Dear participants, 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. I am also excited to welcome Tatjana Nagle, Management Board Member and CFO of the company. During the webinar, you will be introduced with MÁDARA Cosmetics' key activities and most recent financial results. After the presentation, we will have a live Q&A session. We have already received several questions from the investors, but if you would like to join the discussion, please add your question through the Q&A window that you can find beneath the presentation. Without further ado, let me hand over to Uldis and Tatjana. Thank you, Ieva. Good afternoon, dear participants. We are very glad to welcome you to the MÁDARA Cosmetics webinar on the results of the first half of this year. Today, Tatjana Nagle, Member of the Management Board, and I will present you together the management report on the unaudited financial statements of the first six months this year. We will briefly introduce the important events of first half. As usual, you are very welcome to send in your questions. Thanks to those who have done so, we will answer them in the second part of the webinar. As usual before we start, I would like to briefly remind you of the most important elements of the company. MÁDARA Cosmetics is the leading cosmetics producer in Baltics, specialized in producing of natural and organic certified skincare and makeup products. Our core business is within European Union with our own brands, MÁDARA and Mossa. Part of our business is contract manufacturing. In February this year, we have launched selfnamed.com, which is an innovative self-service system providing the production of private label products without minimum order quantities. We will talk more detailed about selfnamed.com later in our presentation. Innovation is an important element of our business. Important part of our business is e-commerce. The company has been listed on Nasdaq First North Growth Market since November 2017, offers shareholders benefits program, is retail investors friendly, and prepares ESG reports. It was short about the company. We will continue with the six months results. The beginning of the year has been quite eventful for our company. The global political and economic shocks both directly and indirectly impacted the operations of our company and demanded adaptation. The adaptation process, however, showed that the company has very good diversified sales channels and that changes in particular channels we can cover with the growth in other channels. The competition in the e-commerce segment has become stronger while physical sales channels are performing very well and show very good results after the challenges caused by pandemics. We have to admit that in the first half of this year, we unfortunately have not achieved the set goals. We are actively adapting to the new situation and have initiated series of activities to return to faster growth in next periods. We believe that there is a big potential for further growth, we will devote our efforts to make the potential in results. I hand over the stage to Tatjana. Tatjana will talk to introduce you the numbers. Please, Tatjana. Thank you, Uldis, and good afternoon, dear shareholders. As Uldis has already mentioned, the first half of the year has been quite challenging. Nevertheless, we have achieved EUR 10.2 million in net turnover, which is a 3% growth compared to the same period last year. The EBITDA was EUR 1.78 million, which is a 34% decline, and profit before tax was EUR 1.27 million, which is a 46% decline. Regarding the margins, what you can see is that our gross margin was 65%, which is a three percentage points decline compared to the same period last year. One of the main reasons for that is our e-commerce share decline. As you know, e-commerce is an important part of our business. With a decline of e-commerce share, we naturally end up with a lower average price, which at the end of the day, affects the gross profit margin. Another factor was, of course, this general inflation, raw materials, transportation, also energy prices affected our business to some extent. Next is the operating margin. It was 12% in the first half of this year, and it is also a 12 percentage points decline in comparison to the same period last year. Key reasons, as I think you are very interested in them. As I already mentioned, one is this decline in gross margin, three percentage points. This year, we invested quite heavily, I would say, in brand recognition. These were additional 2% of our net turnover. Also, Selfnamed, which Uldis will elaborate on a bit later, operated with loss. This loss was 1.75% of our consolidated turnover. Also, depreciation was higher by 1.9%. Of course, there were higher e-commerce advertisement costs. Also, we made some investments related to this direct distribution takeover in some of our strategic countries. Actually, there are quite a lot of different factors what influenced the results. Uldis, we can go to the next slide. I already mentioned the key figures. Regarding the turnover, with all the information that we currently know and predict, we have adjusted our net revenue target for the next year. We have reduced it from EUR 27 million to EUR 22 million, and we expect that the previously set goal of EUR 27 million would be achievable in 2024. Yes, we can go to the next slide. Thank you, Tanya. Now let's look at sales breakdowns. Here we see the geographical sales breakdown. There are no significant changes compared to last year. The share of the European Union markets and Latvia each increased by one percentage points. The share of outside the EU decreased