Welcome to the RugVista Q2 2025 Conference Call. For the first part of the conference call, the participants will be in listen-only mode. During the questions and answers session, participants are able to ask questions by dialing pound key five on their telephone keypad. Now, I will hand the conference over to the speakers. CEO Ebba Ljungerud and CFO Joakim Tuvner, please go ahead. Hi everyone, and good morning. Welcome to this second quarter earnings call. My name is Ebba Ljungerud, and I am CEO, and I have Joakim Tuvner, who is our CFO, with us. Good morning. The structure will be as we normally do it. I will start with the business update, a bit more high level, and then Joakim will dive into the numbers. Last, of course, we will have a Q&A for any questions. I would also like to point out that the images you'll see in this presentation come from a campaign that we just kicked off in our Rustic collection. It's a bit more autumn-y in the look and feel, a lot of coziness and lit candles, even though this is probably the warmest day we've had in Stockholm for a long time. We are slowly moving into the fall, so we have already kicked off the fall campaigns. This campaign actually has a mix of designs, both new designs for the season, including this rug you see here, and also some of our previous top sellers that we have made new versions of for this season. Anyway, to start with the business update. We had a very good quarter, we think, and we're very proud of that. Our net revenue landed on SEK 150.5 million, which is a growth of 17.2%. Organically, if we take in exchange rates, it's actually 22.3%. By some margin, this is for a long time our best Q2, actually, in almost all of the KPIs. It was a pretty even quarter when it comes to top line. It started off a bit slower because Easter was in the beginning of April, and the year before it was in March. Otherwise, it's been a fairly even quarter. If we look at the orders, they are up from 59,000 to 74,000. If we look here, you see the quarterly development. It's a 26% increase compared to 2023. If you look at the rolling, the bottom chart there is the rolling 12-month quarter development. There you see that it does continue to grow over time, even when you look at it in this manner. When we talk about customers, we had 52,000 new customers compared to 41,000 last year. That's a 26% increase, which is again an all-time high for the quarter. If we look at the AOV, the average order value, that was down a little bit this quarter. It declined by 7%, which in part, I'll move over to the next slide so you can see the quarterly development here. In part, it's driven by that we, and I think we mentioned it already in the Q1 report, that we have been driving a lot of sales in the quarter due to our warehouse move. There is also some FX effect in this. If you remove the FX effect, it is not quite flat, but I think it's down around 2% if you include that. This is an area that I think we need to continue to work with. I think, and I believe that the average order value, we have more work to do. It's not a silver bullet. It's a lot of small changes, and we do it all the time. We work a lot with how we plan our campaigns. We work a lot with how we make the algorithms for the site, etc., etc. This work will continue, and we don't want it to keep on declining. I think that's very worth pointing out. Of course, it fluctuates quarter -over -quarter, so it's not going to be a consistent move, but it's still important for us. Moving over to the profitability, the gross margin landed on 62.5% compared to 63% from last year. This is actually almost solely driven by the clearance sale, where the product cost percentage was a little bit higher than before. Our freight costs are still looking really good and were down, just as they've been for the past couple of quarters. If we look at the first six months of this year, so January to June, the gross margin actually increased to 63.4% compared to 62.2% last year. Marketing spend, this is a big investment for us, and it decreased by 0.6%. I think it's just worth pointing out that we, even with this increase, managed to grow organically by 22%. That's a trajectory that we're very happy with. We have done this shift, trying to catch customers earlier in their buying process, and we do see that it continues to look good for us. The volumes in branded search are increasing as well, quite substantially. Basically, when you search for the name RugVista rather than a product. One of the sort of side effects of being earlier in the process for the customer and being more visual in the ads is that we want to build the awareness of the brand, excuse me, over time. Through the increase in organic search, we believe that we are succeeding in that as well. I would again like to point out that this fluctuates a lot quarter by quarter since we are spending a lot with search engines. It depends a bit on how our competitors are doing and how much keywords