Hi, this is Theresa Agnew, CEO of BioGaia , and we are here to report on our Q2 2025 results. For Q2, our sales were SEK 405 million, which represents growth of 5%. That was mainly due to higher sales in the Americas, specifically North America and Asia Pacific. We did have growth of 13.2%. When you exclude currency effects for the quarter, sales in Europe, Middle East, and Africa decreased by 1%. In Asia Pacific, sales increased by 15%, and in the Americas, sales increased by 5%. Our EBIT was SEK 108 million, which was a decrease of 20%, and our EBIT margin for the quarter was 27%. Over the period of Q2, we announced that we are establishing direct sales in the Netherlands for the first time. This is a market in Europe where we never had BioGaia sales.
This is a first for us where we have launched our business online. I can talk about that a little bit more. I also wanted to mention first half sales were SEK 771 million, which was growth of 2%, and that is growth of 5% excluding the currency effects. Some of our launches over the quarter, you could see listed here where we launched our BioGaia Gastrus product. We launched Protectis drops in Jordan, and we also launched a new product. We had our first launch last year in Finland of BioGaia Gastrus PURE ACTION, and we have continued to roll out that product in Q2 of this year in Sweden, Poland, and Hungary. We will continue for the remainder of the year to roll that product out in even more markets.
In terms of key events, we did announce that we were establishing direct sales in the Netherlands, and this was through Amazon and bol. These are two of the leading online marketplaces in the Netherlands, and this launch is going very well. The results have surpassed our expectations. Also, on May 30th, we announced that the number of votes decreased as a result of the conversion of Class A shares into Class B shares. Recently, we have announced the launch of a new subsidiary company, which is called BioGaia New Sciences. This new subsidiary will be dedicated to advancing new microbiome research and innovation beyond our core business. We consider our core business to be gut health, immune health, and oral health. BioGaia New Sciences will expand into new areas such as skin health.
Now, getting into sales, overall sales by segment in terms of for the quarter, our pediatric products segment increased by 2%. The adult health products segment increased by 15%. In pediatrics, excluding currency effects, we had growth of 9%. This was mainly due to increased sales of our Protectis tablets in Spain and South Africa and other countries. For adult health, we had a very nice increase of 15%, and excluding currency effects was 23%. This was mainly due to increased sales of Gastrus in the U.S. and other markets, but as well for Prodentis mainly in the U.S. and Indonesia. Our adult health business is growing disproportionately and we will continue to focus on that. For Q2, our pediatric sales was 77%, but year to date around 75% for pediatrics. You can see our adult health business is continuing to grow substantially by region.
In Europe, Middle East, Africa, for the quarter we saw a decline of 1%. This was mainly in Turkey, France, and Germany. Our sales were negatively impacted. We did terminate our local partner agreement in France earlier this year and we have started up our direct distribution. That started at the beginning of Q2 and that is going well. In Asia Pacific, our sales increased by 15%. That was mainly in Indonesia, Australia, and South Korea. Australia is doing very well. That was a direct market that we took in 2024. In Americas, our sales increased by 5%, mainly in the U.S. and Guatemala. You can see the overall year to date changes for the first half as well. Europe, Middle East, Africa declined 13%, Asia Pacific 1%, so relatively flat, and the Americas at 21%. With all of this, our direct business now represents approximately 36% of our sales.
I will turn it over to Alex to discuss our financials in more detail.
Thank you, Theresa. If we start to summarize some of the key financials, we had sales of SEK 405 million, which was a growth of 5%. We had a gross profit of SEK 294 million, which was a growth of 3% and a gross margin of 73%, and an EBIT of SEK 108 million, which was a negative 20% in terms of growth. Moving on to the sales, as we have mentioned previously, sales were SEK 405 million, a growth of 5%. However, we did have quite substantial negative currency effects in the quarter of -8%. Therefore, the organic growth was 13%. Looking then at the gross margin, we had a gross margin of 73% versus 74% in the previous quarter. In the previous quarter last year, the pediatrics margin came in at 74% versus 77% last year.
