Good morning, and welcome to the Qliro Q2 2022 Earnings Call. All participants will be in listen-only mode. Should you need assistance, please signal for a conference specialist by pressing star then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star and then two. Please note, this event is being recorded. I would now like to turn the conference over to Jonas Arlebäck. Please go ahead.
Thank you. Welcome to the presentation of Qliro's Second Interim Report for 2022. My name is Jonas Arlebäck, and I'm the Acting CEO of Qliro. With me today, I have our CFO, Robert Stambro. Please turn to the next slide, and that's the slide with the bullet points to the right. This is my third and last quarterly report as the Acting CEO for Qliro. During this quarter, it's worth noting we had strong income increase of 7% despite the decline for the e-commerce sector as reported by Svensk Handel. Svensk Handel e-commerce indicated for the first quarter, January to March, showed that e-commerce sales were down 13% year-to-date compared with the same period last year. The strongest revenue increase can be seen in payment solutions due to notably higher interest rates for various products in the quarter.
Another positive force for the company is the profitability program that the board decided in June and that was kickstarted already. It strives to make Qliro profitable for 2023 by accelerating implementation of the new strategy, focusing on payments. This is the strategy that was launched along with the Q1 report and has now been very well received by merchants. Other notable performances or explanations that sums up the quarter from a financial perspective are reported credit losses increased during the quarter. This is mainly due to two drivers. Firstly, increased uncertainty around the future macroeconomics driving increased provisions in line with IFRS 9, and secondly, increased provisions for our portfolio that is not under SRG agreement, and that's due to changes in the market prices for these claims. However, adjusted for these effects, our credit losses are still implying solid credit performance.
We also saw a slight decrease in our loan book within digital banking this quarter. The profitability program, together with a severance paid to a C-level executive and provision for legal costs relating to the dispute with Konsumentombudsmannen, induced costs affecting comparability of SEK 10 million during the quarter. This means that we are adjusted for NRIs continuing to perform in line with our financial target to grow income faster than costs. When looking at our operations, we should also mention that we, during the quarter, onboarded net two new merchants, very much driven by a new strategy. I will come back to that in my later page of future outlook. Please turn to the next slide. In summary, we had an income growth of 7% in the quarter compared to Q2 2021.
As mentioned, the increase was mainly driven by increased revenues in our primary segment, payment solutions. Our PAD volumes decreased by 7% in the quarter which is a smaller decrease than the market as a whole. On top of that, we are pleased that the number of unique accounts grew by 9%. This demonstrates the solid and resilient position Qliro has despite the market's extensive headwinds. What we see is that our customers show change in consumption patterns. More and more choose our part payment products and choose to pay down their purchases over a long period of time. This effect was a strong loan book in PAD, which in turn grew income growth. During the last 12 months, we had 2.5 million active Qliro customers and 51 merchants using Qliro's payment solutions.
We saw our lending grow by 2% in the quarter with the strongest contribution from payment solutions. With that, I hand over to Robert to take you through the financials. Please turn to the next page.
Thanks, Jonas. Let's look at the financials and primarily focus on the Q2 figures. Income grows with 7% in the quarter, which is good given the 13% decline in the e-commerce market reported by Svensk Handel. The income growth in the quarter is primarily driven by an 8% income growth in payment solution. As previously communicated, Qliro's board of directors have decided to run a profitability program to accelerate the company and to reach profitability during 2023. In Q2, the cost of that program was SEK 5.6 million. In addition, we had SEK 4.8 million in one-offs, covering restructuring costs and reservation for legal fees in the Konsumentombudsmannen case. In total, SEK 10.2 million in one-offs for Q2. By deducting these items, we see that underlying cost growth was 4%.
This should be put in comparison to the income growth of 7%. Loan losses grew to SEK 35 million from SEK 23 million in the same quarter last year, primarily due to the extra provisioning made in the quarter of SEK 9 million, but also due to an 8% balance growth in the PAD book. The extra provisioning in the quarter is connected to the current uncertainty in the macro environment and can be divided into two parts. A forward-looking adjustment has been made of SEK 2.8 million in accordance to IFRS 9 and a revaluation of the portfolio outside of our current sales agreement to debt collectors of SEK 6.2 million, given changes in market prices for that asset. Adjusted for these effects, the underlying credit loss level is rather stable to the long-term trend and no deterioration in credit quality was noted in the quarter.
