Welcome everyone to Synsam's Q2 report. Sorry for the technical difficulties. We are now ready to go through the presentation. My name is Martin Daniels. I'm the Deputy CEO and Chief Innovation Officer.
Per Hedblom, CFO of Synsam.
Today's agenda, we will give you a brief business update, go through some of the key drivers of the development, then we will go through the financial part and summary of the key findings and then open up for Q&A. If we go to a highlight overview of Q2 and what we've seen is the first thing we want to highlight is a very strong growth. In a weak market, we have 50.3% growth in Q2, and net sales amounting to SEK 1.399 million during the quarter.
Strong organic growth and an EBITDA margin of 24.5%, almost in line with the long-term target. The quarter has been characterized by continued strong growth in new store rollout. We have opened 11 new stores during the quarter. We've also seen that the subscription model, Synsam Lifestyle, is continuing to perform and be well-received by consumers in times of more economic uncertainty. It's up 27% compared to last year, Q2. During the quarter, we've also launched a Lifestyle 5.0, a targeted subscription model towards pensioners and students. That has been also seen in some of the numbers which we'll come back to. If we go into an overview of the drivers, of course, the Lifestyle subscription continuing to be strong driver of growth and also continuing to be well-received by consumers.
The total net sales of the subscription amounted to SEK 666 million, which is an increase of 27%. We're very glad to see that this model is continuing to perform across all four geographies. I want to highlight Finland, which had a massive increase of 55%, and Sweden, Denmark, Norway, also very strong growth numbers. The Lifestyle sales now represent over 47% of total sales, net sales during the quarters, and the last 12 months backwards. In terms of inflow of customers into the program, we are now at 34% more subscribers active in the program compared to last year.
We have added a total of 30,000 new subscribers during the quarter, and we're also very glad to see that the churn rate continues to be at a stable level, actually decreasing slightly from the previous quarter. Around 2%, which has been the long term level we've seen in the recent years. On top of the pure Lifestyle subscription program, we also have the contact lens subscription model, also continuing to drive strong growth, increase of 30% compared to last year. The active customer base is now 116,000 customers. These are customers. This is a business which is really attacking the online segment in terms of contact lenses.
Here, we are combining the benefits of the online channel, the flexibility for consumers to adjust the frequency of shipments, addresses where they want their lenses sent, and also combining that with the service element of offering the services that we have in our stores. These subscribers get the benefits from online, but also the service elements from the stores. We have last week opened up our production and innovation center on Frösön outside Östersund in the north of Sweden. This is the initiative we've talked about in terms of bringing back production from Asia to Sweden. During this inauguration, we had the Prince Daniel of Sweden.
We also have the Minister for Business, Industry and Innovation, Karl-Petter Thorwaldsson, and of course, our CEO, Håkan Lundstedt, and the Governor of Jämtland inaugurating this fantastic site. Already in September, the first products from this production plant will come into our stores. It is a new brand called Jämtö, which is Jämtland is the county where we are present with the innovation center, and island is in Swedish. That therefore, Jämtö is really the origin of these frames. These products are adapted to the Nordic market on top of the sustainability element of shorter transports, sourcing of material from Europe and so on.
This also gives us a benefit in terms of faster time to market with our collections, and it also reduces risk in terms of logistical chains on the global scale, and also allows us to tie up less capital in inventory. As we have said, the first collection, Jämtö, will be available in stores already in September. With that, we want to show you a short video clip to describe the journey of opening this site. Roll the clip, please. That gives you a description of the journey of taking back a production. As we've seen with the collections we have launched under own brands in the past with the sustainability angle, we see and estimate that this will give us a competitive advantage and drive traffic to our stores.
Coming into the store network, of course, this is the arena where our operations happen. A lot of consumers, of course, continuing to engage with us in digital channels on the website, booking exams, browsing the assortment and so on, but coming back to the stores to do the eye exam and fulfill the sale. Flagship store concept is our biggest store format. We now have five stores at the end of the quarter, and this is a massive destination for consumers. These stores offer a extremely wide assortment and also are at the forefront in terms of optical services.