The same quarter last year, due to some seasonal and geographic mix variation, had a very strong margin of 77%. If you look at the year-to-date figure, it was 76% for 2024 and we are at 75%. We're slightly below last year. However, in the quarter it looks like we are much more below, but again it was due to a very strong quarter in 2024 for adult health. Adult health had a margin of 66% versus 61% in the same quarter last year. The reason for the stronger margin both in the quarter and year-to-date is mix effects. Quite a lot of that has to do with the increased relative sales in the U.S. where we have a stronger gross margin. That is why we have a positive gross margin development for the quarter and also year-to-date.
Moving on to the operating expenses, we had total operating expenses of SEK 186 million versus SEK 149 million in the same quarter last year, an increase of 25%. If we start with the sales and marketing, sales and marketing costs increased by 25%. That's the large explanation why the total OpEx is increasing. It's sales and marketing expenses. The reason for this increase mainly has to do with increased sales and marketing activities in our subsidiaries, mainly in the U.S. but also in Canada, for example, and the fact that we are starting some new subsidiaries and have some initial cost for that, for example in France. Those are the main explanations for the increased sales and marketing costs, which then obviously are increasing more than the sales. In terms of the R&D, R&D increased by 13% due to some increased activity level in the clinical studies.
However, year-to-date it's only an increase of 2% in R&D costs. Administration costs increased to SEK 12 million versus SEK 6 million last year. However, last year included some negative costs due to the reversal of an accrual for litigation fees in connection with the termination of the distribution agreement in Italy. That explains why the OpEx for administration increased quite a lot in the quarter. If we look year to date, our administration costs were SEK 23 million versus SEK 20 million. That increase is to a large extent explained by that reversal of an accrual last year. If you would take out that effect, administration costs are basically flat. We have other OpEx, which is negative currency effects, revaluation of receivables that came in at SEK -5 million in the quarter and at a very substantial number, SEK -29 million year to date.
All in all, we had a total OpEx of SEK 186 million and the growth of 25%. If we move on to the cash flow, sorry, the profit and loss. As we said, we had a total sales of SEK 405 million, a growth of 5%. We had an OpEx growing 25% to SEK 186 million, which then leads to an EBIT of SEK 108 million versus SEK 135 million last year, which is then 20% lower. We have in the quarter a margin of 27% versus 35% last year. Profit after tax came in at SEK 88 million versus SEK 111 million, that is 21% lower. Earnings per share at SEK 0.87 versus SEK 1.1 last year. Move on to the cash flow. Cash flow from operating activities before changes in working capital came in at SEK 91 million versus SEK 124 million, 26% lower.
The reason for the lower cash flow from operating activities then is of course lower operating profit. Changes in working capital came in at SEK -14 million, that is higher than last year when it was SEK -5 million. The reason is an increase in receivables. This mainly has to do with some normal fluctuations that we do have between the quarters. All in all, that leads to cash flow from operating activities at SEK 77 million versus SEK 119 million, which is then 35% lower than last year. Cash flow from investing activities came in at a very, very low level. Only SEK 1 million in investments versus SEK -2 million, which was also low last year. We have cash flow for financing, which is basically the dividends we paid. The total cash flow for the period at SEK -624 million.
That leaves us with the cash at the end of the period of SEK 622 million versus SEK 1 billion one year ago. With that I hand over to Theresa for some concluding remarks.
Yes, as we talked about, our strong sales momentum returned in the second quarter. We saw high demand in some of our key markets, such as in North America, as we mentioned before, U.S. and Canada, and also Asia Pacific. Just to summarize again, our sales for the quarter were up 5%. When you factor in the strengthening SEK, our sales were up 13.2% for the quarter. For the first half, our sales were up 2% and net of currency effects grew by 5%. As we mentioned, we had very strong sales in the adult health segment, that net of currency effect was up 23%. In the pediatric segment, sales also grew 9% net of currency effects. Our operating expenses were up 25%, and that was up 23% when you exclude the items affecting comparability.
