Ladies and gentlemen, good afternoon. We are happy you could join us for MÁDARA Cosmetics investor webinar. Today, we are hosted by MÁDARA Cosmetics Member of the Management Board, Uldis Iltners. He is also a shareholder himself. During the webinar, you will be introduced with MÁDARA Cosmetics key activities and financial results of the past year, as well as an insight into the company's future plans. After the presentation, we will have Q&A session. We have already received several questions from the investors, but if you would like to join the discussion or add your question, please use the chat window. Now, without further ado, I would like to hand over to Uldis who will proceed with the presentation. Thank you, Ieva, for the introduction. Good afternoon, dear participants. Thank you for joining MÁDARA Cosmetics webinar. I really hope you are all safe in this alarming time of war in Ukraine. Our hearts are broken seeing the suffering of Ukrainian people, and we really hope that the war will stop very soon and the situation will stabilize. Today, I will present the management report on the unaudited financial statements for the 12 months of last year. As we have already received quite many questions, I will try to present the last year's results quickly so that we can then focus on answering your questions. As usually, before we start, I would like to briefly remind you of the most important elements of our company. MÁDARA Cosmetics is still the leading cosmetics producer in Baltics, specialized in producing of natural and organic certified skincare and makeup products. Our core business is within the European Union with our own brands, MÁDARA and MOSSA, and part of our business is contract manufacturing. Speaking about contract manufacturing, we have some very interesting news. Earlier this year, we launched self-service platform called Selfnamed.com, which provides ECOCERT and COSMOS certified products without a minimum order quantity. Actually, quite a unique model in our industry, and I will talk about this more later in my presentation. Continuing about important elements. Innovation is a very important element of our business, and we are among the most innovative organic certified cosmetics producers in Europe. Every year, we launch new innovative products. A big part of our business is e-commerce. E-commerce is a very important part of our business. The company has been listed on the Nasdaq Riga First North since November 2017, offers shareholders benefits program, is retail investors friendly, and prepares ESG reports. This was in short, and now we continue with the 12-month results. 2021 has been a very good year of growth. We have achieved a 20.5% increase in turnover, mainly from our existing sales channels. EBITDA increased by 10.2%, and profit before tax increased by 12.2% compared to the previous year. The increase in profit is lower than the increase in turnover due to certain increase in competition in the second half of last year, and also investments in the development of the company's organization, including preparation for the launch of Selfnamed.com project. Nevertheless, I believe our company maintains very good profit margins. Operating margin last year exceeds 20%. Now let's take a closer look at sales breakdowns. Geographical sales breakdown last year has not changed significantly from the previous year. The share of non-EU sales increased by 3 percentage points, and the share of sales in Latvia and the EU decreased by 2 percentage points and 1 percentage point, respectively. Two-thirds of turnover is in the European Union, where biggest markets are still Finland, Germany, and France. Looking at sales by categories, we see an increase in the share of contract manufacturing. Its amount increased to 6% of the company's total turnover. The share of MOSSA has remained the same as a year ago, and the share of MÁDARA brand has decreased by 5 percentage points and accounts for 84% of total turnover. Here is the breakdown of MÁDARA brand sales by product groups. We see small changes by product groups. The most important product groups are still facial care and anti-age products. We can also see that makeup, which was launched in 2019, maintains its position, and the share of makeup has increased by 1 percentage point last year. We see that actually makeup gradually is increasing the share in total turnover. We see that there is still considerable potential for further growth. Next slide. Some more numbers. Here we see the summary of the income statement. Let's take a quick look at the key figures. We have achieved a turnover of EUR 19.4 million. Gross profit is EUR 13 million, which is proportionally slightly less than a year earlier. Profit before taxes is EUR 4 million, which is the highest profit achieved so far. Our turnover target for 2023, the target of EUR 27 million, remains intact. As we started in the previous report, we continue to provide information on the share of direct e-commerce channels in the company's turnover. Here we see that last year, the share of direct e-commerce channel increased by 1 percentage point and makes 36% of MÁDARA brand turnover. Direct and third-party e-commerce channels will continue to be the segment we focus on for MÁDARA brand. As usual, in the next slides, we will look