by two percentage points, which was largely affected by the COVID situation in Asia and related restrictions. Two-thirds of our turnover is in the European Union, where Finland is still the largest market with impressive 52% growth in the first half of this year, which is related to recovery of physical sales channels as well as entry of new sales channels. France and Germany are the next largest export markets. In France, in the first half, we see very healthy double-digit growth. In Germany, however, the results are more modest. We have a few percent decrease compared to the last year. Looking at sales by category, we see some changes in proportions. The share of Mossa has increased by four percentage points and accounts for 14% of the total turnover, and this is historical record. The share of contract manufacturing has increased by three percentage points, while the share of MÁDARA has decreased by seven percentage points, but still by far the strongest business element of the company making 81% of total turnover. There is not much to say about the distribution of MÁDARA brand by product groups. The distribution looks pretty the same as before. We see that the proportion of makeup continues to grow and in the first half of the year makes up 15% of total turnover of the MÁDARA brand. Tanya, will you? Yes. Regarding the direct e-commerce, it is an important part of our business, our e-shops, madaracosmetics.com. What we see is that the share of direct e-commerce has declined by seven percentage points, and in the first half of the year, it stood at 33%, which is still very good result given the fact that also other sales channels are developing. The reasons for the slower growth of direct e-commerce is, first of all, increased competition in this segment. We saw an astonishing growth of e-commerce business during the pandemic in 2020, and now overall, the growth has become more moderate. There are more and more competitors joining the e-commerce business, it means that we are competing both for the client and also for different marketing tools. The second factor is physical retail. Given the fact that pandemic-related restrictions in some countries are lifted, some customers choose to get the experience of physical retail stores, they decide to purchase a product in physical store instead of e-commerce which is just a fact what we should adapt to, I think that we are doing quite good. Thank you, Tanya. As usual, in the next slides, we will look at the most important events of first half. Continuing to implement the strategy of getting closer to end customers, we have taken over the Danish and Swedish markets in the beginning of this year. So far, we have built up a good customer base in both markets as well as we have strengthened our team with the competent colleagues who work in those markets. Also the pipeline looks very good, so we expect that these markets will have nice growth also in the second half. In the first half of this year, we have put a lot of effort into attracting new customers, both physical and online customers. The efforts have resulted in a number of new customers. One of the big successes is the launch of MÁDARA products in Galeries Lafayette Haussmann which is one of the most visible and prestigious department stores in France. Now let's go somewhat more detailed into Selfnamed business. The self-service platform selfnamed.com was launched in February this year and is offering customers a unique opportunity to create their own brands and produce private label products without any minimum order quantities. We have invested in Selfnamed EUR 350,000 so far. Here we see the P&L statement of selfnamed.com for the first half, actually for first months of operation since selfnamed.com was launched in February. We see that we were able to generate EUR 35,000 turnover and in the bottom line, we see losses of EUR 143,000. We see that the cost of goods sold are bigger than the turnover, and this is largely impacted by the rental cost of the premises of selfnamed.com. Selfnamed.com has their own premises, office, production, and warehouse, and this makes the gross profit margin negative. Of course, if you talk about turnover, then we talk about actually small number, but we see very healthy dynamics, and actually, I am very happy about that. For example, turnover in July was as high as turnover in May and June together, which is influenced by more repeated purchases. Also, we see that new customers are attracted every month, which gives hope for larger repeated orders in the coming months. Here we see the growth of registered users, which is one of the most important indicators which give signals about potential growth trends. We see that the registered user trend is very healthy and growing actually very fast. Back to MÁDARA brand. In the first half of 2022, we launched 11 new products. We worked on already beloved and strong product categories, such as CC cream. We added two shades to that line. Also, we added three shades to our concealer. Also, our Time Miracle line, which is based on birch water, got a new upgraded eye cream in a new packaging and with a new formula. Also, the body care line was updated. We added a new aluminum-free deodorant. Also, we added a body peel and a body lotion. And in makeup, we added two new vegan red lipsticks. Also, in the first half of this year, we worked on new products that will be launched this autumn, so new products are coming from us. Nothing has stopped. We can go to the next slide. Yes, regarding sustainability, here is a quick snippet from our ESG report for 2021. You can also read in detail, but some of the