BHG Group AB (publ)

Hi and welcome. My name is Gustav Orrn, CEO of BHG. I'm here together with Jesper Flemme, CFO, to present our Q1 report. We will also be available after the presentation to do our best to answer your questions. Slide two, please. We are happy to present the strong start of the year for BHG. In the last quarter of last year, we showed a small growth after a long period of declining sales. And now in the first quarter of 2025, we report a strong organic growth of 8% and all three business units showing growth versus previous year. Based on our available data points, we are confident that we have taken market share during the quarter. Earnings also continue to improve, now with a sixth consecutive quarter of profitability improvements year on year. This quarter, all business units show improvements in earnings. In this quarter, the first quarter of the year, which is also the smallest quarter of the year, we see a positive development in earnings, going from a small loss last year to a significant improvement and reporting an adjusted EBIT of 21 million SEC on group level. The improvement in earnings comes primarily from top line growth and having direct selling costs and SG&A well in control, creating leverage from top line and improving profitability. We report a cash flow of minus 103 million SEC following the normal seasonal pattern in line with last year's cash flow. I would also like to mention that during the quarter, the outcome of the arbitration proceedings with IP agency was announced. The arbitration was decided fully in accordance with BSG's claim. BSG to pay 2.5 million euros for the remaining 30% of the shares in IP agency. This being far from the claimed amount from the minority owners of 18 million euros. BSG has also received 4 million euro in contractual penalties as part of the arbitration award. After the quarter, BSG has finalized the sale of the IP agency business back to the founders in accordance with earlier communicated process and terms. The primary reason for exiting IP agency was the company not fully operating within BSG's strategic focus. A few words about market development. It is, as you can understand, a very mixed and complicated picture. The market in the first quarter remains challenging, but with signs of market recovery that we started to see in the second half of last year have continued to strengthen during the first quarter of this year and we see increased demand in some but not all of our main markets. The strongest recovery we unchanged see in our largest market Sweden where these data points come from. In short, disposable income is strengthened primarily through inflation in control, interest rate levels coming down and government's interventions to stimulate demand and consumption. Consumer confidence on the other hand, which has been on a long and steady improvement for almost two years, has taken a hit in the beginning of this year, most likely driven by geopolitical and financial unrest. It should be noted that this graph is before the latest turmoil following liberation day with a tariff and the following stock market crash. On this subject, I should say that we have very limited exposure to the introduced and then postponed tariffs and we have a very limited sale to the US. Basically, only Nordic Nest selling for a few million SEC over their international site. However, even if the effect from the tariffs is very limited for us, there will be effects also on our business. The main questions and effects we see are in short, how will the political and financial uncertainty affect consumer sentiment? Historically, it has driven savings and reduced consumption. That is most likely also the effect now, but to what extent is still very hard to estimate. Reduced capacity constraints in China and other regions in Asia where we have production. This should over time most likely have a positive effect on production prices from that region. Most likely, shipping prices will also be affected. How? Still too early to say. And the risk of Asian production initially produced for the US market now directed to the European market as a consequence of the US tariffs, driving supply and having a negative effect on consumer pricing. And finally, the currency effects, where there are several different effects, both positive and negative. And Jesper will try to explain this further in a few minutes. So in summary, we see positive developments of disposable income from macro factors as interest levels, transactions in the housing market and in some markets as Sweden, also government subventions as in Sweden, the increased route of draw. The main question now is how this will balance against the negative effects of consumer confidence from the geopolitical unrest. Line four, please. If we take a look at the development in our categories in the Swedish market, where we have the best data points, looking at the sales trend from Statistics Sweden, or Statistiska Centralbyrån, we see a gradually improvement of sales in our categories all through last year that now continues into the beginning of this year. Our outlook is continued gradual market recovery in 2025, driven by disposable income. With that said, it needs to be highlighted that the uncertainty has increased substantially with geopolitical and financial unrest as the main drivers, which makes it difficult to estimate the risk of setbacks and recovery speed. Sweden leading the way, but with the same tendency, but from lower levels and with some time lag in most of our markets. Slide five, please. As mentioned, we have since the extreme growth during the pandemic operated in a very challenging market, and we saw growth for the first time in two years in the last quarter of last year. Now in the first quarter of this year, we see significant strength and sales development with an 8% organic growth. Slide six, please. Strong growth in the first quarter of the year. Let me try to clarify further where this growth comes from. From a jail perspective, the main growth is still being challenging. From a category perspective, the main growth comes from continued recovery in capital intensive categories, an improvement that we have seen since the second half of last year. We also see strong development in important categories as furniture, home decor, bathroom and garden, where we are ahead of last year. Slide seven, please. If this was primarily reporting and looking backwards, I will take a few moments to speak more about where we are and the strategic plan we have looking forward. As mentioned, in the last quarterly call, we are in the final stages of what we have called the restructuring phase and are now entering the next phase that we have named the profitable growth phase. Let me try to summarize this. We are a group of online businesses joined as one group and together we are the leading e-commerce company in the Nordics targeting consumers. We focus on the home and household market and we have exited businesses focusing on other categories. We are present in a large and growing market driven by external macro trends and with a low online penetration compared to most other categories and more importantly, compared to other more online mature markets such as the UK and the US. We are now well positioned, leaving the restructuring phase where we have focused on consolidating our business to fewer and larger platforms and focused on efficiency, cost reductions and creating scalable solutions. One year ago, we redefined our financial targets, focusing on growth at least in line with the market and reaching the 5% pre-pandemic levels of profitability in the first phase and then the 7% EBIT margin we have in our financial targets. The main components of our strategy boils down to achieve growth through continued organic expansion, group driven strategic initiatives and using both on M&A as a growth lever in new categories, geographies and customer segments. Take and secure lead in key categories using a combination of our multi-destination, multi-banner strategy and the combo of dropship based and inventory based business models to provide the best offer to the consumer of own and external brands, thereby serving multiple customer segments. Using the asset light and scalable online model with low fixed cost and a core focus on cost control to enable the best offer to the consumer and as a consequence of continued increase in price and transparency for the consumer enabled by various online tech developments, we believe that price pressure and margin pressure will most likely continue to increase over time and low cost structure will be the key competitive advantage to enable the best offer to the consumer. The generated cash flow will be used to reduce our net depth but also to fuel strategic initiatives and M&A. Slide eight please. Before I leave it to Jesper, a few words about the more immediate future and the tactical focus of this year. To secure that we take our share of a gradually improving market, which means that we are back to focus on market share, we must secure that we grow faster than the market. To ensure that we maintain the cost levels we have worked so hard to achieve and thereby realize the cost leverage with growing volumes, something we are pleased that we managed to achieve in the first quarter. Strengthen and secure our focus on customer satisfaction. Coming out of the restructure phase, we have increased our focus on providing a positive customer journey through all customer tech touch points in all entities. With that I would like to leave it to Jesper to take us through the numbers.

