Hello and welcome to the Qliro Q1 Report 2022. For the first part of this call, all participants will be in a listen only mode, and afterwards there will be a question and answer session. Today, I'm pleased to present Acting CEO, Jonas Arlebäck. Please go ahead.
Thank you. Hello, and welcome to the presentation of Qliro's First Quarter Report for 2022. My name is Jonas Arlebäck, and I'm the Acting CEO for Qliro. With me today, I have our CFO, Robert Stambro. Please turn to the next slide. This is my second quarter report as the Acting CEO for Qliro. During this quarter, it's worth noting that despite the general weaker performance for the e-commerce industry reported by Svensk Handel, Qliro has had a strong income increase of 10% in the period. Svensk Handel e-commerce indicator for the first quarter showed that e-commerce sales were down 13% year-to-date compared with the same period last year. If you also include Swedish consumers' purchases from international e-commerce firms, sales fell by as much as 15% according to the report.
Our sales volumes in the first quarter were down only 1% compared to with the same quarter in 2021. This shows our robust position given the market's substantial decline. Other notable performances that sum up the quarter from a financial perspective are firstly, that we saw a continued growth trajectory for our payment solution segment, with notably higher interest for our various payment products within the segment. That means that customers are choosing to split up the payments for e-commerce purchased product during longer periods of time. Secondly, as for the previous quarter, we decided to pause all email marketing of personal loans within the digital banking in this quarter. This is reflected in a slight decrease in loan book compared to Q1, 2021.
Third, in the quarter, our cost control continued also when excluding the positive cost impact of SEK 4.9 million related to a VAT correction for the Norwegian operations. When looking at our operations, we should also mention that during the quarter, we onboarded three new merchants. We continued to work with product development, and during the quarter, we introduced new payment alternatives such as Vipps, MobilePay, and Swish. Lastly, I'm very happy to announce that on April 25th, we launched our Safe and Simple Payments strategy along with a new visual identity. I will disclose more details about the strategy later in this presentation. Please turn to the next slide. In summary, we had an income growth of 10% in the quarter compared to Q1 2021. As mentioned, the increase was mainly driven by increased sales in our primary segment payment solutions.
Our PAD volumes decreased by 1% in the quarter, which is much less than the market as a whole. This demonstrates the solid position Qliro has despite the market's extensive headwinds. What we see is that our customers show change in consumption patterns. More and more people choose our products and choose to pay down their purchases over a longer period of time. The effect of this was a strong loan book growth in PAD, which in turn drove income growth. We see that the regulatory pressure has slowed down during the quarter and PAD generated the strongest growth since Q2 2019. During the last 12 months, we had 2.5 million active Qliro customers and 52 merchants using Qliro's payment solutions. We saw our total lending grow by 7% in the quarter. With that, I hand over to CFO Robert Stambro to take you through the financials.
Thanks, Jonas. Let's look at the financials and primarily focus on the Q1 figures. Before we do that, we should take a look at the general e-commerce market in Sweden to put Qliro's financials into perspective. In accordance with Svensk Handel's report, E-handelsindikator, e-commerce sales have slowed down from the record high reached during the pandemic. The e-commerce market had a negative growth of 15% in Q1 compared to last year. Looking at Qliro sales, then it's clear that Qliro's portfolio shows more resilience than the market in general, and that total payments or volumes decreased by 0.7%. The income growth in the quarter was 10%, slightly better than the loan book growth. This is the fourth quarter in a row where we had a better income growth than the quarter before.
To have double-digit growth in a negative growing market is, of course, satisfactory. It is a step in the right direction, although lower than our long-term ambition. Income grows faster than cost in the quarter. OpEx, excluding non-recurring items, is stable to previous four quarters at SEK 91 million. Please remember that we increased our cost base in Q2 2021. OpEx, including non-recurring items, grew by 2%. Loan losses grew to SEK 28 million from SEK 17 million in the same quarter last year, primarily due to the changed credit model in the comparative period in Q1 2021, but also due to the balance growth. Please turn to the next slide. Let's turn our eyes towards the segment in the quarter and start with payment solutions that stands for the absolute majority of our income generation.
As mentioned, Qliro's portfolio shows good resilience and grew faster than the market. The loan book grew by 10%. Driven by changed customer preferences in the checkout. Customers are to a higher degree using our payment products in favor of invoices, and they repay their debts somewhat slower than historically. The 10% loan book growth, together with the removal of regulatory pressure that we talked about last year, caused PAD income to grow by 9.4%. This is the strongest income growth in the segment since Q2 2019. Operating income margin reached 21.3% in the quarter, which is a very attractive margin, slightly lower than the same period last year, but at similar level to Q3 and Q4 last year. For payment solutions, we compare the credit losses in the P&L to the originated credit volume.
