Westwing Group Se

Good morning, everyone, and thank you for joining us for our earnings call on the full year of 2025. My name is Andreas Wörning. 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 full year 2025, after which Sebastian will share the details of West Wing's financial performance. We will then walk you through a financial recap of the first two phases of our three-step value creation plan and share what we will focus on in 2026. Sebastian will then present how strategy and current expectations translate into our guidance for 2026. After our investment highlights summary, we will be happy to take your questions. Let's take a look at West Wing's key achievements of 2025. We were able to increase our adjusted EBITDA by 84% year-over-year, reaching 44 million euros at an adjusted EBITDA margin of 9.8%. Revenue increased by 1.1% year-over-year. GMB growth was slightly stronger at plus 2% year-over-year. Free cash flow more than doubled year-over-year to 34 million euros with a net cash position of 92 million euros at the end of 2025. Free cash flow after leases amounted to 23 million euros, representing an increase of 25 million euros compared to 2024. Networking capital stood at negative 9 million euros at the end of 2025. Beyond financials, we again made progress on our three-step plan to unlock West Wing's full value potential by completing phase two and entering phase three, measures included the completed switch to a mostly global or premium smaller product assortment, which led to negative top line effects, the launch of our website and app in 10 new countries, the opening of seven new stores, the 17% year-of-year growth of our Western Connection business, and the strengthening of our premium brand positioning. Last but not least, we made good progress in all our sustainability focus areas, specifically We reinforced our climate targets and social standards with suppliers and expanded the sustainability offer within the Western Collection. Further details on our progress can be found in our CSRD statement and will also be included in our annual sustainability report to be published on the 1st of April. Let's now take a quick look at our 2025 financial performance compared to our guidance. We kept our promises and delivered both in terms of revenue and adjusted EBITDA. With a strong top line in the fourth quarter, we reached the upper half of our full year revenue guidance with a growth of 1.1% guidance, with minus 4 to plus 2%. In terms of profitability, we significantly exceeded our initial target of 25 to 35 million euros, and a corresponding adjusted EBITDA margin of 6 to 8%. We closed the year with an adjusted EBITDA of 44 million euros, as just said, representing an adjusted EBITDA margin of almost 10%. This performance generated free cash flow of 34 million euros according to the IFRS definition and 23 million euros of free cash flow after lease payments. This demonstrates the strong cash conversion of our business. These results highlight the positive financial effects of the company's successful business transformation over the past three years, which we are going to explain in more detail in the recap section. As always, let's have a quick look at our three-step valuation plan, which we initiated in 2022. 2025 marked the year of transition for us as we completed the second phase of building a scalable platform. We also entered the third phase where we began to focus on key growth levers to be able to scale with operating leverage from 2026 onwards. More on that in a few minutes. But first, I hand over to Sebastian for details on our financial performance of 2025.

