RugVista Group AB (publ) (RUG) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to RugVista's Capital Markets Day 2023. RugVista is a leading direct-to-consumer experts within the category of rugs with a strong financial track record, having grown its revenues by a CAGR of 16% in the last 5 years with an EBIT margin of 11.7% in 2022. My name is Carl Deijenberg. I will be moderating the event today, and we will cover a total of 7 different topics. The event is scheduled to finish at around 12:30, and we will round off the presentation with the questions-and-answer session. So both for you dialing in digitally and for you here in the room, there will be an opportunity at the end to ask questions. So I think with those short introductory words, I will leave the word over to our first speaker, CEO, Michael Lindskog.

Thank you very much, Carl. I am happy to have everybody here in person and those online as well. What we'd like to cover today is essentially the following agenda. So I'll kick it off a little bit with a bit of a strategic overview and also focus a bit on us as an investment case. Second is assortment, and you can read the rest. And as Carl said, we will have an open Q&A at the end. So let me get started. So -- here we go. So as I said, my name is Michael, I've been the CEO here for about 3.5 years now. I have a background in retail, both online and offline. And I think I would characterize myself a little bit as an analytical problem-solver with a desire to build things. So let me kick it off with a few basics about us. So in sort of one sentence, what we do is we sell our in-house designed rugs through our own online stores. That's basically what we do. Of course, it's a tad bit more complex than that, but it boil down to one sentence, that's what we're about. We were actually founded back in 2005, so been around for quite a while comparatively when speaking about e-commerce companies. We are based in Malmö, Sweden, operate 2 warehouses and 2 brands, so RugVista and CarpetVista. We are about 100 people in total, around 90 FTEs, and we are also listed on Nasdaq First North since it's actually March 20 -- yes, March '21, so a bit over 2 years now as a public company. If I wanted to share a little bit more about us as an organization beyond sort of the core facts and figures, I'd like to use this because this is us as an organization and us, to a large extent, also as the people who are part of the organization. And #1, our main purpose is to help people to build a home they love. That's at the core of what we're trying to do each and every day. We've, during the past about 2, 3 years ago, also refined what we're wanting to achieve in terms of our vision. And we formulated really 3 distinct visions around: #1, the business; #2, us as an employer, which is the people vision; and #3, us as part of the world, which is our sustainability vision. And those 3 components, of course, is what we want to achieve overall. And then finally, I think it's worth noting that we see ourselves as a value-driven organization with sort of 3 core organizational values, which are then described in more detail as well. And then let's move on a little bit more to us as an investment case. So if I wanted to encourage you to kind of keep one thing coming out of this session, it would be trying to remember this slide or these 4 key messages, which is, #1, that, as we said, we're a leading European digitally native D2C rug expert. But why we believe we are an attractive investment case is really based on these 4 dimensions, which is, #1, we are addressing a very large and what we also see attractive market that is in the process of transitioning online. Second is that we see ourselves as well positioned to really own this vertical when it comes to online here in Europe. And then the third element, of course, is that we're also beyond having the capabilities and also the ambition, we actually have a plan, a clear plan in terms of how we want to realize our long-term ambition, both from a sort of strategic point of view, but of course, also from a financial point of view. And then finally, I think as most of you already know, the current economic conditions are quite unstable or challenging and us having a very solid financial position in addition to a long track record of profitable growth, I would argue, gives us the flexibility and the muscle to actually continue working on realizing our long-term ambitions. So not only sort of focusing on the now, but having a strong focus on the now in addition to the future. And then in the following slides, I'll go through each of these 4 dimensions in a bit more detail. So large market transitioning online. So the rugs and carpets is part of the mega category, home furnishing or home interior, which is a huge vertical within here in Europe, about SEK 2 trillion, and about 9% of that is rugs and carpets. Out of the total space for -- or the total value of the rug and carpet about, at the moment, we estimate around 20% is online. That gives around about a total value here in Europe for online rugs of around SEK 40 billion annually. And when we did this market study, it's a few years now, the estimated was about a 10% annual CAGR. Then of course, COVID happened, which undoubtedly pushed the online penetration up. And then a little bit -- there was a little bit of a reversion back to the mean ones, once the major pandemic restrictions were lifted, which sort of gives us around 20% online penetration according to our own estimates at the moment. But beyond sort of the COVID effect, I think there's 2 major macro trends, which will continue to support our future growth. And let me start with the first one, which is -- it is still a vertical that is very -- is behind a lot of more mature verticals when it comes to online penetration. So let's assume we are at the 20% today, we're still 10 points behind fashion. We're almost 20 points behind consumer electronics, and we don't even want to talk about the travel and the book verticals. So point is there is an ongoing online transition across essentially all the verticals and both in a B2C setting, but also in the B2B setting, and we are part of that. We're behind, but my -- and my belief, and there's a lot of reasons why I believe this to be true, we will catch up for sure. Second major macro trend is the fact that the digital generation is actually becoming adults now. So we are in a position here today where we have around, in Europe, around 190 million Europeans who were born in the sort of part of the millennial generation or later, who are 25 years plus. And we're using 25 years as sort of the average when people start setting up their home, depending on the market, of course, might be sooner or later. But this generation has grown up with an iPhone or a smartphone, at least, not necessarily iPhone always, in their hand or a tablet and been doing chatting with friends, communicating with the world in general and also making a lot of purchases online. And once this generation starts setting up their own homes, the expectation and also, to be quite honest, also what we see in the data is that this generation will continue to make a majority of their purchases online versus what their parents did, which was offline. Then -- so beyond the sort of macros, what makes the category, the vertical itself interesting? And really here, we see that we can argue about it, but I would say that rugs, to a large extent, is the perfect online product. And why is that? It is a product that the average order value or average item value is quite high compared to many verticals. Second is that it's a product that actually has low inventory risk, really due to 2 reasons: #1, the fashion cycles or trends are quite slow. So there's an opportunity to sell anything that you actually offer over a long period of time. And then the second dimension of that, of course, is that the products don't get destroyed while sitting on the shelves. And then, of course, beneficial with relatively low return rates. And then finally, I think this is the most important one, is that if -- is that we see the buying experience of a rug in an online setting far superior that of the off-line setting. And I don't know if you've ever sort of been in one of these traditional rug shops in the off-line environment. But typically, what you see is 20, 30, 40 rugs in a pile on the floor. And you see the top one quite nicely and then you had to sort of flip through the entire bunch in order to sort of see what's #2, #3, et cetera. And that's quite tedious compared to a process where you have great pictures, you have many filter settings that you can apply and quickly identify something that you like and that fits your needs. And then when you order it, you get it shipped to your home for free. And then, of course, we offer full year returns as well. So perfect product in many instances. A little bit cumbersome, of course, but still a very good product for online distribution. And then the -- another aspect in terms of what we see the market as attractive is that it is a very fragmented vertical where on the reseller side, you have many different types and -- of sellers, both in the online space as well as the offline space and very -- and not that many to be quite fair, that are specialized and pan-European. There are some regional specialists, absolutely. But overall, it is quite fragmented. And really the only sort of major player pan-Europe, and to be quite fair, globally is IKEA. So if you're in the space of home furnishing, you always have to see IKEA as the big dog, and they should have all credit for being that. But beyond IKEA, there's really quite a fragmented landscape. The second characteristic of the vertical that we also find quite interesting is that it is one without what I call strong product brands. There are some brands within the rug space, but they aren't strong like you have in fashion with Adidas, with Tommy Hilfiger, Ralph Lauren, et cetera. That is not the case within our vertical, which for quiet interesting as a reseller because there is some opportunity for someone to really own -- white spot [Audio Gap] we can sort of say that when someone thinks about rugs, they think about RugVista. Because that's the position we want to be in. And that's what -- that is part of our long-term ambition. Then talking a little bit -- so that's kind of the market and why we find it attractive. So let's talk a little bit more about us. So -- and when we talk about us, it really starts with this, which is customer satisfaction. Customer satisfaction is at the core of what we're trying to do, and it is part of the organizational DNA. And we are very proud about the fact that essentially, since the beginning, we have a best-in-class trust pilot rating and over the past 3 years now. We've also measured our NPS score which you can see on the right-hand side is quite strong even when you compare to some of the world's most famous brands. So -- and then you have -- and it's always fun on Mondays or over the weekend to read through some of the comments that people leave, both in our own in-house survey as well as the trust pilot comments about how the customer experience was. And it's -- yes, it warms us to read how happy the vast, vast majority of all our customers are. And the reason also, of course, we -- and also me personally, we believe that at the core, happy customers is the -- a prerequisite in order to be a growing, a financially sound organization. Because unless you have happy customers, you eventually will have problems. Then the second thing I wanted to highlight about us is we, like we said earlier, we are a direct-to-consumer organization. And what that really means is that we work directly with producers, primarily in Turkey and in India, to develop our own assortment. So we design it. We work with the producers to select qualities, colors, et cetera, and then they produce. And that makes us have an assortment, and that is, of course, spot on when it comes to the needs of our consumers, but it's also an assortment that nobody else has. And that, of course, is quite beneficial overall. Second aspect, of course, is that we do essentially everything in-house, which means that we can control and optimize the user experience, end-to-end user experience with the [ 4R ] vertical. So we have 2 warehouses. We operate them ourselves, which, of course, ensures post-order experience is as good as it can be. And we, of course, we work with partners in terms of deliveries or parcel deliveries. But we work closely with those preferred partners to ensure also that from our warehouses to the customer's home, that the experience is top notch. We also have an in-house developed tech platform, both in terms of the back end, what most people will call the back-end features as well as the front-end features. And Peter will talk more about our new front end in a later session here today. And then finally, we also do our -- we have our in-house marketing. We have our in-house content production, both when it comes to text and image and video. And of course, we manage our own money when it comes to marketing investments, which I think we also had benefits last year, especially when we had to be really focused really on efficiency. And we have the capabilities and the manpower to actually execute on that. And from a consumer perspective, of course, the benefit of buying from a D2C player is that -- and what we do at least, and you don't have to do this, but what we do is ensuring that we offer outstanding value for money. So within a given quality range, we will have outstanding value for money compared to anyone. And then let's talk a little bit about the strategy, so the master plan, let's say. And we have essentially a long-term business strategy, which is centered around 4 pillars. We will, during today, focus mostly on Pillar 1 and 2, which -- where Pillar 1 is about showcasing our assortment and in Pillar 2 around the how do we win the key European markets. And then if we start off a little bit with the first portion in terms of showcasing the assortment, like I said, we have an assortment that is unique to us. It is top-notch, offering value for money. It has all the different types, different price points. We need to make sure that the people who visit our web shops get the -- understand that this is the case and that it is us who have produced it. We stand behind the products and all of those things. The second bullet here talks about content. And part of the reason we are building the new -- or we have been building the new platform is that we understand the future of the online e-commerce is content. It is content that inspires. It's content that helps. It's content that guides. And our old platform or exist -- previous platform could not support that. And it's not only text, but of course, images, it's videos and all of those aspects centered around the theme of content. And so that is a huge focus area for us. And then finally, of course, all consumers are not the same. So you need -- and we've done research on this. So we understand that consumers start their purchase journey from different starting points. And of course, we need to serve all of those user journeys in the most appropriate manner. So yes, of course, there are some who are price-driven, and they should be able to find something within a price range. But there's a lot that are actually driven by inspiration. So they want something that fits their personality that -- or they want to do a room in a specific, let's say, nautical theme. And all of those aspects will be built into our new platform, are being built into a new platform. Then the sort of how do we win the key markets. Of course, that's about really going deep in the big European markets such as Germany, such as France, the U.K., et cetera. And in order to do that well and really capture a large portion of that demand in a given market, you need to localize because consumers make decisions based on what they know within that their frame of reference. And yes, the world to a certain extent, is being global, but to a large extent, still, they make decision based on their local references. And that's why being local is so important. And then part of this is also that over time in the key markets, we want to establish our brand name because establishing our brand names -- brand name means awareness, and awareness means trust. And once you're trusted, you can -- you're part of the consideration set for a given purchase. And that's why that is also part of our strategy. And then, of course, we are very public with our numbers. And we have a very -- we have a solid track record of profitable growth. Last year, of course, was a bit of a bump in the road. But considering the macroeconomic environment, we're still quite pleased that we, at the end, actually managed to deliver almost 12% margin. And over the past 3, 4 years, we've completely changed our financial position, moving from minus SEK 80 million in net cash to now where we have around SEK 115 million in net cash, which gives us an extreme amount of flexibility. So in summary, we are the -- we see ourselves as the leading digitally native rug expert. We are addressing a market which is transitioning online, and it's large and it is attractive. We see ourselves as well positioned to own this vertical here in Europe when it comes to online. We have a plan for how to get there. And of course, we have the financial performance track record in addition to the financial strength to execute on this agenda. Thank you very much.