This was mainly due to increased marketing investments in some of our direct businesses such as the U.S. and starting in Canada, and opening of new direct businesses such as in France, and continuing to invest in our direct businesses that we opened last year such as Australia and New Zealand. Our EBIT margin for the quarter was 27% and also 27% for the first half, in line with our strategic direction where we are taking certain markets, where we feel we have strategic opportunity, direct. We continue to grow with newer direct markets such as France and the Netherlands. I am happy to also report that many of our established direct markets like the U.S., Canada, Australia, Finland, and U.K. continue to show excellent sales growth. Now our direct businesses represent about 36% of our overall sales and that will continue to grow.
We also announced earlier this week that we formed a new subsidiary, BioGaia New Sciences. We are excited about this opportunity because our first area of focus will be on the skin microbiome and on skin care products. You may know that we launched our first probiotic skin ointment in 2023 as a test in the U.S. and then rolled that out in Canada actually last year. That has done well. We are continuing to roll that probiotic ointment out in more markets this year and will be launching some additional skin care focused products as well as part of this new subsidiary. The formation of that new subsidiary does not monetarily impact our overall financial results. This is in conclusion for our Q2 and we now open it up for any questions that you may have.
If you wish to ask a question, please dial key 5 on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial key 6 on your telephone keypad. The next question comes from Mattias Vadsten from SEB. Please go ahead.
Yes, hello, good morning. Thanks for taking my questions. I have three. First one, how much is Prodentis now out of group sales, that is the oral health product. Is it possible for you to put this into perspective a little bit as well? Let's say how much it has been growing in the past five years or so and yeah, what the prospects are there. That's the first one and I'll have two more.
Okay. On Prodentis we don't share specific sales figures by product, but what I can say is Prodentis has grown substantially since we started significantly investing in it in the United States back in 2023. We really saw an upward trajectory starting in 2023, then into 2024 and now this year. We've strong double digit growth of Prodentis in the United States. Prodentis continues to grow in Japan. That has always been one of our main markets for Prodentis and then some of our European markets as well. It's really the growth in the United States that has been driving the overall strong Prodentis performance. Just know we are starting to place more focus on Prodentis in other markets as well. In Canada we've just started. In the U.K., we've just started. We will be starting that in France as well. That will be an area of focus for us.
It has been the last two years and will continue to be.
Thank you.
With your product now being sold at CVS in the U.S., can you help us understand a little bit how major this is and how major an opportunity that is, and maybe also help us a little bit with what we should think of in terms of stocking of products and so on? Which quarters is it, you know, benefiting you mostly? That's the second one.
And I'm sorry.
I couldn't hear, now that it's being sold in the U.S., where? I'm sorry.
CVS
At the CVS Pharmacy.
Oh, CVS, yes, yes. In the U.S. we just started selling Prodentis at CVS earlier this year and that is going very well. They're happy with it and they're continuing to place, you know, second and third orders, which is very good. We anticipate that will continue to be strong performance at CVS. Also of note in the United States, we have also gained additional distribution of our Protectis drops where we now have our 5 milliliters at Target that will be starting in the second half of this year. Walmart in stores will also have our Protectis drops product. We have increased distribution not just on Prodentis but also on our Protectis drops in the U.S.
Okay, that sounds good. Lastly, OpEx was very high in the quarter, I think growing somewhere around 25% as you mentioned. Basically, I think Q4 last year and Q1 this year and now also this quarter, the increase has been around, you said, 20 - 25%. My guess is another 20% increase for Q3. How do you see selling expenses developing year-over-year after that? I think I'm after, you know, how lasting this selling expenses increase is for BioGaia. That's the last one, thank you very much.