are, etc. This is not a clear downward trend, but it's something that we want to make sure that over time, we are always in control of this. Looking at sessions, again, to a large extent based on the fact that we have switched in our marketing mix, we have a large increase in sessions, 49% from almost 6 million to almost 9 million. Just as previous quarters, this does affect the conversion rate. When we look at the total economics for the marketing investment, we see that it's actually very worth it. Looking then at EBIT, we landed on 7.1% compared to 2.4% last quarter, almost 3x better than last year. The margin ended at 4.7%, and this includes one-off moving costs of just north of SEK 4 million. We have a chunk there that we've also been quite clear on, to a large extent coming in Q2. If we look at the market climate, we do see that consumer sentiment continues to fluctuate a lot. If we go into this slide, we can look at some of our bigger markets. Even though we've had a strong quarter, you see here that Sweden is the top one, quite low on consumer confidence. Germany is a tiny bit better, and France is also actually quite low. It doesn't always reflect in our results. I don't think you can draw too many conclusions, but of course, it's important for us to know how the total market is doing. For us, this really means that we need to optimize our spend for return on investment even more. We must be good at growing in smaller markets to balance when the bigger markets aren't performing as well as they've had previously. I think it's worth pointing out, I actually see this as a strength for us, that since we have our total market share in any given market is quite small, that also gives us opportunity to move and be a bit more nimble than if we were very dependent on just a few markets. If we look a little bit at the fall ahead, of course, a very, very big thing for us in Q2 has been to move our warehouse. It has, I'm happy to say, gone really well. Amazing work by all our teams there. Even though the move itself is coming to an end quite soon, we will continue to optimize, and this we see as really a continuous area for improvement in our company. We will continue to build on automation, and we will fine-tune. Of course, we have peak coming up in a couple of months, and ahead of that, we want to make sure that our processes are really, really strong. We are also building buffer stock at the moment, basically building up for peak and for later seasons. For that reason, we've actually decided to keep one of our old warehouses to make sure that we have the space we need for this. The assortment, our rugs, here, we are also developing a lot for the fall. I already mentioned the Rustic collection that you see here. Most of our news will actually come a little bit later. They will be in the more Classic collection and also Modern collection. Classic looks much more as the oriental rugs, and Modern are, as the name implies, modern in their design. Actually, quite a lot of color this fall coming. We see a lot of color in all the interior trends. We do all of our design in-house, so that design process has already happened, and now all of the news are actually coming into the warehouse, which is very exciting to see. If we look at the assortment overall, we are slowly trying to shift a little bit away from some of the very cheap rugs and find the sweet spot in value for money and having quality no matter what price range we're in. We are in many different price ranges, so it's just about being qualitative in that price range. We also see that outdoor has performed very well in Q2 and actually Q1, but now it's calming down a little bit, which is normal for fall and winter. That also leads, for us, it leads to that we can push a little bit more handmade rugs. Outdoor tend to be machine-made, and handmade rugs tend to be somewhat more expensive, which we hope will also help us a little bit with our average order value. One thing you've heard we talk a lot about that we continue to work on during the fall is the personalized customer journey. Because of that, we have such a wide assortment within the rug vertical. It is important that the customers find what they want on site. There are a lot of things that are happening during the fall around this, and this will continue to be a big focus area for us. I would also, of course, like to just brag a little bit about our Trustpilot score. We are super proud that we managed to keep this high score, 44.73 in Q2. This is including the move, which even though it's been very, very smooth, there have been a couple of customers where there's been hiccups in the deliveries. We're very proud of this. I think our purpose for the company as a whole is we help people to a home they love. I think that's very important to remember in this context, that it's for the whole company and for anyone who invests in us as well. Yeah. With that, I hand over to you, Joakim. Thanks a lot, Ebba. Starting to the