JGood morning, and welcome to RugVista recorded on RugVista and Financial Hearings webpages afterwards. Today, I am pleased to present CEO Michael Lindskog and CFO Henrik Bo Jørgensen. With that, I will hand over to Mr. Lindskog. Go ahead.
Thank you, and welcome everybody. This is Mikael speaking, and Henrik is also here with me. I am happy to hopefully have a lot of you online listening in on today's call. If we start on page two, I'll kick it off with a few of the highlights from the quarter. Overall, it was a challenging start to the year, but there are a lot of highlights which I think is important to remember. If we start off with some of the challenges that we experienced is number one, of course, the very turbulent macro environment.
As everybody's aware, increasing inflation, the war has really caused consumers to be worried about the future, which of course has impacted both the available monies that they have to spend or discretionary spending, as well as their confidence and willingness to buy slightly higher priced items. It's our take on the situation. With that being said, we ended the quarter down in terms of net revenue, down 9.1% versus last year. The organic growth was down 12.3%. One highlight, however, is of course that we remain very profitable still.
We ended the quarter at 11.6%, and that's still, from my point of view, a testament that we are still running a very profitable business despite or even in a very challenging environment. Also, to keep in mind is that when looking at our two-year trajectory, the growth and profitability development is still quite outstanding. If comparing to Q1 2020, our revenues are up above 74%. We've managed to more than double the order count and more than double the number of new customers we acquired during this past quarter compared to the first quarter of 2020.
Another tremendously exciting, I would say, KPI and all-time high is our NPS value, where we reached 68, which of course is a testament to the fact that we continue to invest in customer satisfaction and ensuring that whomever and whenever somebody buys from us, that we deliver an outstanding experience. Finally, we are making progress on some of the more or the most important strategic initiatives. RugVista Essentials that we introduced at the end of last year has during the quarter constituted an increasing share of the total sales. That's something we're very pleased about.
The website development is progressing, and we plan to release the next iteration of the site by summer. If we move to page number 4, please. We discussed already the NPS of 68. I think some of the important things to note here is that we know that there are differences in terms of how different carriers perform and how consumers perceive carrier performance. For a relatively long time now, a couple of quarters actually, we've actively invested in ensuring that we deliver the best possible experience despite that experience has cost us a little bit more in consumer freight costs of consumer deliveries.
That is of course, an active choice, but that's something we feel is worthwhile doing. The order count and the new customer count decline versus last year, of course, is related to number one, the tough comparable, but also reflective of the overall climate during Q1 this year, which was very challenging. If we move to page five, a little bit of a deep dive into the topic of consumer sentiment. This slide highlights how the consumer confidence index across a number or a selected number of key markets.
If we look at the top, we have the Swedish consumer sentiment development during the quarter, which went down about 16 percentage points during the quarter. Which is a tremendous downward trajectory. As most of you probably know, it has continued to be rather depressed also in April. Germany, similar story, very similar story and even potentially worse story, where they have a slightly different way of measuring it. That is the highlight here is that it turned a lot worse during the quarter in Germany as well.
France being also a very important market for us has seen a very similar downward trajectory as well. If we move to page six, just to also give a little bit of a flavor on what we call the advertising intensity and how that impacted us. We have on page six there a little bit of a timeline from the start of 2021 on a KPI called the cost per visit, which is essentially the sessions. Or sorry, it's actually sessions over costs, right? Marketing spend.
What we see here is that in Q1 2021 that quarter was the 4.4 SEK per visit that we paid. That represented a 5.5% increase versus the quarter before, so the quarter of 2019 Q1. How that's developed over the past five quarters is what the slide shows. What we can see here during 2022 Q1 is that we've reached a very high number of 6.1 SEK on average in terms of what we are currently paying for each visit.
A big driver of this is of course the increased intensity in terms of more players and existing players being more aggressive in terms of trying to attract traffic. It should be noted that this of course is a very high level KPI affected by category mix, or sorry, channel mix, country mix effect, as well as the share of earned versus paid and all of those things. It is part of a big portion of what's going on in the market today.