Thank you Gustav and slide nine please. For the second consecutive quarter we saw organic growth and the growth rate improved significantly compared to previous quarter. Net sales increased by 10% after reaching 2.2 billion SEC and organic growth was 8.2%. From a geographical perspective, we continue to experience favorable growth in our largest market of Sweden, driven by all three segments but mainly value home. Also Germany noted strong performance driven by premium living through Nordic Nest as well as successful geographical expansion in home improvement. Category wise we saw a broader recovery in the demand and achieved growth in most of our core categories. Turning now to page 10 and profitability. Profitability improved significantly compared to last year. Adjusted EBIT amount to 21.2 million SEC in the quarter corresponding to an EBIT margin of 1.0%. All three segments are profitable in the quarter and contributed to the 22 million SEC improvement over last year. The stronger SEC affects our segments differently. Value home has a positive effect because with purchases in US dollars while premium living has negative effect as a result of large share of sales outside Sweden. The group as a whole is negatively affected. Moving on to slide 11 and the EBIT approach. We improved our EBIT margin by 1.0 percentage point in the quarter mainly by reducing and leveraging our fixed costs. Organizational costs have decreased by 8 million SEC and DNA by 10 million SEC compared to the corresponding period last year. Another positive in the quarter is marketing costs which has been improved through increased efficiency mainly in the value homesick. The lower product margin was primarily driven by high comps in home improvement, mixed effects from increased sales of outdoor furniture and both high campaign pressure and currency effects in premium EBIT. All in all our EBIT margin amounted to 1.0 percent in the quarter. Slide 12 and cash flow please. Cash flow from operating activities amounted to minus 103 million SEC driven by a negative working capital development in turn driven by inventory build up ahead of the outdoor season. The right hand graph showing the development in liquidity walks us through the starting period position of 473 million SEC, deducting the cash flow from operations and the impact of investing activities and finally adding the financing activities which are primarily related to utilization of our revolving credit facility and amortization of leasing liabilities but also include interest payments. Bring us to the period end, 418 million SEC of liquidity at hand. Slide 13 please. The group's net debt amounted to 1.3 billion SEC at the end of the quarter and net debt in relation to LTM adjusted EBITDA ended at 3.9 times. On top of our liquidity at hand we had unutilized credit facilities at the end of the quarter of 600 million SEC. Acquisition related liabilities amounted to 349 million SEC at the end of the quarter. Cash flow wise 149 million SEC will be paid out this year including 27 million SEC regarding IP agency. Worth noting is that IP agency has subsequently after the end of the period been sold for 5 million euros corresponding to 54 million SEC. With that I will hand it back over to you Gustav to summarize and conclude.