Thank you very much for that, Michael. So I'll take the opportunity now to ask you 2 questions on the first topic here. And maybe starting off on the online penetration, you have this slide where you show the category today and before the pandemic and also some reference categories. And it would be super interesting to hear your view sort of longer term given your experience from Zalando, do you see any constraints, if we stand here 5 years from now that the penetration in the category for rugs will be similar to what we're seeing in fashion, for example?

I actually don't see any real constraints and definitely none that are not possible to overcome. Personally, I actually think that the vertical has the long-term potential to have even higher online share compared to fashion. And the reason I say that is really, #1, around the buying experience online versus offline, where I think it's far superior in many -- from many dimensions when it comes to online and a much bigger difference when it comes to fashion in terms of the fashion offline experience versus the online. Because at the end of the day, it's pretty simple to buy a dress in an offline environment and actually take it home either if you walk home or you're on the bus or taking a subway, whereas taking a 2x3 rug on the shoulder, carrying 20 kilos on your shoulder in the bus is not super convenient, to be quite honest. And then the -- and I think then the second dimension is really the fact that it is a relatively easy product to buy. As long as you have clear pictures, the only thing -- the only other thing, only other thing is you need to figure out, as a consumer, okay, should it be 2 by 3? Should it be 3 by 3? Should it be round, square or whatever? Compared to I used to be, like you said, I was in fashion, right? And a small dress will fit very, very differently for all of the small-sized females because of the fact that the sort of the human body, even if you're a small -- size small, it's very different.

Very well. And secondly, I also want to touch upon, you highlighted the strategic initiatives that you're working on, and I know we're going to spend more time on that later on. But briefly now, where are you putting your utmost focus right now internally? Out of these key pillars, which ones are the most important to succeed near term in order to get the longer-term picture?

We spent the past couple of years really focusing on rebuilding our e-comm platform. And at the end of the day, that is the -- this sort of showcases everything else we do. It showcases our efforts within enhancing the assortment. It showcases what we're trying to do in terms of inspiring and helping individuals. And also it showcases and helps in our brand-building effort and, of course, in our traffic acquisition and then all of those KPIs as well. So having that new platform and what it enables us to do in the future is critical and that -- because it is sort of the platform where all of the other stuff comes to life.

Great. So by those words, I think we're ready to move to the second topic of today, which centers around the assortment and sourcing, which will be presented by Carin Terins, Head of Design and Purchasing.