left in this slide, Ebba has already been through that our net revenue growth was 17%. After adjusting for the negative currency effect, we grew organically by 22%. As you said, Ebba, that was 26% order growth and - 7% in average order value, of which 5% then was the currency impact, the negative currency impact. We're happy to see that all regions are driving the growth. If we start with DACH, it grew by 18%, of which Germany, which is the biggest market in that region, grew by 10%. The Nordics grew by 32%. There we've seen Sweden for the last couple of quarters being the driver of that region. Now Sweden grew less than the region, so it grew by 19%. We see the same pattern in the rest of the world, which is then mainly the rest of Europe. We see that there are two main markets, U.K. and France, were actually in decline, smaller declines, but the region grew still by 11%. All in all, you can say that we saw bigger fluctuations between the markets than usual, still with a good growth in all regions. I move on to the cost ratios and the EBIT margin. Ebba, you already touched that the product expenses are down, or we lose 1.4 percentage points. The cost is up by 1.4 percentage points. This is driven by the stock clearance that we had planned in order to facilitate the move to a new warehouse. A little bit higher discounts is driving that. Shipping and other selling expenses, which is then our shipping cost to our customers, continues to improve versus last year, although somewhat higher than in quarter one. This is then due to lower freight costs and also due to some internal efficiency that we've been driving. That sums up to a gross margin drop of 0.4%. You see that it doesn't sum up or add up 100%. As we note at the bottom of this slide, there are some rounding differences in this slide as well. Moving on to other external expenses, as Ebba mentioned here, we have moving costs of SEK 4.2 million in this line, and that is equivalent to 2.8 percentage points. That is explaining the slight increase we have there. This line also, the big cost here is the marketing cost, which, as you saw earlier, went down from 29.8% to 29.2%. There is a 0.6 percentage point reduction that I think you have to see in light of that 22% growth. Onto personnel expenses, these are down by 2.8 percentage points. There in last year, we had some one-offs. We had SEK 2.5 million in one-offs. We have six fewer FTEs in this quarter compared to the quarter last year. We also have some economies of scale that drive down the percentage as we grow the top line. Other operating expenses is the FX effect from revaluing assets and liabilities that we carry in foreign currency. Last year, that was a minus. This year, it was a plus. It is a 1.9% gain versus last year. Depreciation and amortization then has increased, and that's primarily due to the start of amortizing our web shop. We stopped capitalizing expenses on our web shop in June of last year, then started to write it off or amortize it. That's the main explanation. It is also that we have higher costs for our leased properties. As of June 1, we have added the new office and warehouse building. When that is then adjusted in IFRS 16, it comes in this line and in the interest line. All in all, we see an EBIT margin increase of 2.9 percentage points despite the moving costs of 2.8 percentage points. Let's take a look at the inventory. You see here to the left that during the course of this year, we have decreased our inventory by SEK 6 million. This was a planned decrease. If we compare to prior year, we have increased the inventory by 19%. If we look to the right in the picture here, we are actually below now our targeted range, which is 17.5% - 22.5% of the last 12 months of net revenue. We are at 17.3%. We have already had quite some number of deliveries in July, and now we're beefing up the inventory to prepare for the high season in quarter four and not let the quarter four drain our inventory into quarter one. Last but not least, improved cash flow. We have changed this graph here to not only include the quarter, but the year to date. The quarter is quite a short period to analyze cash flow. You can see here that starting upper left, the operating cash flow increased by SEK 15 million, and that is driven by the increased EBITDA. In the left bottom corner, you'll see the cash flow from investing activities, whereas we in prior year had very few tangible investments, and we were investing SEK 4 million in our web shop, whereas in quarter two of this year we have SEK 31 million going out for the investments, mostly equipment to the new warehouse. As I earlier said, we have stopped capitalizing on our balance sheet, capitalizing development costs for our web shop as of end of June last year. We have no intangible investments during this quarter. The cash position then, we are roughly at the same cash position as we were about a year ago. Despite the investments, we have paid the dividend during this