at the most important events of last year. In the previous slide, we already talked about the share of direct e-commerce channels for MÁDARA brand. Overall, the company's sales strategy is to move closer to the end customers. In addition to our direct e-commerce channel, the company is successfully developing third-party online stores that are playing an increasingly important role in overall sales. Currently, we work with more than 10 leading e-commerce stores in Europe, for example, douglas.de, flaconi.de, feelunique.com, and several others. We also continued to take over the distribution in European markets. Last year, we successfully took over the distribution in the Netherlands, Belgium, and the United Kingdom. The distribution in Sweden and Denmark was taken over in January this year. Yeah. I will now tell more about our new project, Selfnamed.com. Yeah, internally, we call this project the first technological startup of MÁDARA Cosmetics. We have been working in the contract manufacturing segment for quite many years. In recent years, we have seen strong increase in demand for small batch production that we are unable to produce in the current production process. For example, last year, we received more than 1,000 requests for small batch production alone. Yeah, just to give you some idea what are the number of requests we receive for this small batch production segment. Yeah, this market demand gave rise to the idea of Selfnamed.com as a self-service platform with no minimum order volume. Yeah. In addition to this, Selfnamed offers ECOCERT and COSMOS certified products, and the brand owners do not have to do the ECOCERT and COSMOS certification separately, which had to be done so far. This platform actually gives this possibility to avoid this separate ECOCERT and COSMOS certification, and you can basically order one item from the Selfnamed.com catalog and with your own label, and you will have the ECOCERT and COSMOS label on the packaging. To ensure the production process for small batches, we have created a separate production process and organization. The production process consists of labeling, printing of labels, and also printing and preparing of boxes, and of course, packing the orders for shipments. So far, we have invested EUR 350,000 in Selfnamed, and this year, further investments are expected. In general, the service offered by Selfnamed is very unique. So far, we have not found any other company that would offer the same services. Initially, we will focus on working in Europe, and in the near future, we will start to offer Selfnamed services also in the United States. The product catalog is the product formulations and everything, it's compliant with the United States regulation as well. Yeah. It's a very interesting startup project, and we will keep you informed about further developments. We have also been productive in developing and launching new products. We have added 16 new products to the range of MÁDARA brand. We are especially proud of Vitamin C cream and serum, SPF 50 sun protection stick, and mascara, which is an important addition to our makeup line. Mascara is technically very difficult product in the natural cosmetics industry, and yeah, thanks to our R&D team for the very good result we have achieved. Sustainability is one of the most important elements of our company. Every year we take initiatives to make both the company's processes more sustainable and to support various activities related to environmental protection and building a better society. Over the last year, we have continued to work actively on a number of initiatives. We have joined the Business Sustainability Council of Latvia and have also decided to start B Corp certification process, which is an international recognized standard for sustainable and forward-thinking companies. We have also continued to provide financial support for various NGOs and projects to build a better society and improve the environment around us. Yeah. Actually, sustainability is the backbone of our company. Here are several of our company's awards from last year and also a photo of our team from the company's 15th anniversary celebration last year. At the moment, MÁDARA team has reached 200 employees and I'm really grateful to our wonderful team for their work and achievements. We have a really great team. We have reached the end of the presentation. Please follow the news on our investor page and take also a look at our ESG report on our sustainability activities. Here in this slide, you see the links. Yeah, this was in short about the 12 months results. I hope it was interesting for you and thank you for your attention. Now we can go to the answers and questions session. Thank you. Thank you. Exciting times ahead. Let's start with the Q&A session. Before the first question, a reminder that to join the discussion or ask your question to MÁDARA Cosmetics, please use the chat box that you see on the right-hand side of the screen. Uldis, the first question is about the Selfnamed, and in specific about the marketing plan. How do you plan to approach the potential customers? Yeah. A separate team has been set up for Selfnamed, including a marketing team with people with technological startup development experience. A number of marketing activities are planned