Westwing Group Se

Good morning, everyone, and thank you for joining us for our earnings call on the second quarter of 2026. My name is Andrea Törning. I'm the CEO of West Wing. I'm hosting the call together with Sebastian Westrich, our CFO. Today's agenda, I will begin by providing key updates on our business for Q2 2026, after which Sebastian will share the details of West Wing's financial performance. After our investment highlights, we will be happy to take your questions. Let's take a look at the current state of West Wing. Overall in Q2, we saw strong top-line growth while navigating a challenging macro environment. Our revenue increased by 14% year-over-year to 113 million euros. This was driven by two main factors. First, we saw continued top-line momentum from country expansion. Second, we benefited from strong recurring sales events. Both drivers had already contributed significantly to our strong top-line growth in the first quarter of the year. On bottom line, we achieved an adjusted EBITDA of €5.4 million at a revenue margin of 4.8%. This represents a decline of about €800,000 compared to the same period last year. The negative development in adjusted EBITDA stems from expected macro-driven pressure on contribution margin, including transportation cost increases, and one-off effects related to a large software transformation. Pre-cash flow was negative at minus 9.4 million euros, including an impact of 9.5 million euros for the settlement of mostly legacy stock options. Our net working cap was negative at minus 5.5 million euros at the end of Q2, 11 million euros better than a year ago. We ended the quarter with 68 million euros in net cash, which includes the aforementioned stock option settlements and additionally about 3 million euros spent on share buybacks during Q2. Overall, net cash was 18 million euros higher than at the end of Q2 2025, despite option settlements and share buybacks, reflecting the continued improvement in cash generation. Beyond key financials, we again made good progress on our three-step plan to unlock West Wing's full value potential. Our key achievements included 1. We grew our Western collection business by 11% year-over-year and our third-party assortment by an even stronger 23%, driven by the onboarding of new partner design brands of the past quarters. 2. We continue to build momentum in our expansion initiatives, with strong development in the UK and the launch of three additional countries at the end of July. We strengthened our physical retail presence by opening a new store in Frankfurt and moving our Munich store to its permanent location. Four, we launched new order and warehouse management systems, replacing our proprietary legacy system and completing the final major step in modernizing our technology stack. Five, we successfully opened a third-party operated UK warehouse in July. To complete the summary, The overall development is in line with our guidance that we published in March and which we confirmed today. Revenue is now expected to land in the upper half of the guided range. As always, let's have a look at our three-step value creation plan, which we initiated in 2022. We're happy to report that we are well on track with the execution of the third phase, scaling with operating leverage. As we grow both in pre-2024, as well as in new Western markets, we remain focused on cost discipline for operating leverage. Because of that, we are able to invest throughout the cycle. Let me now briefly guide you through our progress on two key levers of the third phase of our plan as market share gains in existing geographies and country expansion. As outlined in previous Elling's quotes, besides improvements in product assortment, we see offline store expansion as a lever for share gains in existing markets. In Q2, We opened a store in Frankfurt and relocated the Munich store to its permanent location. Let's have a look at some pictures. In Munich, we relocated from our so-called warm-up store to the permanent location at Residenzstraße, one of the city's premier shopping streets. Munich is especially meaningful to us, as it is where our journey began and where most of our central teams are based, enabling us to learn and refine the customer experience even faster. The new Munich store is also the first to feature our enhanced in-store shopping concept to allow for an even better customer experience. Next to Munich, we are also very proud to now have a permanent store in Frankfurt, located in the heart of the financial district. So far, we had a great start in both new locations. In total, we now offer enhanced branded product experience to our customers in six standalone and four store-in-stores. Let's move on from gaining market share in existing geographies to entering new markets. Our expansion markets, that is countries launched since May 2024, accounted for 12% of Group GMV and Q2 2026. Back in February, we reached a major milestone by entering the United Kingdom, representing our largest expansion so far. In just a few months, it has already become the biggest expansion market in terms of GMV. This early success reflects our focus on delivering great customer experience from day one. Alongside our curated product assortment, we launched the UK with our interior design service, Western delivery service, and B2B service. To serve UK customers even better, we opened a local third-party operated warehouse in July. This will help us to reduce delivery times while improving supply chain efficiency over time. Beyond the UK warehouse launch, we continue to expand our geographic footprint. At the end of July, we entered three additional markets, Estonia, Latvia, and Lithuania, bringing our total footprint to 26 markets. We are pleased with the traction in the new markets and will continue to invest into customer acquisition and long-term growth. 2026's marketing investments will be weighted towards the fourth quarter, including brand building initiatives. I now hand over to Sebastian for details on our financial performance.

