Hello, and welcome to the presentation of RevolutionRace Q4 result for 2021, 2022. Throughout the call, all participants will be on listen-only mode. At the end of the presentation, there will be an opportunity to ask questions. If you have any questions, please press zero one on your telephone keypad. Today, I'm pleased to present acting CEO Paul Fischbein, and CFO Jesper Alm. Speakers, please begin.
Thank you, operator. Good morning, everyone, and welcome to this conference call, where we will address the fourth quarter and full year results of the fiscal year 2021 and 2022 for RevolutionRace. My name is Paul Fischbein. I am, as of this morning, the interim CEO, and today, I'm also joined here by the company's CFO, Jesper Alm. Before we comment on the report, let us start with the news that were announced last evening. The company's CEO and co-founder, Pernilla Nyrensten, has decided to step down from the CEO role. She will remain in the board and therefore continue to play a very active role within the company as an active shareholder and board member.
When she announced her resignation, she also asked the board that her wish was to step down from the operational role immediately. The board, therefore, decided yesterday to appoint me as an Interim CEO, and during the interim period, Andreas Källström will take my role as the Chairman of the Board. The process of finding a new CEO starts immediately, and we expect that the process of getting a new CEO on board will take some months, even if we cannot commit ourselves to an exact time period. We have a strong management team and a whole team who remain intact, and also a board, including Pernilla, with long experience from both the company itself and e-commerce and digital businesses in general.
Moreover, as Pernilla is one of the major shareholders and will stay within the company as an active board member, we continue to have full access to all her knowledge and expertise. Therefore, we are very confident that we will face a very orderly handover process and smooth transition period. I would now like to take the opportunity on behalf of the whole board to thank Pernilla for her fantastic achievements as both co-founder and CEO of RevolutionRace. Pernilla and Nicklas Nyrensten started the company less than 10 years ago, and today we stand here with a public company with sales exceeding SEK 1 billion and deliver earnings of SEK 370 million per year. RevolutionRace is now well-established, is a well-established brand among consumers and has a strong team and foundation to deliver future success.
We in the board have enjoyed very much working with Pernilla and now look forward to continue to work with her in her new role as a board member, where she will have an extra focus on her expertise areas, sales and marketing. Pernilla likes to start these presentations with a short video, which we would like to do today as well. Now, I would like to address the Q4 and full financial year of RevolutionRace. We are very proud to report RevolutionRace earnings for its first year as a listed company. In short, we are very satisfied to see that for the full year, net sales grew with 48% to SEK 1.3 billion, and gross profit rose to SEK 963 million, corresponding to a gross margin of 72%.
EBIT amounted to 367 million SEK, corresponding to an EBIT margin of more than 26%. This performance outperformed our own expectations and objectives that we defined a year ago. We are also pleased, as a result of this strong development over the year. That the board of directors also proposes a dividend of 0.77 SEK per share, which is an increase compared to last year's dividend. First, for those who are not familiar with RevolutionRace, I would like to begin with a very short introduction. RevolutionRace is a digital native international D2C and active outdoor brand. We sell quality products with an unmatched value through a digital D2C business model, meaning that we skip the middle man.
We operate with 18 localized web shops and sell our products in more than 35 countries. Similar to previous quarters, we see continued strong growth outside the Nordics, and during this fiscal year, the region DACH grew from 40%-50% of net sales, and the rest of the world region grew from 15%-17%. Since the IPO in June last year, we have delivered on all strategic goals as set out ahead of the IPO. Not only have we outperformed in terms of total net sales, we have also continued our geographical expansion, both through an expanded partnership with Amazon and by adding three new markets. Switzerland, which was launched in Q2, is our most successful launch ever.
During the year, we have also expanded our product assortment, and in addition to adding new colors and items to existing categories, we have also successfully launched two new product categories, Shoes and Bags. Over the year, we continued to work on developing our product strategy. For some time, RevolutionRace has been building a product range designed to attract people with active lifestyles. The company's range is divided between Base, Pro, and Statement according to product specifications and target group. The division gives us access to a large target group and means we can offer something for everyone. Our digital know-how, our customer communication, and positioning are important components to build a strong brand and to further strengthen our brand position over the year. Tonality and feeling on various social and digital platforms enable us to continue increasing market shares.