Thank you, Andreas, and good morning, everyone. I'm Sebastian Westrich, the CFO of Westring. Let me start with details on our top line. We achieved revenue growth of 1% for the full year 2025 and 7% for the fourth quarter of the year, despite a dampening effect on top line due to the changes in product assortment. As communicated in our trading update, the fourth quarter was largely driven by the strong Black Week sales event and a strong year end. Thanks to high productivity and smooth operations in our logistics center, we were able to successfully ship and deliver a significant share of peak orders. While growth in the DACH segment throughout 2025 was impacted by the changes in product assortment, the international segment already showed a nice revenue growth rate of 15% in the fourth quarter, driven by the positive country expansion effects. Looking at our P&L, we see improvements across all P&L lines in the fourth quarter, as well as full year 2025. These are the strongest results in West Wing's history, excluding the exceptional COVID-driven peak in 2020, both in terms of relative margins, as well as absolute profits. Our 2025 adjusted EBITDA increased by €20 million to €44 million, that's plus 84% year-over-year. This was mainly driven by our performance in the fourth quarter, in which we more than doubled our adjusted EBITDA year-over-year. In the following, I will walk you through our P&L line-by-line, starting always with comments on our performance in the fourth quarter. Let us start with a closer look at our gross margin. In Q4, we increased our gross margin year-over-year by 3.7 percentage points to 54.3%. In addition to the positive effects from a higher West Wing collection share, we benefited from lower sea freight costs. Furthermore, the strong growth in Q4 reduced the impact of reach-based inventory depreciation while increasing volume-related discounts. For the full year 2025, we realized a gross margin increase of 2.1 percentage points. The fulfillment ratio improved by 0.4 percentage points for both Q4 and the full year. This improvement was mainly due to an increased average order value, which typically is beneficial for full fulfillment cost ratio, as well as efficient year gains in our warehouse. These improvements overcompensated negative effects from country expansion, which include lower line haul utilization rates during ramp up, as well as longer line haul distances. The improvement in cross-margin and fulfillment ratio later an increase in contribution margin of 4.1 percentage points in Q4 and of 2.6 percentage points for the full year. We are very pleased with these significant margin gains. Moving down the P&L, our marketing ratio improved significantly in Q4, declining by 2.1 percentage points year-over-year. The ratio also showed a clear improvement on a full year basis. While we had and still have higher marketing investments for the new countries, The ratio in Q4 was positively impacted by the very strong Black Week sales event, which came with large scale effects and high marketing efficiency. In addition, we spent less on brand-related investments compared to the fourth quarter of 2024. Our G&A ratio, which also includes other results, decreased in line with the trend of previous quarters by more than two percentage points, both in Q4 and for the full year 2025. This reflects the efficiency gains of our 2024 complexity reduction measures and demonstrates that we have built a truly scalable platform. Overall, this led to an adjusted EBIT margin of 13.2% in Q4, up 8.5 percentage points year-over-year. Full-year adjusted EBIT is up by 5.6 percentage points, reaching a 6.5% adjusted EBIT margin. DNA ratio slightly decreased in Q4 as we had less DNA for internally developed tech assets, given the switch to a mostly SaaS-based platform. For the full year 2025, DNA decreased year over year also due to the full year impact from our 2024 complexity reduction measures, including office and warehouse closures, which were implemented in the first half of 2024. Please note that both G&A and D&A include cost increases from our 2025 store expansion, which will also lead to full-year effects in 2026. Let us now finish the P&L review with comments on our adjusted EBITDA margin. In Q4, the adjusted EBITDA margin improved by 8.1 percentage points year-over-year to 15.8%. Our full year adjusted EBITDA margin improved by 4.4 percentage points year-over-year to 9.8%. We are very pleased with this result as it reflects the significant effort we have put into transforming our business and allows us to see now the true potential of the company more clearly. To provide you with a full picture, let me also comment quickly on the adjustments to our EBITDA for the full year 2025 and our net result. In total, we adjusted restructuring expenses of 2.3 million euros and 7.8 million euros related to share-based payments. Only 0.8 million euros were cash effective. The majority of the adjustments related to revaluation effects of outstanding stock options as a result of the significant share price increase in 2025. Our unadjusted consolidated income statement for 2025 shows earnings before tax of 80 million euros up by 23 million euros year over year and earnings after tax of 29 million euros up by 34 million euros. So also really strong results. The higher increase in net income of about 11 million euros year over year compared to the increase in earnings before tax is driven by a positive impact from deferred tax assets. Let's now move on to profitability on segment level. We significantly improved profitability, both in terms of absolute numbers, as well as in terms of adjusted EBITDA margin in both segments. I want to highlight and comment on two aspects. First is the strong increase in adjusted EBITDA across both segments. For the full year 2025, adjusted EBITDA