ITAB Shop Concept AB

STO:ITAB

Earnings Call Transcript 2023-Q2

[Mats Karlqvist, executive]

A warm welcome to this presentation of ITAB's interim report for Q2 2023. My name is Mats Karlqvist, and I'm be head of Investor Relations at ITAB. [Operator Instructions] The presentation, including the Q&A session, is recorded and will be available at our website afterwards.

With that, I'm delighted to hand over to today's speaker on Andreas Elgaard Board and Ulrika Bergmo Skold. Go ahead, Andreas.

[Andreas Elgaard, executive]

Thank you very much, Mats. So dear all, welcome to our interim report for the second quarter this year. As usual, I would like to do kind of a quick introduction to ITAB. We know that we are a company that is not well known by everybody. So we usually do this in order to give everybody a chance to get to know us and to understand better what we're all about. So we'll start with introducing before I go talk a little bit about what's going on in retail. It's a very dynamic market. And I will then touch base a little bit on our transformation ambitions towards becoming a solution provider. There is plenty of growth opportunity for us. I will touch that slightly before we head into the actual report where Ulrika and me will try to wrap that up before we take some questions and answers.

So just to start with the introduction into ITAB. We usually say that we are what we create together with our customers. So depending on the need of the retailer, their desire maybe to create a certain type of expression or a certain type of experience, our effort looks very different. It also looks very different depending on when we enter into the process. But we like to say this because it could be a car showroom, it could be a petrol station or a grocery environment. It can be all sorts of physical meeting places in retail where consumers engage with retailers brands. Today, ITAB is a leader in Europe, and we have a global reach. With that -- What we mean with that headline is that our -- the core of our business is firmly set in Europe, but we have activity also in South America. We have manufacturing and market activities in Asia. But the vast majority of our sales is in Europe. But we help retailers when they need to in Australia, in U.S., so across the globe, we help them with the need that they have.

Our biggest segment is the grocery segment, followed by home improvement, do-it-yourself, and then construction. In our other segment, where we have is -- starting to become quite big, but there, we have things like pharmacies, consumer electronics, cafes, the hospitality sector and so on.

We can create solutions with the retailers when we are at our best. Sometimes, the retailer [indiscernible] want us to be part of their creative process. They more want us to deliver something that they have specified them -- the solutions is being designed from a blank paper. And I'm saying this because retail is really, really transforming. And the solutions from yesterday is not always relevant in order to solve the dilemmas of tomorrow or the ambitions of tomorrow. We are, today, a value-adding partner that adds value both in terms of concept design, solution design. Of course, we do manufacturing, we do sourcing, we do installation of entire stores, turnkey projects, and we also do end-to-end maintenance, and we help with aftersales and taking care of sometimes also with fulfillment and consolidation. So we really help retailers in a 360 approach. And that's what I mean that we are best when we are part of the creative process and try to answer the strategic dilemmas that the retailers have.

Today, ITAB has around 2,700 employees, and we have activities -- operational activities in 24 countries with manufacturing and production in 15 countries -- in 15 facilities. So retail is truly transforming. I think we are all consumers, and we're all experiencing this. And the last couple of years with COVID and inflation and all the ongoing, I would say, new developments in the world and the economic climate, it's only increasing and accelerating the transformation in retail.

Consumers, they get their expectations from social media, from online experiences. They get it from new types of networking experiences. And consumers, they bring their wish to be seen or heard or to be treated relevant and their time should be well taken care of, they take these expectations to retailers. And retailers sometimes have a hard time to meet up to the consumer demands. Consumers want to engage across the retailer channels. And this leads to -- that retailers need to invest in their existing store fleet. They need to invest in online technology, online channels. They need to invest in in-store technology. They need to invest in keeping their stores in shape as new. And this is putting many retailers into a dilemma that they have not been used to.

The whole industry has transformed from being expansion oriented to being much more refurbishing, redesigning, repurposing. And this is great for us because it means a lot of opportunity, a lot of work, but it also means that the fundamentals of the industry is changing. So going from making large volumes of the same over several years into more of a 6-week or a 12-week project business. It's a big transition for us and for a whole industry. And it requires us to become much more agile, much more tentative to the retailers' needs and an understanding of the consumer dynamics that is posting these dilemmas on the retailers.