key facts are that the company was ranked the second greenest brand in Latvia. Also, regarding the product packaging that we launched in 2021, more than half of these products contained post-consumer recycled plastics. Last year, we donated around EUR 71,000 to different public benefit organizations such as MARTA Centre, SOS Children's Villages, and also oncological patient support organization, Pink Train, and some others. In this year, we have already donated over EUR 60,000 for different good goals. Thank you, Tanya. This was in short about the six months results. I hope you found it interesting. In the appendix of the webinar presentation, which will be published later on the Nasdaq system, you will find full information on the financial statements. Thank you for your attention. Now we will answer your questions. Ieva? Thank you. We're happy to take all your questions through the Q&A box that you see beneath the presentation. Let's start with the first one. Sales in second quarter dropped by 0.5% compared to second quarter last year. What were the main reasons for the decrease? As we mentioned, several of our sales channels performed weaker than last year, which was compensated by the growth in other channels. We see that at the moment, the e-commerce segment has really high competition. E-commerce is one of the reasons why there is this 0.5 decrease in the second quarter. Thank you. Thank you. Why are the administrative costs up by 24%? How much of it comes from premises rent cost increase? Basically, we are talking about €174,000, from which around EUR 75,000 is related to remuneration and corresponding social security contributions. These are mainly new employees with new competence that we hired expecting stronger business development. Of course, it is also, to some extent, a salary increase to the existing personnel, but mainly these are really some new positions. Also, another EUR 44,000 increase was related to our employee motivation program. It is not only administration. We are speaking about the whole team. This is employee health insurance, also catering costs, different team sustainability costs, such as team-building events, also some trainings and educational activities. I think all of you would agree that employees are one of the key pillars of a strong company. Also, another €60,000 where the costs are related to additional office spaces. This year, we added two additional office spaces. One of them is for the Selfnamed team, and another one is for MÁDARA. From these two premises, Selfnamed is the biggest part. Of course, both places needed some furniture, and there is a lot of daily office-related costs. Another thing what is important to mention that regarding our main building on Zeltiņu iela, the rent was not increased, so it is at the same level as it was in the previous year. Thank you. I hope I answered that. Thank you, Tatjana. Yes. What are the main reasons behind decline in operating margin? Do you believe this is long-term sustainable level, or do you have plans to increase it? I think that I answered already to the first part regarding the reasons for the decline. Regarding the second question about the long-term perspective, in our opinion, 10% for the operating margin would be a bare minimum, which should be achieved. Even 10% is considered to be a normal level for good business development. 15% would be the optimal level, although the company historically has outperformed over 15% and 20%. Let's see how it goes. I would not like to give concrete numbers. As for you and as for us, of course, we try to do our best to achieve good margins. Also sometimes there are some really good opportunities which involve costs and which benefit the company in the long term. Although in short term, we could see some lower margins. Thank you. What is behind the EUR 1.3 million other interest payments in first half of this year? I checked this up. Basically, I think that an investor overlooked the data. It was actually EUR 1,300. You can check at the page 26 of the report, it's not EUR 1.3 million. Thank you. Could you elaborate on Asian sales? How big is the weight, and what are the trends? The Asian sales in first half of this year were, let's say, quite struggling because of the COVID situation and related restrictions. As you could see then, our business outside the European Union amounts to 5% of total business. Asia is part of these 5%. We are waiting when the markets will stay open from these COVID restrictions, then we are planning to work more actively in Asian markets, at the moment, it's really difficult to predict when we'll be able to start implement our plans because still the markets are struggling at the moment. Thank you. Thank you. Talking about the other markets, which market do you see as the best in second half of the year? It's, of course, interesting question. We think that our focus markets will continue to work successfully or at least stable. As I mentioned, we predict growth in Sweden and Denmark, because these markets are still relatively small in the total turnover, from the bigger markets, we expect that France might have continued to grow similarly as in the first half. At the moment, it's really difficult to make these predictions since we don't know how this autumn-winter season will look from this energetic perspective. I believe if there won't be really big issues, then our strongest markets, our focus markets in European Union, they will be at least stable. Even if we do not achieve big growth, then they will work stable. Of course, we devote our efforts to achieve growth. Investors are wondering what are the most important