So hi and welcome to the world of rugs, our world of rugs. My name is Carin, and I am the Chief Design and Purchasing Officer. And I've been with RugVista for 6 years starting in January 2018. I'm coming from the fashion industry and have been working with the textile business and sourcing and production for many, many years and have also deep expertise in designing textile materials and colors. Today, I will give you an insight in our broad assortment and also go through sourcing and production strategy that we have and talk about our own designs and the collections and also that we have a new product category. Our business vision is to be the center of the gravity for the European rug industry. And to be that, we need to be experts. And I'm proud to say that we have that knowledge and expertise in-house. And with that expertise, we have to tap a broad selection of the different kinds of rugs in our assortment. And we have a big variety in design, sizes, colors and materials and, of course, price range. Our focus is only on rugs. And the supply chain differs between traditional and design rugs. So let's start with the traditional rugs. The largest category in that one is the Persian. And there we buy each item is unique, and we buy them one by one. And they are sourced through a number of EU-based wholesalers. And for the design assortment or the mass-produced rugs, we differentiate them between machine-made and handmade. And the machine-made rugs are fast and automated production, usually using synthetic fibers and mostly produced in Turkey. For the handmade, we have a lot of different production techniques. So there, we can talk about handlooms, hand crafted, hand knotted and flat weaves, for example. Here, we're using mostly natural fibers like wool, jute and cotton, and the production is done in India. But it's also very important to have long-term good relations with our suppliers that secures our product inflow. It's also good to have large purchases, of course, that we can buy a lot of rugs that gives us better prices and ensures a product inflow and that have been very important through Corona, for example. And we also have independent audits done on all our suppliers. For us, sustainability is very, very important. And we want to take that responsibility and more about this, Patricia will tell you about a little bit later. All of these are really important key factors to have success in our industry. I will now go through and show you a lot of pictures from our production, assortment and sourcing, how we work with it. Right now, we have about 22,000 fantastic unique rugs, picked one by one in stock. This we purchased through -- with close cooperation to -- with our suppliers or wholesalers in Europe. They are sourcing fine objects for us with local agents in villages and in bazaars mostly in Iran or in neighboring countries. And here, it's really important to understand quality versus price to pay the correct price. And to do that, it really requires deep product knowledge and expertise. And when it comes to unique rugs, most of the old unique carpets are refurbished in some way. It means that they are being washed, shaved, sun-dried for weeks outside to soften the colors, sometimes mended so to be used to -- and if there are really worn down, if it's an old carpet and worn down deeply, we can make colored vintage or patchworks out of it. And when we do that, it needs to be maybe bleached, readied and shaved again to get a new pattern. And that transforms the colored vintage and patchworks into a more contemporary look. And that is sustainable reuse that prolong the life of usage and minimize waste. This is a selection of the rugs that we have in our -- on our site today. In each category, there is a large -- many smaller categories under each and everyone. And the largest one with -- but it is within the same family, and the largest one is the Persian traditional. In the Persian traditional, there is a large selection of rugs. And almost everyone has its own -- from every city in Iran, almost every city has their own designs and patterns, colors or knots and a very unique expression. And the city becomes the name of the rug. So if we're talking about Isfahan, Nain, Tabriz and so on. Here, it is our warehouse or some of the warehouses that we listed in Europe. Before we go there, we make a wish list of what we are interested in or we have a demand for. They prepare for us during a long time by collecting rugs from Iran and other countries. And a few times a year, we visit and we do cherry-picking piece by piece. And I have to say, I just love this part of my work. It gives so much inspiration. And every time you go there, you learn something new, you see something new, and we work with fantastic experts in their area. And now let us continue to the handmade production. Oops sorry, back. The handloom production includes many weaving techniques, as I mentioned before. And here, I'm going to detail a little bit into handloom weaving. Handloom weaving is a technique that was developed to get the faster production at a better price level for pile rugs, which has an exclusive look and a very nice hand feel. And to be able to do that, usually, it needs to be 2 or 3 workers on 1 loom or 1 machine, let's say. And it takes about the 2 or 3 workers who working on this 1 depends on the width. And to get -- for 1 day, they weave about 8 meters in 1 loom. They are really skilled. They need to synchronize their moments -- their movements, and they need to work in a really controlled manner to keep the fabric or the rug really consistent in the quality. Weaving is very, very heavy, and it's all handled by men. But some less heavy work, as opening the yarn or spinning, are done by women. But usually, they only work half a day. And the rest of the day, they take care of farming, kids and family. And it's really -- it's a great gift and advantage to work with all these skilled artisans in our production and also our production team in India. Here are the next steps to -- in order to become a ready rag to sale -- for sale. You take them, loom out when the roll is full to take it to carpet washing. It means that to clean the carpet by shoveling the pile back and forth with quite a lot of water and a little bit of a detergent to take away exceeding fibers. And when you've done that, you need to take it out to dry in the sun. You -- preferably, you put it on pebbles. So it comes a little bit air underneath as well. And the rug dry in just a few hours. And then it goes to the binding of edges. That means that you stitch around the carpet all 4 sides or only 2. If you want fringes, you have fringes on 2 of the sides. And to knot fringes, that's really -- it's really not easy, but they're really quick. They take 4, 5 threads at a time, and they secure it with a knot and do that the whole way through the carpet. After that, they try to correct in if there are any faults in the carpet. They do that from the backside. And after that, they put the thin cloth outside the unit, in the nature, and they take the rug, they put it with the pile down, use [ names ] to make the perfect shape, add some latex and let it rise in the sun, and that will fix the perfect shape until later. Then it's need to be shaped to get a perfect surface to be really shiny and nice. And then they do one more finishing detail, and that is to go through it again with a small brush and a scissor if there is some small thread sticking up. And then it's time for packaging and labeling. And let's move on to the contrast with machine-made rugs. This is from some of the factories in Turkey that we work with. And here, the machines are really, really huge, and they're fast and automated and they run 24/7. The yarn bobbins, these are the yarn bobbins, and that's the yarn going into the machine. And for one quality, you need thousands of those. Normally, it's around 10,000 to 15,000, depending on the quality, that's quite a lot. So you don't want to change the yarn that often because it takes 2 to 3 days to shift the yarn for 1 machine. And you see the Power Loom machine in the middle, that's really, really fast. You can hardly see the [ chattel ] moving back and forth when the weave is on. And after that, you take it out, the weave is coming out double and you need to separate it by the pile. So you get 2 carpets. And if the design can't withstand mirrored, you need to avoid that. You can't do like text or numbers and so on. It goes into a latex machine. And after that, it goes to in a heating machine to fix it and make the shape of the carpet. You do the overlooking of edges, same as binding edges in India, but with the machine. And they have help of an air table to get it less heavy. And in then, of course, labeling and finishing and packing. Here, it's quite a lot of similarities with the Indian production, but it's all automated. And now to the work with our collections. Design and product development is a very important part of our work. And to know what trend is going on, we go for fairs and trend seminars. And we see -- we look at social media, we create [indiscernible]. We have RugVista design competition, which gives us a lot of inspiration as well. And we also have some collabs with designers. We have large in-house data expertise that provides us insights on customers' preferences and trends. We're listening to our customers. We get a lot of good answers and questions from customer service. And also, of course, we're listening to our suppliers, which are experts in our area. And that takes me to our design strategy. It's important for us to have in-house design and exclusivity on designs from suppliers. That is a really key factor for the future, and we're working on that more and more. And to build an interesting assortment and collection, by producing own designs or exclusive design ranks in the right quality and price, that will enable a best-in-class value for money. Own designs, also helped us building the brand and makes it easier for us to target the prices and keep our strong margin. And now to collections. Collection is a name of a theme, style or inspiration for which set of designs have been developed and put together. And that's been -- the benefit of that is that it's easier structures, a better structure for us when we're building the assortment. And it gets more inspiring and customer-friendly online. It also supports storytelling and because it will be easy to set the scene and when it's centered around the collection concept. And the collections will be added on the new sites. It's not ongoing right now. We have differentiated our assortment into 3 different sub-brands, and that is essentials, core and premium, seeing good, better and best, and that is in regard to quality and price. And the benefits of that is that our collections will contain a mix of the sub-brands. It also helps us structure our assortment in regard to quality, pricing and purchasing. And we think it's really important that they shall be rugs for every wallet and every stage in life. RugVista Essentials is an affordable story, and we successfully launched it in 2022. We have been targeting customers that are buying for their first home. They have a limited budget, early adapters to trends. The digital natives, the younger generation, as Michael also talked about, and they usually have no car. So the home delivery is important. This is a growing target group. So we are constantly developing our assortment. And right now, we're going to add more structures and also focus on washable and pet-friendly, easy-clean carpets and kids rugs. And Essentials is always with value for money in mind. And the [ mood board ], this is our base [ mood board ], and that means we use it for a broader range of the collections we do. And right now, nature is a big source for inspiration for us. Nature eases our senses and makes us feel good. And especially when the outer world is shaking a little bit, we go back to nature. And so we have especially worked with natural tones, which is easy to add up in most homes. And we are focused on the warm shades going from brown, beige to Ivory. It's less grays nowadays. And materials are also important to have this feeling. You want to bring nature into your home, so you use rate wool, jute, leather, cotton and so on. The shapes are also important, round and chunky shapes, which make you feel embraced and more comfortable. But most important, we think, to make your home warm and cozy is to add a rug, and that will bring the room together like magic. And now a sneak peek to our collections. Our first collection, we call Natural Structures. That is one of the strongest trend, as I have said. And in this collection, we mix different kind of surfaces in the same rug, like it could be bubbles, high and low pine, loops together with flat weave to make it become a modern and tactile feeling of the rug. We have used the natural color sheets because it fits into almost everyone, and it looks really natural. And it also gives a timeless look. And all the subcategories are included in this collection. And since this is a really important collection for us, this is really, really easier for us to work with. And I think that's going to be benefits for the customers. Next collection, we call Bold and Brave. And it is, as you can see, something totally different with strong colors, which is really, really a big trend. Here, we have worked with eye-catching colors, bold patterns, and you mix them together to get a very personal design. The round and uneven shapes are also very, very important and a big trend. And that's also for interior, but especially for carpets, the uneven shapes and round shapes are important. So these rugs gives a really strong statement to any room or any home. For the kids, that is a collection and also a category that had grown a lot. Here, we use colors as well. They're a little bit more dusty and down. The warm color-coordinated collection. We also -- the styling of kids rooms has been really important lately and become a real commercial thing. And I think that's driven by a lot of influencers, for example, which make this to be a really growing category. So we put extra efforts into the development of this one. We have added cotton rugs and even shapes here as well to make it more playful. Interactive designs like play tracks, hopscotch or maybe numbers to train the kids to count, for example. And focus here are in the lower sub-brands. And this is the last one, bathroom rugs, which is a new category for us that we successfully launched in March this year. We wanted to stand out a little bit, so we focus more on a personal style, more colors, more fun and added a few classics as well. Here, it is washable cotton rugs with or without anti-slip. And it's all architects certified, and we're going to add more qualities and different rugs as well very soon. And all this is within an affordable price level. Yes. Now when you get me started, I can stand here talking about assortment's collection for many hours, but this was my last slide. So thank you.