We continue to produce high quality content for social and digital platforms in-house, and that adds a further dimension to the overall RevolutionRace experience and cuts through the noise, which is critical to our success. Now, let's look at a few operational highlights. As I mentioned, during the last financial full year, we outperformed our own expectations and succeeded in increasing our sales by almost 50% to exceed SEK 1.3 billion. At the same time, we maintained a strong profitability. EBIT for the full year rose to SEK 367 million, which is an increase of 59% compared with last year. Gross margin rose to 72.3%, and EBIT margin was 26.3%.
We believe the performance was very strong, taking into account the sad war in Europe, supply disturbances, and other macroeconomic challenges during the year. This was also somewhat mitigated through an increase in investment in our inventory level. During the last quarter, we are pleased to see that the profitable growth continued, even though we at the same time see that external uncertainties have accelerated. Net sales for the fourth quarter increased by 16.2% to SEK 318.2 million. Adjusted EBIT amounted to SEK 73 million. EBIT increased by 9% to SEK 73 million, corresponding to an EBIT margin of 21.3%. Now, let's take a quick look at our markets in Q4.
In our most important market, the DACH region, net sales increased by 37% to SEK 167.4 million, accounting for 53% of total fourth quarter sales. The rest of the world region also reported strong sales growth of 35% to SEK 51 million. In the Nordic region, sales decreased by 12%. This is due to successful and focused marketing efforts outside that region. I also would like to highlight one of our most important KPIs, which is the average net order value. It increased to SEK 774, Swedish krona, from seven hundred and forty Swedish krona, mainly thanks to a favorable market mix.
Q4 generally has a lower average order value compared to other quarters as a result of increased sales of products with lower price points such as T-shirts and shorts. With that, I would like to hand over to the company's CFO, Jesper Alm, who will now present and walk through the financial performance. Jesper, please go ahead.
Thank you, Paul, and good morning, everyone. I will talk you through our financial performance during our last quarter of the year, starting with our financial targets and dividend policy. Ahead of the IPO, the board of directors established our long-term financial targets related to net sales, EBIT, and dividend. Net sales during the financial year 2023-2024 shall amount to at least SEK 2 billion. The company shall maintain an annual EBIT margin of at least 25%, meaning an EBIT of SEK 500 million in 2023-2024. RevolutionRace intends to distribute 40%-60% of profits for the year.
When summarizing the last financial year, we conclude that we're on track to deliver on the net sales target and the EBIT margin for the year exceeded the target at 26.3%. In addition, the board of directors proposes a dividend of 0.77 SEK per share or 87 million SEK in total, corresponding to a payout ratio of 30%. Moving on to net sales development during the quarter, which was 318 million SEK, which is a very healthy number for us, taking us to a full year number of more than 1.3 billion SEK. This is for the quarter, a growth of 16% in net sales and 14% in local currency.
Global supply and logistics situation continues to be challenging for especially new products when it comes to lead times, but we have a healthy inventory situation of primarily the running assortment. Looking into gross profit, we notice a strong development with a growth of 14% during the quarter and 48% for the full year, taking us to SEK 230 million in the quarter and SEK 960 million for the full year. We've seen positive impact from market mix and negative impact from price reductions during the quarter. Moving on to operating expenses, and here we see an increase in personnel expenses compared to previous periods as a result of recruiting to meet the company's continued growth.
When looking at the right-hand side, we see that other external expenses, which is a larger share of the total cost base, have increased primarily as a consequence of higher marketing expenses relative to net sales. EBIT amounts to SEK 73 million for the quarter. Both adjusted and unadjusted EBIT is the same, and we have no adjustments throughout the quarter. The EBIT margin for the quarter was 21.33% and somewhat lower than previous quarters, but still at very healthy levels given the current macro environment. For the full year, we deliver an EBIT of SEK 367 million, corresponding to an EBIT margin of 26.3%.
When it comes to the balance sheet, we see minor movements overall, but I will highlight some topics on the following slides. Net working capital as percentage of sales is flattening out compared to Q3, which is a good sign and also in line with strategy. First topic to be highlighted is related to inventory development. As discussed over the past quarters, we have performed a planned inventory buildup from unhealthy levels a year ago. The reason for the increase is to mitigate the supply chain challenges, but also to cater to two full warehouses as well as smaller hubs that we have. As mentioned on the last earnings call, we expected this increase to slow down during Q4, but have not yet reached this point, mainly due to increased goods in transit.
