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Good morning, and hello, and welcome, everyone, to Doro's quarterly report for the second quarter 2022. My name is Jorgen Nilsson. I'm the CEO for Doro, and joining me here today is, as always, our eminent CFO, Isabelle Senges.
Before we begin the presentation, I would like to apologize to you all for the inconvenience that we will not be able to take any questions over phone today. This is unfortunately a problem that we have with the Investor Relations platform. And, of course, you can still post questions through writing them in the chat at the end of the presentation, and we will, of course, also respond to them as the normal. If you type a question, we will read it back to you, to the audience, and then we will respond. With that said, let's delve into the reports.
So, today's agenda is that we'll first have a look at the key highlights, then we'll go through the second quarter in a little bit more detail, and finally we conclude, and then we open up for the Q&A session, which, as I said, will be interacted via chat. I'm sorry for not being able to do the normal way today. See if we can move on.
Basically, we have been very busy in the first 6 months of this year. We've been working both in our existing business, telephones as always, but we've also been ramping up for the future. And I will say that especially now the second quarter has kicked off with a very good [ energy ], because after 2 years of absence -- total absence, not being able to see customers, not being able to be on the shops, we now once again could reopen and restart the fairs and the meetings during this quarter. So this has included several major exhibitions in the Nordics and in France, and we also had a possibility of having a channel roadshow in Germany. And overall, this has been very well received by our customers. I think both they and we felt that it was really good to meet again face to face. And sometimes it's weird to imagine how fast 2 years go when you haven't been out there. So that was a really nice start to the quarter 2.
Europe opened up. We could visit our customers in their headquarters, and we could even go out in the shops and start talking to the actual sales guys. During this, let's say, renewed customer events, we now also have had a possibility to start trying out some new sales concepts and new ways of promoting our senior proposition. And I will say -- we'll touch upon that later, but, as there's been very few customers add in the shops, consumers add in the shops, our customers, the retailers and operators, they've really listened to the ideas that we've come with, and they're also optimistic too. So that feels really, really good.
Then, during the quarter, we've also released what we call the regional operator variance of the new mobile range. So that includes both the new 4G feature phones and the new smartphone, to the countries outside the Nordics. And the feedback we've had so far from our end consumers was that, previously feature phones were perceived as very easy to use. Then they became more and more complex as we moved into 4G, IMS, et cetera. Hence, the first smart feature phones became basically smartphones, and they are also much more complex. Our customers, the mobile operators, they still required us to do all the technical implementation, IMS, Voice over LTE, Voice over Wi-Fi. The end users, however, just still wanted to make phone calls and maybe some basic texts.
So, for all practical purposes, we really made smartphones but in a foldable shape. This was not so good for the end users. But our new generation which we now released, these are back to basics model where we've removed all the complexity and all the smartphone functionalities I'd say. Or rather, I should say, we've simplified it and made a very simple user interface on top of this. So the end users, our consumers, they see as easy to use as the original 2G or 3G phone, and they should basically not be able to tell the difference that beneath the surface, it's basically a smartphone in a foldable shape. And so far, the feedback from the markets has been very positive. So we have really good hopes for that.
Also, on the upside for us, not only for the users, but these new feature phones, we managed to have better production cost. And then during the quarter, we also implemented another price increase. So, with a new range, with better production cost and implemented price increase, we hope that this should hopefully facilitate the restoration of our margins during the coming 6 months.
But, of course, not the traditional phones only have been our focus because as you know, we're working very hard on our innovation side. And I think today, we're, therefore, very pleased to say that we will be launching 2 of our new nonphone categories already now at IFA in September, in Berlin. So these are also non-phone categories where we've taken our senior know-how and our expertise in consumer electronics, et cetera, and made a new senior proposition of these mainstream products. So really proud that will be -- that we are able to do so within 6 months of basically starting on our own accounts. And then, we still have our third new category, which is also nonphone related, which will be released at the Mobile World Congress in Barcelona in February.