The underlying credit quality has been stable to the long-term trend, as illustrated by the adjusted rolling 12-month credit losses. Historically, we have had volatility related to sales and write-downs of portfolios not included in our agreement with debt collectors. Today, we have a very limited exposure to loans that are not part of the agreement with debt collectors, so the risk of volatility is low. Credit losses grew by 5% and in a slower pace than the loan book growth of 10%. No deterioration in credit quality was noted. To sum it up, the segment grew faster than the market in general. Customers have changed their behavior in the checkout favoring part payment product, and we saw the best income growth since Q2 2019. Please turn to the next slide. Let's focus on personal loans.
As you know, we decided to pause our email marketing in September last year, which in its turn has caused us to lend out less than before. As a result, the loan book size has decreased between Q4 and Q1 this year. When looking year-over-year, the loan book grew by 3% in Q1, and the income grew by 13%, meaning that operating income margin level continued to grow. This is mainly due to improvement in our scorecards made last year. For personal loans, we compare the credit losses in the P&L to the net loan book. We have seen good development in credit losses throughout 2021, driven by improvement in our credit process. When looking at credit losses, it should also be noted that we had a large one-off last year when we updated our provisions model to calculate the credit loss reserves for loans.
That model change affected the comparison period by SEK 7.5 million positively. The updated model was based on considerably more data than the model that was implemented when the product was launched in 2017. The underlying credit quality in personal loans is rather stable to the long-term trend. The adjusted rolling 12-month credit losses were 2.1% in Q1 2022, which should be compared to the adjusted rolling 12-month of 2.2% in the same period last year. To sum it up, the book is decreasing in size quarter-over-quarter as a result of paused marketing. The income margin is improving year-over-year, and income grew by 13% in the quarter. Please turn to the next slide. Before I hand over to Jonas, let's take a closer look at costs.
When looking at the cost development during the last quarters, it is important to notice the increase in cost base that we had in Q2 last year. The increased cost base was primarily due to higher expenses in relation to cybersecurity and the cloud. Depreciation was also part of the increase. This due to a combination of shorter amortization period and somewhat increased investment in our technical platform and service towards merchants. From Q2 2021 onwards, costs have been stable at SEK 90 million-SEK 91 million. Please bear in mind that Q4 always has somewhat higher costs given the volume processed during that quarter. As you know, our mission is to grow income faster than our cost. In this quarter, income grew by 10% and costs grew by 2%, including the VAT one-time effect that we had in the quarter.
The underlying costs grew by 8% and reached SEK 91 million by excluding the VAT one-off. To sum it up, we grew income faster than cost in the quarter. Our cost base is stable since we reached the new cost level in Q2 2021. Having that said, we stand firm with our ambition to grow income faster than cost over the years, but there may be variations and timing effects between quarters. With that, I hand over to you, Jonas, and please turn to the next slide.
Thanks, Robert. Following the financial update, I would like to take a couple of minutes to present our new strategy, Safe and Simple Payments, that we launched on April of 2023. This marks a major milestone for Qliro and is a result of several months of hard and dedicated work. The strategy has a clear focus on delivering a wider range of stable and secure payment solutions to merchants in the Nordic region.
When evaluating ourselves in the market context, we see that our competitors are all trying to position themselves as strong partners to the merchants, taking slightly different directions like white label, full service, business-to-business banking offering, or a strong focus on the end consumer while driving competition between merchants. Also, when I was at the largest fair for Swedish e-commerce, D-Congress, last week, I heard a number of merchants complaining about flaws about the banks trying to also be payment providers and about payment providers trying to become a marketplace comparing merchants against each other. We concluded that there is a gap in the market when it comes to being a player with payments as its core product, as all our competitors are banks and have other focus areas in a strategic direction.
With the new strategy, Qliro sees an opportunity to grow as one of the few players in the Nordic region with its core business in payments. Qliro will be positioned as the pure payments player born out of e-commerce and a digital native. Behind the new strategy and identity, there is extensive qualitative and quantitative research. When we researched what consumers want, being nice and trustworthy stands out, something we strongly identify with as part of our DNA. We have translated this into safe and simple, which means that we are a techy but at the same time a nice player, someone you feel good about working with and also using to pay. With this, we launched a new brand identity to further strengthen our position as a pure payments player.
The new identity has an increased focus on clarity to offer a more user-friendly and more secure customer experience. Please turn to the next slide. When looking at how the Nordic payments and e-commerce market has evolved over the last seven years when Qliro has been active, we recognize that we need solutions and products that can keep up and adapt to the future. With this strategy, we have already set off adapting our offering into something that is flexible at its core without having to create individual solutions for individual deals and thus limit our scalability. Flexibility at the core means a few different things for us, and we are on the path to develop our business and products to reflect this.
These are our five core strategy pillars that ensure that Qliro provides flexibility for the merchants and their customers in every aspect of our operations. First, we are differentiating our checkout offerings to suit different types of merchants, enabling both a full service offering as well as a white label and other variants. You can expect new payment options to be added in a fast pace from us. Second, we are creating flexible financial products to allow us to easily and quickly react to changing market and regulatory conditions and better meet the merchant needs. Third, we continue to build up a solid, scalable architecture that will support Qliro's growth and ensure we are leading the way on the technological scale. Fourth, we are improving both technology and partner setup to make it easier to onboard with Qliro and reduce time to go live.