for the first half of this year to promote Selfnamed. As I mentioned earlier in the presentation, the company has received more than 1,000 requests for the production of small batches last year alone. Now we already have a quite large database of potential customers to start working with, and this is also the approach now in this very beginning. What I can say, the response is very good and already in first weeks, there are new customers, there are orders and there is production for Selfnamed.com. Of course, it will take some time to make the volumes kind of bigger so that they reach kind of also significant size. I can say that this first traction and this first response from customers is positive. Yeah. Thank you. In regards to the Russia-Ukraine situation, what risk measures has MÁDARA Cosmetics implemented to protect its business and the potential expansion of the conflict over these borders? Thank you. First of all, I would like to note that the war in Ukraine has no direct impact on the company's operations. We have no suppliers in Ukraine, Russia, or Belarus. Our sales to Russia and Ukraine are insignificant. They do not account even for 1% of the company's total sales. Indirect impact, especially long-term impact, it is difficult to predict at the moment. What we have seen since the beginning of the war is that our supply and sales channels continue to function normally, and that our main partners are optimistic about the future. We see that countries that have the Soviet Union experience are more stressed and afraid from the current situation. However, we see that the Western European countries, although they very much support Ukraine, we see that they are actually quite calm. Yeah, so in terms of business, they are not suspending anything, and at the moment, we are working according to the previous confirmed plans. Of course, the indirect impact in the longer term is likely to be related to general economic trends. So far, we have seen that the cosmetics industry continues to operate relatively steadily even during economic crisis. Of course, we also hope that the war will not spread beyond the borders of Ukraine and that the situation in Latvia will remain safe. Ieva? Thank you. We do have a similar follow-up question in regards to the imposed both-sided sanctions. Do they have any impact on MÁDARA Cosmetics? So far, we haven't recognized any impact on our business. I mean direct impact. Thank you. How do you evaluate the competition in Asia? Is the competition higher in Western countries or Asia? Yeah. Thank you. Yeah, it is always very difficult to talk about competition in the cosmetics industry since it's very high, and the competition is huge in both Europe and Asia. So far, we have more experience in the European markets, and I personally believe that it is more stable to work in the European markets, where the business environment is more predictable. There are a number of challenges in Asian markets. Firstly, many countries have quite complex product registration procedures for foreign products, which can also be seen as a policy to protect the domestic producers. Secondly, the business environment is less predictable and often subject to significant regulatory changes. Yeah. We work in Asian markets, and we will continue to do so. We'll work to try to find ways how we can strengthen our position in major markets. However, in near future, our main focus will remain in European markets. Ieva? Thank you. Big corporations are well-known for their practices to take over growing, developed private European companies and either close or merge them, thus basically terminating their business. What is the risk that same could potentially happen with MÁDARA Cosmetics? Will you be keeping your unique identity, or are you open to the highest bidder? Thank you for the question. Yeah. Actually, we have not considered any takeover proposal so far, and it is likely that we will continue to reject proposals as long as we have energy and plans to develop the company further. Yeah. I can say that we still have both the energy and the plans for further development. Of course, I'm talking more about my personal position here, and I cannot represent the view of all shareholders. I think at least the founders of the company have similar thoughts than me. Yeah, at the moment, there are plans which we would like to implement, and to continue this MÁDARA unique way. Okay. All right. Thank you. We promised participants to look into future a bit. Here comes the question: How do you see MÁDARA Cosmetics in year 2032? Yeah, it's quite far away. In 2032, I would like to see us move significantly closer to the big European natural cosmetic brands in terms of business size. At the same time, I would like us to continue to maintain our position as one of the most innovative and sustainable natural cosmetics brands in Europe. Ieva? Thank you. Returning back to the Ukraine and Russia topic, has any of your main competitors been impacted by the ongoing conflict? Do you have insights into that? So far, I haven't seen that our direct competitors would be impacted. I know that several Russian brands has been delisted from certain sales channels in Latvia. I actually don't know what exactly is the situation in other European markets. I could imagine