It's really a cost versus experience dilemma and how to get the best return on capital. I will not go through all these market trends, but the dilemma that retailers have is that they still have their fleet of stores. Consumers prefer to shop in stores. At the same time, consumers expect a great online experience. And more and more they expect that you can bring that experience into the store so retailers need to invest. And at the same time, their operating costs are going up, and that is the dilemma, and they need help to reduce the investment costs and they need help to decrease the operating expenses. And at the same time, they need help to stay relevant in both terms of creating inspirational experiences and convenience experiences.

We like to pay to sum up everything that is going on in retail and going on within ourselves that it's really super important to rethink retail and to do that together. There are so many [ retails ], and you cannot develop solutions on your own and try to market them. You have to develop the solutions together with your customers, together with your suppliers and across your organization.

So our strategic ambition is to become the leading solution provider in our industry. I would say that probably we're already there, but we're not there in terms of being leading in the aspect that we want to be. We want to move from being product oriented to become service and solution oriented. And that requires quite a journey. It requires us to change mind shift, to change a little bit our culture. It requires us to leverage all the experiences and know-how that we have, together with our customers and suppliers across all of ITAB, and to package it into something that we quickly can turn around and offer to customers across other geographies.

That's 1 of our uniqueness compared to our competitors, and it's also 1 of the unique business that has the most, I would say, potential to be unleashed. We set out a strategy 3 years ago that was focused on transforming ITAB. When we set the strategy, we were not really aware of COVID, we were not really aware of the lack of, I would say, the supply chain disturbances and the lack of semiconductors, and then that led into the hyperinflation and the high interest rates that we are experiencing. But still, we believe in our strategy. So we've used this as our guiding star and our compass to help us to lead the way. And of course, ITAB, back then, were in a situation where we had to, I would say, clean up a little bit internally and fix our finances before we have the ability to invest in our own future. So that is what we've been up to. So it's all about becoming a solution provider, and to be that requires a different mindset. It's all about empowering people, people in front of suppliers, people in front of customers and people in front of taking the right operational decisions every day.

We also want to create an ITAB that is more scalable, where people are having line of sight, they share the capabilities, they share the information, they share the know-how, they can share their experiences, and that requires us to build a modern ITAB that we can expand the scale when we grow. Investing into our future and into our partnerships is key in this journey, and that's really what it's all about.

So we are today well-positioned and our transformation has helped us to reposition, and we are continuing this effort over the coming 2 to 3 years. What we have started to do is to be less obsessed of the solutions or the products and services that we already have in our portfolio and more to become super eager to understand what are the strategic priorities for the retailer, and what are the outcomes that the retailer wants to achieve. So how can we help them to deliver the desired consumer brand experience that increases the footfall and makes the customer experience beyond brand? How will that experience then increase the sales and drive conversion for the retailer? How will it lead to improved efficiencies and better service to customers and maybe, not to be forgotten, how will it help them to reduce their operational costs?

If we deliver on this, and we often do, then we become super attractive for the retailers. And it's all about delivering on the retailers' KPIs and not always on your own, and be confident in that, that will lead to that you strengthen your position and you strengthen your own company.

Yes, I think I can skip this because I already said it. But what we do today, I would say that we influence the consumer journey within a retailer, and we also influence the way that the retailer operates. So we do that with our interior solutions, with our lighting solutions, with our retail technology solutions. Of course, we have some services today also, and we help to drive convenience or inspirational experiences. We help to make the store staff work in an efficient way and the consumers intuitively understand what the store is all about.

In the future, we believe that the retailers, in order to be able to meet up to all the expectations from consumers, they need to invest more in technology, in-store technology. They need truly to become connected across their channels. You know that we've been talking about multichannel for many years in the retail industry. And now it's -- it is coming more and more. And we need to help the retailers to connect this so they can leverage the in-store data with the online data and create the best possible experiences. And we believe this will drive a lot of service needs and a lot of need for health and support with the tech, both in-store and of course, in the overall holistic way. So in the future, ITAB is going to expand our service offer and also our connected offer.

