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

Welcome to the RugVista Q2 2026 conference call. [Operator Instructions] I will hand the conference over to the speakers. CEO Ebba Ljungerud and CFO Joakim Tuvner, please go ahead.

Good morning, everyone, and welcome to our Q2 2026 earnings call. My name is Ebba Ljungerud, and I'm CEO of RugVista, and I also have Joakim Tuvner with me, who is our CFO. Before we kick this off, I would like to, as per usual, point out that the images in this presentation, they come from one of our [ fall ] campaigns. So this is a sneak peek that you're getting. The campaign is called Urban Reflections, and it has primarily handmade rugs in it, very beautiful. I think this one that you see in the image now is one of my favorites. So Wool and viscose rug that I hope will be a top seller for us going forward. The structure is as we usually do it. So we start with a bit of a business update, and then Joakim will go more into the numbers. And then, of course, we finish with the Q&A. So, if we pop over to the business update. Very proud of this quarter, I have to say, double-digit organic growth and a lot tougher comparables than before. Net revenue was SEK 174 million compared to SEK 150.5 million last year. That is a 15.6% growth, and organic, it was almost the same, 15.8%. And if we move over to the orders, they were 77,000 compared to 74,000, really, last year. And if you look here, you can see that represents 4.1% year-over-year growth, but we are facing quite tough comparables. If we look at the year before, it was 26.3% growth. And so we're happy with this, but I think it's worth pointing out that we are up against tougher comparables going forward as well when it comes to order growth. Moving over to new customers, almost 56,000 compared to 52,000 last year. So that's 11.2% up, which means that new customers in this quarter represented almost 75%. That's quite high. But as we have said before, this fluctuates over time. I would say it tends to be around 30%. So this is -- 30% recurring customers. So this is a little bit higher than the average quarter. And then AOV, average order value, we came in at SEK 3,115 compared to SEK 2,833 last year. So that's a substantial jump, actually almost 10%. And if we look the development over time, you see that it's been flat for a while, and now we are seeing it going up here. I think it's -- we have talked about this many times, and it does come from several different sources, and it's really not a silver bullet here, which I've said many times before. But the start, really, is all the changes that we've done on site that we started with well over a year ago. We show larger rugs, which means we sell more large rugs, which drives AOV up. Handmade has performed very well in the quarter. We have lower discounts. As you might remember, we did a big sellout last year ahead of the move. So that also affects AOV. And then as we said as well in the Q1 report, we have made some price adjustments to mitigate increases we see from the suppliers during the spring. And while those haven't really come through in the COGS, we know that they are coming in the fall. So -- but all in all, if we look at the quarter, the growth came, then, from almost 2/3 from AOV and around 1/3 from the order growth. Moving further down the P&L then, we have a very strong gross margin this quarter, 67.1%. It was 62.5% last year. But I think it's worth remembering that in Q1, it was 64.9%. We have this in spite of the increased freight costs that we have seen, but we are helped by both discount mix and price increases. And I think there's also a bit of an exchange rate factor in this as well. Marketing spend, that landed on a more normalized level this quarter than in Q1, 29% flat. Again, this continues to fluctuate, and it's not something that we really look too much on a quarter-by-quarter level, but rather rolling. But of course, as I've said before, we aim to slowly, slowly, slowly, slowly, slowly drive this down over time. And in general, both Q2 and Q3 are lower than Q4 and Q1. So, this just supports that. Sessions, then, on site that increased by 6%. It's much more like-for-like comparables these days. If you look at last year, it was up 49%. But then you remember that we had a big shift in how we spend our marketing money and what channels we invest in. So now it's much more similar to what we did a year ago. We actually think sessions might go down a bit over time because the AI traffic, at least early indications is that it tends to be lower, but then with slightly better conversion. We're not quite there yet. So we need to see how things pan out, but that's how we see it going forward. And then EBIT was SEK 20.5 million, which is a large increase from last year when it was SEK 7.1 million. That represents a margin of 11.8% versus almost 5% last year. Many contributing factors here, starting with that we had better sales, which drives the economies of scale, of course, the mentioned gross margin. And then we also had a few one-offs from the move last year. Then if we move over to looking a bit at the markets, the customer and also commercial development. The market development, as per usual, also remains very mixed across different geographies. So we continue to be flexible in how we move money from channels and also countries. I think one example is Germany, for instance, that grew almost 26% this quarter compared to, I think it was 10.5% in Q1. So they do fluctuate a lot. And then, of course, we continue to have a challenging world situation. Fuel charges, as an example. First, they went up a lot, and they went down a lot. Now we see some tendencies to going up again. So we really try to mitigate this by being as flexible as we can. And looking at consumer sentiment, it's actually continued quite low. We had almost a very low measurement for Germany, for instance, in the middle of the quarter, and all of the countries that we follow are low in the quarter. So we do see that every time we see tendencies that things go up, it tends to drop again, unfortunately. On a slightly happier note, we have a stable and high Trustpilot score that we're very proud of, 4.6 in the quarter. As you know, we are actively working with this. I would like it to be a little bit higher. So that's something we are working on. Again, something that is not a quick fix, and it's many different factors that contribute to this. But since we are a small brand in a lot of different markets, we know that this is an important indication that our customers both like what we do and like our rugs and they like our delivery, but also that it's a good or almost a necessary thing for people to be able to trust us and make sure that we are a company that delivers on its promises. And then, if we just look quickly at the assortment for the quarter, actually, all lines within the assortment performed well. So machine-made, handmade, and unique all grew. We had several new designs also that we have launched during the spring that took off in a very nice way. So that for us, of course, then means that they live on for many years, and we add colors and we add sizes to the products. And last but not least, I think it's worth mentioning that AI, of course, continues to be a very, very big topic for us. We continue to progress in this area. And just as an example, well over 90% of our development these days is done either completely by AI agents or with the majority of it being done with that help. And we are also continuously really working very hard on improving the structure around both product data and all our content, et cetera. So both customers and the AI-driven services both understand and really find what they need on the site. With that, I hand over to you, Joakim, for the financial deep dive.

