Welcome to Qliro Q2 Report 2023. For the first part of the conference call, the participants will be in listen-only mode. During the questions and answer session, participants are able to ask questions by dialing star five on their telephone keypad. Now, I will hand the conference over to CEO Christoffer Rutgersson and CFO Robert Stambro. Please go ahead.
Good morning, everyone, welcome to today's quarterly presentation from Qliro. I'm the CEO of the company, Christoffer Rutgersson. With me here today, I have Robert Stambro, our Chief Financial Officer. We are both happy and proud to announce a second quarter with profit due to our profitability program. Our revenues in the quarter are up 12% compared to last year, coming in at SEK 117.7 million in a quite weak e-commerce market in general. We also see a continued strong traction of our profitability program, which have not only improved our operational efficiency, excellence, also through digitalization and automations, strengthening Qliro at the core to increase our kind of both merchant experience, consumer experience, and internal efficiency.
Overall, our operating costs in the quarter are decreasing 12% compared to last year. Roughly SEK 11 million, coming in at SEK 82.5 million. We also see positive progress in implementation of our new payment strategy for our payment solution business, where from a volume perspective, we see our total payments volume declining only 2% in the quarter compared to the market, where we see generally in Sweden, for efficient numbers, a 2% decline in April and 12% decline in May, indicating that the market in e-commerce right now is fairly volatile.
Secondly, from a merchant perspective, we now have 65 active merchants on our platform, primarily enterprise merchants, where we are increasing with four merchants in the quarter, including a couple of well-known onboarded SME merchants like Syster P, Nividas, Five Seasons, which are kind of fairly well known in Sweden. We are happy that we are progressing on our product initiatives, with most importantly, we're collecting payment service provider kind of platform, where we now have launched card payments in the quarter successfully with a couple of merchants, and we're kind of rolling out this more broadly in the coming quarters. We will add more payment options over time. I will come back to this a bit later.
Last but not least, just after the quarter, we also signed a new contract with an enterprise merchant, Proteinbolaget, which we are happy to pass it going forward on their growth journey as they are currently expanding quite quickly, both in Sweden and Finland. With this said, I will hand over to Robert to walk us through the financials. I will come back a bit later, giving you a more of a strategic update.
Thank you, Christoffer. Q2 was another quarter of growth and profitability. Last year in Q2, Qliro's Board of Directors announced the ambition to be profitable for the full year 2023. Shortly after that, we launched a profitability program. The program ran until year-end, with corresponding investment costs and IACs. As we sum up the first half of the year, it's fair to say that the profitability program has been successful. We are now profitable for the second consecutive quarter since we went public in 2020. Income grew in the quarter with 12%, driven by payment solutions that grew 13%. Cost efficiencies within the profitability program was realized and has pushed down our cost base to SEK 94 million, last Q2 to SEK 82 million Q2 this year, a saving of SEK 11 million.
Credit losses was SEK 32.4 million in the quarter, lower than Q1 this year and Q2 last year. The credit loss level in both segments are in line with previous quarters. To sum it up, we are profitable in yet another quarter. We experienced the best income growth in payments since being listed, 13%. We stand firm with being profitable for the full year 2023, but there may be variations in quarters during the remainder of the year. As mentioned, the successfully launched launch of the profitability program pushed down the cost base of SEK 11 million from last year, and at the same time, we have tripled the size of the commercial team and launched a team to enhance the speed of onboarding. In Q2, we have been taking on an additional SEK 2 million in costs related to other operating expenses.
This is primarily connected to new sales and marketing activities to increase the visibility of Qliro, the Qliro brand. One good example of this was the launch of the e-com event, Growth and Profitability, held at Moderna Museet. The event had over 200 guests from the e-market community and some of the largest e-commerce retailers on stage. All in all, the profitability program has pushed down the cost base. We are one good step on our way to deliver on the communicate target delivery profitability for the full year, 2023. Let's focus on payment solutions. Payment solutions continue to show good progress in the quarter. The progress resembles previous quarters to a large extent, with the tendency by our customers to choose BNPL in the checkout in favor of invoices.
