Good morning and welcome to the RugVista Group Q2 2022 earnings conference call. All participants will be in the listen-only mode. Should you need assistance, please signal a conference specialist to press 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 questions, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Michael Lindskog, CEO of RugVista Group. Please go ahead.
Thank you very much. Good morning, and welcome everybody to our earnings call for the second quarter this year. If we turn to page 2, let me please give you an introduction on the second quarter and some of the highlights. I think, as most of you have probably been aware of, is that retail has been very challenging so far. We continue to see that the market conditions are very challenging and we experienced an especially challenging second quarter.
However, our focus has been and definitely very much in the near term will be to effectively navigate these conditions. I think to start off, of course, the macroeconomic climate deteriorated further during the quarter. That of course impacted the overall consumer demand. What we have seen is that, for instance, consumer confidence is at or close to all-time lows in many of our key EU markets. Inflationary pressure is resulting in reduced purchasing power. All these factors combined with of course the political unrest or geopolitical unrest is pushing down demand.
One indicator that we have access to is that we are seeing search volumes down 15%-20% in many of the key markets during the quarter. The second of course is that our growth was impacted by these conditions. We ended at net revenue of SEK 21 million, which is close to a 14% decline. Our organic net revenue growth landed at -15.6%. If we talk a little bit about our profitability, again unfortunately we had some external factors affecting that. Number one was our gross margins were down about 4 percentage points.
There we had some internal as well as external factors with number one of course higher discount rate compared to last year. We had some category mix effects, continued high costs for customer deliveries due to the fuel surcharges, in addition to a sharp appreciation in the US dollar, which impacted our sourcing prices. Second is that advertising intensity continues to be high, which impacted our marketing spend ratio. Should be noted that the ratio did decline slightly compared to Q1. With the lower top line, we are seeing negative at scale effects on our more fixed cost items such as personnel.
Final note on the margin is that Q2 historically and typically is our seasonally least profitable quarter. We were impacted also by external factors this year. However, I think it's important to highlight that we have a very strong financial position still. We are an organization or a company with no debt to financial institutions. We have about SEK 82 million in net cash position, and that's even after the challenging year to date performance, as well as executing the SEK 52 million dividend payout during Q2.
One definite highlight though is that we continue to really deliver on our number one priority, which is maintaining and keeping our customer promises. That's really proven by the fact that we maintain an all-time high NPS value of 68. Let me first then move on to giving you a bit of a business update. Let's move to page 4, please. Just to start off, keeping track of our long-term KPIs or our KPIs related to our long-term ambition. Here we can see again that on the left-hand graph that our NPS or customer is still at the all-time high level of 68.
Trustpilot score continues to be at a very high 4.8. Both of the metrics that we use to track customer satisfaction are still outstanding. In terms of the order count, as well as attracting new customers, we did see those KPIs decline compared to last year, as being very much in line with the overall market conditions. Page five, please. Again, a bit of a deep dive into these market conditions and highlighting the declining and deteriorating consumer confidence. We used this or we discussed this topic during the Q1 presentation as well.
Of course, at the end of Q1, we had seen the numbers deteriorate. Unfortunately, the situation became even worse during Q2. which we can see here on the graph and highlighted by Sweden, Germany and France with all of these three markets showing all-time lows or near all-time lows. As I mentioned, the declining consumer confidence, the inflation, higher inflation interest rates, et cetera, it is all resulting in consumer demand being lower, as indicated by the fact that we do see search volumes down 15%-20% compared to last year. Page six, please.
In terms of marketing spend and marketing spend ratio, here highlighted by the cost per visit and how that developed. If we look at the figure for Q2 at the very right of the graph, we see that it landed at 6 on average, SEK 6 per visit, which is a marginal decline compared to the previous quarter and a slight increase also compared to last quarter. As the graph also shows is that really Q2 2021 is when this kind of new, let's call it new or current CPV rate was established. That is kind of the situation where we're currently at.
If we move over to some of the financials, a little bit deeper into the financials. Let's move over to page 8, please. As we said, the challenging market is and has affected our top line. We ended with group net revenue of SEK 21 million. We did see some increase in terms of the increase compared to last year within the B2B segment that grew almost 9%. MPO, as well as the B2C segments, were down however by about 16% as both those segments target private customers.
On a regional level for the B2C business, which is the vast majority of our revenues, we can see that both the Nordics and the DACH region had relatively sharp declines compared to last year. We are however seeing in rest of world some highlights with some of the markets in especially rest of Europe are performing at least relatively well. If we move to page 9, please. Focusing in a bit on our gross margin.
Gross margin for the group for the quarter was 60.1%, which is a 4 percentage point decline compared to last year. The decline was really driven by two main factors with number one, the higher product expense ratio, as well as shipping and other cost increases. When it comes to the product expense ratio, we have experienced higher discount rates compared to last year. There are some category mix effects and also some effects within the categories. With the USD appreciation, it's been driving higher inventory sourcing costs.