Very well. Thank you very much. And I wanted to ask a question on the assortment and the product strategy and bringing new products to the market, maybe from a competition standpoint when you're comparing yourself with your strongest competitors, let's say that, what is the most important parameters to compete on from a customer perspective? What are the customers mostly prioritizing when looking for a new rug?

I think it's most important to have a wide selection with different colors, sizes and materials and price levels. And since we are only focusing on rugs, I think that's the biggest advantage and the most important for the customers today.

Yes. And I also wanted to ask you also given your experience previously also from fashion, maybe a bit on different trend shifts. You described it a bit in the different categories. But how important is it for you to constantly bring new designs to the market? Are there -- have there been any clear trend shifts over the past years? Or...

It depends if you look at the traditional unique carpets or the designer rugs, that's a difference, of course. For traditional, it doesn't differ that much. We can see a little bit more focus on Moroccans maybe and Kilims -- colorful Kilims, which has a really good price level. But otherwise, I think the trends are more slowly in what we are doing than compared to fashion. So it doesn't change that much. But of course, designs are important.

Yes. Okay. Great. Thank you very much. And I think we'll move over to the third topic of today then, which centers around the brand building strategy presented then by Ulrika Klinkert, Head of Marketing.

Thank you for that, Carl. Yes, now we've seen Michael present the framework of our strategy. We've seen Carin present a very tangible and, I mean, look at -- you are here in the room. You can see all the beautiful rugs we have around us. So my topic might seem a bit more soft. But I would like to explain to you why branding is not the fluffy pink unicorn on top of the cake, but rather the scene upon where our story is told. Brand building is actually a foundation of our future growth. And why I can say that is because I've been working with branding for many years in different companies, Betsson, Kjell & Company, Cloetta. And these are all companies that have strong brands that are future proof for growth. So topics I will cover today is why do we do branding? Is it only about spending money? RugVista brand position, who are we? And then at the end, next step, how will we make this happen? So why branding? I think most of you are aware of that if you are not seen, you cannot be proceed as a choice. So first part is always about getting as much reach as we can, as many eyeballs as possible. But the next step is, as Mike said, if you are a known brand, 2 things will happen. First of all, you have more cost-efficient traffic coming into the site, meaning organic traffic, direct traffic. And the second part, the traffic who actually buy will be more efficient. Because if you know the brand where you see an ad, you're more likely to click on that ad, which means more efficient marketing. And the third part is if you have a strong brand, and this -- you might not always think about it, but a strong brand is actually securing that you can have better margin because you are less price sensitive. So these are 3 really important parts why we need a strong brand. So coming into the important things, who are we as a brand? Branding always starts with the customers. And I will not go into the different customer segments. You can read that in our annual report. But when looking into our customers, we have our brand strategy, starting with the customers and 3 key values that we want to own. So our brand position, and when I say we want to own it is that these are not the only thing we are. We're a lot of things, but only it means that we are better than our competitors in 3 factors. We want to be the most convenient brand within the rug industry. We want to be the rug experts, as Carin just described us. And third of all, we want to be trustworthy. And why? If you ask the customers, what's the benefit for them? Of course, if you're convenient, it's much more practical, not only that it's easy, you can sit in your home, just choose your rug, but as Mike described, it's quite inconvenient to carry your rug back home. Rug experts, of course, and experts is different depending on what customer you are. Some people need help and some needs inspiration. And last of all, trustworthiness is all about e-commerce because if you can't go to a store, you really need to trust the e-commerce where you're shopping from. So that is the foundation where we've been the brand strategy around. But up until that, that's just theory. So how will we then make that happen? We need to find some attributes to which we are associated. Attributes could be a color, a logo, a font, a picture, something you recognize when you see us. And when we're shaping this world as we do now, there are 4 key factors which we need to look into. First of all, the attributes need to be very distinctive because if you're distinctive, you're being remembered well when you talk about it in different channels. Second of all, you need to be unique. -- you need to stand out. So we're not confused to any of our competitors. Fourth, we need to be relevant, of course. I mean we can talk to everyone, but we need to be relevant to our customers. And last but not least, we need to be likable because if you're not likable, you are not considered as a choice. So where will this happen? So the third part of the brand strategy is the brand experience. And of course, the brand experience happens on our site. But it's really important to understand that before the customer come to our site, the experiencey in all platforms that could be in Facebook, Instagram, Pinterest, when we're using influencers, all these platforms need to have the same attributes. And of course, the products as well, the products need to be trustworthy. It needs to see that we are experts when we are designing our rugs. So when looking at this, we want to be -- if we take a fingerprint of who we are, we help people create inspiring homes. That's our promise to our customers if they choose us. So now coming to some examples. Here, you see different channels. And of course, different channels, they have different advantages why you choose them. But in each of these channels, we see that we have a distinctive view how we look, but it's still unique compared to our competitors. But also we need to be relevant and likable. And previously, we've been more in channels that are text-based. But now when we're rolling into other channels that are more emotional. Film and photo is a very important part of our new brand platform. So these are examples of new platforms where we haven't been before. And now we're coming into a film version, so you can see for yourself who are we as a brand. And this is what have been done this spring time. [Presentation]

