Ladies and gentlemen, good afternoon. We're happy you could join us for MÁDARA Cosmetics investor webinar. Today, we are hosted by MÁDARA Cosmetics Member of the Management Board and Shareholder himself, Uldis Iltners, and Management Board Member and CFO, Tatjana Nagle. 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 or add your question, please use the Q&A window that you can find on the bottom of the screen. I am now handing over to the presenters. Thank you, Eeva. Good afternoon, dear participants. We are glad to welcome you to the MÁDARA Cosmetics webinar on the results of last year. Today, Tatjana Nagle and I will present together the management report on the unaudited financial statements of 2022, as well as we will briefly introduce the most important events of last year. As usual, you are welcome to send in your questions, and thank you for those who have sent already their questions, and we will answer them in the second part of the webinar. Okay. Next slide, please. Next, please. Next. Yeah. As usual, before we start, I would like to just briefly remind you of the most important elements of the company. MÁDARA Cosmetics is the leading cosmetics producer in the Baltic States, 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, and part of our business is contract manufacturing. In February last year, we launched selfnamed.com, which is an innovative self-service system providing the production of private label products without minimum order quantities. About selfnamed.com, we will talk more detailed further in the presentation. Innovation is important element of our business. Every year, we launch new innovative products in our segment. Important part of our business is e-commerce. 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. It was in short about the company, and now we can go to the results. 2022 was a challenging and eventful year that has put a temporary pause on our previous growth. There are two main reasons. Number one is the challenging e-commerce environment, which is highly competitive at the moment. After the lifting of COVID restrictions in most of our markets in the beginning of last year, e-commerce competition increased rapidly and remained high throughout the whole year, and with significantly higher marketing costs than before. This was the general situation in the e-commerce environment, and this affected not only our direct e-commerce channel, but also our third-party e-commerce customers. Reason number two, the war in Ukraine and its economic consequences. Although the direct impact was low, the indirect impact resulted in a decrease of customers' purchasing power and cautious spending. As a result, last year, we worked with a 3.5% lower turnover than in 2021 and also, our profit margins decreased significantly. EBITDA decreased by 43% and net profit by 61% compared to 2021. However, although we cannot present the gross of financial numbers today, we are implementing a strong plan for this year to return to growth. I can say with cautious optimism that the year has started well for us. We also expect that the e-commerce environment and market will stabilize this year. We are already observing positive trends in the first months of the year. Okay. Let's move to the next slide. Tatjana, will you present, please? Hi. Thank you, Uldis. I will take over. Good afternoon, dear shareholders. If we look at the figures, then in 2022, our revenue stood at EUR 18.7 million. Our EBITDA was EUR 2.685 million, and our profit was EUR 1.561 million. As Uldis already mentioned, there are declines in margins in comparison to 2021. If we speak about this year, then our revenue target for the group is EUR 22 million, and we strive to accomplish our goal. These are, of course, unaudited figures. Audited results will come out later this year, most likely in May. Now we will proceed with some key events of 2022. Sorry, not key events. We will start with our sales breakdown from different perspectives. Firstly, let's look at our sales breakdown by regions. Nothing dramatic has happened here, but what we see is that the revenue share of the European Union has increased by 2 percentage points. What we also observe is that the revenue share of Latvia has decreased by 1 percentage point, and the same for countries outside the European Union. To remind our shareholders, the focus of the company is primarily to grow our revenue in countries in the European Union, so we are really happy to see that the share of European Union is growing and not decreasing. Here we see the revenue split by categories. We have MÁDARA brand, we have Mossa brand, and also we have contract manufacturing. A thing to note is that the share of Mossa brand has increased by 2 percentage points last year. If we look at the sales breakdown by product categories, and here we specifically look at MÁDARA brand, then we are really proud to see that our makeup is developing and the share of makeup has increased by 2 percentage points and is now 15% of the total revenue of MÁDARA brand. Also, as you know, direct e-commerce, our own web shop, is an important revenue source for the company. Here we see