Thank you very much, and good morning, everyone, and thank you for calling in to our presentation of the interim report for the first quarter of 2023. We're happy to welcome you here today and to share our recent activities and deliveries for the first three months of this year. The agenda for today will be as follows. We still believe it's relevant to introduce you to, and to reiterate our vision with Albert and why we exist in the short introduction. This will be followed up with a highlight and summary of the Q1 activities, where we also, this time, will follow up a little bit on earlier communication, and how we've been delivering against them. Thereafter, we will dig in a bit deeper into the recent acquisitions and how Albert Group has evolved recently.
We will follow that up with Martin, our CFO, presenting the Q1 financials. At last, we will close with the 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-CEO, and the other co-founder in the founder duo. Last but not least, we have Martin Dahlgren, our CFO, who will walk you through the financials.
As mentioned, starting the presentation, we still believe it's important to reiterate what we're building here at Albert and why we 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 a quality learning experience at a price affordable for the many, and being one of the leading actors in Europe, democratizing learning. We started with mathematics for consumers. Now we're moving into one of the leading European one-stop shops for learning platforms for kids aged 1- 16.
We offer, not only mathematics anymore, but also basic programming, English, Swedish reading and writing, but also geography, physics, and biology. We started as a direct-to-consumer company. Now we have a business-to-business business unit selling to schools, which is now contributing with approximately 50% of the sales and the ARR. We started in Sweden. Now we're active in seven core markets. We have Sweden, Norway, Denmark, Poland, Finland, and U.K. In the consumer offering, we have helped over 700,000 households and millions of students in our B2B offering. These children have solved almost 80 million exercises in our products. We are an innovative team with around 100 people in the group, all diverse backgrounds, where approximately 80% of the staff are working with product or technology.
Let's look a little bit on the numbers, and per Q1 closing, our customer base in the B2B and B2C offering combined generate just above SEK 213 million in annual recurring revenue, or ARR. As we've been communicating before, we're having a laser focus on the cash at hand, and closing quarter one, we have SEK 116 million cash at hand, and we feel confident delivering the plan to reach profitability without any further capital injections. Worth to mention is that we, during the quarter, thanks to our B2B segment, actually deliver a positive cash flow. Year-over-year, the ARR grew 84% for the first quarter, whereof 16% are organic growth and 68% are acquired. Looking also quarter-over-quarter, the ARR grew with 38%.
From a net sales perspective, it, we summed up to SEK 47.5 million, which is a year-over-year growth of 93%, whereof 15 are organic growth, and 78% are acquired. Looking quarter-over-quarter, net sales grew with 39%. Important to mention here is that in our B2B business, we have finished our yearly Easter campaign successfully, like we did last year. Here, also like the previous year, the new intake of free trials are actually converting to paying subscribers at Easter, and Easter was mid-April, which is in Q2. Hence, these subscribers are counted as a subsequent event and are not included in the reported ARR figures for Q1.
For all the shareholders who have followed us, for a while now, probably recognize that it's important for us to build trust and to deliver on the promises we've been giving. Hence, we would like to do a short recap on what we have communicated and how we've been delivering on it recently. Last quarter, we communicated that we, due to macro and financial market climate, will prioritize profitability and cash, as you can see in our report now, we're trending very well towards profitability, where we've been through significant cost savings and focus on operational efficiency, improved our EBITDA with 45%. If we adjust the cost for one-offs for related to the acquisitions we did, the improvement actually reaches 69%.
During Q4, we also focused a lot on and communicated a lot around the rationale behind our most recent acquisitions, where we communicated that the B2B establishment will decrease the risk and improve the financial profile of the company. Now, thanks to the long contracts, low churn, and invoicing periods in quarter one, we generate a positive cash flow for the full quarter and have eliminated the need of further capital injections in the longer run. Worth to mention is that the invoicing periods in the B2B segments are not only in quarter one, but also in quarter three, which gives a slight seasonality in our business. Furthermore, in Q4, we also communicated that we focus a lot on integration and synergies.