Yes. We will continue this year to invest in the marketing campaigns that we're doing. It is showing favorable ROI in the markets where we have increased our spend, such as in the United States for next year. We will be evaluating that as we proceed with our financial forecasting for next year. There's no comment on that yet. For this year we will be continuing the investments that we have been making in the first half of the year.
Okay, it's still important to revert back to the long term EBIT margin target.
Yes, that's correct. That is correct. As we start to take these markets directly, that also will cause an impact over time on our EBIT margin as well as our sales.
Perfect.
Thank you very much.
The next question comes from Kristofer Liljeberg from DNB Carnegie. Please go ahead.
Hi, good morning. Follow up on the previous question there regarding higher selling costs. Is it possible to maybe split this out between initiatives you're doing in existing markets you mentioned, particularly in the U.S., versus how much of this is higher cost for opening new direct markets such as France, and you also have Netherlands, Australia, New Zealand.
Yeah, I mean, we can't break it out in particular numbers, but right now I would say the higher amount is around the marketing investments that we're doing in markets like the U.S. because we do run lean organizations when we open direct markets. We also outsource a lot when we open direct markets in terms of sales, selling organizations, contract sales forces, and so forth. That cost of the direct markets increases slightly over time as we build the organizations. I would say right now the majority of the cost is around the marketing.
Is it possible to quantify this extra investment you're doing in marketing? Last year you were given a figure for that. It seems last year maybe ended up a bit less than that. Is it possible to do something similar for what you expect for this year, or whether it's possible to say if you would be at this 34% EBIT margin target for this year if we would strip out these extra investments?
We can't quantify specific investments. You know, we always do say our, you know, long term EBIT margin target is our 34%. We will continue though to invest this year. With these investments, you know, that will continue to affect our overall EBIT margin, but not, you know, not significantly.
What do you mean with not significantly? You mean less of an impact for the remainder of the year or so?
I would say overall less of an impact for the remainder of the year, but again, our long-term target is the 34%.
Okay, great. Thank you.
As a reminder, if you wish to ask a question, please dial key 5 on your telephone keypad. There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.
I want to thank you for your questions and participation for our Q2 results, and we will then be reporting next quarter. Thank you.
This is Theresa Agnew, CEO of BioGaia , and we are here to report on our Q2 2025 results. For Q2, our sales were SEK 405 million, which represents growth of 5%. That was mainly due to higher sales in the Americas, specifically North America and Asia Pacific. We did have growth of 13.2%. When you exclude currency effects for the quarter, sales in EMEA decreased by 1%. In Asia Pacific, sales increased by 15%, and in the Americas, sales increased by 5%. Our EBIT was SEK 108 million, which was a decrease of 20%. Our EBIT margin for the quarter was 27%. Over the period of Q2, we announced that we are establishing direct sales in the Netherlands for the first time. This is a market in Europe where we never had BioGaia sales.
This is a first for us where we have launched our business online, and I can talk about that a little bit more. I also wanted to mention first half sales were SEK 771 million, which was growth of 2%, and that is growth of 5% excluding the currency effects. Some of our launches over the quarter, you can see listed here, where we launched our BioGaia Gastrus product. We launched Protectis drops in Jordan, and we also launched a new product. We had our first launch last year in Finland of BioGaia Gastrus PURE ACTION , and we have continued to roll out that product in Q2 of this year in Sweden, Poland, and Hungary. We will continue for the remainder of the year to roll that product out in even more markets.
In terms of key events, we did announce that we were establishing direct sales in the Netherlands, and this was through Amazon and bol. These are two of the leading online marketplaces in the Netherlands, and this launch is going very well. Actually, the results have surpassed our expectations. Also, on May 30th, we announced that the number of votes decreased as a result of the conversion of Class A shares into Class B shares. Recently, we have announced the launch of a new subsidiary company, which is called BioGaia New Sciences. This new subsidiary will be dedicated to advancing new microbiome research and innovation. Beyond our core business, we consider our core business to be gut health, immune health, and oral health. BioGaia New Sciences will expand into new areas such as skin health.
