.2 million, and of those SEK 6.8 million is amortization of acquired intangible assets such as customer relations, software, goodwill, et cetera, and are related to Jaramba and Sumdog. The cash flow for the period was -SEK 11.1 million. That put that into relation to the Q3 quarter of 2021.
We believe this figure is due to the fact that Sumdog has much of their sales after the summer, where majority of customers pay a year up front, so it really increases the group's cash flow. This also impacts our net working capital positive. We at the moment has a negative net working capital of -SEK 6.6 million, which really show the positive in our financial profile, where the customers in our B2B segment pays up front one year in advance. I just want to reiterate our financial targets, which has also previously been mentioned in the presentation. Our target is divided in growth and profitability.
If we look at the growth, we target to grow our net sales by more than 50% per year, where the organic growth should be the majority. This is to exceed net sales of 500 million SEK for the full year of 2025. If we look at profitability, we target an EBITDA margin of 40% in the long term.
Thank you very much, Martin. I think we could end this presentation with some key takeaways that we would like to highlight from this quarter. The first one, we're delivering another solid quarter where we take a clear step towards our financial goals, which Martin just went through. It's a quarter where we deliver cash efficient growth and improves the profitability despite higher year-over-year marketing spend. We also would like to highlight that we have a high customer intake in the quarter despite shaky macroeconomic environment. The high customer intake is a result of improved LTV and CAC ratios during the quarter, which gives a clear indication that high qualitative learning products are still highly demanded among households and schools.
We would like to highlight that we're still continuing evaluating strategic acquisitions for the group, adding another growth dimension while improving profitability. We would like to say that we have a well-filled M&A pipe where we see attractive opportunities for further growth and improved profitability for the group. With that, we would like to open up for Q&A.
Thanks so much for the presentation. The first question here: what is the dynamic in the decline of customer acquisition costs during the quarter?
I can take that question. It's a very good question. You can divide the answer into three parts. It's a combination of mainly three factors, we would say. The first one, it's a successfully executed Q3 or summer campaign where we had good preparations from a creative and a communication point of view, and also a well-paced and distributed spend across the entire quarter and among the media mix during the entire quarter. The second factor I would say is that Q3 usually is a strong period for us. A little bit of a seasonality during summertime.
Longer holidays in general, parents have more time to spend with the children and also have more time to test and evaluate new products, and in this case, learning products at home. The third factor we would say is that we now, with the launch of Sumdog B2C offering, have another option and brand to deploy our marketing budget within. This gives us another dimension in our daily and weekly optimization to reduce the customer acquisition costs. To summarize, we would say it's a combination of three factors. Well-performed campaign, a bit of a seasonality in Q3, and finally also giving us another dimension to optimize given the B2C offering we launched with Sumdog.
It looked like the number of subscribers in the B2B segment fell sequentially from 668,000 in Q2 to 628,000 in Q3. Could you elaborate on the drivers here?
Yes, I can take that one. There has been a slight decrease in the number of subscribers in the B2B business, but we don't believe that is an ongoing trend, so to speak. There has been some delays in signing agreement, and we also see that the focus has been in the quarter is the upsell to our current subscribers in the B2B business, which increases the ARPU. Also, as I mentioned, some focus in our B2B business in the quarter has been on larger deals which take longer time to process. I think that is an important factor to take into consideration as well.
Can you please elaborate on the components in the ARR growth, new customers versus ARPU expansion versus less churn?
We usually don't give details on what drives the ARR in detail. I mean, how the churn has evolved compared to the ARPU. Generally, ARPU increases all the time as we have more and more customers in our subscription base that choose Standard and Plus subscriptions. That's a trend we have seen for a long period of time and that we expect to see moving forward as well. When it comes to churn, it's a metric that don't move fast but slowly improving over time. We have seen slight increase of churn from trial to paying during August, but no effect on the paying subscription base.
Are there any interesting acquisition candidates at the moment that would suit Albert?
Yes. We have been looking at companies for the last two years. We have a lot of ongoing dialogues and very strict criteria on what we're looking for to complement both the group as a whole in terms of financial profile and strategic fit, but also complements to both our B2B and B2C business. There are opportunities on the M&A side for sure.
You had a successful campaign for your B2C product, Sumdog, this summer, but do you see any risk for the B2C segment, now that the households are tightening their finances?
That's a good question. As we just lifted in the presentation, in the report, we highlighted that we had a very good quarter behind us from a customer acquisition perspective. This is shown in the high number of new customer intake during the period. Since our model is an opt-out mechanism in our subscription, we see that this is a clear signal that high qualitative learning products at home are still highly demanded and prioritized among the households. Like Salman mentioned, we could also add to this that we don't see any significant movements in our very important operational metric, which is paying churn. This is also a very good indication that we're still very attractive for households.
I mean, what we also could add here is that we have gone through economic downtimes before. One good example is exactly when COVID hit. It was a bit shaky economic environment. Usually from a B2C point of view, which is where this question comes from, it also opens up opportunities for growth, especially from a marketing perspective, because usually competition decreases and ad prices also decrease during these kind of times. We are not worried right now.
Could you give us an estimate of how much marketing spending was in the quarter? Do you expect marketing spending to remain elevated over the near future as well?
Yes. Thank you. We don't give exact figures on the marketing spend, but I can just put in perspective that I would say this quarter has been special since we had a lot of marketing spend. On the group in total, I would say it's between 60% and 70%. We are cautious in the future and really want to make sure that we have the ROI that we seek on the marketing spend going forward. I wouldn't estimate the same level in the following quarters, but it really depends on what we see as ROI on our marketing spend.
We move on to the last question. During the quarter, you have signed a collaboration agreement with Story House Egmont regarding content around Bamse, but also a licensing agreement regarding Babblarna. What is the hope that this agreement will generate for Albert in the future?
Yes. Great question. We really like these partnerships, and we believe that using well-known content such as Story House Egmont's Bamse and Babblarna will benefit us in reaching new customers in a more efficient way, and by that, reducing the CAC as well as increasing the lifetime value for each customer when we add more premium content to our products.
Thanks so much for the presentation and good luck going forward. Thanks to all the viewers for tuning in.
Thank you.
Thank you very much. Thank you.