Now we can say that we are really, really happy and proud to have been able to recruit Jonas Mårtensson and Anne-Louise as the two new co-CEOs, starting latest on September first. Jonas will focus more on the B2C side, while Anne-Louise will focus more on the B2B side, due to their respective competencies. Even though they're formally starting the positions on September first, they have already been very operational today and have been working really, really hard on and successfully with the integrations. Just to give you a flavor, the B2C integration of the Holy Owly is almost done, and on the B2B side, Strawbees, Sumdog, and Film och Skola are progressing very well with already initiated synergy projects, both on the cost side and also on the sales side.
Thank you, Arta. I will walk through the acquisitions for those that are following the company and have been doing so. It's some repetition from before, but just to explain what the companies are that we acquired, why we acquired them, and how they contribute to the overall group mission. If we start by going through the members of the Albert family, since before we had Albert, Jaramba, and Sumdog, that we acquired in February 2022, where Sumdog was the only B2B company in the group. Now, in this transaction, we added three companies, Swedish Film, with their platform, Film och Skola, Strawbees, and Holy Owly, and where it's a significant majority on the B2B side, when it comes to net sales.
Film och Skola offer educational movies and feature films through a streaming site. They are present in 65% of the schools in Sweden and also offer a content type that we were lacking in the group since before. Video content, educational video content. Strawbees offers educational toys for schools to learn basically hands-on STEM. Using straws, you build up different mechanical objects, and you can also program them to make them move or basically learn mathematics, programming, engineering. Last but not least, Holy Owly, language learning for children aged 3-12, mainly in France, offering only English at the time we acquired them, but today also Spanish and French.
As you can see, what is really common across all the group companies is that we target basically the same ages for children. The user age range is the same, the markets are the same, but with different products that complement each other. And this is kind of key to our acquisition strategy, and we will explain a bit more on that in the coming slide. Why did we do acquisitions, or what is our view on acquisitions in general? It makes sense to explain the EdTech market in general, and it's a lot of text on this slide, so we will just summarize it. The EdTech market is extremely fragmented. Only in Europe, there are around 1,000 EdTech companies, fantastic entrepreneurs that have built great products, but they built niche products for local markets.
In each market, you can find dozens or hundreds of companies that have one product that they serve on the local market. What that basically means is that all of these companies are competing for the same customer. In the B2B segment, they are all targeting the same schools. In the B2C segment, they are all targeting the same parents, which leaves a lot of room for efficiency. By basically combining multiple products in the same platform, you can, with one sales force or with one marketing department, target both the B2B and B2C segment. This also applies to the markets that we were already active in.
We had our offerings in the Nordics, in the U.K., but now when we have added more products, we can also utilize the existing sales and distribution and marketing channels that we had on these markets and add more products to it. From a financial point of view, Arta already went through the major benefits. It diversifies the revenue flows. It reduces the risk, because B2B does not require an equal amount of capital to grow. It does not grow equally fast, but it's not capital intensive. On the other hand, B2C scales very well, and now we get flexibility in basically how we deploy the cash, both short term and long term, to have sustainable, profitable growth.
Finally, focusing on the green mark segments, as Arta said, around half of the net sales is coming from B2C, half from B2B. Apart from just the financial benefits, I think it's important to mention that in the end, no matter if it's B2B or B2C, we are targeting the same child and student, the same learner. So they learn in school, they learn at home, and in the long term, we are building an ecosystem where we're connecting students, parents, and teachers in the same ecosystem. B2B has great benefits, does not grow equally fast, but with the very low churn, recurring revenue, and also the yearly upfront payments from schools, it has a very positive impact on cash flow and stability in the revenues.
On the other hand, complementing it with B2C, we also get the benefits of a highly scalable business model, where we can charge quite a lot per user and month. With that, I hand over to Martin to go through the financials.
Thank you very much. Good morning, everybody. I will now walk you through the financials in our Q1 report, as well as any highlights for the quarter. Our annual recurring revenue has grown 84% year-over-year between Q1 2022 and Q1 2023. The organic growth is 16%, and the rest is tied to the acquired companies during the quarter, which was communicated in December and closed during January. Most of the acquired ARR is tied to the B2B segment. We have also seen a trend shift in Sumdog, which has increased their ARR quarter-over-quarter, which is good to see in the beginning of the year. Overall, we foresee a decrease in the net sales fluctuation with increased share of B2B going forward.