Now, getting into sales, overall sales by segment in terms of for the quarter, our pediatric products segment increased by 2%. The adult health products segment increased by 15%. In pediatrics, excluding currency effects, we had growth of 9%. This was mainly due to increased sales of our Protectis tablets in Spain and South Africa and other countries. For adult health, we had a very nice increase of 15% and excluding currency effects was 23%. This was mainly due to increased sales of Gastrus in the U.S. and other markets, but as well for Prodentis, mainly in the U.S. and Indonesia. Our adult health business is growing disproportionately and we will continue to focus on that. For Q2, our pediatric sales was 77%, but year to date around 75% for pediatrics. You can see our adult health business is continuing to grow substantially by region.
In EMEA for the quarter we saw a decline of 1%. This was mainly in Turkey, France, and Germany. Our sales were negatively impacted. We did terminate our local partner agreement in France earlier this year. We have started up our direct distribution. That started at the beginning of Q2 and that is going well. In Asia Pacific our sales increased by 15%. That was mainly in Indonesia, Australia, and South Korea. Australia is doing very well. That was a direct market that we took in 2024. In the Americas our sales increased by 5%, mainly in the U.S. and Guatemala. You can see the overall year to date changes for the first half as well. EMEA declined 13%, Asia Pacific 1%, so relatively flat, and the Americas at 21%. With all of this, our direct business now represents approximately 36% of our sales.
I will turn it over to Alex to discuss our financials in more detail.
Thank you, Theresa. If we start to summarize some of the key financials, we had sales of SEK 405 million, which was a growth of 5%. We had a gross profit of SEK 294 million, which was a growth of 3%, and a gross margin of 73%, and an EBIT of SEK 108 million, which was a negative 20% in terms of growth. Moving on to the sales, as we have mentioned previously, sales were SEK 405 million, a growth of 5%. However, we did have quite substantial negative currency effects in the quarter of -8%. Therefore, the organic growth was 13%. Looking then at the gross margin, we had a gross margin of 73% versus 74% in the previous quarter. In the previous quarter last year, the pediatrics margin came in at 74% versus 77% last year.
The same quarter last year, due to some seasonal and geographic mix variation, had a very strong margin of 77%. If you look at the year-to-date figure, it was 76% for 2024, and we are at 75. We're slightly below last year. However, in the quarter it looks like we are much more below, but it was due to a very strong quarter in 2024. For adult health, we had a margin of 66% versus 61% in the same quarter last year. The reason for the stronger margin both in the quarter and year-to-date is mix effects. Quite a lot of that has to do with the increased relative sales in the U.S. where we have a stronger gross margin. That is why we have a positive gross margin development for the quarter and also year-to-date.
Moving on to the operating expenses, we had total operating expenses of SEK 186 million versus SEK 149 million in the same quarter last year, an increase of 25%. If we start with the sales and marketing, sales and marketing costs increased by 25%. That's the large explanation why the total OpEx is increasing; it's the sales and marketing expenses. The reason for this increase mainly has to do with increased sales and marketing activities in our subsidiaries, mainly in the U.S. but also in Canada, for example, and the fact that we are starting some new subsidiaries and have some initial cost for that, for example in France. Those are the main explanations for the increased sales and marketing costs, which obviously are increasing more than the sales. In terms of the R&D, R&D increased by 13% due to some increased activity level in the clinical studies.
However, year-to-date it's only an increase of 2% in R&D costs. Administration costs increased to SEK 12 million versus SEK 6 million last year. However, last year included some negative costs due to the reversal of an accrual for litigation fees in connection with the termination of the distribution agreement in Italy. That explains why the OpEx for administration increased quite a lot in the quarter. If we look year to date, our administration costs were SEK 23 million versus SEK 20 million. That increase is to a large extent explained by that reversal of an accrual last year. If you would take out that effect, administration costs are basically flat. We have other OpEx, which is negative currency effects, revaluation of receivables that came in at SEK -5 million in the quarter and at a very substantial number, SEK -29 million year to date.