So as you see, the different ads are very different, depending on what platforms they are. The short one, that's very -- we're starting to experiment with it more, meaning that it's not only the visual part, also the sound is very important when you look at the ads. So next step, how will we make this happen? What happens next? What you need to do, of course, is to reach as many potential customer as possible. And for us to do that, we've been very Google-faced up until now. But with this platform in hand, we will be able to be present in other platforms than we've been before, especially social media. So this is an opportunity for us to grow. Second one, we want to build brand -- broad brand awareness. And what's the reason for that? Well, it's twofold. First of all, of course, you reach new customers that don't know that we exist before. And the effect that we said that we're more efficient in ads, we actually are [ all already ] running, but also customers that are already our customers. Maybe they bought a rug 5 years ago, they didn't really remember us since then. So we need to always be there in the customers' minds. And this is an example of why we need to do this. Here is the brand funnel. And as you see, we have quite low brand awareness, both when it comes to health brand awareness and under weighted. So -- but if you look more further down in the funnel, if we have the brand awareness, we're quite suitable to do the conversion. So that's why brand awareness in broad scale will work for us. And last but not least, we need to be better at create customer relevant content. And when I mean content, it's in all our platforms. But as the next speaker will talk about, our site will be where this content will actually come alive. So with that said...

Very well. And I'll take the opportunity to ask a few questions here as well. And maybe starting off here a bit on the returning customer process, you mentioned it briefly and the brand awareness after a longer period of time. But could you describe it, how often does a customer regularly return to you after the initial purchase? And what do they usually search for them?

It depends on what category you want to buy rug. If we like a unique rugs, the cycle is about 4 to 5 years. If machinery made rugs, meaning more cheaper rugs, it's 2 to 3 years. And what they look for, we can see that customers that are returning are more likely to stay in the area where they purchased before.

Yes. And maybe a question on this slide here. Maybe a few of the competitors listed here, a few generalists. Maybe we can call them that. And I know that you have a another few pure online competitors, but from a branding perspective and what we just talked about in this section, what are the most, if you would boil it down to 3 bullet points, how do you want to differentiate, I guess, these competitors and your most important or maybe your strongest online competitors?

Yes. I think we're really suited with the 3 key values that we talked about and depending on what competitors we compare with. So experts, if you compare to the online, I would say, competitors, we are, by far, the most expertise, meaning we have the widest range. And we also do all our designs ourselves. If you look at maybe the ones that are offline, so you have a store, we are far more convenient. So I would say convenience and expertise are our, so to say, shields towards our competitors.

Very well. so I think with those words, we'll move over to the fourth topic of today, which is centered around the new e-commerce platform, which will be presented then by Peter Rosenfors.

Hi, everybody. Peter Rosenfors is my name and I am the CTO at RugVista and I am [Audio Gap] is the site, but the tech platform, as it is, is a much bigger thing. Going into our history peek, the previous tech platform of course and also talk a little bit [Audio Gap] as Michael said, strategic priorities to drive growth, showcase our own assortment and win the key European markets. We need to merchandise our assortment really great. We will need to build content to inspire and help users in finding their rugs they're searching for. And we will need to serve more user journeys effectively in our platform. European markets, we also need more experience and also [indiscernible] during this presentation and also build an own and liked brand, a place where we can showcase our brand. To do this, we need a solid e-commerce platform that we can work with and not against. We need to have something that can help us do this. That's why we took the decision to build upon our existing platform and create a new platform for the future. We go right up to the current status here. We are in our internal versioning. We call it 0.8 in our existing version of the new platform. We lack 2 major components in the new experience. We have them in place, of course, because we have it live. But we're going to improve our checkout experience and our my pages experience, both very important part in e-com stores, of course. We are now live in 5 numbers -- 5 markets today on the new platform, on the new e-com front end. We started with Croatia for over a year ago and went live, followed by Austria some months later. But now we are ramping up. And in the latest weeks, we have Switzerland, U.K. and yesterday, we went live with our home turf, Sweden, on the new e-comm store. Still, we got some stuff to do to get it to all markets. We have 20 domains today approximately, and we're aiming for having all the major markets live during this year. A peek back why we've chosen to do this. Now it comes a little bit more tech part, but our previous platform, it's homemade, a robust platform that still drives a lot of traffic. We have it live in many of our markets and is built in a very good way. But everything that's built in a very good way 15 years ago gets a little bit old. So it's built also in like you build, it was the state of the art back in those days. It's very easy and fast to build in one way. But as you put things on top, it gets kind of out of hand. So it's hard to maintain and difficult to add features, and we have one single point of failure when we're talking about the monolithic architecture like our previous version of the platform was. So we took the decision to build the new platform. And the new platform is much more efficient when it comes to service-oriented structure, meaning that we don't have one single point of failure in our structure. We also got much more efficient way of scaling, scaling efficiently when it comes to money also because we can turn many more nubs when we need to kick the traffic up. It's much better availability then uptime also on the new platform. We have a great uptime on the previous, but it's much less sensitive and can keep much better uptime in the new platform. And also the new is big or built for a totally different world than it was 15 years ago. Now Google sets the rules now and we need to optimize for much different things than for many years ago. Also, we got the new user behaviors, like Ulrika talked about. We have other customer platforms we need to expose on and other customers and other customer behaviors we need to present our assortment to. So new world, new platform. Three major parts in our platform that we can talk about. It's -- the first one is the back-end solution. The second one is the content management. Content as we talked about, really important to be able to win European rug industry. And everything boils down to the new e-com site. Let's look a little bit more into the back-end solution. We have a strong technology in the company. We have experts in what we do. And we are having a big number of developers with a high number of years experience in the developing this previous platform and also now in the new platform. We also always choose to build where we can make a difference, build where we can really stand out against our competitors and buy the rest. So this one is a home-built solution. And it's -- if you look at it as a platform foundation, we have put in a lot of time in enhancing the product model. The product model, meaning all the products have attributes, all the products have a structure where they should be. Like also Carin mentioned, we have a structure and hierarchy in our data model. We have enhanced that a lot to be able to, in the end, show the right rugs for the customer and help the customer find the right rug. So everything boils down to data quality and data structure in our rugs. Also, it's a localization enabler from the back end, manage things like price discount campaigns, localized really important for us to be able to do that in the future. Offer campaigns, send out to target right customers will be possible or possible now in this platform in a much more efficient way. Our platform is -- back-end part is much more than this. It's -- we handle the whole order structure, the whole purchase for Carin's team to purchase the rugs. We handle all the customer and the customers send that in our platform. So it's big. The second part is our content management system. Our content, content, content, we have talked about it a lot now, but it's really important. And we've chosen a third-party solution for this, a headless third-party solution back to build what we want to be experts in and we buy what we can be used. So it's heavily customized to fit our assortment. Not everybody that builds a standard solution have rug sellers as customers. This is also a really big localization enabler where we can have different online merchandising between countries. We can also localize site experience because if you look at the patterns when customers buying our rugs, it's totally different kind of rugs in different areas of the world or different areas of Europe. So really important to be able to showcase and show products in an efficient way. Catch country seasonality assortment, of course, is really important so we can differentiate when we are pushing certain campaigns. And regarding functionality, the solution is a flexible content creation factory, and it's built up on a totally different SEO optimized site structure. And that's really important because users, when I say users inside like a RugVista, we can create the same pages to sign on-site journeys through this platform that will really benefit our customers. And we can also add all kinds of content, the text, the image, video, everything we need for all platforms. Content management system, a really important part together with the back end. But what's shown to the customer is the last part, the front and the online shop. This is what we have released now in the 5 countries already. The other parts already are there in the existing domains that are not over to the new platform in some ways. So when we're talking about the new site, the new front end, again, we've chosen to build our front end ourselves. We think that we need to be -- handle our front end, to have the experience or the user experience for best in the business, and it's really important to have the control of that. We don't want to be in a standard e-commerce platform with our front-end part because then we are constrained. The vast majority of all our traffic is coming from mobile devices. So this front end is, of course, much more responsive. We have a mobile-first approach and everything, and that was not the case when we started building a platform 15 years ago. It's, of course, built for site speed optimization and for the [ core ] vital that we have to take in consideration. And we have put in a lot of effort in having a user experience that's really important to be able to help the customer in a great way. One key thing is also the search engine optimization and the machine and human content value that we can add in this platform because that will make it possible for us to have a much more efficient traffic acquisition. So we don't need to buy in all the traffic. We can earn traffic, we can build organic traffic in a much more efficient way. Some short things. Before we started and during the journey here, we have put in a lot of effort in understanding why the customer make choices, what the customer make choices of. So we have a great -- I'm part of this, but we have a much better navigation experience where the customer can find products through all the visuals or the things that we have found out that they are really putting a value in navigation, so by shape, color, room, style and so on. We also got the whole site based on our filter functionality, and that means that we are using all the product attributes from the back end and put it into the filter functionality. And this really can make it easy for us to build a site that the customer can find, but also for the customer to find exactly the rug they want to find. And everything boils down to how we present the product in the final step before you go through the checkout, and you do a good visual experience in how to choose size, color and so on. To wrap things up, what we need to do now in the future, I talked about getting this platform out to more markets. This priority one now, but we are still continuing to improve and implement new stuff on the platform. The new checkout experience, a new My Pages experience is the work that's on as we speak. So that's something we have in focus now, but also to enhance the all-inside algorithms to make it even more easy and efficient for the customer to find rugs in our site. We should help them, not make it harder. So that's really important. And the final part is great content. We're now in a phase where we have a platform. We can fill it with content, and we are doing it as we speak with our internal resources. So we can make it in the long run, drive traffic much more efficiently to our site.