Our cash position increased from SEK 71 million to SEK 75 million during the quarter. Cash flow from operating activities amounted to SEK 46 million, where the operating result was offset by increased net working capital. Cash flow from financing activities was -SEK 41 million, and that's mainly attributable to repayment of borrowings. During the quarter, we have expanded our total credit facility from SEK 300 million to SEK 600 million to increase financial flexibility and to support the company's continued growth.
We have, at the same time, extended the facility by one year to the fourth quarter of 2027. Well, since this is the last quarter of our financial year, the dividend proposal as Paul has pointed out was 77 öre or 0.77 SEK per share, to be decided by the AGM in November. The proposed dividend is for a total of SEK 87 million, 30.2% of net profit for the full year. And corresponding to a 20% increase compared to last year's dividend. I think that sums up my part now, and I'll hand over back to you, Paul.
Thank you, Jesper. In summary, we are very proud and satisfied with the performance during both the first financial year as a listed company and also the last quarter of the year where we saw that the growth story continued. We have a clear focus on customer satisfaction and are pleased to see that it results in high engagement among our customers. We have a strong brand position. Our financial position is very strong, and we now look forward to an interesting future where we believe that we are well-positioned to continue to increase market shares. Looking ahead, we are very humble in facing the macroeconomic challenges currently prevalent in the world. These entail reduced purchasing power among consumers as a result of rising inflation, for example.
The cost of digital marketing is also increasing, which may affect our margin in the short term. We see that online sales volumes have generally decreased, and it is likely that RevolutionRace may also be affected by this. We therefore expect that in the short term, the sales growth rate may gradually slow down the upcoming quarters. In fact, in July 2022, we noticed lower sales growth compared with the quarter that recently ended, that is Q4 2021, 2022. This said, we are very convinced that RevolutionRace is very well-positioned for future profitable growth. We have our sights set on continuing to grow profitably over each quarter and year, and therefore look forward to the future with great confidence. That concludes our comments on the result.
Before we finish, I would like to take the opportunity to also thank the whole team at RevolutionRace for a fantastic performance during last year. It was very impressive to see. With that, we are now happy to answer questions. Operator, do we have any questions?
Thank you, Paul. If you do wish to ask a question, please press zero one on your telephone keypad. If you wish to withdraw your question, you may do so by pressing zero two to cancel. The first question come from Niklas Ekman at Carnegie. Please go ahead. Your line is now open.
Thank you. Yes, I have a couple of questions. Firstly, I'd like to start with the CEO resignation that was announced here. Obviously, you've had 7 fantastic quarters behind, and this is the first quarter with a slowdown. I'm trying to understand this decision to leave the company immediately the night before the results. Why not ensure a gradual transition, rather? Is there any dispute that has been behind this, or can you elaborate a little bit more here just so we can understand from the outside what is going on? Thank you. That's my first question.
Maybe I'll start to answer that before we go on with your next questions. First of all, of course not, we don't have any disputes with Pernilla. In fact, we have a very strong relationship, and we look forward to continue to work with Pernilla as a board member. She will be a very active board member. With that, especially focusing on her areas of where she is an expert, which is sales and marketing. It was Pernilla's explicit wish to actually step down with immediate effect as of today.
Pernilla, it's her conviction that if you don't feel 100%, and to do the role 110%, maybe it's better to pass it on immediately. Of course, I mean, it's her decision. I know that she's been very active this morning with answering questions about her decision. I guess we should forward the questions to her, and I'm sure that she will address the questions. Rest assured there is no conflicts or disputes behind this decision, if that was the question.
Okay. Yeah. That's fair enough. Thanks for commenting. That's much appreciated. Second question, can you talk a little bit here about current trading? Is there any way you can quantify? You're saying that growth in the start of Q1 here is slower than the 16% growth you reported in Q4. Is it a tangible slowdown? Can you maybe talk a little bit about the monthly trend here in general? Have you seen, in general during Q4, is it a gradual slowdown throughout the quarter? Was any month worse than the others, or can you just try to help explain the trend here? Are we seeing a gradual deceleration or how should we look at the trend you're seeing now?
I can address that question as well. I would say that we are very confident. First of all, we have our financial goals, which means that we have an objective to reach sales of at least SEK 2 billion for the financial year 2023 and 2024, which is not that far away anymore. At the same time, our goal is to maintain an annual EBIT margin of at least 25%. I think that's an important component to understand, and we are still confident about that. At the same time, we definitely see that we will continue to grow. We will continue to grow profitable each quarter and year. We look forward to the future with great confidence.