All in all, we had a total OpEx of SEK 186 million and the growth of 25%. If we move on to the profit and loss, as we said, we had total sales of SEK 405 million, a growth of 5%. We had an OpEx growing 25% to SEK 186 million, which then leads to an EBIT of SEK 108 million versus SEK 135 million last year, which is then 20% lower. We have in the quarter margin of 27% versus 35% last year. Profit after tax came in at SEK 88 million versus SEK 111 million, that is 21% lower. Earnings per share at SEK 0.87 versus SEK 1.1 last year. Moving on to the cash flow, cash flow from operating activities before changes in working capital came in at SEK 91 million versus SEK 124 million, 26% lower.
The reason for the lower cash flow from operating activities is of course lower operating profit. Changes in working capital came in at SEK -14 million, that is higher than last year when it was SEK -5 million. The reason is an increase in receivables. This mainly has to do with some normal fluctuations that we do have between the quarters. All in all, that leads to cash flow from operating activities at SEK 77 million versus SEK 119 million, which is then 35% lower than last year. Cash flow from investing activities came in at a very, very low level, only SEK 1 million in investments versus SEK -2 million, which was also low last year. Cash flow for financing is basically the dividends we paid, and then a total cash flow for the period at SEK -624 million.
That leaves us with cash at the end of the period of SEK 622 million versus SEK 1 billion one year ago. With that, I hand over to Theresa for some concluding remarks.
Yes. As we talked about, our strong sales momentum returned in the second quarter. We saw high demand in some of our key markets, such as in North America, as we mentioned before, U.S. and Canada, and also Asia Pacific. Just to summarize again, our sales for the quarter were up 5% but when you factor in the strengthening SEK, our sales were up 13.2% for the quarter, and for the first half our sales were up 2% and net of currency effects grew by 5%. As we mentioned, we had very strong sales in the adult health segment that net of currency effect was up 23% and in the pediatric segment also grew 9% net of currency effects. Our operating expenses were up 25% and that was up 23% when you exclude the items affecting comparability.
This was mainly due to increased marketing investments in some of our direct businesses such as the U.S. and starting in Canada and opening of new direct businesses such as in France and continuing to invest in our direct businesses that we've opened last year such as Australia and New Zealand. Our EBIT margin for the quarter was 27% and also 27% for the first half and also in line with our strategic direction. Where we are taking certain markets, where we feel we have strategic opportunity, we take those businesses direct. We continue to grow with newer direct markets such as France and the Netherlands and are happy to also report that many of our established direct markets like the U.S., Canada, Australia, Finland, and U.K. continue to show excellent sales growth. Now our direct businesses represent about 36% of our overall sales and that will continue to grow.
We also announced earlier this week that we formed a new subsidiary, BioGaia New Sciences. We are excited about this opportunity because our first area of focus will be on the skin microbiome and on skin care products. You may know that we launched our first probiotic skin ointment in 2023 as a test in the U.S. and then rolled that out in Canada actually last year. That has done well. We are continuing to roll that probiotic ointment out in more markets this year and then will be launching some additional skin care focused products as well as part of this new subsidiary. The formation of that new subsidiary does not monetarily impact our overall financial results. This is in conclusion for our Q2 and we now open it up for any questions that you may have.
If you wish to ask a question, please dial the pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial six on your telephone keypad. The next question comes from Mattias Vadsten from SEB. Please go ahead.
Yes, hello, good morning. Thank you for taking my questions. I have three. First one, how much is Prodentis now out of group sales? That is the oral health product. Is it possible for you to put this into perspective a little bit as well? Let's say how much it has been growing in the past five years or so, and yeah, what the prospects are there. That's the first one and I'll have two more.