Then finally, it is -- has been a very tough sales quarter, and you'll see that in the coming slides. But we've managed to keep our gross margin stable. And we also had a very strong cash flow still. But I think Isabelle will touch more on these topics a bit later.
Okay. Then, I'll see if we can move into more details, if I manage to change the slides.
So, what are the key business points during the quarter. Well, as I said, after 2 years of COVID, most of our end users had basically stayed at home and spent time on renewing all their home electronics, their phones, et cetera. So there were a lot of people in the beginning of this year who started talking about a pent-up need to do other things, experiences, dinners, travels, et cetera, et cetera. We noticed this already in the beginning of the year, let's say, a temporary change in the consumer behavior from electronics to experiences, if you put it on.
But then, just as people began to start thinking of other ways of spending their money, Russia invaded Ukraine. And I don't really have to tell you, but now we've seen everything from fuel and heating, electricity to food and all the basic necessity, skyrocket. And inflation has, of course, increased. And I would also say that there has been a general uncertainty in the world economy, and also in security among people, which has followed. As a result, we have, during this quarter, seen our end users being much more cautious with the discretionary spending. And as a result of that, we've seen much fewer store visits, both on and offline.
So, consequently, our overall sales was impacted by this downturn and we ended up just shy of SEK 200 million, which is a drop of almost 4% compared to the same quarter last year. and obviously, not only consumers cost having been impacted by the war, our costs have also increased. The cost of sold -- goods sold, the freight, and needless to say, our gross profit, has been affected accordingly. So the gross profit was down almost a fourth compared to the same quarter last year. And of course, this negative development, if you say, from the USD against the euro and the Swedish krona, has continued to put a severe strain on us.
But, I said before, despite the increased COGS and freight cost, and the negative impact of the dollar, we've actually managed to maintain our gross margin stable, which I think is quite impressive. Isabelle will outline a little bit more about that later. Likewise, despite the near total absence of consumers in the stores, we did see a small direct positive sales, especially in Germany, when we began touring some of the major retailers with our, let's say, new sales tactics. So not many customers, but there was a direct effect on the few customers who were there. So that's good. In either way, our operating profit declined compared to the same quarter of last year. This is, of course, a direct consequence of the decrease in gross profits. But on the upside, the EBIT increased compared to Q1, at least of this year.
And I think that's pretty much summarizing the business key points because I've mentioned them already in the previous slide. So, let's try to move on and take a look at the sales in the respective markets and regions. Just see if I can...
We then see that sales in the Nordic dropped by almost 40%, and that is, of course, a lot. But here, it's really important to remember that the high sales in Q2 last year was basically driven solely by boosted sales, by one of the largest mobile operators in Sweden. They ran campaigns to replace all their fixed line customers' copper access with Doro's home mobile phone. And this definitely drove, should we call it unexpected or unusual volumes last year. And I think in Q2 last year, only their sales of this particular phone to replace copper was some SEK 13 million. So, when we say there is a big drop, it has not so much to do only with the tough times. But the Nordic has also been very negatively affected by the internal reorganization of one of the major distributors in the Nordics, which has resulted in a temporary hiatus in their ordering.
If we move on to West and South Europe, they sold for almost SEK 79 million, which is a drop of almost 20%. And of course, this region like the others, have suffered from low store sellout, because customers or consumers have been much more preoccupied with the general dire economic situation, and therefore, shifted away their focus from the shop business. We also, especially in this region, experienced delays in deliveries, and that particularly pertains to the fixed line products, which now -- and that's not only for door, but overall, their fixed line products have very long lead times.
Moving a bit East, the sales in Central and Eastern Europe, might be sometimes call it DACH, that amounted to SEK 44 million. So here, the decrease has been much smaller than the other regions compared to last year. And this is also probably since we saw a bolstered sellout at these major retailers and in regions when we did a new Doro roadshow. Unfortunately, the channels which we had not timed to visit, they underperformed.