On a very short term, we do see that in the beginning of this quarter, the Q1, we see that growth rate have slowed down, and in fact, is lower than the growth rate we saw in Q4 last year, which was 16%. You're asking me to quantify. I can actually say that since we are confident that or our goal is to continue to grow, you could sort of say that it's between 1% and 16%, something on a very, very short-term basis. Because that is what we are actually saying in July.
Okay.
Uh.
Yeah, yeah. Fair enough. Another question here just on the inventory. It's up now 20%, quarter-over-quarter, and then sales growth is slowing. Do you see a risk of significantly increased markdowns, or is this more a normalization as you see it, obviously from exceptionally low levels one year ago? How should we view this? Is there any risk that you have now gone from having too little inventory to having way too much inventory?
No, my comment is that we definitely see that the inventory level will flatten out going forward. We will, of course, make sure that we are ready for the peak season in Q2. You can expect the inventory level to flatten out. We definitely do not see any sort of risks or something, if that was your question. Your question on the inventory itself, since such high share of sales is based on running assortment. We feel very confident both with the inventory level but also the inventory mix. As you said, it was too.
Okay
It was too low a year ago, and we now feel that we have a healthy level, but you shouldn't expect it to increase significantly, more to flatten out.
Excellent. Thank you so much for taking my questions.
Thank you.
Thank you. The next question comes from Benjamin Nordin at ABG. Please go ahead. Your line is now open.
I believe two names were mixed up there, but that's all right. I can just ask one more question on the July growth figure. You're right that the current quarter has started off softer with July growth below the quarter's growth. Like, my question is, was last July exceptionally strong, or was it more in line with the quarter overall? Just to get a bit more flavor on that, please.
I will actually pass that on to Jesper, who was CFO a year ago. I'm not sure that we disclosed the monthly numbers a year ago, but maybe you want to elaborate a little bit on it, Jesper.
No, we haven't disclosed last year's July sales, but it was not exceptional in either direction.
What we do see, we often don't want to talk about the weather and how hot it is, but it is exceptionally warm right now, at least in the Nordic region. It is helpful for the company if the heat slows down a little bit, 'cause as I mentioned in the beginning, shorts and T-shirts and those kind of products do have a lower average order value than our products for maybe a little bit cooler season.
Absolutely. Perfect. Just one question for clarification as well. Inventory levels flattening out, you mean that as in absolute terms, right?
Yes. During the year.
Yeah. Okay.
On a quarterly basis, you could expect some, you know, preparations for seasonality effects, for example, prior to the peak season in Q2.
Yeah. All right. Perfect. Got it. I believe that's all for me. Thank you very much.
Thank you. Just as a reminder, if you do wish to ask a question, please press zero one on your telephone keypad. The next question comes from Daniel Ovin at Nordea. Please go ahead. Your line is now open.
Yes. Good morning, Paul and Jesper. I have one question here on sales and your medium-term target here, 'cause you're now aiming at SEK 2 billion sales in the year 2023-2024, and I calculate that you would need to grow sales by a CAGR of about 23% to reach this number. Given that we see this slowdown also going into the next financial year and consumers being relatively weak, I just wonder how what do you base this assumption on. Is it mainly on the high growth in new regions, or is it on new categories, or how do you think about your view on reaching this target. That's my first question. Thank you.
Well, first, we don't base it on a one month, slower one month, that's for sure. We are still very confident of reaching those levels. We are used to operate with higher growth rates than we saw in July. I think we base it on a mix, but I would like maybe to highlight that I've been working with e-commerce for almost 20 years, and in fact, I've seen that brands and e-commerce companies often tend to sort of getting an advantage of maybe turbulence and challenging times. What I'm trying to say is that I think that RevolutionRace is very well-positioned to actually grow faster than the market and increase market shares.
I think you can say that it's not based on like one single component. It's based on a higher overall level, and especially that I think that we are very well-positioned to continue to grow. We have very good relations with our customers, with our suppliers. We have good engagement, high product ratings from customers. I think it's very much based on the fact that it's a very strong brand in general. I don't know, Jesper, if you want to add something on that.
No. Yeah, yeah, well, of course. Continued growth overall, new products, new product categories, increasing online penetration over time. There's a number of factors in our advantage.