Please turn to the next slide. Let's turn our eyes towards the segments in the quarter and start with payment solutions. This 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 8%, driven by changed customer preferences in the checkout. Customers are to a higher degree using our part payment product in favor of the invoices, and they repay their debt somewhat slower than historically. The 8% loan book growth together with the removal of regulatory pressure that we talked about last year caused PAD income to grow by 8%.
Operating income margin reached 22.1% in the quarter, which is a very attractive margin, slightly lower than the same period last year, but at the higher level than last quarter that was 21.3%. For payment solutions, we compare the credit losses in the P&L to the originated credit volume. As mentioned, we had extra provisioning in the quarter due to increased macro uncertainty. This affected the credit losses in payment solution by SEK 7.4 million. The underlying credit quality has been stable to the long-term trend, as illustrated by the adjusted rolling 12-month credit losses. No deterioration in credit quality was noted. To sum it up, the segment grew faster than market in general. Customers have changed their behavior in the checkout, favoring part payment products and we see no deterioration of credit quality.
Please turn to the next slide, please. Let's focus on personal loans. As you know, we decided to pause our email marketing in September last year, which in turn has caused us to lend out less than before. As a result, the loan book size has decreased between quarters. When looking year-over-year, the loan book declined by 6% in Q2, and the income grew by 6%, meaning that operating income margin level continued to grow by 60 basis points year-over-year. Credit losses increased partly by the SEK 1.6 million in extra provisioning that was made due to macro uncertainties in accordance to IFRS 9. If deducting that extra provision, the credit losses of loan book in the quarter was 50 basis points higher than last year's same period. The reasoning for that increase in credit losses is a mix effect.
We tend to attract less low-risk customers into the personal loans portfolio than previously. This has a positive effect on the operating income and a negative effect on credit losses. The underlying credit quality in personal loans is rather stable to the long-term trend. The adjusted rolling twelve-month credit losses were 1.9% in the quarter, which should be compared to 2.0% in the same period last year. To sum it up, the book is decreasing in size quarter-over-quarter as a result of post-marketing. There is a mix effect in the portfolio that has a positive effect on operating income and a negative on credit losses, but it's net positive. Please turn to the next slide, please. Before I hand over to Jonas, let's take a closer look at cost.
First of all, we had a total of SEK 10.2 million in items affecting comparability in the quarter. SEK 7.7 million out of the SEK 10.2 affected administrative expenses due to the recently launched profitability program, restructuring costs, and provision for legal costs related to the court case regarding email marketing and personal loans. Amortization increased as part of the profitability program, where we have accelerated the technical development and as a consequence, reduced the amortization period of some of the assets. This affected the quarter by SEK 2.6 million and will affect the remaining of the year with an additional SEK 9 million. In addition to the SEK 9 million in increased amortization, we also estimate one-offs of up to SEK 46 million during 2022, with the plan of reaching profitability in 2023 and onwards.
In this quarter, income grew by 7% and the underlying cost grew by 4%, reaching a cost base of SEK 94 million. With that, I hand over to you, Jonas. Please turn to the next slide, please.
Good. Now we should be on the slide with the label looking ahead. Thanks, Robert. What I want us to conclude with is that we have initiated and we continue to deliver on our recently launched profitability program. As said earlier, this will induce costs initially but make clearer, better positioned and more profitable already from 2023. We estimate costs in second half of 2022 of up to SEK 55 million. The full effect from the profitability program is expected in 2024 with the majority realized already during 2023. The plan is to turn profitable on profit before tax level for 2023. I want to underline that the board and management are very committed to this plan.
As part of the revised strategy that you have already been presented with, we are pursuing a broadening of the offer to the SME segment in Sweden, where a more standardized offering has and will continue to be developed. Currently, our pipeline of new merchants to be onboarded is the largest in over two years. That really demonstrates the positive reception of the new Qliro strategy and our attractiveness as a partner to e-commerce merchants. We are, of course, thrilled to welcome Christoffer Rutgersson as the new CEO of Qliro, taking office first of October. Christoffer has been a consultant to Qliro since March and is involved in the profitability program. Moreover, this means that this is my last interim report during this tenure, which I'm grateful having been part of.