In Australia [ execution ], we are -- I would say we are working on all these 4 pillars. We have done the stabilize phase where we reduced our SG&A. We started coordinating our purchasing, and we took out a lot of fixed costs. So we stabilized our financing, we lowered our debt. We really created a position of strength, but we can use them to invest into the future. We have started to build and invest in new ITAB. So we are right now in the process of, I would say, designing the templates for our future common ways of working. We have chosen of the partners to do this work with. So we will have a uniform IT, uniform KPIs and most important, common ways of working across ITAB. So we're building new capabilities.

This will help us in the expand phase and that is something that we're super eager to focus on where we will be able to deliver a more sustainable and profitable growth. And of course, doing this, and at the same time, balancing the challenges that is in the world around us. And we have been quite good in reacting to this. And that's also something I would like to come back to when we sum up the Q2 report in how to deal with the ongoing threats in terms of energy crisis, inflation, interest rates, COVID, you name it.

So far, our strategy has worked out for us, and we are well on our way. So if we compare '19 to '22, we have strengthened our [indiscernible] in the grocery sector that is the most important sector for us. Our retail technology segment has increased as a percentage of our sales. Our net debt has drastically decreased, both because we have raised new equity, but also because we have taken capital out and cash out of the business, so we have improved our capital efficiency.

And we have improved our EBIT margin in the process. And bear in mind, during these special years, we've been able to achieve this. We still have more to do, and it will take a couple of years before ITAB is in shape that we want it to be so we can meet our target of becoming the leading solution provider.

So there is a clear growth opportunity for us. And I just want to touch base on that just very briefly. Our market is really driven by retailers' investment in their stores. And our opportunity is really evident. We believe that, today, we have less than 10% market share within Europe. And we are 1 of the 3 largest companies, if not the largest, in Europe today or at least in 2022. So there's plenty of room for the market to consolidate. There is plenty of us to increase our piece of the cake in terms of services, in terms of technology and recurring revenue. And it is very, very important for us that we capitalize on this and understand how the dynamics of our industry is changing, how refurbishment rates are increasing, how the spend is changing, its dynamics, and how maintenance is becoming more and more important for the retailers to think about already before they do their investments in order for them to stay relevant and to build stores that they easily can transform and adapt to the changing consumer dynamics?

Our growth is really focused on 3 main areas. So of course, we have our core markets with our core customers, where there's a clear upside to drive cross sales, and to increase our existing portfolio of products and services with existing customers. That is very, very important. We also think that, in our core markets, there is an opportunity for us now to take new customers. Then we think that expanding from our core to expand with new offerings, so more retail technology, more services, help retailers to really balance the multichannel dilemma so they can keep all their technology connected and all their services kind of in shape to support their journey.

And then the third sector is really to expand to new markets and new segments. So completely new retailing segments and new markets in the world where we have an opportunity to follow our customers.

So by that, we are ready to go into the Q2 report, and I will hand over Ulrika to begin the presentation.

[Ulrika Skold, executive]

Yes. Good day, everybody. I will now go a little bit more into the figures of our Q2 report. And looking at an overview of ITAB's development and financials over 12 months, our sales have declined with 6%. We have improved our reported EBIT from SEK 231 million to SEK 415 million after completion of the restructuring phase of the transformation and cost related to this. And we have, despite the volume loss and challenging market sentiment, strengthened our gross margin, which, to some extent, has compensated our result for the loss -- lower volumes.

Our cash flow performance has improved, driven by high margins and reported results and also reduced operating capital after a period with supply chain challenges.

Our net debt position continues to be on a low level.

If we look at our sales, in the second quarter, we have a currency adjusted sales decline of 15%, where our biggest sectors, grocery and do-it-yourself, stands for the biggest decline. Many customers have been hesitant towards investments in new stores and upgrade of existing stores due to the economic development with inflation and increasing cost of capital. The biggest decline can be seen in North and Central Europe and also U.K., while the Southern Europe so far is less affected.

We have increased our sales to Rest of the World, mainly driven by our loss prevention solutions. And we continue our strong growth in retail tech, loss prevention solutions in most of our market areas where we are well-positioned, and we have seen an increased interest in our products in this area. And also in low energy consuming lighting products where our solutions help retailers to decrease operational costs and, at the same time, improve the customer experience.