New sales resources continue to progress with new processes and tool and the new CRM system live. The pipeline continued to grow also in the SME segment. The number of active merchants grew with 27% in Q2 year-over-year, compared to 17% in Q1 year-over-year. Four additional merchants are now live on the platform. Qliro shows good resilience in a declining e-commerce market. The total payment volume decreased with 2% compared to the market in general, that decreased with 12% in May and 6% for the full year. The consumer reach of Qliro continue also to grow, and we now have 5.6 million consumers that have used our checkout the last 12 months. This is a growth of 4% year-over-year, or 200,000 new unique consumers.
We have seen a clear shift in the consumer preferences towards BNPL, it grew with 4%, in favor of invoices that decreased with 16% year-over-year. This had a positive impact on our income generation. The take rate, which is the operating income divided by total payment volume, grew from 3% to 3.5%. We have now two quarters in a row with take rate of 3.5%. In other words, we are yielding better on every volume processed on our payment solutions platform than one year ago. As mentioned, payment solution grew with 13%, it was driven by BNPL products and higher take rates. During 2022, we launched a new strategy with clear focus on merchants, widening focus on sales, including the SME segment and the introduction of collecting PSP.
During the quarter, this quarter, collecting PSP for card payments was successfully launched, resulting in reduced administration for merchants connected. More Pay Now payment methods will be included during the year. This will simplify onboarding of new merchants, improve our merchants' experience, and enable Qliro to capitalize on Pay Now volumes. We continue to work with improvement of the conversion in the checkout. This will increase profitability both for merchants and for Qliro. In this quarter, we delivered instant pre-scoring in the checkout, optimization of card payments, and the possibility to save the bank account with Trustly Express. This combined should have a positive effect over time on the income development. Credit losses over pay later volume is in line with the five-quarter average of 1.7% and slightly lower than last quarter in Q2 last year.
To sum it up, we have launched improvements in the checkout that will benefit merchants, Qliro, and customers over time, and payment solutions grew with 13%. Let's focus on digital banking. The digital banking loan book continued to shrink in size, have lost 13% since last year. Stands for 33% of Qliro's total loan book, compared to 38% last year. Worth to notice is that the reduction in loan book size is getting less over time. The SEK 127 million reduction of loan book since Q2 last year has not affected the operating income to much extent. The increase in income margins has mitigated all of the loan book drop. Operating income was SEK 90 million in Q2 this quarter, which is SEK 600,000 higher than Q2 last year.
The income margin, which measures the income of their cost over loan book, has, at the same time, increased by 100 basis points, taking us from 7.5% to 8.5%. The reason for the increased margin is the gradual movement in the customer mix throughout the year, where we lose more low-risk customers than we attract. This have caused operating margin to go up and consequently increased credit losses. By deducting the credit loss level from operating income, we can see that the underlying adjusted income margin has improved with 20%, sorry, 20 basis points in one year. In other words, our profitability, deducting for cost, inclusive, including credit losses, is improving in the segment. To sum it up, digital banking is a smaller part of our balance sheet compared to one year ago.
Improvements in income margin has mitigated the reduction of the loan book. Before I hand over to Christoffer again, let's look at capital and liquidity. Qliro has a capital headroom of 5.7%, or SEK 135 million to regulatory requirement. The liquidity position is strong, which is by L CR of over 200% and a stable funding ratio of above 130%. The lending activities are focused on the Nordic countries and are funded mainly by deposits in Sweden and in Germany. Lending in Norway and Denmark is financed by the stock market. With that, I hand over to Christoffer again.
Thank you, Robert. Let's talk a bit about our payment strategy. From our perspective, our ambition is to make sure we deliver, merchant experience in world-class for merchants and their customer journey. The reason I say this is we're facing both local and global competitors, and I have to say that Qliro can truly differentiate on working closely with merchants and delivering a superior merchant experience, and that's why we're meeting merchant today. It's also very important to realize that we are managing their customer journey, and it's not our customer journey, but it's the merchant customer journey. This is also an area where we differentiate towards some of our key competitors.
Secondly, looking at kind of happenings in the quarter, as Robert mentioned, we had a big event for launching some of our new products in early June, when anniversary in Stockholm. On the theme of Growth and Profitability within e-commerce, which is not only an important topic for us, but also for many of our merchants, given the kind of the volatility in volumes in e-commerce in general, as kind of consumer demands is shifting with the current macroeconomic environment. We had roughly 200 guests talking about this topic, including some of our leading merchants, and we see a big interest right now in kind of considering new payments providers or evaluating kind of all options for e-commerce merchants and kind of improving their both top line as well as bottom line.