nearly doubled in the international segment and increased by around 70% in the DAH segment. The second aspect is the 15.5% adjusted EBITDA margin that we achieved in Q4 in both the DAH and the international segment. The similarly high margins in both segments reflect the successful execution of phase two of our three-step value creation plan focused on building a scalable platform. Compared to 2024, we now operate a centralized and scalable platform combined with a largely global, more premium, and more focused product assortment. As a result, margins across both segments are converging, with only minor differences in cross-margin and fulfillment ratios between countries, which largely offset each other at segment level. While both segments benefit from the same platform and assortment, the profitability impact of expansion initiatives differs. In the DACH segment, our 2025 expansion focused on store openings, with ramp-up investments in personnel, operating expenses, and lease costs affecting both G&A and D&A. In contrast, expansion in the international segment is primarily driven by entry into new countries where wrap-up investments are more heavily weighted towards marketing leveraging our existing platforms. While the expansion effects did not cause a major difference between the two segments in Q4, they may lead to differences in coming quarters depending on the timing and scale of investments. We are very pleased with the progress on segment level, which clearly demonstrates that the leaders of our three-step value creation plan are delivering the intended results. Let us now take a look at our net working capital and our net inventory. By the end of 2025, net working capital remained clearly negative at minus 9 million euros. Although our net working capital increased slightly year over year, Our net inventory levels decreased compared to 2024, despite a 17% year-over-year growth in the more inventory-intensive West Wing collection. This is a result of our ongoing initiatives to improve inventory management and a stronger-than-expected Q4 top line. On the next slide, you see CapEx and CapEx ratio for the full year 2025 compared to 2024. Despite investing about 2 million euros for store openings in 2025, our overall capex decreased by 2 million euros year over year with a capex ratio of 1.9% of revenue in full year 2025. The decrease in capex is attributed to the decline in our investments into intangible assets as we transition to a software as a service based technology platform. We expect our capex ratio to benefit from scale effects as we grow our top line. In other words, Without major investments, such as additional store openings, the capex ratio should gradually decline with increasing revenue as we operate a capex-light business model. Moving on to net cash. We are pleased to report a strong net cash balance sheet position of 92 million euros at the end of December, 23 million euros above previous year's levels. This increase includes a negative cash out of 4 million euros for stock option settlements. Free cash flow was at 35 million euros in 2025, which takes into account the negative effects from the above-mentioned stock option payouts. In 2025, we had lease payments of 11 million euros for offices, our logistics center, as well as our stores, which are shown in the financing cash flow according to IFRS standards. This led to a free cash flow after lease payments of 23 million euros. Also important to mention is that we maintain a strong balance sheet with no debt other than the IFRS 16 lease obligations and IFRS 2 liabilities from cash settled stock option programs. Please note that the net cash position of 92 million euros at the end of 2025 is slightly below the unaudited number that was published in our trading update in January. The reason for this is a reclassification within current assets from cash and equivalents to receivables from payment service providers. With 92 million euros of cash, a capex-like business model, and a completed turnaround, disciplined capital allocation becomes increasingly important. We are clearly committed to maximizing shareholder returns beyond operational performance, guided by five key principles. First, we maintain a strong balance sheet to navigate a volatile macro environment and preserve strategic flexibility. Second, we invest selectively in opportunities that offer attractive returns. Third, we actively manage dilution from outstanding stock options. This includes forcing the exercise of legacy programs without an end date of former employees at relatively low share price levels with settlement in cash. Further details on our progress can be found in the appendix to this presentation. Fourth, we retain an appropriate level of treasury shares to hedge dilution and cash risk from remaining stock option programs. And fifth, we return excess capital to shareholders through share buybacks and earnings per share accretive share cancellations. So far, we've demonstrated strong execution against these principles. Between 2022 and 2025, we invested more than 15 million euros in approximately 1.8 million treasury shares. In early February, we canceled about 1.3 million treasury shares and announced a new share buyback program of up to 8 million euros or up to 700,000 shares running until the end of July 2026. So far, we have repurchased around 150,000 shares for approximately 2.4 million euros. In addition, we reduced outstanding stock options by about 15% from 2023 until the end of last year. On the right hand side of the chart, you can see the development for our weighted average shares outstanding since 2022, reflecting the impact of our buyback programs. Together with our operational improvements, this supports continued growth in earnings per share, which we will present to you in the recap section. Over to you, Andreas.