quarter. We have a drop of SEK 62 million since the year-end. You can say that generally, our year-end cash position is artificially high. I mean, of course, we have a very good cash flow in quarter four. It's high season, but we have also, most of the time, decreased our stock levels. We also have quite a big payable of VAT that we have gathered up during quarter four that is paid in quarter one. It's artificially high, I think we can say in end of quarter four. SEK 158 million. With that, I think we have a strong balance sheet to finance this inventory buildup that is coming up, the final fixed assets purchases that we have to pay in quarter three. I think we stand strong going forward. Ebba, with that, I'll hand it back to you. Thank you. To sum up, we're proud to present our Q2 numbers with strong top-line growth and also a quite decent EBIT, even including the moving costs. The fall assortment is starting to come in. We're very excited about this. We have lots of news coming, and we hope to see strong sales. The move is coming to an end. As I said before, we will continue to work with automation and improving our processes. Now we have better, really, conditions to be able to do that going forward. Our personalization projects are going to continue to be focus areas during the fall. With that, I think it's time for a Q&A. If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. Good morning, Ebba and Joakim. Victor here from DNB Carnegie. A couple of questions from my side. First one, are there any positive sales effects here in Q2 that from perhaps more aggressive marketing or discounting compared to normal and maybe related to carrying sales that will not be material going forward? Or would you say that your Q2 performance is representative of your underlying performance and thus sustainable? I would say that there isn't any major impact by specific marketing drivers or the big sale that we had. It's also true that we do sales every quarter. It was a little bit bigger in Q2 because we wanted to clear out some of the stock before the move. In general, it's no. Yeah, long way of saying no. Do you agree, Joakim? I totally agree. I mean, the total volumes that went out in that clearance sale were mostly focused on slow-moving products and where we had only a few SKUs of each, and hence there wasn't a big volume going out. It was more like any other normal strong campaign, we can say. Perfect. Very, very interesting. On your high web traffic growth, I'm curious here, how do you want to improve conversion going forward to catch all these new visitors that are finding RugVista? I think the personalization is very important here to make sure that, of course, it's normal to see lower conversions when you drive a lot more traffic, but we really want to make sure that people find what they want. Even though I love our website, I still see room for improvement, if I put it that way. This is not something that we do very quickly. It's more slow changes and a lot of A/B testing over time and finding out what works. I see that is where we need to put a lot of effort going forward. Yeah. I have some other questions on marketing. I'm curious what you are seeing here in the European market post the minimalist changes and tariffs in the U.S. You mentioned your Chinese competitors and others before. I'm curious what you are seeing in terms of competition on ad spend and marketing in your market. Yeah. Joakim, do you want to? I think the tariffs don't affect us directly so much. It's more like creating these uncertainties in the consumer sentiment. We saw that the consumer sentiment went down quite a lot in April, and that was when there were a lot of tariff discussions going on. I think the tariffs affect us more in terms of how the whole economy moves. We know that when consumer sentiment is down, what normally is hit the worst is then discretionary goods. I think that is the impact we see from the tariffs. Okay. My question was more about competition on digital marketing from large international players moving to Europe or from the U.S. Yeah. Competition is always very fierce for us. You could argue that it fluctuates and it's higher in Q4 than in Q2, which is true. We haven't seen any major shifts. Some keywords go up a lot. We have seen a couple of new competitors that we haven't had before that are coming in. It does fluctuate all the time. Yes, we know that some competitors have moved a lot of marketing spend to Europe from the U.S., it hasn't affected us majorly. I think you see that in that we managed to keep the marketing spend under control even in this quarter with that type of uncertainty. Okay. Perfect. A final question from my side, and it's also on marketing. You spend roughly 29%, 30% of sales on marketing, a little bit lower in the lower end this quarter. You've invested in your new website to drive more organic traffic. What I'm curious about here is what do you expect the impact on your traffic from AI operators