topics and trends now in eco-cosmetic segment. It is expected that trend of natural and organic cosmetics is continuing to grow. Millennials are leading this trend since they are now starting entering the job market and they have natural interest towards eco-friendly lifestyle and products. Millennials will drive the growth of natural and organic cosmetics in the next 5 years. What we see in the global research is it is predicted that the global natural and organic cosmetics market in next 5 years will grow by 10% every year by year. We see also the trend that customers are more likely to choose those brands who are social and environment responsible. I think here we are in quite a good position. Everyone can take a look in our ESG report and see and follow the activities we are doing. The customers, in general, they are becoming more educated and clever. They choose natural and organic products that are really natural and organic. They understand the difference. They also choose products that really work. Also for this trend, we are in a very good position since our products are dermatologically tested and have a very good performance. Thank you. When do you plan to reach break-even in print-on-demand segment? If the current growth trend continues, then we expect that the break-even point could be reached in next six months. However, to prepare for the next stage, we might need to make some investments and also develop our organization. If we talk about the current cost level, then the break-even point might be reached if not until end of this year, then in six months period, if the growth trend continues as we see it now. Thank you. Thank you. Investors are wondering whether they should be concerned about the low share price recently. Can you comment on this? Yeah. The management of the company has no direct influence on share price. I think that the changes in the share price we see in recent times are more related to the sentiment of investors and the general attitude. As I told, I believe the company has still very good growth potential. We, as company management, will do our best. We will devote our efforts to turn this potential in good results. Okay. Is management considering review of S&D strategy, reducing geography while increasing advertising and branding in key markets? Our focus is still to work on European Union markets, and the main attention is on those markets where we work directly, and these markets are currently Germany, France, the Netherlands, U.K., and now also Sweden and Denmark. These are the focus markets where we invest most and most of financial resources as well as our attention. I think currently, the number of the focus markets is not too big and also from the risk diversification perspective. We need more than one market since we see that the global political or economical changes can influence quite heavily one or another market. We need definitely several focus markets, and I think currently we are also not planning to expand the number of our focus markets. These are our markets where our resources and attention is spent mostly. Why turnover expectations have been lowered, and how do you plan to solve it? This is something that you covered already during the presentation, but maybe there is something you would like to add. Tania, would you like to add something? I think nothing to add at this point. Thank you. Thank you. Now we're continuing with the questions submitted during the webinar. What is the sale and profit target for this year? As for 2023 and 2024, you mentioned EUR 22 million and EUR 27 million sales target. The question is about the sales profit target for this year. We will not give this guidance for this year, and both not for the turnover and profitability level. The target for next year is EUR 22 million and for 2024, EUR 27 million. If you talk about the expected mix by sales channels, we currently expect that from the second quarter of next year, the e-commerce segment will start to grow and it will still be a very important part of our business. Let's see at what stage it will recover next year, but this is one of our expectation that starting from second quarter, the e-commerce will start to grow. Thank you. Is there anything here that you would like to add on the expected profitability level? I think Tanya already talked about profitability levels. As Tatjana told, an 50% profitability level is something we see that is optimal to continue to grow. See if the competition and the market environment will allow us, of course, we will try to go above 15%, this is something that is rather difficult to predict at the moment. As for the factors affecting this is, as you said, the competition and the market situation. Right. Yeah. Thank you. Please explain more about competitive situation in e-commerce. Are there any specific companies or regions? Are there new manufacturers or only resellers? The number of online shops and companies that operate and sell cosmetic products online has really significantly increased compared to the pre-COVID situation. Now this year, the growth of e-commerce segment is lower than it was in last 2 years. There is much more companies operating e-commerce, much more players in e-commerce, and this increased the competition as well as the marketing costs for e-commerce. Much more players are playing in the e-commerce market, which is at the moment not growing that fast as it was before, and this creates this strong competition. I wouldn't say that there is a specific companies or regions. We see this overall, that in general, the competition has increased, but as I told, we believe that starting