Customer deliveries are still up due to the fuel surcharges primarily. Just one quick note on the segment gross margins. We see that the MPO segment is especially negatively affected by the increase in customer deliveries, and that's driven by the geographical sales mix within that area. If we move to page 10, please. Looking a bit or highlighting some of our cost items in the P&L. We mentioned or I mentioned that our EBIT margin landed at 0.4% for the quarter.
That was a sharp decline compared to last year. We've talked about the gross margin decline of about 4 percentage points. We had an increase in other external expenses, which primarily was driven by the marketing cost ratio increase, but also recruiting expenses and as well as costs related to hosting and preparing our first public AGM back in May. Personnel expenses are also up compared to last year, about 5.5 percentage points. A combination of multiple factors.
Of course, number one, that we are more people compared to last year, and one could potentially argue that we were slightly understaffed last year. We, and of course, with the lower top line, we are seeing the negative scale effect. When we also had some additional costs related to the CFO change. Then finally, I think, as I mentioned earlier, the second quarter has historically been the seasonally least profitable quarter for us. We had some additional external factors impacting profitability for sure. If we move to page 11, please.
Here I want to give everybody a perspective on our rolling twelve month. As we can see, especially with the focus on rolling twelve months EBIT, we of course with the performance here today, the rolling twelve month number has declined, but the 12.8 percentage point is still a very healthy margin. As I mentioned, the second quarter is typically the seasonally least profitable. If we move over to page 12, please. Taking a deeper look at our balance sheet.
We increased our inventory by about SEK 90 million during the quarter. That pushed our inventory as a share of LTM net revenue t o 24.8%, which is an increase compared to last year, but also compared to our starting point for the year. That's slightly above our target range of 17.5%-22.5%. Besides the increase in absolute numbers or value of our inventory, the real culprit here in terms of being slightly above the target range is the lower top line.
However, as we've mentioned before, our inventory risk in terms of fashion trends and et cetera is very low. The fact that we actually have a healthy inventory position is well ahead of the upcoming peak season. Moving over to page 13, please. Strong net cash position. Let's start off on the right-hand graph of the page, where we see that we're still with a net cash position of almost SEK 82 million. That is even after the challenging year-to-date performance as well as the SEK 52 million dividend payout.
If we look at the top left side of the graph, we see cash flow from operating activities. Of course, operational profitability deteriorated compared to last year. We also had a cash outflow from working capital, and that's primarily the inventory build up. Moving over to page 14, please. I'd like to again just give a quick summary and also an outlook. I think number one, we have to admit that, of course, year-to-date market conditions have been extremely challenging and have negatively impacted our operational performance.
Year-to-date net revenue is at SEK 307 million, which is down 11% compared to last year. Our EBIT margin year to date is at 7.2%, which is about SEK 22 million. However, our financial position remains strong. We have no debt, SEK 82 million in net cash. Our rolling 12-month EBIT margin is still double digits, and our inventory position is healthy, so we're well prepared ahead of the upcoming peak season. We have taken actions in order to adjust to the current market. These actions are showing a positive impact on our quarter-to-date performance. Our quarter-to-date being Q3.
We did implement selected price adjustments to counteract the USD, SEK exchange rate development. That of course would have a positive impact on gross margin, and we've already seen that quarter to date. We've further increased our focus on marketing spend efficiency. That has also been an area where we've seen improvements so far in the quarter. We've of course adjusted, reviewed and adjusted our personnel plan for the rest of the year, and really adapted that to the current reality and the current outlook.
Finally, I think I wanna highlight that we did integrate a new system for integrating new carriers that gives us speed and flexibility in that process. In that area for developing a customer proposition. In addition to that is going to deliver cost savings. We see already that being the fact, and we are currently live with the new system in Sweden, Denmark and Finland actually. This rolling out new carriers will be an ongoing activity during the rest of the year.
Finally, we are still very confident that we're doing the right thing by focusing on our long-term strategic agenda while also navigating the current conditions. We will continue to focus on ensuring high customer satisfaction levels as that is our number one priority and we see that as critical for long-term profitable growth. We are working on making major improvements to our customer proposition. I talked about localizing our carrier setup. Of course the new site is our most important project. We have an aim of having at least 50% of our revenue through the new site by end of year.
We are also improving or we have been improving our assortment. During the fall, we'll see many new designs introduced, as well as filling some white spots that we had in our previous offering. Of course, we continue to have a high degree of cost efficiency focus in all areas. With the current situation, that is an extra important priority. With that being said, I think we are, as I said, working on the right actions, making the right adjustments, that I am confident will improve our short- and long-term profitable growth opportunities.
With that, I would like to hand it over for any potential questions.
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 speakerphone, please pick up your handset before pressing the keys. If at any time your question has been answered and you would like to withdraw your questions, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question comes from the line of Benjamin Wahlstedt with ABG. Please go ahead.
Good morning, Michael. Just a couple of questions from me today. A question regarding gross margins. You talk about higher discounts having an impact this quarter. How should we think about this dynamic going forward, given the higher inventory levels we can see?