Great. Thank you very much for that.

Thanks.

So maybe a couple of questions. First, starting off on the rollout, you talked about now having 5 localized domains on the new e-commerce platform. Could you share anything on the time line of the remaining ones that you're running on the old one currently?

We are -- our main goal is to have all our domains over to the new platform in 2023. Of course, everything is based on data. So yesterday, when we went for Sweden, it was our biggest existing market we went on. And we're really monitoring closely now, we've prepared a lot, but we're monitoring closely now to see how the traffic is going. First days feels nice, but it's -- we need to have more data on it.

And have you already noticed any differences with the new platform? Is it too early? I know Croatia, you've been live for quite some time. Any differences in conversion rates or customer behaviors? Or...

A little bit why we want to be in a bigger market because getting data and trusting the data, we need more traffic. So I think after this release, it will give us much more insights. We have insights from the other markets also, but it's not in that amount of data, so we can trust it. But it feels good and looks good, but we don't -- can't trust the data to give it.

And maybe finally, was maybe a new information for me, but you talked about driving quite a lot of traffic through mobile. And out of curiosity, have you had any plans to launch an application for mobile? I know Boost, for example, has been very successful with that. Is that something that you will be looking at?

We -- of course, we talked about it. Of course, we looked into it. One difference between us and Boost, for instance, is there -- like you mentioned, is the time between each purchase. It's easier to have a go back to the same application when you have a purchase within 2, 3 months than 2, 3 years. But of course, we looked into it, and it's much easier to do that on the existing platform with the structural data we have. So it's not up for now because we are focusing on releasing, but it's absolutely in our eyesight.

Okay. Great. Thank you very much for that. And I see now it's 11:22. We have scheduled a short break. So we will be back at 11:30 for the second part of the presentation. Thank you.

Thank you. [Break]

Okay. Welcome back, everyone, to RugVista's Capital Markets Day here at 2023. We're now entering the second part of the event. And we have 2 more topics to go through before we're doing the Q&A session. So that will be the sustainability part as well as the financial part. Starting off with the financials, will be presented by Joakim Tuvner, CFO of RugVista.