With that being said, I think the important thing for us on this topic moving forward is that we continue to monitor ensuring that we get the best possible ROI on our marketing spend, that we continue to find growth pockets. When we know that or notice that ROI isn't as high as expected on the spend, that we quickly address that. That's really going to need to be the focus over the next few periods, or until the current conditions change. With that being said, I wanna hand it over to Henrik to do the financials.
Thank you, Mikael. Let's go to slide 9 please. Starting with our net revenue. We ended the quarter at SEK 186 million, representing a decrease of 9.1% versus last year. In terms of local currency, down by 12.3% with the SEK depreciating against almost all other currencies that we are exposed to, in particular, euro. As Mike mentioned, market conditions were very challenging during the quarter. We had high inflation, especially energy prices eroding consumer purchasing power. That in addition to the situation of the war in Ukraine led to large decreases in consumer confidence that Mike also alluded to.
Actually we are at levels not seen since the financial crisis in 2008, 2009 in markets such as Sweden. Now, this fact in combination with the tough comparable last year where our sales was up almost 92%, drove the negative net revenue development during the quarter. On a segment level, B2B stood out with a positive growth of 5%, where especially our interior designer customer group continued to develop positively. It should be mentioned though that B2B did face a slightly softer comps compared to the other two segments. But nonetheless, a positive growth for the quarter. Zooming in on B2C, on the right-hand side you can see the development by our three reported regions.
Market conditions were challenging in all three regions, and we did see decreasing revenue in all of the regions. DACH net revenue decreased by 15.1%, as you can see in the upper right-hand corner, but it should be noted that the region did face a particularly tough comparables with growth of nearly 121% last year. Lastly, also worth highlighting is rest of world, where sales only declined by a couple of percent. On a positive note, we continue to see markets such as Great Britain performing quite strongly. Now moving to the next slide, a view on our gross margin development, where we landed at 62.3% for the quarter, compared to 64.9% last year.
Let me just quickly mention that the numbers you see on the left-hand side exclude other income and divested operations. They differ only slightly to the reported numbers in our income statement. Now, the gross margin decrease was driven by higher product expenses as well as higher costs for customer deliveries, as Michael mentioned. The product expense ratio was driven by category mix effects, while the shipping expenses were driven by, as Michael mentioned, the conscious decision to invest in carriers that were slightly more expensive, but where we could uphold our high customer satisfaction, which we chose to do. Lastly, due to the increase in oil prices compared to last year, there has also been an increase in fuel surcharges by the carriers.
On the right-hand side, you can see the development by segment, and we did see quite some differences across the segments. What I would like to highlight here is MPO, where you see a decrease of 5 percentage points in the upper right-hand corner. What that basically shows is the larger impact from the shipping cost that was explained previously, which is due to the fact that the vast majority of sales in MPO is outside of Sweden and the Nordics. Lastly, in terms of gross margin, I would like to highlight that Q1 2021 was an all-time high. Q4 2021 was at a similar level, but that included the one-off impact from the reversal of the UK VAT. Q1 2021 is the all-time high.
If we compare to 2020, then our gross margin is still up 0.7 percentage point. If we move to the next slide, a look at our operating profitability, which landed at 11.6% for the quarter, as Mikael mentioned, compared to 19.4% last year. On an adjusted basis, excluding IPO related costs at 24.2%. Now, the decrease was driven by the deteriorated gross margin as explained on the previous slide, as well as the higher marketing costs that Mikael alluded to.
Looking at our OpEx, we also did see an increase in our personnel costs, which was driven by negative scale effects due to the decrease in the net revenue compared to last year, as well as new hires joining the company according to plan. Lastly, also worth noting is higher other operating expenses, which is basically currency differences resulting from the SEK depreciating. Now we've moved to the next slide, a view on some of our balance sheet items. Here the inventory value where we headed into Q1 with a very solid inventory position. That meant that we only added limited goods on stock worth SEK 2 million during the quarter.