And then finally, we have U.K. & Ireland. There was a drop by 28%. We came in at SEK 32.5 million. And of course, as with the other regions, our reseller stores experienced much fewer visits and a lower sellout. And then also in Q1 of this year, we had -- one of the major retailers had significant deliveries. They were both boosting up for a big campaign. But then as customers stayed away, the big order volumes which they ordered, started clogging up their system. So they haven't restocked the way we would have expected, and that has definitely inhibited them from placing new orders in the quarter.
I think that's a bit of an overview of the regions. But I would like to point out, on the upside, both the U.K. and DACH, or Central Eastern Europe, has actually increased sales during the first 6 months of this year compared to the first 6 months of last year as both regions did strong in Q1 this year. So that's good.
And with that said, I will leave the word to Isabelle to delve into more details of the sales and profitability. Let's see if I can move the slides as well. Yes.
So thank you, Jorgen. As Jorgen mentioned, we had quite a tough quarter in terms of sales. The net sales in this quarter amounted to SEK 198 million compared to SEK 260 million same quarter last year, which is a decrease of 24%. The details of the sales per region were given by Jorgen. I can just reemphasize that last year, we had a quite strong quarter too with high level of sales in Nordic and U.K. Whereas this year, as Jorgen mentioned, and since the beginning of the year, or many reasons that we all know by now, the sellout is slow, and the ordering from our customer is not at the level that we could have expected.
Moving on to the margin. Our gross margin decreased versus same quarter last year in absolute value, as a consequence of the lower revenue from sales, but we did manage to keep the percentage stable at 35.6% this quarter compared to 35.2% last year. In terms of margin, we still face the same issues as during previous quarter, which is a high cost of goods as we purchased our products and components in U.S. dollar, and high inbound freight. Having said that, we succeeded to -- in keeping good control of all the other elements of the margin. Our warranty costs were low, and we got some push from having resolved some outstanding issues in our favor, among other things, with regards to accounts receivable. So the percentage of the margin was eventually quite satisfying this quarter.
In terms of profit, the EBITDA ended up at SEK 15.7 million compared to SEK 32.2 million same quarter last year. And the EBIT ended up at SEK 5.5 million compared to SEK 15.5 million last year. The EBITDA and the EBIT are, of course, affected by the lower revenue. We can point out that when it comes to our operating expenses, we have had a good control of our OpEx. And even though we have resumed some sales and marketing activities, as Jorgen mentioned, we have managed to keep the overall spendings at a lower level than the same quarter last year.
Lastly, the profit after tax amounted to SEK 4.9 million compared to SEK 12.9 million same quarter last year, giving a profit per share of SEK 0.20 versus SEK 0.36 last year.
Moving on to the cash flow. We had a quite good cash flow during the second quarter. The cash flow from operating activities was SEK 44.7 million compared to SEK 25.1 million same quarter last year. This strong cash flow is coming from a significant improvement in our working capital, both in terms of receivables and in terms of payables. The investments during second quarter were at SEK 9.8 million. It is an increase compared to first quarter, which is in line with our development strategy. It is below the level of investment of second quarter in 2021, which was SEK 20.2 million, as there was still investment for the care part in our balance sheet at that time. So as a result of the positive working capital development and slower investment and free cash flow after investment, was quite improved versus same quarter last year, amounting to SEK 34.9 million compared to SEK 4.9 million.
When it comes to cash and cash equivalents, the balance at the end of quarter 2 was SEK 132.5 million to be compared with SEK 79.1 million end of quarter 2 last year. The equity ratio at the end of quarter 2 was 48.9% compared to 56.2% end of same quarter last year. Lastly, we ended up the quarter in a net cash position of SEK 41 million compared to a net debt position of SEK 1.8 million at the end of first quarter and a net debt position of SEK 73.1 million at the end of the second quarter of 2021. So overall, in terms of cash flow, a very good quarter for us.