Thank you, Carl. I will start to give a short brief description of myself. I have been working in -- mostly in fast-moving consumer goods in Oriflame, abroad and then in companies mostly involved in fast-moving consumer goods. I have been CFO for RugVista since the 9th of January. So I'm 4.5 months into this saddle. I will talk today about our financial targets, and I'll try to give you a little bit more flavor and body on to the targets. And our 3 financial targets are to have an organic net revenue of approximately 20%. And then you hear us all the time to talk about profitable growth. So our second target is to have an EBIT margin of at least 15%. Then of course, we want to have a cash conversion, so we convert -- we can convert that profit into dividends to our shareholders. So our third target is to be able to pay a dividend as a percentage of net profits of up to 50%. So if we start with the first one and go back a few years and look at the time when we made the IPO, so we went with a prospect with these numbers with a CAGR of 20%. And in the first year, between 2020 and 2021, we grew 30%. We all know about the pandemic boost that we got short term, but we also had a long-term pandemic boost effect, which is the migration that Michael spoke about from offline brick-and-mortar store onto online. And then we have the low consumer sentiment that we're all aware of. We've spoken about that in the last few earnings calls, that made us drop a few percentage points in sales in 2022. But still, over this period, as Carin already mentioned, we have a 16% CAGR. I'll give a little bit more body into our foundation for growth or actually repeat a lot what earlier speakers have said. Starting with Michael, he spoke about the SEK 30 billion market that we're already in, the online carpets market, which is at only 20% penetration online. It's growing with a CAGR of 10%, 11%. Like Michael said, it's the perfect online product. We have a good average order at relatively low returns, and we can say, let's call it, decent margins or even good margins. Michael also mentioned the other macro trend where we have all these digitally native people that are building their first home. 77 million people during the course of this decade that will come into this market that are 100% digitally native. And then Michael showed you our strategy for how to capture that growth. Further on, we had Carin. Carin, you spoke about the world of rugs and how we extend our assortment, for instance, in Essentials, how we extend the assortment in Essentials to gain access to the lower price points. So we need that to reach the millennials, for instance, to capture opportunities in other marketplaces like Amazon, where the low price points are really, really important. Carin spoke about new categories, bath mats. So we have the bath mats here. For those of you who are in here, you can take a look at those. For the rest of you, you'll find them on our web shop. And also, Carin spoke about sustainability and how we incorporate that, and you will hear Patricia later to talk about that as well. Then you heard Ulrika talk about our brand foundation and how we -- with our brand foundation that is in place, how we can extend the reach and reach out now to new formats, which will make us enable us to reach new customer groups. Also, she spoke about building brand awareness and she said, in selective markets, in key selective markets. And this will, of course, enable us to get a better conversion to capture new customers. And we have said it before in earnings calls is it's not about adding a new corporate branding marketing budget on top of what we're already spending in marketing, but it's rather to reinvest what we gain from the efficiencies that we believe we will get with the new platform into corporate branding in selective markets. And last but not least, we heard Peter to talk about our new platform. If we take Michael's point about localizing, so this new platform will enable us to localize content in a totally different way. We will be able to do content management, very important for our marketing team with completely new tools. We have a new customer journey with much better selection filters, much better journey, checkout and My Pages. So we believe that with all these in place with the macro trends, we have a strong foundation for growth. And on to our second target. So you hear us talking about profitable growth and to have an EBIT margin of at least 15%. So when we went -- with the prospect in the IPO, we had 18.5%. And in the first year, we delivered 18.1%. So if you look at the fundamentals of our costs, no cost is 100% variable or 100% fixed. But overall, 70% of our cost base is variable, the goods for resale. And if you compare us to other e-com peers, bear in mind that for the goods for resale, we include the freight out to the customers as well, including return freights. And the marketing cost, we consider being able to manage that as a variable cost as well. And with that fixed cost base, we see clearly from history that when we get the growth, we have a good leverage, and we can deliver a good EBIT margin. But we also see that when sales turns, and we don't get the growth, we are quite resilient to downturns as well and can deliver a fairly decent profit margin of 11.7% for last year. And on to the third and final target, if you talk about being able to distribute cash to our shareholders, then it's cash conversion that is important. And what is cash conversion? It's working capital management. And by far, the biggest item in our balance sheet, apart for the goodwill, which doesn't move, is not cash implied in that, it's our inventory. And if you take a look historically over the past few years, so inventory, these are the percentages of the last 12 months of sales, so the ending inventory balance as a percentage of the last 12 months of sales. So a year in which we like 2020, we had a pandemic boost of sales. We had difficulties in product replenishment. We had difficulties in rebuying from our suppliers because of the pandemic. Of course, we had an amazing cash generation in that year. On the contrary, in 2022, if sales decline, we build inventory. And we are now at 26.3%, our inventory level. And as we said in the last earnings call, our target is to be between 17.5 to 22.5 percentage point of the last 12 months of sales. So we have a job to do in getting the inventory down to the level where we want it to be. So overall, you have to look at our cash conversion ability over a longer 5-year period to get a fair measure of what is our cash conversion, and it is 84.5%, which is a very good figure. And you have to bear in mind that this figure is in light of years of increase. It includes the investment we make in fixed assets, and it is also with an ending point of inventory, which is higher where we want to be. What else do we need in order to be able to pay a dividend where we need a good balance sheet? Do we have that? Yes, we do. We have a high solvency. We have no interest-bearing debt, and we have a good cash position. Like Michael said, we have SEK 142 million in cash when we closed the last quarter. Just a brief look at the history as well. So as a listed company, for the 2021 profits, we distributed, in 2022, SEK 2.5 per share to our shareholders, which is the equivalent of SEK 52 million and 52% of our net profit. Now for the profits of 2022, the Board has proposed for this AGM this afternoon to pay a dividend of SEK 1.5 per share. That would be SEK 31 million, and that would be the equivalent of 53% of net profit. So, so far, so good as a track record. And I think we have the fundamentals in place to being able that when the growth comes, when our EBIT will be in place and we will be able to convert that into cash. So that was it, Carl.

Thank you very much. And I can ask first maybe a question on the margin target. I think if we ignore the seasonality of your business, we can say that you've achieved this 15% EBIT target in the last 3 quarters, more or less. And could you describe a bit maybe how you -- sort of reasoning of -- obviously, you're now proven this margin target. Is there any reason for going back to growth mode? We're in a slightly weaker market now. Is this a good opportunity to gain market shares where other players are maybe holding back a bit? Or anything on that would be very interesting.

Okay. During the quarter 1 and quarter 2 of last year, we were fighting the headwind in marketing, and we found that to be the marginal cost for capturing that growth was very high, which we particularly saw in quarter 2. Michael said that in the earnings call that we would be go back to profitable growth, and we would focus on profitable growth. So I think you can always say that we've tried it. For the moment, it is not the right thing to do.

Okay. And secondly, you touched upon it as well with regards to the balance sheet, net cash position, almost growing bigger and bigger for every quarter given the conversion and the margins. And would be interesting to hear, I mean, obviously, you're distributing dividends, but what kind of other alternatives are you looking at to utilize the balance sheet with?

I mean the short answer is what you said yourself, it's to pay dividends to the shareholders, right? But if we take a look a few years back, when we got listed, I think it was quite common that companies that got listed had a net interest-bearing debt, net debt-to-EBITDA of about 2x, 3x, something like that. And then with the turmoil, they are down to maybe half of the EBITDA after debt levels of 4, 5, 6 in their EBITDA. Then with the raising interest rates and with that level of gearing, you would reach interest rates today or you would not only have a financing risk and you would also have probably double-digit interest rates. So I think overall, I think our shareholders or many of our shareholders do appreciate that we have the position we have, and that we don't need to necessarily change that in the short term.

Yes. Okay. Very well. Thank you very much. And I think we will move over to the final topic of today, which is around the sustainability again and the sustainability target before going into the questions-and-answer session. So that will be presented by Patricia Widgren.