Thank you, Andreas, and good morning, everyone. I'm Sebastian Westreich, the CFO of West Wing. Let me start, as always, with our top-line performance. Growth continued in the second quarter, with revenue increasing by 14% year-over-year, bringing revenue growth for the first six months of the year to 13%. As Andreas highlighted earlier, our Q2 performance was once again supported by our country expansion initiatives, the continued strength of our recurring sales events, and strong growth in both the West Wing collection and our third-party assortment. Let us now take a closer look at our top-line performance on segment level. We are pleased to report growth across both segments, with revenue increasing by 10% year-over-year in DACH and by 19% in international. In the DACH segment, growth was supported by the continued expansion of our physical store network, and in the international segment, our country expansion initiatives continued to deliver strong results, with the UK in particular maintaining very encouraging momentum after our launch earlier this year. G2-adjusted EBITDA came in at 5 million euros, down 800,000 euros year-over-year. Profitability was impacted by the expected microdifference pressure on contribution margin, including fuel costs and unfavorable shifts in demand mix. In addition, we incurred temporary one-off costs related to the migration to our new order and warehouse management systems. These costs mainly reflected implementation-related expenses, low warehouse productivity during the ramp-up phase following the system go-live, which required additional shifts, as well as low freight efficiency. While some migration-related costs will continue into Q3, we expect them to be significantly lower than in Q2. At the same time, we have already started to realize the first efficiency gains from the new systems, particularly in our inbound processes with the full benefits expected to materialize from Q4 onwards. Beyond efficiency improvements, the new platform will enable faster shipping and flexible delivery options for enhanced customer experience. Looking at the first half of 2026 compared to the previous year's period, Chassid EBITDA remained broadly flat. Let me continue with an overview of our P&L development with a focus on the second quarter of 2026. In Q2 2026, growth margin decreased by 0.7 percentage points year-over-year to 51.9%. This was driven by a slightly lower West Wing collection share, 63%, compared to 65% in Q2 2025, as well as overall margin pressure across the portfolio. The fulfillment ratio increased by 2.6 percentage points year-over-year to minus 21.7%. This development was driven by three main factors. First, we incurred temporary one-off costs related to the migration to our new oil and gas management systems, as discussed earlier. Second, transportation costs increased year-over-year, mainly due to the temporary fuel surcharges following higher oil prices. In addition, the increase was driven by our targeted investments in freight quality in the dust segment and regular carrier price increases. Third, we continued to experience unfavorable mixed effects reflecting macro-driven changes in consumer demand. This included trading down behavior and a shift away from larger furniture items, both of which had a negative impact on our unit economics. Overall, contribution margin decreased by 3.3 percentage points year-over-year to 30.2%. Our marketing ratio improved by 0.2 percentage points year-over-year to 13%, despite our ongoing investments into country expansion. Please keep in mind that brand marketing investments will be concentrated on the fourth quarter as Andreas mentioned already earlier, which means that marketing ratio is expected to increase in Q4 compared to the previous year's fourth quarter. Our G&A ratio, including other results, improved by 2.1 percentage points year-over-year to 15.9%, driven by significant scale effects despite additional G&A costs for our new stores. This marks our seventh consecutive quarter of operating leverage in G&A. As a result, adjusted EBIT margin came in at 1.3%, down 1.0% year-over-year. DNA ratio improved by 0.5% year-over-year to 3.5%, also driven by scale effects. Overall, adjusted EBITDA margin amounted to 4.8% in Q2 2026, down 1.5 percentage points, compared to 3.6% in the previous year. While we are, of course, not happy about the year-over-year decline in adjusted EBITDA margin and absolute profitability, It is important to note that the pressure on our contribution margin was primarily driven by temporary factors, including one-off system migration costs and macro-driven happens. At the same time, we continued to benefit from significant operating leverage in G&A and D&A, demonstrating that the structural efficiency measures we have implemented remain firmly on track. With that, let's move on to profitability on segment level. In Q2 2026, negative one-off effects from the migration to new order and warehouse management