that this kind of strict reaction might be only here in Baltics and probably in Poland. I would not expect that this has been done also in the Western Europe. As I say, so I don't have exact information and there are no direct competitor from Russia. It's most likely that there won't be any significant impact. Thank you. Next question is about the energy and commodity prices, which now are reaching the new heights. The comment is that in year 2021, the direct e-commerce sales were slightly better than in 2020, and direct distribution took place in more markets, but the margins have reduced considerably. Therefore, the question is, in your opinion, how much this impacts your margins, and also whether you're able to incorporate the energy price increase in your pricing policy. Okay. I think this question has two parts. The first part is about the increasing energy prices, and here I can tell you that we are in quite a comfortable position since our production process is not energy-intensive. I believe that even these increased energy prices will have no significant impact on our operations. Also, our office and production building is good with energy efficiency. Yeah. I believe that the energy costs, they will grow and that, of course, they will have some impact. We won't see any significant changes in total. Yeah. The second part of the question was about the decreasing profit margins. Yeah, the reasons are that we have seen increased competition, especially in the e-commerce environment in the second half of last year. It required some more resources for e-commerce marketing. We have developed our organization, including setting up the organization for Selfnamed. I hope I answered your question. Thank you. The next question talks about the sales drivers. The sales growth has slowed down compared to 2020. What will be the sales drivers, particularly in 2022 and 2023, to maintain the growth to achieve the 2023 target? Yeah. I would say these might be three or four elements or drivers. The first, our direct e-commerce channel. We still see that we can grow our direct e-commerce. Secondly, third-party online shops in Europe. As I mentioned, we have already established cooperation with more than 10 leading online shops. Here the list of third-party online shops will grow. This year we will start cooperation with several other third-party online shops. In the markets where we do the distribution ourselves, our target is to open new physical sales doors. I think in this setup where we work as distributors, so we are quite efficient. Yeah, so we see that in all of the main markets there is potential to open new doors. Of course, the fourth element could be also to open new markets or new channels, which would mean that these will be mainly markets outside Europe. As I told you, so usually these markets outside Europe, they take quite a lot of time to set up all the necessary requirements to do the product registration and to start working. Usually it takes more than one year to set up a new market outside Europe. Yeah. These are the four elements or drivers which I see that could drive our sales growth in next years. Yeah. Thank you for sharing the insight, Uldis. Next question is about the Selfnamed project. Are print-on-demand margins very similar or perhaps higher or lower compared to MÁDARA brand products that are sold through direct e-commerce? Yeah. I think on the gross profit margin level, they are pretty similar. Of course, the business model is somewhat different from MÁDARA distribution and from other e-commerce. Yeah, it's pretty the same, I would say. Thank you. How far the direct distribution is to be taken? Will it be expanded as far as possible, and which are the next markets in mind? Yeah. At the moment, we have direct distribution in Germany, France, the Netherlands, Belgium, the United Kingdom, and since January, also in Sweden and Denmark. There are several other markets on the shortlist, but at the moment, for this year, I'm not sure if we will take over any other market. I think now our main target would be to grow the existing markets. These are already quite a lot of markets. Several of them are quite new. Yeah, we need now to focus on growing these markets. Ieva? It was mentioned that last year, significant technical improvements were made to the website and online store. Could you expand on that? Is there anything else that should be upgraded on the website? Yeah. Since we see that at the moment, already more than 50% of users are from mobile devices, we have improved the usability of mobile devices on our webshop significantly. Yeah, so we see that actually after these improvements also the orders that came from mobile devices have increased quite significantly. Regarding the further improvements, the next important step would be to improve the automation of the webshop which is related to the personalization. I mean, that we can work personalized with each customer, prepare personalized offers based on the customer profile. Ieva? Thank you. You already mentioned several newly launched products that you're proud of, and the question is about the same. How many new product releases are planned for this year, and in which category? Yeah. I will say that this is still a secret. I can say that there will be a spring