the revenue share of direct e-commerce. It has declined by 2 percentage points in the last year for reasons Uldis has already mentioned. Also to add, I have to remind myself and also our shareholders that the COVID pandemic finally has stepped back, and we see that retail is developing quite well. Also one of the reasons for a change in proportion is that the retail channels are finally recovering. Now finally, about the key events of 2022, what we are really proud of. Last year, our brand, MÁDARA, was accepted in Paris Galeries Lafayette, Paris Haussmann shopping center, and it was a very big and important event for the company. So far, we are the only cosmetics manufacturer from Baltics which is represented in this retail space. In September, we have launched our pop-up space in Galeries Lafayette, which got a lot of attention and positive feedback, both from our clients and also from media. This pop-up space was built to last. Later it was moved to Sokos in Helsinki, and we are also planning to show our beautiful pop-up space in other locations as well. To continue on Finnish market, last year it was 12 years since we started business in Finland, and as you know, Finland is one of the most important countries for our company. Last year we did research. We studied carefully Finnish lifestyle and beauty needs, and afterwards we launched a special campaign for Finnish market and real MÁDARA users and Finnish women were involved. After the campaign, we saw a really good increase in our sales in retail channels. Sales in Sokos went up by 25% and sales in Stockmann went up by 58%, which are really good numbers in my opinion. Another thing regarding sales, what we are also proud of is that MÁDARA was accepted in U.K. Sephora online store. As you know, Sephora is internationally acknowledged beauty space, beauty retailer. We hope to see good growth also from this channel. This is of course not the only one, but the one we would really like to share information with you. Now regarding the new products. We like to innovate and last year was not an exception. We launched 16 new products and also we improved a number of our existing ones. Let's start with the new ones. We have launched the KIND line, which is basic skincare for family, which is suitable both for children and also adults, and is also suitable for people with sensitive skin. These are basic body skincare products, shampoos, body lotions, body washes, et cetera. We also paid attention to products that are already beloved by our clients. This is, for example, our peel, and we extended the line. Currently we have three peeling products and one of them, the new one, has already received positive recognition and was named Peeling Product of the Year in Finnish magazine, Eeva. Also our GROW & FIX Brow and Lash Booster got some additions to the line. Now we also have a fixing tinted brow gel in three shades. Also these products, although launched quite recently, have already gained popularity and received positive feedback from our clients. We also improved, refreshed our body product line. Now we have new soaps in larger size. We have hand and body creams that you can try. Now I give word to Uldis to tell you more about Selfnamed. Thank you, Tatjana. Yeah, now about my very favorite topic, selfnamed.com. As we have already informed, in the first half of last year, we launched MÁDARA's first technology startup, selfnamed.com, which is a self-service system providing private label products without minimum order quantity. In our view, the project is developing very well and healthy. We have created a good base for further growth during last year. It's also important to mention that in the second part of last year, selfnamed.com received support from European Bank for Reconstruction and Development to further develop the platform and implement a mock-up generator, which is already implemented, and develop drop shipping functionality and integration with e-commerce platforms, which will be implemented by beginning of this summer. Next slide, please. Yeah. Several improvements have been introduced related to the ordering of sample sets and increasing the possibility of individualization by offering different packaging types for the products. This year, the expansion of the product assortment will be continued, including the addition of new products. Next slide, please. Yeah. From the numbers perspective, selfnamed.com is still rather small. We see impressive growth in the second half of last year. The growth was 640%. We still do not reach the break-even point. In total, selfnamed.com generated losses of EUR 320,000 for the whole year. At this point, we consider this still as a normal and a healthy situation since we need to invest to attract new customers. We see that every month, the customer base is increasing. For example, the number of orders in the second half of last year was 310% bigger than in the first half. We see also a healthy repeated order rate. Approximately 80% of the turnover is generated by repeated orders. All in all, we consider this as a healthy start and really looking forward to continue to develop and invest in