Thank you, Carl. So welcome to this presentation of sustainability efforts at RugVista. My name is Patricia, and I'm the Chief Organization and Sustainability Officer here at RugVista since 2020. And prior to that, I've been working within the retail industry for many years with retail brands like Biltema and Granit. So I'm going to introduce you to our sustainability vision, strategy, long-term goals, our achievements so far, and finally, our planned actions going forward. As Michael mentioned earlier, our sustainability vision is to lead the rug industry towards a socially and environmentally sustainable future. With our vision, we are committed to driving behavioral changes across the whole value chain and the industry as a whole. This is not only important for our shareholders, but also for our customers, and of course, our employees who all want to be a part of a company that actively contributes to a sustainable future. In 2020, we launched our sustainability strategy, LEAD.CHANGE. The strategy serves as a foundation for our 2030 goals and focuses on 3 areas: Planet, People and Business. The focus areas guide us in developing a circular business model reducing our environmental impact and promoting sustainable social development through responsible business practices. And we have also identified 5 change levers that will enable us to achieve and scale our sustainability efforts. We have set ambitious long-term goals, and I'd like to highlight a few of our achievements so far. So firstly, I'm thrilled to say that RugVista's climate goal has been approved by the Science Based Targets initiative. And by 2030, our goal is to reduce our greenhouse gas emissions by a minimum of 46% in Scope 1 and 2, and we are committed to measuring and reducing our emissions in Scope 3. Secondly, in 2022, we performed a life cycle assessment with the top 5 materials used in our rugs. And these findings prompted us to expand our Scope 3 measurement to include the climate impact of rug materials as well. And it will also help Carin and her team when designing new sustainable rugs and collections. And finally, we want to take responsibility for our entire footprint and ensure compliance with a code of conduct throughout the whole value chain. So we have started and so far successfully mapped 67 of our Tier 2 suppliers. Our value chain provides an overview of sustainability priorities, activities and impact. And by analyzing our footprint within the value chain, we can effectively manage both positive and negative consequences. This approach helps us to identify opportunities, mitigate risks, evaluate impacts of different parts of the value chain and, of course, create value for all our stakeholders. And in the next few slides, I'll delve into each focus area, beginning with Planet. At RugVista, we are committed to fighting climate change and minimizing our environmental footprint in our own operations. And in our own operations, Scope 1 and 2, which you can see on the left-hand side, we successfully reduced our emissions by 69% over the past 4 years. And that is mainly thanks to our switch to renewable electricity and also LED lightning in our facilities, like this warehouse and also the other one in Limhamn. The achievement means actually that we already reached our science-based goal -- target for reducing greenhouse gas emissions by 2030. However, our main greenhouse gas emissions come from our indirect emissions. That's Scope 3, representing over 99% of our footprint. Therefore, it's crucial to intensify our efforts in reducing emissions throughout the whole value chain. This task is challenging, though, and we need to rely on a good collaboration with our suppliers to drive change. The impact of our suppliers operation, including our rug materials, accounts for 96% of Scope 3. And during 2022, we reduced the CO2 emissions in Scope 3 by 18%. A large selection of our rugs are designed to be used for many years, some last for several generations and can be reused in different ways. Thus, lifespan is an important key in our work towards circularity. We have, for instance, unique rugs that are more than 20, up to 100 years old. And both patchwork and vintage rugs, like Carin mentioned before, are made by old worn-out rugs. And last year, we launched RugVista RE.USE in partnership with Tradera, and that's a circular marketplace enabling us to give defective rugs a second chance and also to help our customers prolong the life span of their RugVista rug in a new home. And for the People area, I would like to highlight some key points regarding our social responsibility and the crucial role our supplier relationships play in us driving improvement. Through collaboration, education and support, we work closely with our suppliers to achieve a positive change. To navigate the complex audit processes in the rug industry, we have established strategic partnerships with 2 NGOs. Firstly, we collaborate with amfori focusing on centralized production units, mainly in Turkey and India, to ensure responsible practices and adherence to social and environmental standards. As you can see to the right, there are significant improvements in the audit results through the BSCI amfori auditing system, both in terms of ratings and the number of suppliers included. A large part of our products are actually audited through this system. Secondly, we have partnered with Label Step, an organization dedicated to support our Tier 1 and 2 home weavers and decentralized production units, mainly in India, Iran, and Pakistan and Afghanistan. This partnership allows us to promote fair and ethical trade practices within this specific segment of the rug industry. And let me share a quick, but important update about our organization. We prioritize creating an inclusive and diverse work environment, striving to be a great place to work. To evaluate employee satisfaction, we regularly measure our employee Net Promoter Score. And by the end of 2022, we achieved an eNPS result of 47, bringing us closer to our long-term goal of 60. This demonstrates our commitment to continually improving our employee value proposition. And in terms of Business focus area, it's worth noting that all our suppliers have committed to our code of conduct and that we have successfully integrated all suppliers into our auditing systems. And on this final slide, you see our key priorities moving forward, and I want to highlight a few of them. As 99% of our greenhouse gas emissions come from Scope 3, we want to ensure that our major suppliers have robust emission reduction plans ready by 2024. And to support that, we will implement amfori BEPI, a system focused around improving environmental performance in the supply chain. Utilizing recycled material has great potential for reducing environmental impact. And based on the insights of the LCA, our design team, in collaboration with our key suppliers, will explore the opportunities to increase the use of recycled materials and the design of recyclable rugs. In our commitment to People, we will continue to build close relationships and support our suppliers to continuous improvement. Education, we believe that education is the key to driving positive change and responsible business practices throughout the entire supply chain. And as we move forward, we are committed to strengthening our brand positioning by building a trustworthy relationship with our customers, providing them with the knowledge and the inspiration they need to make a conscious and sustainable choice. And with the introduction of the new -- our new platform, we have a powerful tool to enable that support to drive a positive change. And finally, by pursuing these initiatives, we strengthened our commitment to sustainability. We drive positive change in our value chain, inspire our customers to more sustainable choices as well to others to join us in building a more sustainable rug industry. Thank you for your attention.

Thank you very much. And I had a question on -- or I wanted to ask with regards -- you touched upon it, but maybe if you could describe a little bit more on this, we can call, the Tier 2 suppliers. I know you have a very diverse supply chain, but maybe -- we can maybe call them more high-risk countries, like Iran, for example. Or how do you ensure, for example, equal working conditions? And could you maybe describe a bit the valuation process also there?

of course. As I mentioned before, we have a cooperation with Label STEP, an NGO that is very active in these countries that you mentioned. So we do audits both in Tier 1 and actually in Tier 2 there as well. So together with them, we do our best to ensure that also the sub-suppliers have equal conditions. But it's not only the audits. That's only one part. What we believe is even more important and what we also do with Label STEP is actually that we support the suppliers and educate them for continuous improvement.

Yes. And maybe on the topic, I think you had -- you can correct me if I'm wrong here, but I think you said 67% of Tier 2 suppliers being audited last year?

No, mapped.

Mapped, sorry. Yes. Could you give us sort of a flavor how is that figure developed over time? And maybe why it isn't higher today?

To map sub-suppliers, it's quite complex, especially in countries like Iran and Afghanistan, where many of the sub-suppliers are individual small contractors. But we started actually in 2021 to map, and we have so far mapped all our major suppliers, I would say, the key suppliers, especially in India and Turkey. And during this year, our ambition is to map -- to reach 100%.

Great. So 11:59, good timing to start the Q&A then, and maybe we can bring all the presenters to the stage. So again, as I said in the beginning of the presentation, we'll have a 30-minute Q&A session now. So for those of you that are dialing in on the webcast, you can write your question in the chat box, and I'll make sure to read it out loud. And of course, we'll have questions in the room here as well.

So maybe I can start off to you, Michael, with a first question and maybe a bit on the topic of the -- what I asked Joakim before as well. I mean, obviously, the market has changed a lot since the pandemic, and 2021 and 2022 has been a completely different year. But I wanted to ask, when it comes to time when the market improves again, how easy would it be for you to sort of reinstall your mood of growing again and then sort of switching from focus on profitability back to growth?

It's quite easy. It's essentially from one day to the next and it's quite possible with the sort of responsiveness and direct impact that our marketing setup has. Then of course, let's say, if we talk about driving a car at a given speed going from, let's say, 50 to 100 overnight isn't necessarily the -- always the most optimal way of achieving that. But what I can say is that we continuously keep track in terms of what -- with the data sources that we have internally in terms of how do we see the total market and the total demand that's out there and continuously evaluate how do we ensure that we always get sort of the best marginal ROI on our next euro invested. And then depending on how that equation evolves over time, we are definitely ready to do it whenever we see the time is right.

And maybe a question on the similar topic. I know that this is a very fragmented market, and there are quite a limited number of pure online players, so to say. But could you say anything if you've seen any sort of change in behavior among your competitors during the last year or so? I mean, obviously, you have a very strong balance sheet and good margins. But I guess, smaller competitors maybe have a, let's say, tougher time than you. So have you seen any changes in how the competition is a bit as a result of the market environment?

To a certain degree, it has during the past quarter or so, has eased off a little bit. And we can see, especially in the auction processes that we are involved in on a sort of a second-by-second basis, but it's not necessarily so much driven by the smaller players out there. It's, I would argue, more the multichannel players, in addition to the, well, I sometimes call, the sort of online home improvement department store or so, whatever you want to call them, that have, to a certain degree, eased off a little bit and focus a bit broader, especially with the multichannel players, of course, with their offline network coming back in play, and they're spending again more resources in those areas versus online.

Yes. I think I'll stop there if we have any questions from the room? Yes, please go ahead.

Carin, if you could talk a bit about how fragmented the sourcing market is? Is it -- has it consolidated over the years? And in terms of your sourcing, how large are the largest suppliers for you?

What do you mean with how large is...

So is there any particular supplier of rugs that you depend on that feels up 10% of your annual [ clients ] on an average basis?