launch and an autumn launch. Yeah, both launches will have several new products. All right. Exciting. It was described that MÁDARA skin care products regularly receive recognition in international competitions. Is there an immediate and considerable demand increase in MÁDARA products after such recognitions? Yeah. Usually, there is no significant increase. Even if there is a significant increase, then it's usually for short term, but I think these awards, the positive impact is in long term, and long term for brand awareness and recognition. Yeah, so I would say that usually, there is no direct significant impact on the sales. All right. Thank you. How is the automation of production envisioned in the long term? Yeah. We are gradually improving our production processes. In the same time, we need to keep the flexibility of our production to be able to produce different batch sizes and different kind of products on the same production lines. Most probably, our production process in near future won't be fully automated. Yeah, every year, we are improving some processes, also. Last year, we launched first robotic hands in our production for packing the products. Yeah, there might be added some more robotic hands in the future to automate some manual processes. I think we are, from the automation level, we are in quite a good position considering the size of the company and the product portfolio. I think we have already quite automated process, at least yeah, comparing to other similar productions, what I have seen. Ieva? Thank you. Now we can turn to the questions that we have received during the webinar online. The first one is about the competitive environment in second half of the year. You mentioned in the presentation the increased competition in second half. Who particularly is pressuring the market? Did you have to reduce product margins due to that? Yeah. I think we need to take a look back when COVID started, and it was a huge turning point for e-commerce channel. Already in the second part of 2020, quite many new e-commerce shops and channels were launched. Now in 2021, we saw that when the COVID situation is stabilizing, the e-commerce market is, of course, still growing, but it's not growing the same speed as it was in the first wave of COVID. Now on the market are much more e-commerce players that are competing with each other. This means that we need to have some more resources to make the e-commerce marketing. This is also one of the reasons why we are now more actively starting to work with third-party online shops, with big ones, so that we can maintain the e-commerce position. I really believe that we will be able to grow also our direct e-commerce share, but it might be connected with somewhat higher e-commerce marketing expenses than they were in 2020. Thank you. Percentage of e-commerce sales up to Q3 was 43%, but now for the full year, it's 36%. There seemed to be a slowdown in e-commerce sales in Q4. Is that correct? If so, please explain the reason and outlook. Uldis, it seems to me that you already at least partly answered the question, but is there anything you would like to add? Yeah. You're right. Yeah. The fourth quarter was quite difficult for e-commerce. I think we have learned from this and made some solutions for that. I think this year with this improved planning, we will be in a better position. Ieva? Thank you. Gross profit margin and operating profit margins were lower in second half of the year. Is this because of increase in contract manufacturing? Please explain the margin outlook for the EUR 27 million sales target. Contract manufacturing has somewhat lower margins. However, we don't have any sales or little sales costs for contract manufacturing. Regarding the margins for 2023, then at the moment we are not providing the guidance for profit margins. Yeah. At the moment, our aim is to reach the result keeping similar profit margins. Thank you. As an addition to what we discussed right now is the next question. When you announced the EUR 27 million sales target, was the contract manufacturing already included? If not, should we think about the new target as EUR 27 million from existing business, which includes MÁDARA, MOSSA, plus upside from the new contract manufacturing? In this case, what kind of sales do you expect from the contract manufacturing? Yeah. The contract manufacturing part was included, but the Selfnamed part was not included. At the moment, as I mentioned, we're working in the contract manufacturing segments for quite many years. These are usually middle-sized European companies that order more than 5,000 pieces per item. This part was included in the EUR 27 million target. The Selfnamed business is not included. I think we first need some more time to see the direction from the market, to see the sales number. At the moment, I'm not ready to set a new target because of the Selfnamed. I hope that this will make a good addition to our business and that we will be able to set a new target. I can't do this at the moment. We might come with this information and review the targets later this year if Selfnamed develops according to our expectations. Ieva? Thank you, Uldis. 