Our growth in loss prevention solutions has a positive impact on our gross margin, driven by our technology leadership and favorable market conditions in this segment. The favorable product mix, combined with increased and better balanced prices during [ 2023 ], together with implemented cost savings, resulted in a significantly increased gross margin, and we reached an EBIT result of SEK 91 million in the second quarter. This corresponds to 6% EBIT margin, which is stronger than last year's second quarter, where we had 4.7% in adjusted EBIT margin and 3.7%, if including the restructuring cost.

However, our result is still under pressure by lower volumes. And to strengthen our earnings performance, we are continuously adapting our production cost and also addressing our fixed costs, including administration and sales. We started this work during end of last year, and we have implemented a part of identified cost savings and further actions will be realized in the coming quarters. Our focus is clearly now to increase our operational efficiency with targeted sales initiatives and adapted cost savings.

Our operating capital is stable on a lower level after a period where supply chain disturbances, price increases and lack of components had a negative impact with both increased and unbalanced inventory levels as a consequence. The cash flow for the second quarter amounted to SEK 230 million, and rolling 12 months, we have a cash flow of over SEK 800 million, driven by higher profitability and margins, no nonrecurring costs and improved operating capital levels.

Our inventory levels are now on a more normalized level, but our focus and actions to further increase our capital efficiency continues.

And by that, I hand over to you, Andreas, to comment on the main takeaways from the Q2 report.

[Andreas Elgaard, executive]

Thank you very much, Ulrika. So just to kind of to zoom out and sum up, I would say that I'm super proud over the efforts that the team has shown so far this year. We are losing on the top line, but we are strengthening the bottom line. And I think that is the sentiment that with good cash flow and good control over our finances I think that is -- that, for me, are the main takeaways. We know that forecasting and figuring out what's ahead is harder than ever. We live in a very disruptive environment right now. And we have, in this environment, shown now during the last couple of years, that we're good in reacting and, at the same time, not losing focus on investing in the future. So I think that is kind of a sentiment to take -- that I want you to take with you.

I will say that we have seen several deals that have landed during the report period. We see that our solutions for both to reduce shrinkage or [ thefts ] in stores are being really recognized, and they're being recognized because they're smart and they're modern and they are nonintrusive. So the consumers don't feel targeted. They are kind of rewarding all the consumers with good intent and they catch consumers that maybe have bad intent in a way that is nonintrusive and helps the retailers to create a calm and good atmosphere. And we do this by using smart AI solutions that are self-learning and [ sensor ] driven. So there's a lot of [ kind of ] smartness that we build into the checkout arena and our gates.

We also see a growing interest for lighting solutions. So we have some market-leading efficiency and that is being recognized by more and more customers. And we want this to be -- to move beyond the traditional customers and into maybe segments where we're stronger.

There is a clear economic downturn. We see this -- we see customers that have maybe difficult financial position. They're really real hesitant to invest unless the business case is super strong and that the business case is helping them to reduce their operational expenses. So you need to fight for every deal you get. But at the same time, we see that we are being able to balance the economic downturn.

Our price adjustments, our long-term kind of rebuilding of the cost structure, but also the short-term cost adjustments that we've been doing has helped us to keep and even strengthen our profit margins despite the decline. So I'm super proud of the team for doing this.

In the quarters ahead, we will continue to strengthen and rebuild ITAB. We will continue to try to focus our earnings on areas where we have good margins and to be a bit selective in the deals that we take. And hopefully we'll be able to manage -- to keep profits up even though the surrounding environment is challenging for us.

So by that, I think I just want to end with this message that the trends in the market is really underbidding areas of growth where we are well-positioned. So retailers are really consolidating their supply chains to reduce costs. They are leaning towards the larger suppliers, which is helping us. We see that the shift in store investments and new types of store programs is leading to smaller refurbishments with clear return on investments. This is also an area where we are strong. The use of retail technology is increasing, and we are probably 1 of the largest companies in Europe in this area, and that is helping us and really positioning us to be an important partner for retailers.