from second quarter next year, this will somehow level out and we will be able to achieve growth in e-commerce. An interesting question about Mossa versus MÁDARA. Why is Mossa sales strong while MÁDARA struggles? Do you expect the trend to continue? In long-term, how do you think about the ideal sales balance between Mossa and MÁDARA? Definitely the MÁDARA brand is our strongest business element, and it will remain long-term the strongest. I think Mossa proportion in our business in the nearest periods won't change significantly to the proportion we saw in first half of this year. Mm-hmm. Thank you. One of the participants would like to elaborate on the e-commerce. I understand the industry-wide struggle. Given that situation, how has MÁDARA competitive position changed? I am fine with sales decline as long as MÁDARA is gaining competitive position in long run. How do you measure this? There is an additional question: given the increased competition in e-commerce, are you seeing companies leave the e-commerce space, or are there still new entrants? Yeah. I think how to give a grounded answer on the competitive position. I really do not think that our competitive position has become weaker as such. We are still very actively investing in marketing. I think our webshop is in a very good technical position, offering the most modern e-commerce tools. Yeah, I really do not believe that our competitive position has decreased. It is the current market situation in e-commerce that it is quite tough. Answering the second part of the second question, at the moment, we do not see companies leaving the e-commerce space, we think that many e-commerce companies will reduce their investments into marketing. Currently, many of them which are launched recently, they still have a lot of money from investors and they are just burning the money. When the money is gone, they will be forced to reduce the investments into marketing. Of course, still there will be new entrants because I believe that e-commerce will continue to grow. Currently, the issue is that there was a really high growth in two last years, and now, this year, when the physical sales channels opened and recovered from the pandemics, the growth is much lower. There is still growth in e-commerce. It is much lower than it was in the last two years, and this is creating the current situation. I really believe that this will level out in next six months. There will be more. Yeah. Mm-hmm. Thank you, Uldis. Could you please share overall insights of how sales have been performing in the third quarter so far compared to first and second? I won't give you any precise information since we are still in August. We see that it's good. Currently, it continues the trend we saw in the first six months. However, I need to admit that July and beginning of August is, in our industry, the seasonal weakest period. The main months in third quarter is September, which largely impacts the results of the third quarter. It's actually too early to say anything about third quarter. All right. Let's talk about the activities that you're planning to do to accelerate growth. Could you talk about cost-cutting efforts to make the weaker top-line growth and perhaps some other action points that you're planning to take? We are reviewing, of course, also our costs and adapting to the current situation and allocating the resources towards the activities that can bring good results. It means there is some changes in cost part, but currently it's not something we could call really drastic cost-cutting. We still believe that we implementing our activities, we can return to good growth. At the moment, this is our priority to understand how we can use the current situation and invest and be able to come back to higher growth. Are you able to disclose who are the contract manufacturing customers? How much customer concentration do you have? If I understand correctly, by customer concentration you mean the number of customers, right? Or the geographics. There are several new customers for our contract manufacturing segment, Biggest part of them are from European Union. Similarly, as for our total business, also our contract manufacturing customers are mainly from European Union. There are new customers this year. Thank you. What is behind lower sales in Germany? I assume that your market share in Germany is still very low, isn't it? Yeah. It's still quite low. What is the reason behind lower sales? I would say this is the general market situation. Consumers, customers, they are more cautious about the economic situation and somewhat reducing their expenditures for cosmetics. I would say this is the general sentiment of the market currently. Mm-hmm. Thank you. Currently the last question that we have received, are you able to raise prices? Theoretically, yes. What shall we do is at this moment when we see that actually the purchasing power in most of European Union countries are probably decreasing, I'm not sure. We will not raise the prices this year. This probably will also give us some competitive advantage to our competitors who have raised the prices already. In our opinion, at the moment, we will benefit more from not raising the prices. Hoping to gain some competitive advantage compared to our competitors. Mm-hmm. Uldis, Tatjana, we're through with questions. Thank you for your active engagement, participants. We had a lot of interest today. I'll remind you that the recording of the webinar will soon be available online. Please follow MÁDARA Cosmetics announcements to stay up to date. Thank you all for joining today. Thank you. Thank you. Thank you for attending.