From that flagship store concept, we launched the Megastore format, which is a format that brings all the benefits from the flagship store format as a broader assortment compared to regular stores, but adding that into smaller locations compared to flagship stores. These are more expandable in terms of applicability in more places in the Nordics, and we now have 26 stores in total at the end of the quarter. We have, during the quarter, just to give you some examples, upgraded existing stores both in Sweden, Denmark, and Finland to this store concept. Again, in addition to the broader assortment, we also have in these stores eye health centers offering more advanced eye health services and applications.
Recycling Outlet, also launched during 2020, continues to be an important part of the store rollout during the quarter in which we opened six Recycling Outlet stores. We now have 20 stores in total across all the four Nordic countries. Again, recapping, this format gives a second life to old frames handed back from subscribers during yearly swaps. Here we are combining the strong demand from consumers to make sustainable choice and also offer lower price points.
This is really an add-on in the local markets where we already have existing Synsam stores, and it's a vehicle for us to attract new customer groups that previously didn't go to Synsam. If we look at the total number of stores at the end of the quarter, we have 520 stores, of which directly owned stores amounting to 487. Again, 11 new stores were opened during the quarter. Summing up some of the numbers coming back to a very strong growth during the quarter, 15.3%, compared to a market which is growing much less than that.
We have seen a gross margin decrease temporarily during the quarter, which was a planned action to launch Lifestyle 5.0 towards pensioners and students, groups that we didn't previously were as strong in as in our core customer groups. Very strong like-for-like growth. We want to point out 9.5% in like-for-like, which is a very strong growth number. EBITDA margin 24.5%, again, affected by the deliberate actions to win new customer groups. If we then take that Q2 into the first half, it's an overall very strong growth, 15.0% growth, a gross margin of 76.2% and a like-for-like which over the first half amounting to 8.9%, EBITDA margin 24.5%. With that, I hand over to Per to go through more details on financials.
Thank you, Martin. We have to go into the segments, the countries, where we see that Sweden has had a very strong growth, organic, with a lot of new stores and of course like-for-like above 10% year to date and above 13 like-for-like in Q2. More than 16% organic growth in Q2. Also increased EBITDA for the quarter and year to date. Finland, very, very strong growth. Over 50% organic growth in second quarter, 13% like-for-like. Of course the difference is the large amount of new stores in Finland, but not only growth from new stores, but as you can see, strong like-for-like as well. We have almost maintained profitability in Finland even though we've had this massive expansion of new stores.
We are almost on par with Q2 last year as well as first half last year regarding EBITDA. Denmark, Norway, somewhat slower growth, although in Denmark year to date over 9% organic. Almost the same profitability in Q2 in Denmark, somewhat stronger year to date. Norway, lower profitability. You can see also that we have now almost same number of stores in Denmark and Norway. We have 238 stores in Sweden and 45 stores now in Finland. Strong growth in Finland. Going down into the detail, we talked about the numbers several times. Martin has mentioned the overall development. I would like to dive into the OpEx and the gross margin. We've had higher OpEx in Q2. Result has been affected by higher operating costs.
This of course relate to the expansion of new stores. Well, we have 11 in Q2, but we've had large number of new store openings in Q4 2021, Q1 2022 as well as Q2. These are in the ramp-up mode. Therefore, they have higher costs to sales than other stores. This also includes a strong expansion in Finland of course. We are actually now sitting here in the production facility in Östersund. That's where we're broadcasting from. The inauguration was the August 17th. That is we prepared for this launch in sort of trained the personnel and prepared for the production in July, in Q2. This will continue in Q3 as well.
Q2 has then been affected by the startup costs in the new production, which was expected and which we have communicated before. This will continue also, and we have mentioned that by the way in the report that will have further effects in Q3 than we're now only launching. Cost of opticians is important. Opticians is a key factor and there is a lack of opticians. We are focusing very much on solving capacity issues and therefore there is a higher cost for opticians. We increased our marketing efforts. We have some extra electricity costs, but that's not substantial. This basically explains the increase in OpEx percent of sales.
As Martin pointed out, we have targeted pensioners and students as part of a launch for Lifestyle 5.0, which has temporarily negatively affected the gross margin. I want to mention that, I mean, we are in a competitive market. If competitors launch campaigns, we cannot stand still. This effect, though, was planned and something we did specifically to launch 5.0. Want to mention that. Going quickly into long-term financial development. We have now passed, we are above SEK 5 billion in sales last 12 months, an increase of 16% compared to the previous last 12 months. Strong increase in growth in sales.