Energy efficiency is higher up than ever on the agenda, and it has not reduced during the last year, even when energy prices have more normalized. It's still top of mind with most of our retailers. And we are really seeing that most retailers are leaning towards us, and the outcome that we're trying to achieve with our strategy transformation. And I want to highlight, once again, that EuroShop, in February, March this year, that is the world's largest retail supplier fair, we really managed to change the perception of who we are. And when we are measuring that with our customers, they are really acknowledging that they see the change in ITAB and this is something that is very positive.

So with that, I hand over to our Q&A.

[Operator]

[Operator Instructions] The next question comes from Karl-Johan Bonnevier from DNB Markets.

[Karl-Johan Bonnevier, analyst]

Just to give a little better feel for the underlying ongoing trends. When I listen to your -- how you talk about retail technology and retail lighting, it sounds like those areas, even in the mix you saw in the first half of this year, are growing -- those are growing components. So when we look at the 15% organic headwind, and I guess there is a positive pricing component in that as well, is all that volume loss is really related to interiors for the moment or I am interpreting you wrong?

[Andreas Elgaard, executive]

I think, as usual, it's not a simple way to describe the dynamics in the ongoing market. But I mean, as a sentiment, interiors is maybe suffering a little bit more than what services and technology are doing and lighting. But it all depends on the customer mix and the product mix. But of course, products that deliver clear return on investment are more appreciated in the current market dynamics. But it's not so easy to say that 1 segment is suffering and other segments are winning. It's more complex than that.

[Karl-Johan Bonnevier, analyst]

So if I look at it, I would expect then still small -- some small decreases also in the lighting segment and technology being a part of the growth -- of the mix which we saw in the first half of this year?

[Andreas Elgaard, executive]

I think that we see -- I mean, we are not reporting it in that way so we refrain from doing that. But we are seeing that our -- I would say that within retail technology, the things that we're highlighting are growing and being strengthened, and maybe some other things that have a clear return on investment is struggling a little bit. But it's also -- that's maybe just a quarterly sentiment. If you look at the long-term trends, it's -- there is something else going on. But I think it's very -- it's fair to say that the total offer is what makes us attractive. So it's not -- the interiors are very, very important to create the relationship and nothing influences the consumer experiences more than the built environment. And we believe that both technology and lighting needs to be part of a complete solution.

And our service offer needs to strengthen the solution that you have in store. It also needs to strengthen the retailers' ability to execute their stores and to over seasons and over periods of change. So we see that -- we see a new dynamic going on in retail where more and more understanding is that you cannot break your concept up in pieces and try to negotiate that. The full effect and the best outcome you get when you have everything integrated. So I think that is how I'd like to answer that...

[Karl-Johan Bonnevier, analyst]

Very clear. Very clear.

[Andreas Elgaard, executive]

Yes. From quarter-to-quarter, you will see sales mix or you will see changes, but it's really, really clear that our right to play is that we can help them with the entire situation that they have, both meeting their customers and enabling their store people to shine and be efficient.

[Karl-Johan Bonnevier, analyst]

Yes. I guess, and what I'm being detailed on this is obviously the fantastic gross margin recovery you had in the quarter. And I guess Q2 last year was probably the weakest point from a gross margin perspective as well before you started to implement price increases and similar things. Is it possible to maybe dial down into the gross margin recovery, how much you see coming out of the mix and how much is related to price adjustments and then you're getting back to where you should have been?

[Andreas Elgaard, executive]

I would say that we are in a position since second half last year where we're better balanced when it comes to the managing inflation. And so what you see now is a normalization, plus there is a mix effect that high-margin products have been sold in -- but it's also a customer mix. So depending on who -- which customer we have that is big in each quarter, [indiscernible] influence us. But we are proud over how we have managed so far, but it is a very tough situation because you -- there is a clear recession, there is clear hesitation for retailers to invest. And there is many that are tempted to lose the focus on keeping margins up. But we know that, that's important for us. So we'll keep that focus. That's all I would say.

And then how well we will succeed, we need to follow in each quarter. But we have a clear focus on keeping margins up.

[Karl-Johan Bonnevier, analyst]

And on, say, the recession risk and the hesitant clients, I guess we have seen this kind of volatility in demand also historically. What is your take on about how long can the customer base basically dilute their refurbishment needs, so to say, before you really come into a catch-up need? Is that maybe a potential already for 2024? Or would you argue that might be too early?

