Westwing Group Se

Good morning, everyone, and thank you for joining us for our earnings call on the third quarter of 2025. My name is Andreas Hörning. I'm the CEO of West Wing. I'm hosting the call together with Sebastian Westrich, our CFO. Looking at today's agenda, I will begin by providing key updates on our business for the third quarter of 2025, after which Sebastian will share the details of West Wing's financial performance. After our investment highlight summary, we will be happy to take your questions. Let's take a look at the current state of West Wing. In Q3, we delivered growth and continued to improve profitability significantly. Our GMB increased by 5.4% year over year, despite changes in product assortment. We improved our adjusted EBITDA by 73% reaching 6 million euros at an adjusted EBITDA margin of 6.1%. This marks an increase of 2.5 percentage points year over year. Free cash flow was positive at 10 million euros in Q3, and we ended the third quarter with a net cash position of 58 million euros. For the full year 2025, we expect free cash flow to be double-digit positive. Strategically, we are well on track with the implementation of our three-step value creation plan. Our own product brand, the Western Collection, grew 19% year-over-year, which resulted in an all-time high Group GMB share of 66%. As part of our geographic expansion, we achieved our full-year objective of launching 10 new countries, and we continued our store expansion with the opening of seven new stores this year. The operational progress is fully in line with our targets. We confirm our financial guidance for 2025 and are currently expecting the adjusted EBITDA at the upper end of this guidance. We also confirm our ambition for 2026, which is the return to a high single to double digit growth at further improved profitability. As always, let's have a look at our three step value creation plan which we started executing in 2022. In terms of levers, we successfully completed the first two phases, the turnaround and strategy update phase and the building of a scalable platform phase. 2025 marks the transition year for us, where we are focusing on the key growth levers of the third phase to be able to scale with operating leverage from 2026 onwards. As in the last earnings call, Let me now briefly guide you through our progress across the key levers of the third phase of our plan, beginning with the latest developments of the Westfin Collection, then moving on to how we strengthen our market share and existing geographies, pushing the premium positioning of our brand, and finally, the progress we've made in terms of international expansion. So, starting with the Westfin Collection. The Westfin Collection is our gorgeous sustainable private label product brand and we continue to be very pleased with its performance. It again delivered strong growth of 19% year-over-year resulting in an all-time high Group GMV share of 66%. This represented a total GMV of 75 million euros in Q3. The strong development supports our top line as well as profitability since the products are very desirable and they allow us to achieve a higher contribution margin compared to third-party products. As we build Europe's premium one-stop destination for home and living, we're creating a unique product assortment for design lovers consisting of our own brand Western Collection and the best third-party design brands. We still have significant room for improvement on both sides. As outlined in our last earnings call, the size improvements in product assortment we see offline store expansion as a lever for share gains in existing markets. In 2025, we opened a total of seven offline stores. In Q3 alone, we successfully opened three standalone stores located in Munich, Berlin, and Cologne, as well as two store-in stores, one in Düsseldorf and one in Copenhagen. Before I share an update on our geographic expansion, let me show you some impressions of our newly opened stores. In Munich, we opened a so-called warm-up store. It is more than just a pop-up. It's a preview of our first permanent Munich store coming next year in the heart of the city. Munich is especially meaningful to us as it's where our journey began and where many of our central teams are based, enabling us to learn and refine the customer experience even faster. Next to Munich, we're also very proud to now have a permanent standalone store in Berlin. It's located on the iconic Kurfürstendamm bringing West Wing to life in the heart of West Wing, Berlin's Western city center. On top, we opened our standalone store in Cologne, one of Germany's busiest shopping cities. Next to our standalone stores, we also opened two store-in-stores. One is located at Breuninger Düsseldorf on the prestigious Königsallee, Following the successful pilot of our Store-in-Store concept in Stuttgart in 2024, we are proud to continue our partnership with Breuninger, arguably Germany's leading fashion and lifestyle department store chain. The other one is our very first Store-in-Store in Scandinavia, at the iconic Illums Bolicus flagship store in Copenhagen. This opening marks a new milestone in our Nordics expansion, following the successful launch of West Wing in Denmark, Sweden, Norway, and Finland earlier this year. By partnering with Illums Bolicus, a destination known for timeless elegance and Danish design culture, we are strengthening our presence in the Nordics and connecting with a design-savvy audience in a uniquely meaningful way. Overall, offline stores help us to further strengthen brand presence, positioning, and top line. providing a holistic shopping experience across the multi-touch customer journey supports West Wing's market share gains. In home and living, many customers combine online and offline experiences in their journey, especially for large furniture purchases. The latter mostly for the touch and feel and simply because basket sizes in furniture are often very large and require many touch points for conversion. On the next slide, You can see impressions of the official opening of our Berlin store, where we welcomed over 250 friends of the brand, key opinion leaders, press and content creators from the worlds of fashion, art, design and lifestyle. The event generated strong positive press coverage and a high volume of social content, amplifying our brand visibility. Let's move on from gaining market share in existing geographies and increasing our premium brand positioning to entering new markets. At the beginning of the year, we announced our plan to open 5 to 10 new countries in 2025. We are happy to announce that we successfully opened 10 new countries this year, reaching our full year objectives. As outlined in our last earnings call, geographic expansion allows us to offer our existing global product assortment to customers in the corresponding market segment for design lovers in other countries. This means selling more of the same products. All continental European countries follow the same logic, with low marginal costs of serving them. Translation supported by AI, onboarding of last-mile delivery providers, local influencer marketing, and performance marketing with attractive returns within a few months. Therefore, in the mid-term, we aim to be present in approximately all European countries. We do not plan to open any additional countries until year end, as our focus is now fully on the most important season of the year in home and living. To provide for a glimpse into our 2025 country expansion, let me share some impressions of our Nordics launch event. At the end of August, we celebrated our Nordics launch with 200 guests, including brand partners and leading voices across fashion, design, art and lifestyle. From a styled steamboat experience to sculptural installations at the West Wing Villa, the event showcased our passion for timeless design and cultural connection. It generated extensive positive media coverage and inspired highly shareable social content across the region, achieving exceptional reach both online and offline. This milestone marks the start of our journey in Scandinavia, bringing beautiful living to even more homes. Back to results. I now hand over to Sebastian for details on our financial performance.