systems affected profitability in both segments as related costs were allocated based on cross-sales. Sharded EBITDA margin declined in both segments as a result of these one-offs, as well as the aforementioned additional negative margin effects. The DAH segment was to a large extent impacted by unfavorable mix effects and deliberate investments in freight quality, including a shift in shipment volumes towards carriers offering higher delivery service levels. Consequently, adjusted EBITDA margin declined more than in the international segment. A very encouraging signal is that adjusted EBITDA in the international segment increased year-over-year in both Q1 and Q2, despite the pressure on contribution options. This demonstrates that our expansion initiatives contribute positively to adjusted EBITDA, with only the countries launched in 2026 still below break-even as they continue to ramp up. Let us now take a look at our networking capital. At the end of Q2 2026, networking capital remained negative at minus 5 million euros a year-over-year improvement of 11 million euros. This mania reflects a favorable development in trade payables versus last year's period. I would also like to highlight our disciplined inventory management during the quarter, which made a positive contribution to networking capital as well. Despite top-line growth and inventory investments into UK-specific product variants to support the UK launch, we maintained inventory levels broadly flat year-over-year, demonstrating continued focus on working capital efficiencies. On the next slide, you can see capex and capex ratio for the first half of 2026 compared to the first half of 2025. The first half of 2026, capex came in at 6 million euros and increased 1 million euros year over year corresponding to a slightly increased capex ratio of 2.4% of revenue compared to 2.1% in the prior year period. This temporarily increased capex was mostly driven by investments and intangible assets related to the migration to new order and warehouse management systems and some minor investments into our ERP systems. Overall, our capital expenditure continues to reflect our disciplined approach and capex-like business model. Let us now take a look at our net cash position. We are pleased to report a strong net cash balance sheet position of 68 million euros at the end of June 2026. Free cash flow was at minus 9 million euros in Q2 2026, which includes a cash out of 9 million euros related to the settlement of employee stock options. IFRS 16 lease payments amounted to 3 million euros, leading to a free cash flow after lease payments of minus 12 million euros for the quarter. Other financing cash flow amounted to minus 3 million euros related to the purchase of treasury shares. As free cash flow in 2026 was significantly impacted by stock option settlements, I would like to provide a clearer view of the underlying cash generation in the first half of 2026 compared with the prior year period. This slide shows free cash flow after lease payments and before stock option settlements for the first half of 2025 and 2026. The stock option settlements are split into two categories. The purple bars represent cash settlements related to legacy stock option programs, which were established before 2020. The light green bars represent settlements under newer programs introduced after 2020, including our employee equity participation programs and management program. As you can see, around two thirds of the stock option settlements in the first half of 2026, so approximately 6 million euros, were related to legacy programs, while around 3 million euros related to newer programs. In the same period last year, virtually all stock option settlements were related to legacy programs. Looking at the underlying cash generation, pre-cash flow after leases and before stock option settlements improved by around 9 million euros year-over-year, from minus 17 million in the first half of 2025 to minus 8 million in the first half of 2026. As I mentioned earlier, this improvement was primarily driven by stronger networking capital performance. Overall, the negative pre-cash flow in the first half of the year should not come as a surprise. Our business has a pronounced seasonal cash flow profile, with Q4 typically generating the strongest cash inflows due to higher profitability and favorable networking capital movements. These working capital effects naturally reverse in the first half of the following year, resulting typically in temporarily negative pre-cash flows. Let me now provide some additional color on the stock option settlements in the first half of 2026 and what you can expect going forward. As we mentioned previous calls, we have been actively accelerating the reduction of our outstanding legacy stock options by exercising our right to force the exercise of vested options. Combined with a higher exercise volume due to the increase in our share price earlier this year, this resulted