[Andreas Elgaard, executive]

I mean, of course, we have more insights into what's going behind our figures and what we can share. But we feel that the whole situation in Europe is affecting everything. So the Ukraine war -- Russia's war in Ukraine is really affecting everything. And things can change very fast. We have seen that just a few weeks ago. We saw how fast [ we thought ] things would change on the ground in Ukraine due to events in Russia. But we see that we don't think that there will be a quick recovery. If there's nothing substantial happening, then we think the recovery will be more low. We also see that countries where there is clear, I would say, investments into fighting recession and stimulating the domestic markets, they are really managing better. So we have -- that, that is what will happen, but we will see a gradual confidence gain in our customers.

We see that some of our customers are maybe getting over the shock of that interest rates have gone up so much because it is a new environment. But the needs -- the underlying needs, the shape of their stores, their consumer experience that they are offering, those needs are -- doesn't change really. So we only know that the business cases needs to be stronger. They need to be more clear. The outcome needs to be kind of validated. But once that's in place, we see that retailers are taking decisions. So we hope that they will start to take -- we have some signs that things are easing up, but we are not in a situation yet where we can be bold about it. So we keep a very focused approach where we are working on the things that we can control and not think too much about the things that we cannot control. So that's our approach.

[Karl-Johan Bonnevier, analyst]

That sounds logical. And looking at the good feedback you got from EuroShop and your big investment there, have you seen that already starting to, say, lead into new order discussion or maybe even order intake that's going to help you, say, in the near-term?

[Andreas Elgaard, executive]

I mean we have seen a lot of very positive attention coming out of EuroShop. So I would -- I mean, I would say that, yes, we have seen a positive effect out of -- and there's a lot of discussions going on with customers on all levels, renewed discussions and some new relationships that have been developed during the fair. So some of it has already materialized. Some of it we will see materialize over the coming months and quarters and years. But I think that we are very, very happy with the situation that we are in after EuroShop. And we do believe that ITAB have changed our perception in the eyes of the customers.

We have made several measurements on -- after the fair, and that is kind of the 1 clear sentiment is that customers have really understood what we try to show and they have appreciated it. Then it needs to be transformed into sales, and it will take some time. But we are so far very positive. I can give 1 example. In U.K., for instance, we -- there was a lot of problems with the air traffic during the week of EuroShop. So some customers in U.K. were not able to go because there were some cancellations last minute and then it's very, very difficult with hotels to kind of rebook because [indiscernible]. But some of these customers really [ sad ]. So we built up kind of a mini version of EuroShop in our U.K. office. And we've had more than 200 customers, not individual customers, but representatives from our customers visiting us and some have been -- some are new, and some have then gone back and they have called on other colleagues to come.

So we've expanded our relationships. And I think that is the main purpose of our transformational efforts is to expand our relationships across the customers, to move away from a being strong in the purchasing department to be strong also in the marketing and operations departments where we don't have that relationship today. And we can see clear signs that customers are acknowledging that we can do more than traditionally.

[Karl-Johan Bonnevier, analyst]

Excellent. And good to see also that the slower volume at least means that you are able to drive the cash conversion to very good levels. Do I understand you right? Or Ulrika, when looking at working capital, we shouldn't expect much more of a, say, normalization tailwind, at least in inventory at this stage?

[Ulrika Skold, executive]

I think we -- as I said, we are at more normalized levels. But of course, we still have imbalances in some areas, and we're still working on the efficiency. And I think we have potential to further increase the capital efficiency and inventory efficiency we have. So I think, yes, that we see, still see a potential, but we have a more normalized situation.

[Karl-Johan Bonnevier, analyst]

And when you look at accounts receivables, and I guess, the risk of the whole retailer universe and big parts of it being in financial troubles, have you seen any problems with bad debt or anything like that?

[Ulrika Skold, executive]

No, nothing significant, I would say. We have very little losses in that area. And we haven't seen that increase either.

[Karl-Johan Bonnevier, analyst]

Good to know. I saw in the quarter you also disposed of your shareholding in [indiscernible]. And I know they were an integrated part of the [ Onred ] system. Has this changed the relation there anyway? Or is now, say, more of a normal working relation on independent parts? Or how should we see it?