If you look on our right-hand side, you can see that we still remain well within our target range of having inventory as a share of last twelve months net revenue of 20% ± 250 basis points, where we ended the quarter at 21.6%. Lastly, look at our cash flow. Starting in the upper left-hand corner, you can see the cash flow from operating activities, which landed at -SEK 18.6 million for the quarter. Compared to Q1 2021, it was negatively impacted by the lower operating profitability. We had a higher tax payment compared to last year and an increase in working capital, with the latter being driven by a lot of supplier payments being due during the quarter.
Moving to CapEx, we have started to capitalize tech development costs. This practice has been initiated to get a higher degree of synchronization between the costs we have in tech and the income derived from the development projects, which have a multiyear revenue stream profile and with a lag compared to when the costs are held. Further, we did observe that if we benchmark to our online listed peers, then more or less all of them do capitalize their development costs. As such, we now have a better comparability to them now that we are also capitalizing our development costs. The CapEx for the quarter amounted to SEK 1.6 million, of which 1.4 related to the tech development cost.
Now lastly, on the right-hand side, a look at our net cash position, which decreased by SEK 26.9 million compared to year-end, which is due to the operating cash flow. In addition, would like to highlight that the board of directors has proposed a dividend payout of SEK 52 million to the AGM, which is to be held on May 20. But nonetheless, even accounting for a potential dividend payout, we do still have a very healthy cash position, still. With that, I'll hand it back to you, Michael.
Thank you, Henrik. Yeah. If we move to page 13 just to summarize quickly. Again, Q1 definitely impacted by the tough macro environment. Of course the tough comparable for last year. Those are to a certain degree things which are difficult for us to affect. Despite this tough situation, we do show continued good profitability and also want to actually reiterate what Henrik mentioned in terms of our strong balance sheet. We are very well capitalized. We have no loans or debt to banks or the like.
We are very sound and capable of maneuvering through this period. Again, when looking at a little bit more than just this short time frame of one quarter, our trajectory is still very strong, both in terms of top line development as well as underlying development on profitability. We are making strong progress on our strategic initiatives. We continue to develop RugVista Essentials. It is showing very good early signs of doing what we expected it or wanted it to do in terms of what that portion of the assortment was supposed to attract, a new customer group, and we're seeing indications that that is happening.
Our tech team is working hard on, and a lot of people within the organization working hard on getting the next iteration of the webshop ready for one more market in the by summer though. With that being said, the short term is uncertain. The war is still ongoing. Inflation and consumer confidence are still macro KPIs or factors that are affecting us. We are and I am still very confident in our long-term outlook and the ambition that we have for the long term. It is still very much in place.
We continue to do the right things, working on and really working on enhancing our total consumer value proposition so that we continue to develop in becoming an even better retailer and product expert, as well as a better organization. With that being said, we would like to open it up for questions.
Thank you. If you wish to ask a question, please press zero one on your telephone keypad. For your question, you may do so by pressing zero two. You will now be on brief pause while questions are being registered. Thank you. Our first question comes from Carl Deijenberg from Carnegie. Go ahead. Your line is now open.
Perfect. Thank you and good morning. A few questions from my end. First, a bit here going into Q2 and maybe hearing a bit what you see in April. I mean, Q1 was sort of the last quarter for you of exceptionally tough comparisons. I'm just curious of what you're seeing here going into Q2. Could you say if you're back to organic growth or sort of the trajectory compared with where you ended Q1 would be interesting to hear.
Yeah. We're not doing an annual forecast of course, but the situation if one looks at very publicly available factors, the consumer confidence and inflation is still sort of relatively unchanged compared to the end of Q1, I would argue, if we're looking at Sweden and Germany and some of the other bigger markets. The situation is still very uncertain and how long the current situation and the situation experienced during a large portion of Q1 will remain is very uncertain.
Hopefully once everybody has become a bit more used to at least this current economic climate, things will sort of progress. It's, as I said, it's very difficult to predict.