in cash settlements of around 9 million euros in the first half and reduced the number of outstanding stock options from 3.5 million at the beginning of the year to 3.1 million today, already including additional grants under the new program. The reduction was primarily driven by the settlement of legacy stock options from programs established before 2020. The number of outstanding legacy options declined from around 2.5 million to 2 million during the first half. Importantly, the legacy options exercised in the first half of 2026 had an average exercise price of just 3 euros and 10 cents. The remaining legacy options have an average strike price of more than 18 euros, meaning the potential dilution from these programs has been reduced significantly, especially if you expect an increase in share price over time. Looking ahead, we expect the number of outstanding legacy stock options to decline by around 70% until mid-2027, driven by continued forced exercises and the scheduled expiry of several programs. As a result, by the end of Q2 2027, we expect our outstanding stock option base to consist to a very large extent of our newer long-term incentive and employee participation programs, with only very limited dilution risk remaining from legacy programs established before 2020. Let us now turn to capital allocation. With 68 million euros of net cash at the end of June, a capex-like business model, and a completed turnaround, disciplined capital allocation remains a key priority. And we remain fully committed to our five capital allocation principles, which we introduced earlier this year. I already covered the third principle, reducing dilution from outstanding stock options on the previous slides. And we talked about the latest settlements. I would now like to turn to our fifth Capital Allocation Principle, Returning Excess Capital to Shareholders through Share Buybacks and APS Accredited Share Cancellations. We are very pleased to report that we successfully completed the Share Buyback Program, which was launched in February 2026. In total, we repurchased approximately 512,000 shares, representing 2.6% of our share capital for a total consideration of €8 million. The average purchase price was €15.62 per share. Looking ahead, we will continue to evaluate capital allocation opportunities across all five principles, including the potential for further share buybacks where we believe they create value for shareholders. Turning now to our outlook with some comments on current trading. We confirm our full year 26 guidance with revenue expected in the range of 417 million euros to 495 million euros, redescending 5% to 10% year-over-year growth, and adjusted EBITDA of 36 million euros to 48 million euros, corresponding to a margin of 7.7% to 9.7%. Given our strong top-line performance in the first half of the year, we expect revenue in the upper half of our guidance ratings. Let me share some comments on this with a focus on current ratings. Despite our strong performance in the second quarter, we entered the third quarter with a year-over-year growth remaining broadly flat. We believe this was largely driven by exceptionally hot, sunny, and dry weather across Europe, which typically reduced online shopping activities and which temporarily shifted consumer spending towards seasonal products, such as fans, portable air conditioners, and heat protection products, rather than home furnishing. Finally, the year-over-year comparison is also affected by a stronger prior year base. as July 2025, in contrast to this year's holiday season, the above-average rainfall across large parts of Europe, providing more favorable conditions for online shopping. As we expect these effects to be temporary, we remain confident that growth will return over the remainder of the quarter. However, given the softer start to the quarter and the stronger prior year comparison, we expect growth for the third quarter as a whole to remain below the levels achieved in the first half of 2026. As a result, the growth rate achieved in the first half of 2026 should not be annualized. Nevertheless, we remain confident that top-line growth will continue. Overall, we are well on track to deliver on our guidance for both revenue and profitability. We remain focused on executing our three-step value creation plan with a key objective to further improving profitability and cash flow while unlocking West Wing's full value potential. With that, I hand back to Andreas to conclude the 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, both in our existing geographies and beyond. Third, we are 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 capital. All of this will lead us in the mid-term to 10% plus adjusted EBITDA with a continued strong cash conversion. This also allows us to continue to invest through the cycle, even in the presence of temporary headwinds from the ongoing conflict in the Middle East. Sebastian and I are now happy to take your questions.