Yes, that is correct that we did have higher discount rates compared to last year. I think the higher inventory position gives us flexibility in terms of how we navigate the rest of the year.
Of course, pricing can be, or discounts can be a lever to drive a conversion or short-term sales, and will always be a tool that we use. We will try to use as effectively as possible. I think important to mention is that the price adjustments that we did implement were essentially during the beginning of Q3 or end of Q2, right around that area. It had limited impact on Q2 numbers and will have more impact moving forward.
Yeah. Perfect. If we look at Q3 instead then, after the price adjustments, what sort of gross margins would you say we can expect here? And what have the effects of the price increases been on the average order value? If you could just give us a bit more flavor on that.
Yeah. I mean, both of those numbers are improving versus the previous quarter. That is for sure. It was still only about halfway through the quarter. I'd like to not give a clear number until we actually close the third quarter. It should be mentioned that we do have a situation where July, August are typically smaller months, and in September, it really marks the kickoff, let's call it, for the peak season.
Yeah. Perfect. Thank you very much. Another question on the next quarter, perhaps then. You also comment on efficiency gains in marketing towards the latter half of the quarter. Is it possible to get a sense of entry and exit rates in this regard? [cross talk]
We saw a slightly improving CPC or CPV development during Q2 for sure. That is a combination of overall market as market conditions, in addition to, of course, our internal focus and efforts to improve the marketing spend ratio. We've especially seen a positive impact of those efforts so far during Q3.
They are again. We're only halfway through the quarter, but we are at least seeing improvements in that ratio that are relatively significant, I would say.
Perfect. Thank you very much. I believe that's all I had right now. Thank you.
Thank you.
Thank you. Next question comes from the line of Carl Deidenholtz with Carnegie. Please go ahead.
Thank you. Two questions from my side. First, on the current trading going into Q3. You talk about in the report here search volumes aggregated and remarketing down by some 15%-20% in your markets on the top level. Do you see any improvement sort of market-wise there so far into Q3? Because I believe maybe that comparisons were on a year-on-year basis easier in July and August if I remember correctly.
Yeah, especially the second half of 2021 and Q2 was relatively weak for retail in general. I think, again, it's a little bit too early to make a full statement in terms of how Q3 in total will turn out. We are having, well, cautious optimism. It may be a tad bit on the aggressive side. At least we are hopeful that our efforts are paying off in terms of ensuring profitability.
There will be opportunities for improvement in terms of online, rest of the year as well.
Fair enough. The second question's on slide 10. You highlighted a few sort of costs taken here in Q2 that could maybe in one way be viewed as, let me say one-offs, for example, the CFO change here in Q2. Would it be possible to say just on an aggregate level that the cost here in Q2, both on the personnel and other operating expenses that are sort of one-off for you just to understand sort of the underlying profitability ex that.
Yeah. We had of course a discussion with internally and with our auditors regarding what should be classified as non-recurring or one-off costs. And we decided that these things as one becomes more mature are part of business. However, compared to last year of course, they weren't there last year. So the CFO change did not happen last year, so to speak, and the AGM, we did not have a public AGM last year. And so those are both impacting the year-on-year comparison. And the numbers are in.
Yeah, they're not definitely not the double-digit million SEK of course, but they are not insignificant, so more than SEK 1 million for sure.
Okay. Fair enough. I think that was all of the questions from my side. Thank you.
Thank you.
Thank you. If you have a question, please press star then one.
Maybe I can answer a couple of questions that came in through the written line. The first question is in regards to the number of employees and how that developed quarter-over-quarter, and the associated personnel costs, which went from about SEK 17 million to about SEK 20 million during this quarter. A part of that is for sure the CFO change, and the costs associated with that. There could also be effects related to this.
There are also effects related to the salary adjustment period that happened sort of in the middle or in the what's it called between Q1 and Q2 and of course had a helpful effect on Q2 but very limited effect on Q1. The second question that came in was regarding the pilots of new marketing activities that we performed during the quarter. Those pilots proved actually very successful.
We did a little bit of a 360, let's call it, a marketing activity to really push Essentials, which is the value for money product range that we developed and introduced earlier this year. There, in many of the new ad formats that we piloted, we saw very good performance compared to the benchmarks that we had access to. That's promising for the future in terms of over time having an ambition to build a known and well-liked brand.
However, with those type of activities, the return on investment is typically not short term. We will evaluate how those activities will be executed, if at all, during the rest of the year. Any more questions?
There are no more questions at this point of time. Should we conclude?
Yes, let's do that. With that being said.
Can I go ahead?
Go ahead. Yeah.
This concludes our question and answer session. I would now like to turn the conference back to Michael Lindskog for any closing comments. Please go ahead.
Again, thank you everybody for listening. We are aware that year-to-date performance for sure has been challenging and significantly impacted by the macro conditions. We are still very committed and confident in our long-term agenda, and that is what we continue to prioritize, in addition of course to ensure that we effectively navigate the current market. Thank you and until next time. Bye-bye.
Thank you. The conference has now concluded. Thank you.