Christoffer will, with the board of directors, develop financial targets connected to the strategy. They will be communicated before end of this year. Thank you all for listening. Now let's conclude with the Q&A. Please turn to the next slide.
Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speaker phone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star and then two. At this time, we will pause momentarily to assemble our roster of questioners. Our first question comes from Ermin Keric from Carnegie. Please go ahead.
Good morning. Thanks for taking the question. Perhaps starting on the profitability program, could you just talk a bit more about what we should expect in next year? Do you expect a similar pace of income growth and the bridge to profitability mainly to be driven by lower expenses or do you expect a higher income growth pace as well?
I think it's a combination. I mean, first and foremost, the profitability program is accelerating our strategy. Our strategy is of course growth strategy within payments. We are, as I think I mentioned before, increasing the number of commercial people in our organization and are, yeah, strengthening our approach to the market and merchants. We see that they are paying off. As I said before, our pipeline is bigger than in two years. We believe that will yield fruits in terms of more volume from next year. As you who are aware of the business model of Qliro, it takes some time to onboard clients, merchants, but we should see some top line impact next year.
That said, I mean, profitability is so important for us in next year. We will also of course work on the cost side. Ideally we will do that by technology development. We are in a space where we are building our new technology and new platforms for our payment products to be strong in the long future. That will also make us more efficient and even more scalable. That should pay off on the cost side. We are doing housekeeping of external products and services that we are buying. We sometimes see there are things that you need to do from time to time just to keep the costs down on external spend.
Finally, also on the cost side, we are digitalizing the interaction with our consumers, so not sending that much printed mail anymore. That should of course also increase the quality and efficiency in dealing with us.
Thank you. Maybe just staying on the profitability program, is it fair to assume that you will kind of gradually come into profitability during the year? You don't expect necessarily to be profitable already from Q1 2023?
No, it will come gradually during the year. Yes.
Thank you. You mentioned that you've been sort of strengthening your commercial capacity. Is that mainly to the SME side or are you also stepping up for increasing your efforts to win over new enterprise merchants as well?
It's both, I would say. SME is a very interesting segment in terms of profitability, but it has only a certain size, so to speak. We want to, yeah, maximize our growth, really. We need to work on both sides, both SME and enterprise segments.
Thanks. Just staying on the current merchant base you have. You mentioned that you added two SME clients during the quarter but I still notice your total number of merchants actually down by one. Does that mean you lost three merchants during the quarter? Could you just give us some flavor as to what's then caused them to change provider?
Yeah. We unfortunately had a bankruptcy of one of our, or actually two that were connected to merchants this spring. That explains the large part of the drop there. Then we are adding merchants in a fairly rapid phase in terms of SME merchants. That's the uptick, so to speak.
Perfect. Thank you. Just perhaps one last question that's a little bit wider. Obviously, one of your main competitors, Klarna, did some changes to its offering in the checkouts versus removing the account payments and also prolonging the invoice payments. Have you seen any impact from that? Are customers asking you or consumers asking you to do the same? Are merchants sort of favoring you because they don't like Klarna's changes, et cetera? Could you give us any indications how that has impacted the market?
Yeah. On the first side, we haven't heard those requests from our consumers. As I mentioned before, rather the contrary, they seem to favor now what we have seen the last one to two months, especially our on payment products, and they seem to pay off their products on a longer period, so to speak. They seem to actually act in an opposite direction on what Klarna is trying to drive. We have those products, of course. Looking at the merchants, we are actually experiencing over the last, yeah, two to three months much more interest now from the merchants having Klarna's solutions to listen to what we can offer. That could be a sign of what you alluded to there.
Yeah, I think this projection of Klarna becoming more of a consumer marketplace maybe is not in favor for the merchants. That's something they bring up, at least when they come to us and ask what we can offer.
Perfect. That's all for me. Thank you very much for taking the questions.
Thank you.
Thank you. Once again, if you do wish to ask a question, please press star then one on your phone and wait for your name to be announced. We'll now pause briefly to allow any further questioners to register. As we are showing no further questions at this time, that concludes our question and answer session for today and also our conference for today. Thank you all for attending today's presentation. You may now disconnect your lines.