Thank you, Sebastian. So this next section, I will recap the first two phases of our three-step value creation plan and outline our priorities for 2026. Let me start with a recap. Now with the completion of phase two in 2025, the financial impact of our strategic transformation is fully visible. And that is what I would like to highlight today. The first phase of our three-step value creation plan spanned from mid-2022 to the end of 23 and included the turnaround of the company as well as its transition to the one West Wing commercial model with a stronger premium brand positioning. The second phase started in 2024 with a focus on building a lean and scalable platform and was completed mid-25. The core of this phase was complexity reduction, leading to significant cost decreases, efficiency gains, and scalability. Given the scale of change required to achieve these strategic and operational milestones, it is clear that we planned and executed a true transformation. However, we did not set out to deliver a transformation for its own sake or for short-term gains. We defined a long-term value creation plan. And value creation needs to be reflected in a significantly improved financial performance. Let's now take a look at how this transformation strengthened our financial model. What you see here is a P&L comparison of full year 2022 and full year 2025. The takeaway is obvious. Our new commercial model plus the complexity reduction fundamentally changed our P&L. Let us go through the P&L line by line and look at key changes. First is gross margin. Compared to 22, We improved it by almost six percentage points. The reason for the improvement is simple. We changed what we sell. I'll share details on this in a minute. Next is the fulfillment ratio, up by 3.3 percentage points compared to 2022. This ratio also benefited from the assortment changes, which led to increased average order values. In addition, we centralized our logistics operations closed warehouses and realized efficiency gains across freight and warehouse operations. Cross-margin and fulfillment ratio together amounted to a contribution margin of 34.5% in 2025, an increase of 9.2 percentage points compared to 22. Let's move on to our marketing ratio. It increased by three percentage points compared to 2022. There are three major reasons for this improvement. Firstly, the investments into premium brand positioning. Secondly, we now operate a full funnel marketing model with higher spend on conversion in the lower funnel. And thirdly, in 2025, we invested into the ramp up of 11 new countries, which mainly requires marketing investments to build awareness and a customer base. The next P&L line shows our G&A ratio, including other results. It improved by 5.5 percentage points to 15.9%. I'll share details on this topic in a separate slide. It is important to note that we reduced the DNA ratio in absence of meaningful scale effects and while we invested into store expansion. This brings us to adjusted EBIT margin, up 11.6 percentage points since 2022 in just three years. Moving further down, we see additional improvements in DNA ratio, as we reduce DNA on internally developed technology assets, as Sebastian just said, and lease through our complexity reduction measures. It also includes lease costs for our new stores. As a result, we improved our adjusted EBITDA margin in 2025 compared to 2022 by almost 11 percentage points. The numbers clearly show that the business we run today is structurally very profitable and attractive. Let me show you two slides on the topics We changed what we sell and G&A costs. While absolute top line did not change much since 2022, we changed what we sell to a very large extent. The left-hand side of the slide shows the DMV of our West Wing collection business and of our third party assortment over time. In 22, the dominant business model at West Wing was the shopping club, which primarily offered third party products at a high discount. The new commercial model, which we introduced in 2023, changed this. It put the shop and our high-margin Western collection to the forefront, and our marketing activities were adjusted accordingly. In 2024, we accelerated the transition with the introduction of a mostly global, more premium, and smaller product assortment to the reduction of non-premium third-party, the end to localized assortment, and the go-live of new third-party design brands. The change in what we sell is reflected in the compound annual growth rate of the Western Collection versus the assortment of third-party suppliers. While our Western Collection grew at a CAGR of 18%, the third-party GMV declined by 13% on average per year. It is important to mention that while our third-party GMV overall is shrinking, the premium or design brand part is growing fast. Below the chart, you can see that the change also led to a lot less discounting of products versus the original selling price or recommended retail price. The GMV share that came with a discount of 10% or less was only 34% in 