Thanks, Ebba. Just one note before I jump in on the numbers. I think many investors or analysts may use an AI tool like ChatGPT or Claude, et cetera, just to run these reports. And there are things that are highlighted as errors when you do that, very convincingly so with calculations, et cetera. And these things are not errors and can be explained. So if you run across that and are still in doubt, you are, of course, more than welcome to contact me. So like Ebba mentioned, we were up against the comparable of 22% organic growth of net revenue last year. And now we had a double-digit growth with 15.8%, excluding a minor currency impact of 0.2%. So in DACH, we grew by 30.7%, whereas Germany grew by 25.7% despite that decreasing consumer sentiment that Ebba just showed. Nordics grew 15.4%, Sweden grew 9% and Rest of World grew by 10.5%. And there we had France to continue to grow very well with 21.9%. So again, quite varying performance within the markets. So on to the expense percentages as a share of net revenue. Just a comment here, we have added in the rolling 12 numbers. We think that adds the value to look at this over time. As you know, we have some seasons. For instance, in Q4, we have 35% of sales last year. We actually had 41% of our EBIT last year. So have a look at those numbers more than over-interpreting each individual quarter. So, to product expenses, then. These were down by 3.8 percentage points. This was mainly due to the price increases and the lower discount levels, but also somewhat to the weaker U.S. dollar versus the euro. You know that we, in quarter 2 last year, had a lot of sellout of products just before the move that we were going to do in June. And that, of course, impacted last year's margin. Moving on to the other part of the gross margin here, shipping and other selling expenses. And this decreased also due to the same reason as the product cost, and this is despite that we had some increased fuel surcharges that impacted negatively, mainly in April and May. So this then sums up to a 4.6 percentage points better gross margin. And here, we think moving forward, fuel surcharges is anybody's guess where those will end. But as we mentioned in the last earnings call, we did increase the prices in April, and this was because of a known product price increases that we will get that we think will kick in a little bit in quarter 3 and then in quarter 4. So other external expenses. So, in last year, we had the moving cost through the first 3 quarters, and we had a SEK 4.2 million moving cost, which is equivalent to 2.8 percentage points in last year. And that explains the decrease. Personnel expenses is quite stable, just a bit up in fixed amounts, but then due to the increased revenue, it's down by 1.8 percentage points. Moving into other operating expenses. And here, we have the effect from revaluation of the assets and liabilities that we carry in foreign currency. This goes up and down. Now it was an income in last year of 1 percentage point that became a cost this year. We do not hedge this, and we try to work naturally with it, meaning that we try not to keep too high balances in foreign currency that we haven't planned to purchase something with. So depreciation and amortization is now stable. You can say this is then an effect from a higher net revenue. Again, in quarter 2, we have the fixed amount of our depreciation and amortization is what we expect more or less having going forward. So this then sums up to an EBIT margin that is 7.1 percentage points higher than last year, arriving at 11.8%. And the main factors contributing to that is, of course, the increase in net revenue and also the increase in gross margin, plus then the fact that we had a SEK 4.2 million nonrecurring costs in last year. Moving on to the balance sheet.