Thank you, Andreas, and good morning, everyone. I'm Sebastian Westrich, the CFO of West Wing. Let me start with details on our top line. Our GMB increased by 5.4% year-over-year, while revenue was at plus 3.4% year-over-year, despite the negative impact of the changes to our product assortment. I want to highlight here again what Andreas mentioned earlier in this call. our West Wing Collection business continued to grow by 19% year-over-year. Now let me also briefly comment on Q3 top-line development on segment level. The DACH segment saw a revenue decline of 2.1%, while the international segment's revenue increased by 10.8%. There are two major reasons for this difference in top-line development. Firstly, we began introducing a largely global and more premium product assortment and related restructuring of our local business functions in the international segment as early as Q2 2024. The assortment offered in the DACH segment remained unchanged until late 2024 and as a result, last year's baseline for DACH is stronger than that of the international segment. Secondly, the international segment benefited from additional revenue generated by our geographic expansion with 10 new countries launched in the first nine months of 2025. Regarding top-line outlook for Q4, remain cautious as the performance depends largely on the month of November, including the upcoming Black Friday sales events. Now let me continue with an overview of our profitability development. In Q3, we improved our adjusted EBITDA by €3 million to €6 million, which represents an increase of 73% year-over-year. In order to show profitability development before D&A, we also included the EBIT development on an adjustment basis on the right side of the slide. It is also clearly positive at 3 million euros and showed an even greater increase of 4 million euros year over year. Excluding adjustments, Q3 showed a negative EBIT of minus 4 million euros. The adjustment mainly includes the negative impact of a higher fair value of employee stock option programs due to the significant share price increase in Q3. The impact amounted to minus 6 million euros, which was non-cash effective. It is important to highlight that we're actively reusing the number of outstanding stock options to reduce both dilution risk for our shareholders as well as negative P&L impact from potential further share price increases. Let us now take a look at our P&L margins. In the first nine months of 2025, we realized an adjusted EBITDA margin of 7%, This is a significant improvement of 2.6 percentage points compared to the previous year's period in the absence of any scale defects. Let us now focus on the P&L development in the third quarter of 2025, which you can see here on the right-hand side. I am pleased to report that we improved our P&L structure in Q3 in almost all areas, leading to a strong improvement in adjusted EBITDA margins by 2.5 percentage points year-over-year to 6.1%. Our gross margin improved by 2.2 percentage points year over year, mainly due to strong West Wing collection share gains. The fulfillment ratio improved slightly by 0.1 percentage points year over year. The fulfillment ratio includes negative effects from expansion as we accept lower logistics line haul utilization from our central warehouse to the new countries in the beginning. This ensures short delivery times also for our customers in the new markets, but comes at higher cost per order. With increasing scale, this negative effect will decrease. Overall, this lateran increase in contribution margin of 2.3 percentage points to 33.9, a really strong result for our third quarter. Our marketing ratio increased slightly by 0.3 percentage points year over year to minus 13.4%. The main reason for the increase is our investment into expansion. Our G&A ratio, which includes other result, improved by 2.3 percentage points to minus 17.9%, reflecting the positive effects from our 2024 complexity reduction measures. This led to an adjusted EBIT margin of 2.6% in Q3, up 4.3 percentage points year-over-year. DIN 8 decreased by 1.8 percentage points year-over-year, primarily driven by the full depreciation of legacy technology assets. Overall, as mentioned before, our Q3 adjusted EBITDA margin improved by 2.5 percentage points year-over-year to 6.1%. The adjustments made in Q3 were minor except for the higher fair value of our stock option programs following this significant share price increase, which I mentioned before. An overview of these adjustments, as well as the unadjusted consolidated income statements, can be found in the appendix to this presentation and in our Q3 financial report. Let's move on to profitability on segment level. In Q3, which is displayed on the right-hand side of the slide, we saw a strong improvement in adjusted EBITDA margin in both segments. In the DAF segment, adjusted EBITDA margin improved by 3.6 percentage points year-over-year to 6%. In the international segment, we were able to improve our adjusted EBITDA margin by 1.2 percentage points year-over-year to 6.4%. The improvement in profitability reflects the successful implementation of our three-step value creation plan across both segments. Let's also briefly look at our earnings per share development. What you can