Okay, fair enough. Maybe let me put the question in a different way. When you share this very good slide of the consumer confidence, on a month or the quarters there on the different countries, and I'm just curious, so do you see any incremental improvements here going into Q2, just speaking sort of generally in the market? Or is sort of the general outlook in March compared with April sort of unchanged?
There's of course within specific markets both positive developments as well as more of the same as what happened in Q1. In total, I think it is too uncertain to put a very solid statement out there that we're seeing things changing or becoming worse. It's very uncertain at the moment.
Okay. Fair enough. I have a question on the marketing costs accelerating here in Q1 as percentage of sales, and you also have that cost per visit slide there in the presentation. Maybe if you could share a bit your views here, what you're seeing going into Q2. I mean, there are, at least from what I'm seeing, a few signals that maybe ad prices have started to come down sort of incrementally here in April and at the beginning of May. Just curious if that is something that you're seeing as well, or we'll continue to see sort of an unchanged outlook on that side compared Q1, Q2.
I mean, of course, we have essentially real-time perspective on that topic. What I can say is, you know, that we noticed relatively early in the quarter with the data that we have available that there were strong signals that the demand was falling. That those signals or that data, from my perspective, did not necessarily translate into quick actions from, let's say, the industry as a whole.
Hopefully when, you know, everybody sort of participating in the various marketing activities that we also participate in, once they sort of see the impact and what's going on in the market that they will sort of also react accordingly.
Okay. Fair enough. My final question with regards to competition, I mean, given that you're one of the largest pure online players in the space here in Europe and given the development that you faced here in Q1 also going into Q2, I'm just curious of what are you seeing in the competitive landscape here in the last months? Do you see that competition is coming down as a result of depressed sort of profitability or if you could elaborate sort of your views on physical versus online competitors here going into 2022.
I think the sort of landscape in itself has been relatively the same over the past 3-4 quarters, I would argue. What I mean by that is that the online pure players are relatively the same. A lot of those guys have been very aggressive during this period. The second set of sort of participants in the market are the multi-channel players. Of course, during COVID, they, as we've mentioned before, had to divert more of their marketing spend to drive traffic to their online proposition.
Of course, that has not necessarily increased the number, but they become more aggressive as well, I would argue. It's not a lot of new, but it's the same, and those players being more aggressive versus what we saw or have been on a sort of longer or midterm perspective. As I said previously, when everybody sort of has the opportunity to really assess what's going on with consumer demand, of course they need to take their own decisions, but let's see what happens in terms of their willingness to maintain those levels of marketing activity.
I think it's also worth noting that we mentioned that there are, you know, between markets differences on average. I would argue that we're more than holding our own in terms of market share from a consumer interest perspective. That is what we're continuously attempting to do, and of course continue to grow our online share as well as attracting more offline people to the online buying situation. At the moment the future outlook, at least in the short term, is a bit uncertain.
Okay. Thank you. I think that was all of my questions. Thank you very much.
Thank you.
Thank you. Our next question comes from Johan Brown from ABG. Go ahead. The line is now open.
Thank you very much. Hi, guys. Two questions from me. Firstly, touching a bit on the last question here in terms of the CPCs and the CPC slide, which was very helpful. Just looking at the multichannel players and pure online players and the rest of the competitive landscape, who would you say are the main cost per visit driver here? And if you were to compare your unit economics and profitability compared to those, how do you stand?
I think number one that's important to remember is that there's really only, I would argue, one pure player that sort of has a major presence across most of the European markets. That, as we've mentioned before, is Benuta out of Germany. Second is that the only sort of offline or multichannel player with a pan-European presence would be IKEA. The landscape is very fragmented across the different markets we operate in. What we do know is at least focusing on selling rugs only.
We do know that our average order value is on the high end among the participants in the market, which of course and that coupled with our healthy gross margins gives us the opportunity to invest quite a fair amount in marketing and still maintain a good level of profitability. How that compares to others, of course, if you have a lower AOV with the same gross margin, of course your absolute money available or contribution to for other expenses will be lower compared to us.