Thank you very much Jesper. Let me try to summarize this. The market has improved in the first quarter with strength and demand and our outlook is unchanged that the market will continue to improve during the coming year. With that said the market uncertainty has significantly increased during the last few weeks. We see strong growth and profitability improvements in all three business units in the first quarter of the year. Our tactical focus for the coming year is unchanged focus on growth and market share and to secure our cost levels to drive profit through cost leverage and maintain an increased focus on the consumer. We have worked hard and we now have a well-defined plan and a strong position leaving the restructuring phase. We are confident but humble entering the next phase of profitable growth to capitalize on a gradually improving market. Thank you very much for listening and now happy to do our very best to answer your questions. Thank you.

To ask a question please dial pound key five on your telephone keypad. To enter the queue if you wish to withdraw your question please dial pound key six on your telephone keypad. Question comes from Johan Fred from Seb please go ahead.

Hi good morning guys thanks for taking my questions. Firstly solid organic growth in Q1 and your sales figures came in ahead of consensus. However the drop through to earnings was a bit lower than expected and adjusted EBIT was significantly lower than consensus estimate. Is the deviation solely due to the lower gross margin and effects or what are we missing here? I think the discrepancy between top line growth and EBIT growth is quite large. Could you help guide us?

Hi Johan I'll do my best it's Gustav here. First I should say and just point out that we think this is a very very solid report and we're very happy both on top line and on profitability actually considering the improvements we did from previous year. But with that said top line as you say super good and gross margin is the area where we're not entirely happy in all segments. It's a slightly varied picture and as Jasper mentioned in the call it's primarily gross margin in value value home to some extent but also gross margin in premium living that we're not entirely happy with. And the main reasons are I would say campaign pressure especially in premium living and Nordic Nest but also the fact which comes from Mix. We have sold more garden furniture which is of course driven top line but that is a segment where we have lower margins and this year we had a little bit of the warmer period earlier coming in Q1 which drove outdoor furniture and thereby we get the slightly negative effect on the gross margin. And also as Jasper explained an FX effect that affects us as well. I think in general top line super good gross margin could have been better yes but we don't think it's completely off direct selling cost well in control and SG&A well in control and actually proud of what we achieved on the results.

Got it thank you for the clarification and another question here on your sort of wording around your outlook. It seems to be a bit more cautious than previously and sort of quoting a greater future uncertainty than what you saw previously. At the same time you also highlight that the U.S. exposure is fairly limited and that your largest market Sweden is performing well and the macro indicators are positive there. Have you seen anything in sort of any tangible changes during April that has changed your view?

As you know we don't comment on sales but I think we can all agree that the uncertainty in the market has increased in the last few weeks following sort of geopolitical turmoil. As I said to what extent that will affect the consumer we still don't know that is too early to say and I think it's important to highlight as I did that you know disposable income and most macro indicators are developing in the right direction but of course we have to add the fact that there's an added insecurity in the market given what we're seeing right now.

Okay so it's a fair assumption that this is your statement around the uncertainty is relating to the what we're seeing in the overall markets rather than you having seen any tangible impact on your numbers because Swedish and Nordic consumers should be fairly, besides sort of spillover effect on consumer confidence, should be fairly unaffected by the tariffs right?

I would answer yes to that question.

Thank you so much. Those were all of my questions for now. Thank you for taking the time.

Thank you. The next question comes from Daniel Schmidt from Danske. Please go ahead.

Yes good morning Gustav and Jesper and Jakob. Just coming back to that question when it comes to significantly increased when it comes to uncertainty and of course everyone can follow the news but if you incorporate the fact that your biggest market also has played in your favor when it comes to political decisions in the other way in the other direction in terms of root of drag which is already in play how do you square that?