[Andreas Elgaard, executive]

It has changed. I think that we've had several relations that -- I mean, we've had a relationship of being developing partner, a customer and an owner. And I think that we have now clarified the relationships, and we are super motivated and determined to grow [ Onred ], and that is a mix of different technology and different partner. So I don't know if that answers your question?

[Karl-Johan Bonnevier, analyst]

So there's no change basically to the development and partner relations there, still a growth part of the -- of your ecosystem in the prospect?

[Andreas Elgaard, executive]

Yes, absolutely, absolutely.

[Operator]

There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.

[Mats Karlqvist, executive]

We have a couple of questions coming in through the webcast. I think some of them you've already touched on, Andreas and Ulrika, but I'll ask them anyway and see if you have any more comments on them. The first 1 is if you could give some more color on the Rest of the World sales that has risen by 15% in the second quarter and 45% in the first quarter. Could we give some more color on what is building up the Rest of the World sales?

[Andreas Elgaard, executive]

Yes, we can do that. I mean, in percentage, it's high numbers, but still as total part, it's not that big, but we expect it to continue to grow. There is quite large quantities going to customers in Australia. We have -- as many of you know, we have sales in North America, both on lighting and on gates, and sometimes also on checkout solutions to some specific customers. In our Rest of the World, there is also, of course, our efforts in South America through our team in Argentina, and they are doing tremendously well despite some of the challenges that are in Argentina with high inflation and some restrictions on steel imports set by currency dilemmas. And also, we are seeing that our business in Asia in -- I mean, beyond Asia Pacific, if you focus in on Asia, is developing positively. So -- and we expect this trend to continue. Of course, we're still mainly a European company, but we see clear opportunities, especially for our niche competencies and niche solutions to continue to grow.

And some of it might be ready for a major breakthrough like we have seen in Australia. It is -- we communicated that through a PR, and it's really a major breakthrough that is happening there. And we believe it might lead to more good stuff, but let's see in the future if that's true or not.

[Mats Karlqvist, executive]

Okay. And the second question is, and I think you've also touched base on this before, an update on retail tech segment. What products are attracting retailers' interest, and how the total segment is developing compared to the 28% part of the total turnover in 2022? And also an update Onred if you could give some more flavor on that of the products or focus?

[Andreas Elgaard, executive]

If I start with Onred, and then maybe, Mats, you can remind me of the starting questions, I mean we decided to package some of our digital achievements under the umbrella of Onred. Onred is really, I would say, it's a modular platform of different capabilities that we put together. And it's -- the thing with Onred is that it's not easily defined. Some things that we drive on Onred is managing hundreds of millions in transactions yearly. So Onred is not something that is out-of-the-box new that we launched. It's something that is already existing across many of our customers, but we will start to package this in a more digestible way. And we are most likely going to do it in a customer-by-customer case. So we develop solutions together with our customers. We build the new modules that are required or we combine modules that we already have under our control, so to say.

So -- and we believe that Onred is going to be the way for us and the way, hopefully, for customers to agnostically be able to connect our technology with maybe sometimes competing technology or technology that our retailers already have. We have built this in an agnostic way. So it's not -- it's as open as possible so data can flow freely and you are able to easily connect different types of technology. Many retailers are stuck in a legacy landscape where they don't have access to their data. And when they invest in new business cases, they often need to invest in new hardware, new software, new kind of data stack. They need to invest in us in a stand-alone consumer experience just with that piece of technology, and it's very inefficient.

It maybe answers an immediate need, but when you want to scale, it's not very efficient. And Onred is helping retailers to be able to scale new technology without investing each time in new hardware, new software, new data capability, et cetera. So -- and they don't need to give away any of their current legacy IT to do this. So we believe it's going to continue to grow, but we are -- we will stay humble for now, and we will share our successes when we have them.

[Mats Karlqvist, executive]

Okay. Thank you. The second part -- or the first part of that question was connected to that, what the products -- what main products within the retail tech segment are attracting the retailer?

[Andreas Elgaard, executive]

I mean right now, it's super clear, and I think we communicated it also in a couple of PRs. It is solutions that help consumers to understand and retailers to understand if the consumer have paid or not. Inflation and the cost of living crisis across the world have put a lot of people under pressure, immense pressure to provide for their families. So things like theft have gone up. And of course, we have been working with, I mean, traditional gates and guidance solutions that helps to navigate the customer flows and helps to make sure that it's clear where you should go, where you do your checkout, and it helps the retailers to kind of keep track of customers in their stores.