A follow-up on that one. Would you say it's these players that have more of a broad geographical reach that are pushing prices? Would you say it's the local competition that does?
A little bit of both is the answer to that. Some of the pan-Europeans are of course being more aggressive. In general, it is a category that has a lot of local diversification or whatever the right term is. It is more that we in a given region or a given market have a local competitor set that we need to adapt to, and that differs between the markets and regions.
Great. A question on the gross margin as well. You're mentioning different reasons here for the gross margin coming down a bit. Looking at the current situation and the current sort of climate, would you say the 62% gross margin is a reasonable level going forward? Or, what's the trajectory and building blocks going forward for this one?
I mean, the two main items in our gross margin, of course, is the product cost and then the customer deliveries. We've mentioned before, if I start with the shipping expenses, that we from a strategic perspective are looking at localization. That of course, part of that localization is finding and identifying a local carrier here also to deliver here to do last mile deliveries. Once that is in place, I expect that that will put us at a better position in terms of offering a better customer proposition as well as a cost profile from a cost per delivery.
The second aspect, in terms of the gross margin being the product expense or where we previously have mentioned that since the items or the articles that we sell are exclusive to us, to the vast majority, we have a relatively high degree of pricing power compared to retailers selling third-party brands. That gives us the opportunity to compensate for potential increases in price or, yeah, cost increases just in terms of purchasing prices of the product.
Thank you. Those were all of my questions.
Thank you.
Thank you. Our next question comes from Niklas Ekman from Carnegie. Go ahead, the line is now open.
Thank you. Just to follow up here on if you can elaborate a little bit about the trend you've seen during the quarter. A lot of other online retailers seem to indicate a decent start, and then things fell off a cliff around the twenty-fourth of February, and then it's gradually improved a little bit since then. Is that something you recognize in kind of the sales trend during the quarter?
To a certain degree, yes. I think it's important to remember that maybe outside, maybe not so much in Sweden, but even to a certain degree in Sweden, energy prices really started to become an issue for many households already towards the end of last year, thinking about electricity, thinking about gas, et cetera. It wasn't that the start of the quarter from that perspective was all fine and dandy, to be fair. Of course, the overall sentiment during the quarter had an increasingly downward trajectory, though.
Okay. Thank you. The second question is, just, if you have any insight into how physical retail is doing? I'm curious how much of the weakness we're seeing here is just a shift from online back to physical retail after COVID restrictions were removed, and how much of this is a general drop in sentiment. Do you have any insight there?
Not any specific insight. Of course, there are a few anecdotes that I've picked up and observed, so to speak. I think in general it seems that value for money is becoming very important for consumers. Of course, that from a just pure logical perspective could make sense, that when discretionary income becomes tight, most households really start looking at, okay, where can I get the most value for money? Those propositions in general seem to have fared the current climate slightly better than others.
Okay. Thank you. Thank you. A third question, just if you can provide some more information here about Henrik leaving the company after a fairly short period of time. Can you elaborate a little bit about the reason for leaving the company?
Sure. Happy to. It's a sort of mutual that Michael and I have been discussing for a while and for various reasons. We do not think that it's a perfect fit on either end. We're both better off separating and going our separate ways.
Okay. Fair enough. Thank you, and then thank you for taking my questions.
Thank you.
Thank you. If there are any additional questions, please press zero one on your telephone keypad. There will now be a brief pause to register further questions. Thank you. At this time, there are no further questions. I will be handing over to the speakers. Go ahead.
Thank you. We have received a question via email. The question is: Given your strong cash position, positive earnings and falling share price, do you consider buying back shares an option? The short answer is yes, but it's unfortunately not possible with us being listed on the Nasdaq First North Premier Growth Market. It's not an option. Good. Nothing else then? Okay. No, we will end the call here. Again, thank you everybody for listening in, and looking forward to also interacting with you moving forward. Thank you, and have a great day.