2022, and we almost doubled that share to 64% in 2025. In other words, today, we make close to two-thirds of our top line on full price or close to full price, up to 10% off, Well, that ratio was only one third in 2022. Let's now briefly talk about the DNA ratio improvement. In 2022, after the COVID bubble in e-commerce burst, Westing had unsustainable levels of personnel and related costs. We chose our new commercial model also with the aim of being able to run it with a reasonable team size. What you can see on the chart is that we are able to run our business now with roughly half the team size of 22, with more or less the same top line. Our new commercial model allowed us to consolidate activities and centralize business functions, including the closure of several offices. It also allowed us to switch from a proprietary in-house developed tech stack to a SaaS-based technology platform. All of that was, as you can imagine, very painful for our teams, as we had to part ways with lots of valued colleagues. But it was inevitable if we wanted to provide West Wing with a future. Last but not least, the new model allows us to now scale with operating leverage, adding increase in personal costs. We so far added roughly 80 positions for our expansion efforts, mainly for our newly opened stores. This is already included in the numbers you see on the chart. Putting everything together again and switching from percentage of revenue to absolute numbers, the next slide offers Another view on the outcome of our transformation. The improvement in absolute adjusted EBITDA from 2022 to 2025 by P&L Lions. In just three years, we improved our adjusted EBITDA by 48 million euros. As one of our analysts recently stated, a textbook turnaround. I want to use this opportunity for a shout out to the entire West Wing team. as this is the result of lots of hard work and, as we say over here, doing business creatively. Our turnaround is also reflected in our earnings per share, which you can see on the following slide. The dark green bars show unadjusted earnings per share. The light green bars show earnings per share on an adjusted basis. Adjustments include changes in fair value of employee stock option programs as well as restructuring expenses. The earnings per share are calculated by dividing the respective earnings by the weighted average number of shares in circulation. This means outstanding shares after deducting treasury shares. The large improvement of 2025 stems primarily from the very profitable fourth quarter, as well as positive impacts from deferred tax assets following the successful turnaround that Sebastian mentioned beforehand. In addition, our tender offer at the end of 2024 to buy back shares had a very positive impact on earnings per share for 2025. Now that we've seen the financial impact of our transformation, let me turn to our key focus areas for 26. The phase we've been in since mid 2025 is step three of our valuation plan, scaling with operating leverage. In simple terms, this means driving growth while continuing to deliver strong profitability, even against rather weak consumer sentiment and other short-term negative macro impacts. Let's see why we believe we can achieve this in 2026 by looking at the development of the Western Collection, potential market share gains in existing geographies, and country expansion efforts. As you can see on this slide, cost discipline is another lever of the third phase. As it is embedded in everything we do, I will not address it separately. Let's have a quick look at our Western Collection leader. The Westin Collection is our gorgeous, sustainable private label product brand, which supports both 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. In the full year 2025, we reached an all-time high GMV of €321 million, representing a Group GMV share of 63%. Looking ahead to 2026, We expect to continue scaling the West Wing Collection, supported by three main levers. Firstly, new product launches across both existing and new home and living categories, which unlock additional sales potential. Secondly, our store and country expansion, which will make our products accessible to even more design lovers. And thirdly, our investments into brand awareness and positioning, which are typically centered around the West Wing Collection, such as the recent Volkis Sofa campaign. At the same time, when looking at GMB share of the Western Collection, we expect the pace of share gains to be moderate compared to previous years. There are three main reasons for this. First, third-party GMB is expected to stabilize in 26. The active reduction in this part of the assortment contributed heavily to the increase in Western Collection share in the past. Second, we're driving growth in a particular segment of third-party assortment, the design brands. which are growing fast at the moment, also because of the onboarding of new ones. Third, just recently we've seen a trading down of customers from larger items to smaller items. As the Western Collection is the strongest in large furniture, this is impacting Western Collection's share at the moment. Sebastian will elaborate a bit more on what we see in a few minutes. While these three drivers are significant, we continue to see clear top line growth potential across both the key assortment areas of ours, best in collection and third party design brands. Besides growth in our premium product assortment, we see offline store expansion as a lever for share gains in existing markets. Let me start with a quick recap of the strategic rationale behind our stores. 