On this positive note, we'll get back to you again for a wrap-up.
Thank you, Isabelle. So we'll move into some concluding remarks, and then we'll open up for a Q&A session over the chat.
So on the upside of this quarter, I would say, we kicked off with really good energy. We returned to the customer failures. We returned to customer meetings. 2 years of absence. It was great. We felt it. They felt it. Lot of good energy. We visited Elbit, Power Nordic, Orange Group in France, et cetera. And we also started rolling out a smaller roadshow to a selected channel in Germany -- one of the major channels in Germany. And during these renewed customers, we did have the possibility to start trying out some new sales concepts and ways of promoting this new proposition. And I would say that our customers were very positive to these new ideas. So let's hope we can roll it out to other regions.
And then, on top of that, we did roll out the operator variance of our new 4G feature phones and the new smartphone range, and they have been very well received, and which we have good hopes for, since I said they are really back to basics phones despite being smartphones beneath the surface. And then for us, of course, it's also good because there are better production costs. So yes, looking good, looking forward to that.
Then, likewise, despite the sales decline, as we've seen, it's been a troublesome 6 months, and the increasing cost of goods for us, we still managed to deliver a positive result. And we still have a strong cash flow, which I think is very satisfying in these quite tough economic times. And I said, although Q2 was not the best. If you look at the first full 6 months, actually, the sales in U.K. and DACH were higher compared to the first 6 months last year.
Then -- sorry -- in terms of challenges for the quarter, I think the one single overarching challenge is how to have the sellout in the stores pick up again. This is, of course, not a problem that is unique to Doro. It's affecting the entire consumer business. But how do you -- how do we manage this with the current economic instability and the increasing prices and the inflation. Naturally also the increase -- continued increase in the cost of goods and freight, and not to mention the negative impact of the U.S. dollars. So these 2 things, the sellout and the increase in COGS freight in U.S. dollar, these are something we really have to keep a close eye on, and we do.
And finally, in terms of priorities ahead for us. I would say, get the sellout in the channels back on track. And I think when we now try just with a new sales concept, maybe that will give us another bit. We will continue trying it out. And if it's successful now in some of the regions, we will definitely try and copy it to the others. And then also, of course, for us, we're really looking forward now to the launch of our 2 first nonphone categories at the IFA Fair here in September. And then our third innovation category and which we hopefully will launch at Mobile World Congress in Barcelona.
Yes. I think that would conclude the presentation part, and we can then open up for taking your questions. And once again, sorry for not being able to take them over the phone, but it's more than fine for you to just type it in, and we will read the question to everyone.
Can you see there as well? Yes. You want to read the question or should I? Okay.
So, we got a question here from Niklas Sävås of Red Eye. Do you see the same pattern at the start of the third quarter as in the second quarter with lower traffic in stores and online?
So there are multiple questions. I think we will take them one by one.
As it is today, Niklas, yes, I do think so. I think we will hopefully be able to stimulate. We have a couple of ideas, like I said, a couple of new sales tricks up the sleeves, I would say, to see if we can stimulate. But overall, yes, as long as the war continues, or rather as long as people are preoccupied with paying high electricity bills and paying through the notes for their food, I think there will be a more conservative way of spending that little extra that people have.
Question two, was there any one-time effect in terms of boosted sales in Q3 last year?
Yes. Yes, sorry.
Yes. There was a big one-off to a retail channel in Germany.
True. Yes. That was -- that's true.
We hopefully -- we will try to mitigate this, of course, in the Q3 sales, but this was quite significant.
Question number three. You mentioned that the gross margin held up primarily due to accounts receivable that were outstanding at favorable terms. Can you elaborate on this and also discuss how large the effect was on price increases in the quarter? Accounts receivable, would you like to mention?
Yes. So we had some open issue, unresolved business with some customer, and we managed to get the funds in eventually. So our accounts receivable that's much better. So with the risk that we thought might have come not realized. So in that sense, we were able to release provision, and it affects positively our margin.