EBITDA, Adjusted EBITDA, about 1.3, or more specifically, SEK 1.311 billion. 26%, roughly, Adjusted EBITDA margin. That's above our financial target. EBITDA almost on same level as from 2021. The cash flow and financial position, we had a stronger cash flow in Q2 compared to last year, and that's very much to do with working capital, positive effect in working capital. Net debt increased to above SEK 2.9 billion, compared to around SEK 2.6 billion a year ago and around SEK 2.4 billion at the end of 2021. I want to remind everyone that we had a dividend of SEK 255 million in the second quarter. We have increased our lease liability.
I mean, we have opened a lot of new stores. Also this facility, the effect of the rental agreement for the production facility came into effect in Q2, affecting lease liabilities. That's an increase. Then we have the currency effects on the Swedish krona, since we have some loans in other currencies to the banks. These are some explanations of the increase. I also want to highlight that regularly, we in June have the lowest cash and the highest net debt because of the increase in inventory due to summer season. That is normal, and these effects are then adding on to that one. That's basically a highlight for the cash flow and financial position. By that, I hand over to Martin again.
Thank you, Per. Again, to summarize the key points of Q2. Synsam continues to show a very strong growth. We are strengthening our market position in a very competitive marketplace. The subscription model continues to be a strong driver for us. We're seeing it be even more attractive and fulfilling more functions now in times where consumers are experiencing more financial uncertainty. Our store concept portfolio is powerful and adding to our success. The omni-channel model and the strong digital tools complementing the store concept continues to be a strong driver for us.
Of course now, with the production center being up and running, and the first spectacles being produced, we see a very strong opportunity for us to continue to drive traffic and sales of own brands starting in the beginning of September. With that summary, we open up for Q&A. Operator, please moderate any questions from the audience.
Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your touch tone phone. If you are using a speaker phone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. Again, if you have a question, please press star then one. Our first question will come from Ajay Nandal with Citigroup. Please go ahead.
Good morning, gentlemen. Hope you can hear me.
Yes.
Yes. Yes.
Great. I have a couple of questions, and I would like to take them one by one, if that's fine with you.
Yes.
The first one is on the macro condition. Have you seen any shifts in consumer behavior in terms of trading down to cheaper glasses or anything like that yet? Or has that not impacted you yet?
I can start.
Yeah.
We're continuing to see a strong demand for customers wanting to come to our stores. Of course, as you are alluding to, there is some mix effect where some consumers are looking at lower price points. Also we're seeing that the subscription model adds a lot of certainty to consumers. The opportunity to not invest a high amount of money for a cash purchase, but rather go for a monthly fee is continuing to be a strong options. We've seen, as we said, a strong customer inflow in that customer group looking for subscriptions. I think two components of some trading down, but also people trending towards the subscription a bit more than we've seen before.
Got it. Thank you. My next question is on the Lifestyle 5.0. How is this iteration different from versus the previous iteration in terms of customer proposition? Like how many spectacles does the customer have to buy? What is the lock-in period, et cetera? If you can highlight any key differences.
Yeah. The overall logic and model of the subscription is similar to the previous version. This is a sort of targeting of the offering and packaging of the offering towards an elderly population and also a younger student population. It's a packaging and adaptation, you can say, of the existing model, but targeting those customer groups in which we haven't been as successful in the past.
I remember at the time of listing, I think the average spend per customer on Lifestyle was around SEK 500. Do you expect that spend to be maintained in this plan also? Or can it be slightly lower than that given that the target is younger population?
I would say that we have as a strategy to broaden our customer base in general. This is just one step in that direction. If you look at students, one could assume, although we don't have sort of specific data on that, it could be somewhat lower spend per customer per purchase. Pensioners maybe, but they also are progressive customers which need higher-end lenses. It's not obvious that they should give a lower ASP. However, that being said, our strategy is to broaden our customer base and, by doing that, not being seen as expensive, being seen as value for money. I will say we do not aim at maintaining a certain ASP level for Lifestyle.
We aim at increasing number of customers. Of course, that is the best CRM tool we could have, and we also strongly believe it's the best value for the customers as well. We want to broaden our customer base, more customers, once again, not striving to maintain ASP. Then you can sort of deduct what I mean. We can't really forecast either, but I mean, if we need a lower ASP to reach more customer groups, then that might happen, yes.