that are reshaping search engine optimization? What are your thoughts here for the future? Very important shift, I would say. That's something that we are both already doing a lot of work in that area and also keeping a very close track. We don't know exactly what the shift will be, but we are sure that there will be a shift. For us, it's important to keep track of what's going on and what's moving where and how people, how our customers search and where our customers come from. Without saying that we see a clear direction to going to this platform or that platform, we are convinced that there is a shift that is happening. It's more about keeping track and being very nimble and also very attentive and not take things for granted. Perfect. Yeah, it's going to be interesting to see the full picture. All right. Thank you very much for those answers. That's all for me. Thank you. Thank you, Victor. The next question comes from Benjamin Wahlstedt from ABGSC. Please go ahead. Good morning and well done on a strong quarter. I want to speak some more on the warehouse clearance. I was also wondering on the impact on the AOV from the warehouse clearance. Is it positive because you're selling mostly slow runners, large items, unique rugs, or is it negative, please? It is, even though you're right that it is bigger, slow-moving rugs that tend to be a little bit more expensive than we're selling, it still has a little bit of a negative effect on the AOV because that type of stock otherwise brings up the AOV. I wouldn't say that it's a huge impact, but it tends more downwards than upwards with small movements. Yeah. All right. Thank you. I was also wondering about Q3. You have been making some changes to your assortment when it comes to Q3, especially thinking of, for example, outdoor rugs here, which makes judging underlying comparable growth figures a bit more tricky. I was wondering if you could say anything about how you judge the comparable figures in Q3 versus Q2, please. I think we had quite a poor quarter in quarter two of last year and the same in quarter three. I think they are somewhat comparable in that sense. All right. Somewhat comparable underlying in Q3. Perfect. Finally, for me, I was wondering if you could say anything about what moving costs, if any, you expect in Q3, please. We are definitely expecting some moving costs in Q3. Yeah. Having said that, I think the big chunk we have taken in quarter two, we had some in quarter one. We will have some moving costs in quarter three. We're shipping the majority already end of July. We're shipping the big majority, 90%+ from our new facility, and we have moved most of the goods. Most of the costs for the move are taken when we end quarter two, but there will be some in quarter three. All right, but below the levels seen in Q2 then, I take it. Yeah. Thank you. That's all for me. Thank you. Thanks, Benjamin. The next question comes from Emmanuel Jansen from Danske Bank. Please go ahead. Good morning, Ebba and Joakim. I hope you can hear me. Yes, good morning. Great. Good morning. I wonder if you can perhaps start with describing how the quarter in itself has developed throughout the month regarding sales momentum. It started a little bit slow, mainly due to the fact that Easter, which is not a holiday when people buy a lot of rugs, was in the beginning of April. Last year was in the end of March. Actually, it's been fairly even throughout the quarter. A little bit of a drop in June is fair to say. June, the warmer and more summery, the lower the sales, but not huge fluctuations. Okay. Great. Looking also, correct me if I'm wrong here, but looking a bit on your marketing strategy the last couple of quarters, it's at least my impression that you have been trying at least to reach out to a broader customer group, if I'm correct. Yes, you are. Would you say that that has been one of the key drivers behind this volume growth that we have seen in terms of order growth, or is it anything? Is that the primary growth driver, you would say, or is it the customer experience on the website or the updated assortment? It is a combination of all, I would say. The marketing, I think, helps, and we see that in the growing numbers of visits that come in, even with the lower conversion. It is also a fact that we are today working in a very different way with CRM. We are working in a very different way with how we present on site. We are also clustering in a different way on site. It is hard to pinpoint one specific thing, but the marketing is definitely helping. I think long term, what I am very interested in is how can we, and this has to do with the previous questions around AI as well, how can we be better at building our brand in a cost-efficient way long term? Since we are not that big in any market, it is hard for us to do very big above-the-line campaigns. We want to make sure that we build our brand in pretty much any communication that we do with the customer. We think that the