Okay. On Prodentis, we don't share specific sales figures by product, but what I can say is Prodentis has grown substantially since we started significantly investing in it in the United States back in 2023. We really saw an upward trajectory starting in 2023, then into 2024 and now this year. We've seen very strong double digit growth of Prodentis in the United States. Prodentis continues to grow in Japan. That has always been one of our main markets for Prodentis and then some of our European markets as well. It's really the growth in the United States that has been driving the overall strong Prodentis performance. Just know we are starting to place more focus on Prodentis in other markets as well. In Canada we've just started. In the U.K. we've just started. We will be starting that in France as well.
That will be an area of focus for us. It has been the last two years and will continue to be.
Thank you.
With your product now being sold at CVS in the U.S., can you help us understand a little bit how major this is and how major an opportunity that is, and maybe also help us a little bit with what we should think of in terms of stocking of products and so on? Which quarters is it, you know, benefiting you mostly?
That's the second one.
I'm sorry, I couldn't hear now that it's being sold in the U.S. where. I'm sorry
CVS.
At the CVS Pharmacy.
Oh, CVS, yes, yes. In the U.S. we just started selling Prodentis at CVS earlier this year and that is going very well. They're happy with it and they're continuing to place second and third orders, which is very good. We anticipate that will continue to be strong performance at CVS. Also of note, in the United States we have also gained additional distribution of our Protectis drops where we now have our 5ml at Target that will be starting in the second half of this year. Walmart in stores will also have our Protectis drops product. We have increased distribution not just on Prodentis but also on our Protectis drops in the U.S.
Okay, that sounds good. Lastly, OpEx was very high in the quarter, I think growing somewhere around 25% as you mentioned. Basically, I think Q4 last year and Q1 this year and now also this quarter, the increase has been around, you said, 20 - 25%. My guess is another 20% increase for Q3. How do you see selling expenses developing year-over-year after that? I think I'm after how lasting this selling expenses increase is for BioGaia. That's the last one. Thank you very much.
Yes, we will continue this year to continue to invest in the marketing campaigns that we're doing. It is showing favorable ROI in the markets where we have increased our spend, such as in the United States for next year. We will be evaluating that as we proceed with our financial forecasting for next year. There is no comment on that yet. For this year we will be continuing the investments that we have been making in the first half of the year.
Okay, it's still important to revert back to the long term EBIT margin target.
Yes, that is correct. The other thing, as we start to take these markets direct, that also will cause, with an impact over time, our EBIT margin as well as our sales.
Perfect. Thank you very much.
The next question comes from Kristofer Liljeberg from DNB Carnegie. Please go ahead.
Hi, good morning.
Follow up on the previous question there regarding higher selling costs. Is it possible to maybe split this out between initiatives you're doing in existing markets you mentioned, particularly in the U.S., versus how much of this is higher cost for opening new direct markets such as France? You also have Netherlands, Australia, New Zealand.
Yeah, I mean we can't break it out in particular numbers, but right now I would say the higher amount is around the marketing investments that we're doing in markets like the US because we do run lean organizations when we open direct markets. We also outsource a lot when we open direct markets in terms of selling organizations and contract sales forces and so forth. That cost of the direct markets increases slightly over time as we build the organizations. I would say right now the majority of the cost is around the marketing.
Is it possible to quantify this extra investment you're doing in marketing? Last year you were given a figure for that. It seems last year maybe ended up a bit less than that. Is it possible to do something similar for what you expect for this year, or whether it's possible to say if you would be at the 34% EBIT margin target for this year if we would strip out these extra investments?
We can't quantify specific investments. You know, we always do say our, you know, long term EBIT margin target is our 34%. We will continue though to invest this year. With these investments, you know, that will continue to affect our overall EBIT margin but not, you know, not significantly.
What do you mean with not significantly? You mean less of an impact for the remainder of the year or some?
I would say overall less of an impact for the remainder of the year, but again, our long term target is the 34%.
Okay, great. Thank you.
As a reminder, if you wish to ask a question, please dial key five on your telephone keypad. There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.
I want to thank you for your questions and participation for our Q2 results, and we will then be reporting next quarter. Thank you.