That's the move cost.

And that's the moving costs. So moving on to inventory. We are up SEK 13 million versus the same quarter last year, which is not strange because we had that sellout. We have SEK 140 million in stock. If we look at the right in the picture, we have this range, 17.5% to 22.5%. Some may think we are too low getting into the high season. But bear in mind that we now -- since we came into our new warehouse and office building can actually better receive inbound goods throughout the peak season as well. So SEK 140 million, up SEK 13 million. Last but not least, into cash. So cash flow from operating activities up to the left top corner here, were similar to last year, although with a higher EBITDA this year and a higher increase in working capital. So on the working capital here, we had a positive impact last year from this sellout of inventory that we even have this year. And we have also decreased the accounts payable pattern compared to prior year. Cash flow from investing activities at the bottom left here, you see that we had quite large investment for us in equipment to the new warehouse and office building last year. And as you can see now, this is more normalized at the lower levels. So cash position then to the right. We have decreased cash since year-end with SEK 111 million, which is a dividend that we paid in May to our shareholders, SEK 104 million, and we are SEK 27 million behind our cash balance last year despite that record dividend. So Ebba, with a good cash position, that concludes the financial update, and I'll hand it back to you.

Thank you. All right. So just to summarize and give some Q2 highlights. Both top line and customer KPIs are all very strong. It's our best Q2 ever for top line orders, new customers, and we also think that the average order value is on track. So we're very happy about that. I would also just like to mention that we are facing tougher comparables going forward. And this is a business that fluctuates a lot quarter-by-quarter, but this quarter, we're very happy with. And then if we look at the growth, it comes from both the customer demand and the value per order and of course, also helped the bottom line is helped by the stable marketing ratio, which still led to growth in sessions. Also, what also makes me very happy is when all of our product lines developed nicely, which was the case in the quarter. And we also really like it when we launch new rugs that sell well and that we see will contribute for a long, long time. So that's been nice, not only for Q2 actually, but the whole first half of the year. And then, as Joakim mentioned, we had a record dividend payout in May of SEK 5 per share. So that was also nice to be able to do in the quarter. And with that, that concludes the presentation. So then we move over to the Q&A. And before we start, I can just mention that this rug here is a unique rug. So we always try to -- in every campaign we do, we try to combine our own designs with unique rugs that we find, and this one comes from Morocco, for instance. So it's a nice way to make the campaigns very versatile and live. But with that, let's move over to questions.

[Operator Instructions] The next question comes from Johan Fred from SEB.

Ebba and Joakim, can you hear me?

Yes.