If we look at our net sales, net sales for the isolated quarter grew from SEK 24.6 million- SEK 47.5 million, which is a growth of 93%, of which 15% is organic and the rest is acquired. The net sales is therefore primarily driven by the acquired companies, and most of the increase is tied to the B2B business, both in Sweden as well as abroad. There have been some slight negative effect in the Norwegian crown during the quarter. Based on the seasonality in the B2B business, tied to their yearly subscription, most of the net sales for the year in our acquired B2B businesses are already secured for the full year, which is very pleasing to see. Here, I just want to highlight the adjusted gross margin, as well as our reported EBITDA.
The adjusted gross margin came down quite a bit during the quarter, which is tied to the new service mix from the acquired businesses, which have slightly more licensed content than our B2C business. I do here, however, again, want to reiterate, which was stated in our prospectus, that in mid-Q2 of this year, we will no longer pay any royalties for our Albert Junior product, which is our most popular product. This will, of course, have a positive impact in our adjusted gross margin going forward. The reported EBITDA is SEK -10.2 million for the quarter. This is greatly improved by both cost saving in our business, as well as a positive contribution from the acquisitions that was completed during the quarter. This is in line with the shift toward profitability that we have stated in previous reports.
We have also had a one-off of SEK -3.1 million, tied to the acquisitions in the quarter. If we adjust for that, our adjusted EBITDA is SEK -7.1 million. Here, we just want to showcase the reported operating result and what is added back to our reported EBITDA. Our operating result for the period was SEK -22.5 million, and of those, SEK 12.3 million is amortization of acquired intangible assets, such as consumer relations, software, goodwill, etc., and are related to the performed acquisition during the quarter, as well as previous year. We have also, during the quarter, have had a positive cash flow from operating activities, which is tied to the seasonality in the acquired B2B businesses, where the majority of their sales are in the first quarter of the year.
Our Net working capital is also showing a healthy figure, where the B2B segment is receiving upfront payment for yearly plans. This is a trend that we will see continue going forward. Thank you.
We're ending this presentation with some key takeaways that we would like to highlight from this quarter. Firstly, we would like to state that we're delivering a very solid quarter, where we take a clear step towards our financial goals, especially from a profitability perspective, where we're improving EBITDA significantly.
Thanks to the 50/50 split between B2B and B2C, and the long contracts, low churn, and the invoicing periods in our B2B business, we are generating a positive cash flow for the full quarter and have eliminated the need of further capital injections in the long run. We would like to highlight that all integrations are going very well and according to plan, and this is thanks a lot to our new recruited co-CEOs, Anne-Louise and Jonas. With that, we would like to thank you very much for listening in to this conf call, and we're open for the Q&A session now.
Thank you so much for the presentation here. I think we go right ahead and start with the questions. The first quarter has been marked by strong sales growth. What has contributed to that?
Yeah, I can take that question. Like Martin said, it's a lot due to the acquired businesses, and mainly from our B2B segment. Like we mentioned in the report, our B2B segment has a bit of a seasonality with the two major invoicing periods. The first one is here in the quarter one, and the next one is in quarter three, which are mainly the periods where the schools actually start after holidays. This helps the sales growth a lot.
Your recurring revenue increased by 84%. What will you focus on going forward, organic growth or acquired growth?
Well, I mean, looking year-over-year, we will probably see a strong ARR growth throughout the full year, we would like to say. Looking more, quarter-over-quarter, it would not be as aggressive growth. Like we mentioned, we're focusing more on profitability and investing a bit more into the B2B segment, which grows stable, but not as fast. This will probably result in we have a much more focus on the organic side of the business.
Thanks. You have done a lot of acquisitions recently. How are they performing, and is this according to plan?
Yes, short answer is that all are performing according to plan. Here we believe it's important to highlight the progress of the integrations. I mean, from a business point of view, they're all performing according to budget, and delivering what we expected that they will deliver. From an integration perspective, we believe it's we have to say that they're going very smooth. We have fantastic entrepreneurs in those companies, and with the very strong focus and high engagement from Jonas and Anne-Louise, we would like to highlight that integrations are going very well and according to plan.
How do you view acquisitions in the current market situation? Do you see opportunities, or have you taken a more passive approach?