reason we see a very big increase in branded search on the search engines has to do with the fact that we are higher up in the funnels. Our ads are more visual, more appealing to, let's say, a more brand-aware consumer than someone who is looking for a very specific type of rug. That is our continued strategy to try to continue to build on that. Okay. Great. That's very helpful. Can you perhaps maybe when did this start, you would say, with this kind of marketing strategy going higher up in the funnel? I would say we started in Q3 last year a little bit, and then it's been growing quite a lot since Q4. Great. Perhaps maybe a final question from my side. We're talking about the average order value, and you were mentioning that you hope to see maybe a bit more sales through from handmade rugs in the second half year. Why should we expect that to happen now? Do you have any different tools now that you didn't have one year ago? Can you also perhaps give us some colorings on the gross margin profile, etc., on handmade rugs compared to design rugs? Yeah. I think there are two factors that are relevant. First, the one is that we are changing in what we actually produce in our assortment and that we have let go of some of the, let's say, lower quality rugs and try to push. Again, it's not about being super premium in everything, but it's about good value for money no matter what sort of price range you are in, that we want to be qualitative in the relevant price range, so to speak. The shift that I mentioned is that outdoors, which is machine-made, tends to be stronger in the summer months. It's up to us what we push and how we plan our marketing and how we populate our sites and what we communicate in our campaigns and in our emails, etc., what type of rugs we push. I don't think we disclose gross margin on product type level. It's more on a trying for us, trying to control the assortment a little bit more from our end. Yeah. Would you say also that they have less moving parts now compared to a year ago? You can put more effort and focus on selling these kind of products now than versus a year ago? Actually, we have a lot more versions of rugs today than we did a year ago. It's a slow-moving product, so what we designed a year ago was released in the spring. I think we are better at making more conscious choices today. Having said that, just to add one thing, this is what the business is. I think that it is about every day making choices. We're both a design company and a trading company. We need to look at this on a daily basis, basically. Great. I think that was all my questions for now. Thank you, Ebba and Joakim. Thank you. Thank you. The next question comes from Johann Fred from SEB. Please go ahead. Yeah. Hi. Good morning, guys. Thank you for taking my question. I just have a quick follow-up question on the gross margin development. I note in the conference call here that you highlight that the product margin fell by 1.4% year- over- year due to what you quote as a higher discount. Is there any kind of mix effect here looking at the underlying comparables? As you mentioned, outdoor rugs' sales have been strong during Q2 this year. My question is essentially, is there a mix effect here as well, or is this 1.4% decrease solely due to the higher campaign activity? 100% the latter part. I mean, it's driven by the clearance that was driving the average. Our average discount went up, and that 100% explains, or 100%, but that explains most of this increase in product cost. It's not the outdoor. Thank you. Very, very clear. Thank you so much for taking my questions. Thank you. Thank you. We have a written question here that Victor Hansen has added in. Your Trustpilot score remains high, but it seems like you have stopped reporting your Net Promoter Score, NPS, this year. Is there any reason for this? Thanks. Yes, we talked about this last quarter, I believe. We decided to go to, because what we do is we split. Some customers get sent to one type of, or what we did, I should say, get sent to one type of question, and some get sent to another type of question. We decided to focus on one of these tools to just have more data, really, in the tool. We decided to go with Trustpilot, and we made this switch J1st of January, I believe. Yeah. I think that, you know, the average person has much easier to relate to the Trustpilot score. Whereas the NPS value, not everyone knows it started at - 100. Some people think it's from 0- 100, etc. That's maybe a poor reason for not reporting it. I think it's easier to understand the Trustpilot score, which is also the important score for us that we know drives conversion when consumers feel confidence that other consumers have experienced a good experience on buying from us. That was the only written question we got in, Ebba. Thank you very much, everyone, for listening in. Hope you have a nice day in the sun. We will be back with Q3 on the 6th of November, right? Yes. Yeah, thanks a lot, everyone.