So we are continuing to do those things. So the things that are really getting tractions are the smarter products that are sensor and, I would say, self-learning software driven that is -- that can help automatically to see which consumer and which part of consumers are behaving in the right way in the checkout arena. So we know if they have paid or you even know if they have products. So you can open the gates automatically for them. They don't need to show any receipts. So the gates will open for them. If you -- if there is any question mark, if you have paid everything that you have in your bag or not, then there will be -- the gates will not open, and it will trigger the staff to have a conversation because, as you know, there might be something wrong. There might be only good intent behind the consumer, but this software is helping -- the solutions and the software integrated into the checkouts, both conventional and self-checkouts, are really helping to improve the consumer experience so there's less hassle, there's less problems with the consumer experience.

And at the same time, it drastically reduces the problem of theft. So -- and you can imagine how much -- how important that is for retailers. It's super, super important because a lot of the margin today is walking out the doors not being paid for.

So that's maybe the strongest area, I would say, right now.

[Mats Karlqvist, executive]

Okay. And the final question was, if we could give an update on the share of our revenue that comes from retail tech segment. We had 28% in fiscal year 2022, we have an update on that or not?

[Andreas Elgaard, executive]

I don't think we have previous 1 of those percentages. But if we take that question, and then we could maybe come back to that.

[Mats Karlqvist, executive]

Yes, no problem. Another question is if we could give some flavor on the outlook for the coming 6 to 12 months?

[Andreas Elgaard, executive]

We usually don't do that because I mean, traditionally, we have not done that. We did that when we had our equity raised a couple of years ago where we had to provide the same figures to the market as we did to potential investors. And also it was during the COVID period when it was super uncertain, and we were doing some major cost restructuring so people had to know about how much of our costs would increase and how much to expect from us. And also, even if we had a tradition of doing forecasting, right now, I would like to say it's more difficult than ever to forecast the coming period.

So yes, so we refrain from doing forecasting, but we're laser focused on working on the things that we can influence. So taking care of our customers, developing solutions together with them and making sure that we are prudent in our cost adjustment.

[Mats Karlqvist, executive]

Thank you very much, Andreas. And the final question that have come in through the webcast, and I think it's similar to the question that Karl-Johan had as well. Right now, consumers seem to travel instead of shopping. For how long do you think that retailers can wait before they start to invest again?

[Andreas Elgaard, executive]

Yes. I mean I think it's very much up to what is the financial situation of the retailer, what is the strategy of the retailer? I mean there is -- I mean there -- you can look at some large -- if you look at the discounters, they are growing. They are continuing to grow. They don't need to invest as much in their multichannel environment because they know that a good and low price is always attractive, and it's even more attractive right now than ever before. So typical discount and low price chains are gaining market share, I mean, typically. We also see that some other retailers maybe take different -- have taken different routes. Some large fashion retailers are really investing in more people, more stores and more physical experiences. And others have tried to meet the online competition by doing the same as the online retailers and had a hard time because they sit with the same fixed costs as before and now they invest -- are investing massively online.

So it is very hard to say when retailers will come back. We see that some of our customers are investing enormously into the future and others are being very cautious, sometimes because they believe that's the right way to act right now. Sometimes it is maybe because they have high debt and the cost of capital has gone up rapidly. So they need to really be sure that they can afford before they invest and that the business case is strong.

So I know -- so I don't have the crystal ball for the future, and -- but we are optimistic about the future. We always are. We are preparing ourselves as ITAB to become more competitive, and we believe that our industry is going to consolidate and mature, which will be very good for everybody in the industry.

[Mats Karlqvist, executive]

I think that's an excellent ending. I don't -- we haven't received any more questions. So I thank you, Ulrika and Andreas, for this presentation. And please do not hesitate to reach out to us if you have any further questions or comments. And by that, we could all wish you a very nice summer. Thank you very much.

[Ulrika Skold, executive]

Thank you.

[Andreas Elgaard, executive]

Thank you very much. Bye-bye.