Got it. Thirdly, in terms of margins, I understand that the Q2 was impacted in terms of gross margins by the sort of Lifestyle 5.0 rollout. How should we think about the margin trajectory in second half, both in terms of gross margins and EBITDA margins?
Yeah, okay. Sorry. Could you rephrase your question, please, so I answer the right way? Sorry. Please.
Yeah, sure. I just want to understand how should we expect the gross and EBITDA margins to trend in the second half of the FY 2022. In terms of gross margins, will the 5.0 rollout continue to impact the gross margins?
Okay. Do you mean the third quarter?
In Q2 when you reported? Yeah.
Did you mean the third quarter? Yeah, okay. I mean, we can't give a forecast, but I mean, we can say that the launch of 5.0 and this effect on gross margin, that was planned and it was temporary. I can say that at least. We say it's temporary because it is temporary, and that has of course an impact on how you will look at Q3. That being said, as always, I want to underline that this is a competitive market and we, if necessary, would adapt, we would adapt prices to maintain our value for money position.
Once again, this effect you saw in Q2 was temporary, once again. OpEx wise, we had a sort of large number of store openings. We will focus more on actually in Q3 specifically new locations, upgrading stores to the mega concept, et cetera, rather than new establishments in Q3 specifically. The establishment we've done large amounts since Q4 2021, of course, are in a ramp-up mode and affect us. That is according to plan, but nevertheless, it does affect us. The opticians is important. There's been capacity constraints on opticians and impacting the costs as well. Of course, that's what happen when there is capacity constraints. That's something that we have worked a lot on.
I can't say it's totally resolved, but we're looking at technology solutions which might help us in this regard. These technology solutions are in pilot phase and aimed at increasing the efficiency of the opticians without affecting the customers and really without making their jobs less interesting. We look at these kind of solutions and they are in pilot phase and will be rolled out end of Q3, starting Q4. That of course will. We have a higher right now cost level that, as I was saying, opticians. We also communicated in the report in the middle of the report that we will have continued effects.
We inaugurated our production facility in August 17th and then of course prepared up until then the production and now in our early production phase. The effect will be between SEK 12 million and SEK 17 million negative on EBITDA in Q3 due to the production facility. That's also an effect compared to SEK 1 million last year, third quarter. Of course, we have, I mean, although we are withstanding increases in prices from our vendors regarding goods, there are other OpEx-related items, electricity being one of them, which impacts us of course. This basically highlights how we view OpEx, which is obvious if you look at it.
Got it. You mentioned price hike from the vendors. Have you been able to pass on these price hikes or you are trying to hold on the prices to capture market share?
Once again, as long as we have a strong growth, we have an opportunity to not accept price increases from vendors of goods for sale, to be very clear.
Okay.
We're quite good at that and that's an effect of our volume increase. However, OpEx related costs such as electricity, for example, affect us to some extent. We want to avoid being seen as expensive. We always pass on price increases from vendors of goods for resale.
Got it. In terms of EBITDA margins, do you think you can still hit your midterm target this year or because the H1 run rate is a bit shy of 25%, or the 25% benchmark? Do you reckon it will be possible to hit that, the midterm target again, or it might be slightly lower this year?
I don't want to go into a forecast exercise. The only thing is we maintain our financial target. That is target we have, and that's something we always strive to reach. I can't give you sort of a more detailed answer on that one. It'll be going too much into forecasting, actually.
Okay. My last question is on the production facility. How do you plan to ramp up? Have you set any targets in terms of reducing the dependence on Asia, X percentage every year or any color around that ramp up of the facility?
Okay. Yeah, yeah. I mean, we have a plan, and we've communicated that over a number of years. We are going to bring back production. I think an important part here is we're driving that shift as fast as we can, but it's also important to keep in mind that it's a consumer in the end making a decision of what to buy. As we've said before, our ambition is to take it back over a number of years, and we are performing towards that plan. We're now just starting up the first batches, and we're bringing on more people and more products all the time.
Got it. Thank you. That's all from my side.
This concludes our question and answer session. I would like to turn the conference back over to management for any closing remarks.
Okay. With that, we want to thank you for listening in. As we've said, we've seen a strong growth in the quarter. We are looking ahead for the second half with a lot of comfort and we look forward to meeting you again next time. Thank you.