Fifth, we continue to have relentless focus on a strong Nordic post-purchase offering that gives the consumers a seamless customer journey. That means e.g. our award-winning customer support and app. Please turn to the next slide. What do we think this will give Qliro? Through Safe and Simple Payments, we believe Qliro will have a strong position as the only pure payments provider. By making it easier to understand who we are and where we are headed, we expect to increase our brand knowledge in the market. By making it more clear with what we stand for and what merchants get when working with us, we expect to win more merchant deals. Through increased knowledge about Qliro among consumers, more consumers will feel safe shopping with us, both in using our own and our partners' payment methods.
This could also benefit us in employer branding and with attracting talented coworkers. Altogether, we see the strategy as an important building block for our growth journey going forward. Please turn to the next slide. What does the near future hold for Qliro? We expect to continue to sign up and onboard new SME merchants and develop new verticals for collaborations. We're already strong in beauty and fashion, as you know, but we'll soon get into the next large vertical to expand in. As part of a revised strategy, we are pursuing a broadening of the offer to SME segment in Sweden, where a more standardized offering has and will continue to be developed. When a new board of directors will be appointed at the annual general meeting on May 17th, financial targets connected to the strategy will be developed.
The first quarter has been an eventful and productive period for Qliro, and I'm looking forward to give you an update on the progress we're making going forward in July. Thank you for listening to today's presentation, and we will now open up for Q&A.
Thank you. Ladies and gentlemen, if you do have a question for the speakers, please press zero one on your telephone keypad. Once again, that is zero one on your telephone keypad to ask a question. Our first question comes from the line of Ermin Keric from Carnegie. Please go ahead. Your line is open.
Good morning. Thanks for the presentation and taking the questions. The first one would maybe be where you ended actually on the financial targets. Could you give us any hint on the financial impact from this strategic review you've done? Also how confirmed you feel that this is with the new board of directors that you're expecting to have?
I think it's a last part just one again how-
Now, how much have you been able to anchor this new strategy?
Yeah.
Given that you are having that rotation in the board of directors, so you don't get kind of a new chairman that all of a sudden wants to take another strategic direction?
Of course, we have had dialogue with the new suggested now proposed chairman over the last couple of weeks. He is okay with what we're presenting now. However, as you would expect from a new chairman coming in and a likely change of the board of directors, in mid May, they will of course review the financials and thus we are awaiting their direction to develop and communicate the financial targets connected to the strategy.
If you could just give us some kind of hint in what you expect to be the main benefit from this new strategy? Is it that you will attract more merchants, so you'll grow the merchant base? Or is it that you'll increase your income from each merchant you have, or what's kind of the main driver here with this new strategy for increasing your income?
I think we're looking at both. I think the last quarter of increasing our say share of wallet or whatever with the existing merchant, I mean, is very much driven by the e-commerce development in general. Of course, we will expand our offering with more payment solutions and products as I mentioned. We will also look into maybe in the later part of the strategic horizon, some value-added services to add in addition to the payment, the pure payment solutions. What you said first about expanding our footprint along the merchants and getting more merchants onboarded, I would say that's primary and initial focus for the strategy.
How do you see the activity currently? Because it's been quite a few quarters now where you've been talking about increased interest for the solution, but we haven't seen it come through full in the numbers.
No, I mean, something I've worked with since I started here is to boost and, like, expand our commercial capability. We are currently scaling it up and strengthening it in different ways. As I mentioned, I was at this larger e-commerce fair last week and saw a lot of curiosity and interest from the merchants in our products. I think we haven't maybe been visible enough out in the markets towards these merchants over the last couple of quarters, and I think that has driven what you mentioned, yeah.
Thank you. Just one final question from me, perhaps. On the digital banking side, now you are only talking about the personal loan. Both of you could talk a bit about the strategy for that one going forward. Is that something you still hope to grow or is it gonna be even potentially divested? Also, generally, the segment was branded the digital banking because you were supposed to have this more of an ecosystem with an app with different services. Is that completely abandoned now?
Yes, I would say that. Digital banking right now is only the personal loans. I mean, as I mentioned, payment solutions are our core and key focus and our buy now, pay later lending products will remain and be further developed even in a faster pace, I would say, with this new strategy. We'll continue to strengthen our capabilities in this area. As I say, digital banking and personal loans, they are appreciated by our customers, but more of a complementary business segment that enable and facilitate our payment solutions. It's a good source of revenue for Qliro, but we don't see it as our core business and we don't have any ambition, of course, to become a bank. Not becoming a bank.
Perfect. That's all for me. Thank you very much.
Yeah.
Thank you. Once again, for any questions, it's 01 on your telephone keypad to register. As there are no follow-up questions, I now hand back to our speakers for any closing comments.
I think, we then just thank the audience for listening in to us and looking forward to talk to you again in a quarter's time. Thank you.
Thank you. This now concludes our conference. Thank you all for attending. You may now disconnect your lines.