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. Our stores allow us to provide such a holistic shopping experience across the multi-touch customer journey. In addition, offline stores help us to further strengthen our brand presence and positioning through a real-life brand experience. This is why we believe in stores as a lever for share gains in existing markets. While we opened seven new stores in 2025, we plan to add only one additional store in Frankfurt in 2026. In addition, we will relocate the Munich warm-up store to its permanent location in the heart of the city, which allows for even stronger physical presence. The main reason for the slow expansion pace in 2026 is that we want to focus on operational excellence and improved customer experience across our expanded store portfolio before moving into a potential next phase of store openings. So far, we are very pleased with the development of our stores. However, given the relatively short time since most of the openings, it is still too early to draw real conclusions. Let's move on from gaining market share and existing geographies to entering new markets. One month ago, we reached a major milestone by entering the United Kingdom, representing our largest expansion so far. We're doubling down on this market entry as we speak. Nearly our full product assortment and all our premium services are available to the customer. The latter includes our design service, tailored B2B solutions, and our West Wing delivery service, with a small number of West Wing branded trucks visible across the London area. To drive new customer acquisition, we have a full funnel marketing activation in place across both paid and organic channels. Given the significantly larger market potential of the UK compared to the countries we entered in 2025, we expect a higher level of marketing investment compared to 2025 as we ramp up our UK business. Once we've built sufficient visibility on demand patterns, we will store best sellers and UK specific products, for example, lighting with a local electrical plugs in a UK based warehouse to further enhance customer experience and delivery efficiency. This warehouse will be operated by a third-party logistics partner, ensuring flexibility as we scale the business and supporting future top-line growth in the UK. UK returns are already being handled by this partner today. With this latest development, we are excited to see the impact that the UK market might have on our growth and brand trajectory. In 2026, we will not only drive growth in the United Kingdom, but also across our other expansion countries. In 24 and 25, we launched a total of 11 countries, and we've already seen the early signs of success from these expansion initiatives. For instance, nearly all of the 11 countries have either already reached full payback or are on track to deliver full payback within the first 12 months of operations. This underlines the strengths of our expansion playbook, delivering short payback periods through a lean and scalable setup. Besides payback time, we are also pleased with top-line contributions from our 11 expansion countries. In Q4, our customers in these countries collectively accounted for 6% of our total GMB, and we expect this share to increase further over the next quarter. To continue to drive growth in 2026, we plan to invest up to €10 million in marketing in our expansion countries, with a significant part allocated to the Ukraine. Key initiatives are scheduled for the second half of 26, including brand investments. The overall investment size will depend on expected return on investment and the overall development of the Group over the next month. In previous calls, we mentioned that we aim to be present in approximately all European countries in the mid-term. As the remaining non-Serve countries are significantly smaller than the UK, we will focus our efforts in 2026 on the UK and the 24-25 expansion countries. we might open a few smaller additional ones, such as the Baltics. In summary, for our Western collection, offline stores, and country expansion efforts, we are well positioned to drive growth in 26 while still delivering high profitability. That being said, there may be temporary headwinds from the ongoing conflict in the Middle East, which could impact our top line and profitability in the near term. Sebastian will comment on this as part of our financial outlook in the next section. Sebastian? Over to you.