see on this slide is the last 12 months data since Q1 2024. The dark green bars showing unadjusted earnings per share, the light green bars showing earnings per share on an adjusted basis. Adjustment includes changes in fair value of the aforementioned employee stock option programs as well as restructuring expenses. We are happy to be able to show that the very positive development continued also in Q3 2025. The dent in the unadjusted earnings per share in Q3 stems again from the steep increase in West Wing's share price in Q3. Let us now move from profitability to our balance sheet and take a look at our net working capital. By the end of Q3, net working capital stood at minus 1 million euros, which is 4 million euros higher compared to Q3 2024, but 7 million euros lower versus the previous quarter. Compared to the previous year, we still had higher inventory, mostly driven by the newly introduced West Wing collection items that we already mentioned in previous calls. Compared to the previous quarter, we managed to reduce inventory levels slightly, despite the typical seasonal inventory buildup towards the high season, and we improved rate tables as well as contract liabilities. further in Q4 due to typical seasonal effects and their respective positive impacts on cash growth. On the next slide, you can see CapEx and CapEx ratio for the first nine months, as well as for the third quarter of 2025 compared to the same period in 2024. CapEx remained broadly stable year over year in 2025, both for the first nine months and in Q3 specifically. However, when comparing 2025, 2024, we see a shift between investments into property, plant and equipment, and intangible assets. While in 2025 we invested more into store openings, we were able to reduce capex for internally developed tech assets as we moved to a SaaS-based tech platform. Let us now take a look at our net cash position. We are pleased to report a strong net cash position of 58 million euros at the end of September, which is eight million euros more compared to the end of June. Overall, free cash flow was at 10 million euros in Q3. Taking lease payments of 3 million euros into account, we had a positive free cash flow after lease payments of 8 million euros in Q3. Our balance sheet remains strong, with no debt other than the IFRS 16 lease obligations and IFRS 2 liabilities from cash settled stock option programs. We remain confident to enable double-digit free cash flow for the full year 2025, driven by both profitability and networking capital. Given our seasonality, Q4 is expected to be the strongest quarter. On the next slide, I'll comment on the financial guidance for 2025, which we published at the end of March. Our performance in the third quarter and the first nine months of 2025 in terms of both revenue and profitability is fully in line with our guidance. In terms of top line, we had, as expected, headwinds from our changes in the product assortment. These negative effects are expected to ease further towards the end of 2025. But as mentioned earlier, top line in Q4 depends largely on a successful November and the Black Friday sales event. In terms of profitability, we expect a typical seasonal peak in the upcoming fourth quarter. To summarize, we are well on track to deliver on our 2025 guidance in terms of revenue and profitability, and also in terms of a clearly positive double-digit free cash flow. Given the strong performance in the first nine months with an adjusted EBITDA margin of 7% so far, we currently expect to end the year at the upper end of the adjusted EBITDA guidance. This brings me to our midterm outlook, which was shared for the first time in our full year 2024 earnings call. I want to highlight again that our ambition is to return to significant growth in 2026 while continuously improving profitability. Significant growth means a high single to double digit growth rate driven by our expansion initiatives and the anticipated easing of negative impacts from the product assortment changes. In terms of profitability, we expect scale effects as we grow, as well as positive effects from our improved product assortment. We remain focused on executing our three-step value creation plan with a clear goal of driving sustained improvements in profitability and cash flow. Combined with our return to meaningful growth, This will enable us to unlock the full value potential of Westrain. I'm handing over to Andreas now to conclude our presentation with our investment highlights.

Thank you, Sebastian. Let me briefly recap the investment highlights. First, we have a unique, relevant customer value proposition through the specific assortment and the way we serve our customers. Second, the market potential is huge, especially in our existing geographies, but also beyond. Third, We're developing the super brand in design with high loyalty and true potential to grow further. Fourth, we have high and increasing margins as well as operating leverage while we scale. Fifth, we have a great balance sheet with a strong cash position and no debt, strong networking capital and low capex. All of this will lead us in the midterm to 10% plus adjusted EBITDA with a continued strong cash conversion. Sebastian and I are now happy to take your questions.