selfnamed.com this year and hope to present you nice growth and further development in our next statements. Okay. Yeah. Now about our sustainability activities, which are a very important element of our company. In 2022, we continued to improve our sustainability parameters. Now, for example, MÁDARA face toners and body washes come in packaging made from 100% recycled ocean plastics, which is collected along the shores. The new KIND line bottles are also made from 100% post-consumer recycled material. By using the recycled materials, we reduce the need for the production of new plastics, and this is in line with the EU guidelines and policies. Next slide, please. Yeah. Another important element of our company is social responsibility. Last year, the focus of our social responsibility activities was focused on the support of Ukraine. We both organized our own creative activities to attract funds and also got involved with co-financing in various other support programs. Yeah, next slide. Okay. Yeah. We have reached the end of the presentation. I would like to invite you all to follow our Investors' news as well as to read the ESG report, which tells about our activities in the field of sustainability and social responsibility. Yeah, this was in short about the last year's 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 the full information of the financial statements. Yeah. Thank you for your attention. Now we will go to your answers, to your questions, sorry. Thank you. Let's continue with the Q&A now. A reminder to the participants to join the discussion, please use the Q&A window that you see on the bottom of the screen. The first question, wh at is the biggest challenge for growth and profitability in 2023? Yeah. The biggest challenge actually remains similar to last year. We hope that the e-commerce environment and market will stabilize. As I mentioned, we see positive trends in the first months of this year, especially regarding the marketing costs of e-commerce, which allows us to reach wider audiences. I hope that this trend will continue, and this will potentially allow us to reach better results in e-commerce environment than last year. Of course, the second challenge is still the war in Ukraine and the economic consequences. We hope that the customer purchasing power and this cautious spending approach will not deepen. We hope that it will improve. Also besides these challenges, as I mentioned, we have prepared and are implementing, in my opinion, very good plan for this year how to approach new customers. Also, despite all I mentioned challenges, we are prepared to work in this rather tough environment and still planning to return to growth this year. Thank you. Yeah. Continuing on the same note, have you observed clients become more price- sensitive? Are previously loyal customers buying less or perhaps stopped buying? Yes, we see decrease in purchasing power. This is something we can observe in our direct e-commerce channels. We see somewhat lower average purchases. Some of our customers are switching from MÁDARA to Mossa brand, which is still okay. These are two, our own brands, and in this environment, it's good that there is also alternative for MÁDARA brand, somewhat cheaper priced Mossa brand. Thank you. There are certain product categories with a potentially refillable packaging, such as shampoo and liquid soap. It would help to reduce waste and save costs. What is your view on the topic? Yeah, I totally agree. In our R&D process, when working on developing new products, we also try to consider to use refillable packagings. Until now, we have not launched them because of several reasons. Yeah, it's possible that in future there might be also refillables. Thank you. Your 2023 revenue target implies close to 20% growth. What are the key actions that you are taking in order to reach this goal? Our plan consists of several elements. One of very important points is that we are planning to acquire new customers, both in e-commerce and in physical retail, in our European markets. Therefore, we have adjusted our sales department organization and putting more efforts in acquiring new customers. There are several other points in our plan, for example, to start to work with new audiences. One of the new audiences is men's category. We have observed already before that part of our customers are men. Although we don't have special designed men's line, so this year, one of our targets is also to increase the men's audience. Adding new products to the product line. All in all, the plan for this year consists of almost 10 different activities, which are new compared to last year. This is the base for our assumption that we will be able to grow this year. Thank you. Participants are interested to hear more about positive trends in e-commerce in early 2023. Yeah. As I mentioned, we see that the marketing costs are decreasing. It's easier to reach new customers and yeah. This makes a direct positive impact to the e-commerce sales. Thank you. Can you tell us more about your pricing strategy, given the high inflation environment? There is a kind request if you could break down