Having done three acquisitions recently and looking at the current market conditions, the natural answer is that acquisitions do not have the same level of priority now that they had before. However, our fundamental belief in driving growth through both organic and acquisition in the EdTech industry remains. As we explained previously, it's a very fragmented market. I mean, these relationships take time to build, so we will continue to build relationships with entrepreneur to maintain those relationships. Looking at the current market conditions, our valuation, and the importance of keeping the cash at hand, we will not prioritize doing more acquisitions, but rather focus on integrating and gaining synergies from the already done acquisitions.
What would be the next important milestone in the next, coming 12 months?
As of now, we appointed Jonas and Anne-Louise as Co-CEOs of the company, starting September 1st. We have done these three relatively large acquisitions during quarter one. It will be very important to get the new management in place, and also to actually start. Now we have done the analysis during quarter one: how should we form the group? Which synergies should we target? Now it will be a matter of actually executing on those and reaping the benefits from the acquisitions that we have done.
Can you please elaborate a bit on the climate on marketing? Do you see any difference in customer acquisition cost, slash loan-to-value, and have you noticed that the price for marketing has gone down during the quarter?
Yes, I think we actually elaborated, or we had a hypothesis that we communicated in the quarter four, that usually when this kind of financial crisis comes up, many of the consumer-heavy companies actually withdraw their marketing budgets. This usually results in less competition on ad spaces, and this is actually something we've seen during the first quarter. We have had an Easter campaign. It's not shown in the ARR because it is a subsequent event, like we mentioned. They will convert to paying in quarter two. We had a very high intake of new customers at the very good KPIs from a customer acquisition cost perspective.
Yes, summarizing it, we are seeing less competition on ad spaces, which drive down prices on the CPM level, and, yeah, it helps our KPIs in the B2C business.
Did number of subscribers grow quarter organically quarter on quarter in both B2C and B2B?
On the B2B side, yes. We like Martin mentioned, we have a positive trend in Sumdog, where we're actually growing the business. This is something we have not been successfully been able to do previously, but now we're doing that, so that's very positive. We're growing it. On the B2C side, not really, because like we mentioned, the high intake of new free trials during the quarter, they will not be converting to paying subscribers until after Easter, which is in quarter two. Reported subscriber numbers in quarter one on the B2C side are not showing growth, and the reason is because they're converting to paying subscribers during quarter two instead.
Thanks. Could you elaborate what kind of efficiency measures you have taken to save costs, and how does this impact your business?
Yes, I mean, primarily, if you have been following Albert for a while, you'd know that the majority of the cost in the P&L has been from marketing. Reducing marketing cost and gaining efficiency in the customer acquisition-oriented metrics has been priority one during the quarter.
If we're looking at your reported numbers, accounts receivable are up in Q1. Could you elaborate what kind of sales this is relating to? Do you expect to do similar kinds of sale activities in the future?
Yes. If we look at the reported figures for Q1, the account receivable has gone up quite a bit, and most of the account receivables that are reported for the first quarter are tied to the B2B business, which has the seasonality, which we have discussed. In the future, I would say that the account receivables should increase quite a bit from the B2B in Q1 and Q3.
Could you elaborate a bit on the accrued expenses and deferred income in the balance sheet? What is driving the growth?
Yeah, of course. I would say it's basically a similar metric. The reported accrued expenses are tied to prepaid income, basically. When our B2B business is increasing, and that has more yearly subscription, the deferred income of those businesses are increasing, basically.
Thanks. Moving on to the last question here. We talked a little bit earlier about market spending. How is market spend trending, and could you provide some color on the planned marketing spend for this year?
I mean, we don't guide marketing budgets usually, but I think all our shareholders could draw the conclusion that when we are having a bit more focus on profitability, and cash flow and cash at hand, it naturally means that we don't spend as much money as we've previously been doing in marketing. However, we hope that we can deliver good KPIs on customer levels. The ratio between customer acquisition cost and lifetime value are still performing good in quarter one, and a lot of this is due to the efficiency measures we're doing, a very strict optimization activities we're doing in the organization.
Also like we mentioned, that the competition on ad spaces are actually decreasing, which drives down the customer acquisition costs and helps our B2C KPIs.
Thanks so much for presenting today and answering questions. Thank all you viewers for your patience regarding the change of the time. I wish you all a pleasant weekend.
Thank you very much.
Thank you.