Firstly, on the growth, 16% organic growth was very solid and without the excessive marketing spend as compared to Q1. What has changed there sequentially? Is it stronger underlying demand or some tweaking in your strategy or something else? Any color on here would be appreciated.

Yes. I think it's -- I feel like I say this a lot, but it's not one thing. It's many contributing factors. One thing that is driving the AOV, which, of course, helped this quarter quite a bit is that over time, we have -- when we -- if you look at our site today, the rugs you see are bigger. There is also a trend to buy bigger rugs in general, and that helps the AOV, which then helps the top line. The discount is lower. What else did we say? The price increase, of course, helps. And then if we look at the customer side, we had -- it was, I would say, cheaper to acquire customers and acquire traffic this quarter than as we saw in Q1. So it's just a lot of contributing factors. But I think one thing that we don't talk about so much, but that also helps is that in my very subjective but still opinion, we are getting better and better at designing rugs which also helps to drive the interest for us and you can really see it in how new designs take off and how they grow. And then, of course, we have this huge advantage that we can build on that over time. Do you want to add any?

More of your internal actions rather than a sequential improvement in underlying consumer demand. Is that correct?

We don't really see it, to be honest. And it's also -- it also differs a lot from market to market. I mean Germany, for instance, performed super well in this quarter for us, and it's not really the consumer sentiment isn't really going up in Germany in the numbers that we track anyway. So -- but I've said this before as well that since we are quite small in any given market, if we manage to do things just a little bit better, then we can also grow even if the consumer sentiment isn't really there.

Got it. Very clear. A second question on the gross margin, if I may. It was up close to 5% year-on-year, driven by what I assume is weaker US dollar and lower discount rates and price adjustments, as you said. How much of these improvement is structural rather than transitory, and how should we think about margin going forward given your pricing increases and AOV growth versus a USD/SEK potential headwind?

Yes. I think -- I mean, a lot of this is driven by -- the 2 main factors is the price increase that we have done. We have actually done a couple of price increases in last year, and we did one in April. And the other one is generally, not only in quarter 2, but generally, we have lower discount levels, particularly then in quarter 2, where we, in last year, had this sellout. How should we think about it going forward? Well, on the fuel surcharges, the freight cost out to the customer, I think it's anybody's guess. Like Ebba mentioned, April and May, we had very high fuel surcharges. That's why we increased the prices quite quickly. And then those came down a lot in June, and then we have some tweets from the President. So we don't know where that will go. On the product expenses, we have some price increases coming up. And it will, of course, first, they have to be delivered, which they are not yet, the more priceier products. And then it will take some time before the inventory turnover kicks them into the P&L. So that will be like in end of quarter 3 or more so in quarter 4.

The next question comes from Emanuel Jansson from Danske Bank. Please go ahead.

Ebba and Joakim. A couple of questions from my side as well here. Regarding demand here and the strong sales figures that we've seen during the quarter, can you elaborate a bit on how you experienced demand throughout the quarter, given that you managed to lower the marketing spend related to sales as per the Q1 report? I assume that the sales demand has been quite stable throughout the quarter.

Yes. It has been quite stable throughout the quarter. So maybe a little bit of a slowdown at the end, which is normal, but the weather was amazing at the end of June.

The World Cup of football maybe.

World Cup -- so maybe a little bit tiny bit slower, but fairly stable over the quarter.

Perfect. Thank you. Very clear. Going forward as well then, you've been growing double digits for six consecutive quarters now, and I believe that the last growing second quarter was quite a tough comparable. What are your view of that you are being able to continue to grow at a high pace going forward? Is it tough or is it very likely that we continue to see this high growth given your new marketing strategy and the [indiscernible] et cetera?

I think it's quite tough, to be honest, to continue to grow this way. We have said that our aim is to grow double digits over time, but it will fluctuate quarter-over-quarter. And I think it's a long-term goal rather than a quarter-by-quarter goal. I don't know, would you like to add something, Joakim?