Yeah. We also have actually a number of new markets and countries in the rest of the world region who are still small, but they are growing very fast. When they start to grow bigger, that will of course also have an impact on the total growth numbers.
Okay, perfect. Thank you very much. One question here also on the inventory level here that you seem to feel quite confident even though that number is up quite a lot if you could look at last year then. I'm just wondering what you're seeing in the industry. Is your feeling that your competitors overall are also sitting on a high inventory levels? Perhaps have you seen already in Q4 that the level of markdowns has come up? I think you wrote in the report somewhere that the gross margin was a bit under pressure by campaigning. I just wonder if you can elaborate a little bit around that. Thank you.
I think it's difficult for me to comment on that. I'm not that into the details of the competitors yet. I often tend not to comment on competitors. I don't have, please bear with me and excuse me for not having all the answers today since I'm very new to this assignment. I don't really have any comment on the market development in terms of price pressure. We haven't seen.
Okay.
Any significant sort of patterns in that direction from our side.
Yep. All right. One question also on the OpEx side here. I noticed here that OpEx grew quite much faster than sales here. I'm just thinking a bit forward here. I think you also mentioned that marketing costs were up quite a lot here. How do you think about the OpEx levels going forward? I mean, do you have any cost saving plans or do you have any? I mean, how do you think about continuing to invest in marketing, et cetera? I'm just trying to get a feel here for how easily you can adjust that OpEx level. That's the third question. Thank you.
I can elaborate a little bit on it, even though I'm very new. I mean, we have invested quite significantly over the year in increasing headcounts. That of course is to facilitate the higher volumes that the company is operating on compared to a year ago. I think that's very natural. However, having said that, we feel that we have, at the same time, also invested in our infrastructure. You could definitely sort of on a high level basis expect that to flatten out. At the same time we have and will continue to invest in our brand.
We, as we mentioned in the report, we have seen that the cost of digital marketing has increased lately. At the same time, we have also chosen to continue to invest in our brand and not only on sort of short-term sales performance activities, but also on the more long-term brand building activities. We will continue to do that, of course. We are here for the long term and I think it's important to continue to invest in the brand, since our brand and our product is maybe the two most important components for the future success. As I-
Mm-hmm
also as I mentioned before, we actually see these sort of macroeconomic challenging times as an opportunity for the company to increase market shares, and we want to grab that opportunity on a short-term and midterm and long-term basis. Of course, also balance that to uphold a decent profitability going forward as well. It's a balance.
All right. Okay. Just one last question, if I may also that, I also noticed that you only choose to pay a dividend of 30% of the profit for the last financial years, whereas your guidance is 40%-60%, and you're also running with a net cash position. I just wonder a bit of how you have reasoned around this. That's my last question. Thank you.
Sure. No problem. I can actually comment on that. As you know, we intend to distribute between 40% and 60% of the profits for the year. At the same time, we also say that we have to take into account growth or investments in growth opportunities and strategic initiatives. We definitely feel that our increase in investment in increasing our inventory level is maybe the most important strategic initiative that we have taken so far in this company's life cycle. We have taken into account that the inventory level have actually increased by a couple of hundred million SEK during the year. Therefore, we have taken that into account when we decided on the dividend level.
We still feel that the baseline is sort of 40%-60%, taking into account these investments. We land in a balanced 30% dividend of the profit for last year. That is how that decision was based.
Perfect. Okay. Perfect. Thank you very much. That's all my questions.
Thank you. There are no more questions at this time, so I hand the word back to the speakers for any concluding remarks.
Um-
Yes, we have.
Oh, we actually have a question from online. Is that correct?
That is online. To comment on the negative growth in Sweden.
Okay. I can comment on that. As we did in the last quarter, we always choose to focus on marketing efforts on markets or regions where we feel that we get higher returns on those investments. We do feel that we have gotten higher returns in other markets. That is, I think that is more of result of our refocusing those efforts in our other markets. I would say that is sort of the major explanation behind that. Do we have any other online questions? No. Okay. That concludes the question and answer session. I guess I can conclude with saying that we are seeing exciting days and look forward to the coming months.
I would like to say thank you to all for participating today and for your interest in us. We look forward to speaking to you again over the coming weeks and months. May I also remind you that our Q1 report will be announced on the eighth of November. With that, thank you.