the second half sales growth rate in Europe and Latvia by price and volume? Yeah. Answering the first part of the question. Yeah, we haven't increased the prices last year. This was our decision, seeing that purchasing power is decreasing. In our opinion, it would not make a positive impact on the sales if we would increase our prices. However, we have adjusted the prices this year from the beginning of this year, and there is certain price increase for many of our products. We have carefully analyzed and benchmarked our products with our competitive products and brands. This was kind of from the market approach and market perspective, so that our products would remain competitive. For certain products, we even decreased the prices. As I say, this was a market approach and when we saw that there is potential for price increase, then for those products, we adjusted the prices. Thank you. Thank you. The second part of the question, Tatjana, can you please help me with the numbers? The break. Yes. The breakdown of sales growth in Europe and Latvia, right? Mm-hmm. Yeah. Yes. I do not have the numbers at hand, but overall, the growth in Latvia, of course, was lower than in Europe. This is what I can tell for sure. If we look at the beginning of this year, then also for Latvia, we see healthy revenue growth. Thank you. Latvia is experiencing very high inflation rate, above 20%. How much is your cost affected, like production costs and wages? Since you need to catch up with the inflation, should I expect further cost increases this year? Yeah. There is certain cost increase for salaries and of course the energy costs are much higher than before. Although it does not, I mean, the energy cost, it does not make a significant impact on our P&L statement since we are not energy-intensive company. Regarding the production cost, the ingredients and materials, then we haven't observed a significant increase in materials and ingredients costs. For this year, we are planning to have on average, the same ingredients and material costs than last year. There won't be any increase, and we are not expecting, on average, an increase of material and ingredients costs. Thank you. You have commented that your weak performance last year was affected by increased competition in the market. Could you please comment on the competition situation at the moment? Yeah. I think the e-commerce environment is stabilizing, and this was caused by the two COVID years when many new e-commerce players came on the market and many companies focused much more on e-commerce than before. In the beginning of last year, when most of the restrictions were lifted and the customers could return also to physical retail, then e-commerce market did not continue to grow as it was during the two COVID years. This increased the competition level a lot. Now we see that after one year, it's starting to leveling out and as I already mentioned, one of the signs that the competition level is decreasing is the decreased e-commerce marketing costs. Thank you. What is the profitability guidance for this year? Yeah. As usual, we are not giving the profitability guidance, but our aim is to return to the profitability levels as we had them in previous years. How do you. Last year, we consider really as exception and as I would say, a pause in our growth. How do you assess the change in the relative competitive position of MÁDARA in Latvia and Europe? For example, I understand that one advantage of MÁDARA was the lower cost base operating in Latvia. Now, Latvia is having higher inflation rates than other parts of Europe. I worry if this diminishes your cost advantage. I don't think so. Although we have, at the moment, rather high inflation rate, as I mentioned, we do not expect a significant increase in production costs this year since the cost of materials and ingredients will not increase. What is your turnover guidance for this year? Tatjana, can you help me? Yes. The turnover target for this year is EUR 22 million for the group. Another question is about entering new markets or customer groups. There are a lot of projects in the pipeline regarding both new clients and addressing new customer groups. Uldis already mentioned about targeting men. This would be one of the projects we are working on, and of course, new clients in existing markets and some projects about acquiring new markets as well. Thank you. Currently, the last question that we have received, your EBITDA margin was 14.4% in 2022, while it averaged at 22.8% over 2017, 2021. What do you see as achievable, sustainable EBITDA margin level in the long term? Yeah. As I mentioned, we do not give the profitability guidelines, but our aim is we see that the healthy EBITDA margin would be around 20%, and this is something we are aiming to achieve. Thank you. All questions are now answered. The recording of the webinar will soon be available online. Please follow MÁDARA Cosmetics announcements to stay up- to- date with company's news. Uldis, Tatjana, thank you for your time. Participants, thank you for joining the call today. Thank you for joining, and thank you for your attention. Thank you.