Where we provide value for merchants in this context is not only increasing kind of the leading checkout conversion, where we, within the quarter, have launched, not only Trustly Express, where consumers can save their account in our checkout, which increased conversion for kind of, loyal, kind of, returning consumers, but also pre-scoring, as I think also Robert mentioned earlier, where what we basically do is we optimize which payment method we choose for which consumer on an individual basis. Giving our kind of big volume of consumers, especially in the Nordics, we see an uplift of roughly more than 2% kind of coming from these initiatives. That only, not only drives volumes for us, it also drives increased revenue for our merchants. Secondly, we talk a lot about upsell with our merchants.
We have specific features in our product that enables merchants to drive more sales within the checkout experience. Secondly, or thirdly, it's extremely important to create loyal consumers, not only for us, but especially for our merchants, where we can drive back consumers to the merchants to buy again and again. In this kind of environment, where I think many merchants are facing challenges with growth or profitability, it's more important than ever to make sure kind of consumers are coming back and are loyal, because it's cheaper to work with returning customers than buying new customers. We see this as a big trend and a topic for discussions with many of the merchants we talk to. Also, we showed this in the first quarter a bit of details on our strategic directions.
I will not go through all the details again, but just give you a short update on where we are on each of these five topics. First of all, when it comes to increasing our addressable market by launching in SME, we signed a couple of SME merchants, or onboard a couple of SME merchants in the quarter, as mentioned before. We also launched with two new partner platforms, Ucommerce as well as Vendre. We also launched integration to Fortnox, through a partner, Automatisera Mera, to automate accounting for the SME merchants that are using both Qliro and Fortnox. I think this overall kind of strengthens our position and addressable market within the SME segment. Secondly, when it comes to collecting PSP, we have now launched card payments within the collecting PSP.
This not only makes it easier for a merchant to sign up with Qliro, it also simplifies administrations, it simplifies pricing, and it gives us an opportunity to capitalize on the Pay Now payment volumes. We are planning to launch more payment methods within these initiatives, and one of them is Trustly, where we also deepen the partnership within the quarter. When it comes to geographic capabilities, we have not extended the geographic capabilities in the quarter, but we see that many of the merchants that are now shifting Qliro and changing to Qliro have the, both the ambition to expand geographically, and many of them face limits in the kind of current solution where we can support them and kind of optimizing and giving them knowledge of kind of how to set up their business in also markets outside the Nordics.
When it comes to conversion, I mentioned some of it before, and I think this is a big topic for us, not only from a product perspective, but also an analytical perspective. We have made some investment in in the quarter, not only in our Snowflake platform, but also in the analytical tools around this. We're planning to launch a new analytical suite available for our merchants in the third quarter, to also provide this data directly to the merchants. Last but not least, when it comes to scalability, the investments we have done in the profitability program and digitalization, many of our core functions, is giving good results in terms of efficiency. In, in the quarter, We launched our new ERP system from a financial perspective with good success.
We start to see all the benefits on the consumer side, not only from an efficiency perspective, but also consumer experience improving with our Net Promoter Score, which we kind of measure internally on all kind of our contacts. Our, kind of, about 35% in the quarter, which is very positive. Last but not least, looking ahead, we are further expanding in both enterprise and the SME segment of our payments business, both with merchant but also new partners. Secondly, we want to become a stronger payment partner, focus on conversion, upsell, and building loyal customers, as mentioned. This is an area we'll continue to invest kind of during the rest of the year.
We're also launching new payment methods within our collecting PSP, where we initially focus on kind of an all Nordic payment methods. As mentioned, in the coming quarters, we will also introduce with Pay Now bank payments for including all of Europe. We see some initial benefits for our new merchant success team, with translates the foundation for a faster onboarding. Onboarding times for new merchants that have onboarded so far is starting to get quicker and quicker, and we think this will become even better in the Q3 and Q4. For the full year, we still guide on profitability for the full year. We're more confident with the second profitable quarter behind us, with that said, I thank you for today, and open up for questions.
If you wish to ask a question, please dial star five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial star five again on your telephone keypad. Please state your name and company. Please go ahead.