200 employees means sales per employee of EUR 100,000. This seems low compared to other companies. How do you think about this? In the long run, where do you want to bring the sales per employee figure? Yeah. We need to take into account that our company is a vertically integrated company. From product R&D to production to making all the marketing and visual and branding materials. All these processes are within the company. This probably makes it look that the sales per employee is lower compared to other cosmetic companies. But I also know that we are really one of the few companies that have those vertically integrated processes. And I believe this is actually to be a vertically integrated company. This is an advantage and this is also one of our strengths and uniquenesses. That this allows us to produce unique products and to be a unique brand. Ieva. Thank you. How big capital expenditures are planned for next year? How much from that would be for growth, and how much for maintenance of existing equipment? I think the question is what investments are for 2023, right? For this year? For next year. It means 2023. It means 2023, I guess. Okay. Maybe you can provide insights in both. Yeah. No, no. The investor confirms that it's 2022. It's this year, Uldis. Okay, good. Yeah. For this year, we are planning several long-term investments. All together, this will be between EUR 1 million and EUR 2 million, which is actually similar to the investment level which we had also in previous years. There will be investments in improving the production process, adding new equipment. There will be investments into developing our own e-commerce platform. There will be investments into brand. I mean, the promoting of the brand. There will be investments into further development of Selfnamed. Yeah, and some other smaller investments. Overall, we see this quite active year with several investments that could allow us to grow further. Yeah? Could you please specify what would be the margins in Selfnamed? I'm actually not ready since it was launched a few weeks ago. At the moment, I'm still not ready to talk about the margins. The margins will depend very much on the volumes we will be able to generate and at the moment we are in the very beginning. What I could promise that we might come with some more detailed information in the second part of this year when we already have some more customers and the processes has reached already some volumes. Yeah. Yes. On the topic, do you have free capacity for Selfnamed production? Yes, we do. There is still free production capacities and, as I mentioned, we are also planning some investments, adding some new equipments for our production. Yeah, the answer is yes, we have the capacities. All right. The next valuable comment from one of our participants is the following: As a cosmetics company, I think the most important task is to build a strong brand. In this view, I do not understand why contract manufacturing is important. Isn't it better to focus on building the mother brand? Please help us understand why contract manufacturing in long run results in higher competitive advantage? Yeah, it's a good question. When we started contract manufacturing business, the idea was that the contract manufacturing part is balancing our production capacities, and I think contract manufacturing has this positive impact on balancing and using the production capacities. From another perspective, very often this contract manufacturing part increases our competence and we are developing new formulations. We see some other perspectives from the contract manufacturing customer position. Yeah. I mean, one of our strengths or elements is that we do the production ourselves and we are also a production company. I think it does not harm our own brands, and it does not take a very significant attention to our own brands. It's. I see this as an interesting addition to our business, which very often gives us also some new insights and ideas. All right, very good. Have you seen higher customer acquisition costs recently? Do I understand correctly? It's about e-commerce customer acquisition, or. My guess would be so, yes. Yes. In general, okay. Yeah. I think, yeah, it's the same what I mentioned before, that we see that the competition is increasing and it relates also to new customer acquisition. Yeah, for sure. Thank you, Uldis. Let's finish with the last question. Do you plan to share profits to investors as dividends payment? Of course, this is the responsibility of shareholder meeting. As we know, then our practice is to pay dividends, and I think we have paid dividends for every year since already. I don't know, five to seven years. Yeah, from my perspective, as I see it at the moment, then last year was a positive, profitable year and most probably there will be a proposal from the management to pay dividends also this year. Thank you. All the questions have been answered. I'll remind you that the recording of the webinar will soon be available online, so please follow MÁDARA Cosmetics announcements to stay up to date with company's news. Uldis, thank you for your time. Participants, thank you for your very active engagement today. Yeah. Thank you very much for your attention and for so many questions. I really appreciate this, and I think this is the most interesting part of the webinar. True. Have a nice afternoon, everybody. Thank you. Bye.