With the risk of repeating myself as I said most macro indicators are turning in the right direction right now and of course the increase root of the Swedish market we hope and believe is a positive driver and we also have a high level activity on the housing market and so all macro indicators and disposable income is developing in the right direction but needs to be balanced at least the risk of added uncertainty and how that will affect consumer confidence.

I understand the first part of course I'm just saying that what has also happened in the late part of Q1 at the same time as this happened on a sort of the global arena is that the Swedish government came out with this sort of increase but you don't mention that specifically is are you feeling that the overall uncertainty when it comes to geopolitical turmoil is much more relevant for you?

I think we're into questions now that is very very hard to answer I mean it's the uncertainty is there we don't know to what extent it will affect the consumer and again coming back the macro indicators are going in the right direction and we think and believe that the root of drug change will have a significant positive effect on the market development yes if that was unclear then I don't want that now.

I just think sort of when you read your comment initially it's a bit one-sided and maybe that's the way it is but that's why I just wanted to clarify a bit and maybe it's more dynamic to it than at first sight basically what you see at first sight. The fact that outdoor furniture was selling better I guess in March than last year is that a good indication for the spring season into Q2?

I think it's always a good sign when the season starts early you sort of you want to get the outdoor garden season started and that is now started so that's definitely a positive sign yes.

And is there anything weather-wise that has surprised you negatively so far in Q2?

We don't comment on Q2.

Okay but just referring to outdoor furniture I guess that's quite dependent on weather that was probably quite favorable in March is there anything sort of that you can point to that's changed that you don't want to comment on that?

No as we said the outdoor season started well and outdoor furniture was off to a good start in the first quarter.

Okay thank you that's all for me.

Thank you.

And if you wish to ask a question please dial pound key five on your telephone keypad. More questions at this time so I hand the conference back to the speakers for any closing comments.

All right one written question with the improved profitability and stronger market position what is your take on M&A looking forward?

And I can start we have a positive view on M&A it's part of our our model and we have used it successfully in the past and we continue to options continuously. Our focus is still unchanged but currently to look at sort of lower risk bolt-ons rather than platform acquisitions but that is something that we are doing and we have a structured approach of how to do it and much of the cash flow that we generate will be used for M&A because we believe it's a good way to continue to grow our business. Anything you would like to add to Jesper?

No.

Good

that's

all any further questions?

Question comes from Daniel Schmidt from Danske please go ahead.

Yes I have a follow-up as well maybe more for Jesper. The 149 million in the earners last deferred payments that are cash out this year is that all related to Q2?

Yes everything will be settled in Q2 as well as the payment we received from selling IP agency of 54 million.

Yeah right exactly and so you have the 149 million and I assume that's Huma and IP agency and then maybe not something more smaller if I got it right then maybe I'm wrong and then you get the cash in when it comes to IP agency. Apart from that I think Q2 usually is a fairly good cash flow quarter when you look at it and given what you already know is going to be cash out is there a good chance that you will neutralize that cash out with normal cash flow in the quarter?

Yes I mean the normal seasonal pattern is that we have a very strong cash flow in Q2 so absolutely yes.

So if you continue to deliver on your profitability path that you're on where you've seen increasing profitability for the past exporters even though you have this cash out you're into a good quarter when it comes to cash flow implicitly you should be able to take down net at EBITDA again which is quite elevated now after Q1.

Absolutely as you say the increase in leverage is only to do with the seasonal pattern and us increasing inventory ahead of the outdoor season so yes leverage will come down should come down.

The remaining 200 which I think is going to be paid out in 26 to 28 is that evenly spread?

Yes I think that's a fair assumption.

And that is it basically there's nothing more that we haven't talked about when it comes to these deferred payments. No. Okay thank you.

Good thank you. One more written question can you elaborate on the effect exposure related to US dollars and euros in some more detail?

I will try I think there's two effects we have the translation effect from consolidating subsidiaries with a reporting currency other than SEC and there a strong SEC is negative then we have the transaction effect and that one you can split in two we have purchases of products from Asia paid in US dollars so we have a net negative flow in US dollars of roughly 600 million SEC a year or at least it was 600 million last year. The greater flow is from sales outside Sweden and that is mainly in euros and NOC and that flow is bigger than the one going in US dollars and thereby the total effect on the group is negative from

a

stronger SEC.

Thank you that was all.

Any further questions? Then we thank you very much for listening and thank you for good questions. Thank you very much. Goodbye.