Could we say that since there's been less customer activity, there's been less invoices to sell? So we've been chasing after the guys that owed us the money, and we managed to successfully settle that.
Then you also mentioned here, can you elaborate on the effect on price increases in the quarter?
Hard to say. I mean, in general, we don't increase all the prices with the same percentage. We try to tweak it from region to region, and then, of course, from product to product. I think also, one of the major effects is that when you release a new product, there can be a price increase because nobody is kind of aware of that price. But in terms of the effect, I think we pointed out that the cost of goods still continue across the freight and then, of course, the USD dollar -- U.S. dollar. The U.S. dollar kind of did not make up for the price increases. So yes, had we not done it, there would definitely be less margin. But I'm not sure, should we -- can we elaborate on the percentages now? We shouldn't do.
No.
What was -- the final question. Will we see a larger effect driven by price increases as well as from the new phones with lower production costs in the third quarter?
In terms of the new products, hard to say. We don't know how successful that it will be, to begin with. We do also know that with new products that tends to be higher warranty because -- as you noticed, we had low warranty costs in the quarter, and that's also because we're now basically at the end of the product -- or the previous product life cycle. And as you get closer to the end, the warranty costs normally go down. In terms of the price increase, well, if the dollar stabilizes, if the cost of goods, et cetera, stabilizes, then there will definitely be a positive effect of it. That's what we're hoping. But it's kind of hard to say today if the prices in the world and the inflation increases, whether that means we would have to increase our prices again in order to have a positive effect of it. The lower production costs for the new models are, of course, to our benefit. That's for sure.
Okay. Then we have 2 more questions coming in here from Oscar Ronnkvist at ABG. Question number one. What is the momentum in consumer activity like going into Q3 relative to Q2?
What is the momentum? Not sure if I may -- I understand -- but if I understand it correctly, are we saying that -- Q2 of last -- sorry, what momentum in consumer activity like going into Q3 relative to Q2?
I would say that the momentum would be better. It seems weird to say that people have gotten used to the higher prices in the war. But if we go a few months back, and it's strange to already talk in those terms, but of course, I think most of the people in Europe were shocked by the Russian invasion. There were also -- especially among the senior population in Sweden, I know for a fact, people were very worried about all the Russians coming and stuff like that. So people tend to go back to more back to business as usual. So people are less preoccupied with the actual war.
Then again, with the continuous increase of prices, interest rates going up, people paying more than ever for their homes. And I've noticed myself also the price of food, et cetera. I think it will be a better momentum going into Q3 than into Q2, if I put it that way. But the best momentum would be, of course, the war ends, stabilizing of cost of goods and currency.
There's another question to answer. How much is the gross margin impacted from the finalization of [indiscernible].
Yes, so it was around SEK 4 million.
Okay. And Niklas and Oscar, please feel free to fill up with more questions. If you did not fill, we responded to your questions.
Okay. Here is a question from Fredrik. What percent of the current receivables are uncertain, do you think?
After a very good review and cleanup of quarter 2, I think it's very low. There is not -- even though the situation has been tough for many companies, we have actually not felt it for the moment at least, and we have not had any sign of any difficulty at our customers. So I think there is not much worry on our current receivables at this point.
Thank you for that question, Fredrik. More questions from anyone? We have another minute or so. Once again, you have to type, and once again we'll try to answer that. No. It doesn't seem like there are any more questions. Final 30 seconds we give you if anyone is still typing.
So if no further questions from you in the audience, then we conclude this presentation. And thank you very much for taking the time in the middle of the summer to attend this Q2 report from Doro. We wish you all a very nice summer, and hopefully, also have some relaxing vacation. I think we're planning to have it ourselves. Our next report, the Q3, will be released by October 21st. Thank you very much, everyone. Have a nice...
Thank you. Bye-bye.