Hi, thanks for the presentation. Ermin from Carnegie here. Maybe a first question would be on the rate sensitivity as you see it going forward, both on the funding side and on your two different segments. How do you see the ability to continue to pass on higher rates on the lending side? Do you think you can keep doing that on both of the segments, or is there any kind of?
The sound is very poor. Could you please repeat the question? I couldn't hear half of it.
Of course. The question was on the rate sensitivity. If you could talk about how you see your ability to pass on higher rates to your customers on both of the segments and also on the funding side?
We are adjusting. Is the sound on? Okay, good. We are adjusting our margin on the loan side. We are compensating for the increased funding cost. We also see a positive mixed effect. This is had some mixed up with the sound. Did you hear my response?
Sorry, and it's been quite bad throughout the presentation, to be honest.
Oh, that's unfortunate. What I said.
Sorry? Sorry.
Sorry. Do you hear me now?
It's a bit echoing, but it's okay.
Hello?
Yeah. Do you hear me?
Sorry, we seem to have a problem with the sound from the speakers.
Now, we hear you very well, actually.
We have an issue with the Financial Hearing. Can you hear us?
Yes, we hear you now.
Hello? Hello?
Yes, we can hear you.
Okay. It seems like we have an issue with the sound. Not sure if you hear us, but I can promise that if this not solved, we're gonna change provider from Financial Hearing to something else.
We can hear you.
Okay, good. Where are we in the questions? Not sure if you heard my response.
If you could please repeat it. Thank you.
Okay, I will repeat the answer. I think the sound was a bit bad on the inside. What I heard was you asking if we can adjust for the increased funding cost in our different segments. Of course, that's also why we're kinda keeping in common and quite stable.
Question was, basically, going forward on higher rates, if we see market rates continue up, do you think it's sort of neutral for Qliro, or do you think you can pass on more on the lending side than you are having to give away on the funding side, on deposits?
I think this, we don't see a big impact on our results from this, not now, not going forward. I think we're quite well protected.
Got it. Thank you. The next question was, you talk a bit about conversion on the checkout. Do you have any update or any figures you could give us on how conversion is on Qliro's checkout compared to competitors? If there is any difference, if you could give us any color on if there's any specific parts of the checkout that's driving that out or underperformance that you see it?
It's multiple different things that are impacting conversion. Not only kind of UX and kind of load times in the checkout, but also kind of how we optimize every payment method. I think we, as one of the big provider in the Nordics, I think we have a big benefit of having a large consumer base that are shopping with Qliro quite often. And I think that's helping us with, especially with kind of pre-filled profiles and kind of brand recognition. What we've seen now is when we're starting to save not only kind of our own solutions for a quick checkout, we also are kind of saving accounts with Trustly Express, we're saving cards in the checkout, and we optimizing kind of based on consumer level, what method showing from which consumer is quite a conversion increase.
Compared to competitors, I think we're much more, kind of, sophisticated from a technical and analytical perspective here than many of the local competitors. We typically say a conversion uplift for the merchants that are migrating from something else to Qliro.
Is it possible to quantify that conversion uplift to an extent?
It varies a lot, kind of merchant by merchant, depending both what they have today, but also kind of their technical setup. It's hard to generalize, but we're not afraid to give conversion guarantees to merchants that are to go with it.
That's very interesting. Thank you. Then the final question would just be on how you're thinking about managing of your credit losses going forward or kind of defaults. Given that we've seen NPL prices come down quite a bit, do you still see forward flows as attractive, or do you have any plans to maybe hold more of NPLs on your own balance sheet going forward?
It's something we are considering, we have not taken a decision in this area, but it's, as you mentioned, it's definitely a bit of volatile market when it comes to this kind of arrangement at the moment. With that said, I think the macroeconomic outlook is, I don't think it's worse now than it was, a few quarters back, and we see kind of fairly stable credit losses. If you look at, on our payment business, credit losses versus the volume, given kind of the quick duration of the book or, versus the balance on the loan side.
Perfect. Thank you. That's all for me.
Thank you.
As a reminder, if you wish to ask a question, please dial star five on your telephone keypad. There are no more questions at this time. I hand the telco back to the speakers for any closing comments.
Thank you very much for today, and have a nice summer. Looking forward to get back in Q2.