BHG Group AB (publ)

Welcome to BHG Q2 Report 2025. For the first part of the conference call, the participants will be in listen-only mode. During the questions and answers session, participants are able to ask questions by dialing pound key 5 on their telephone keypad. Now I will hand the conference over to CEO Gustav Orn and CFO Jesper Flemm. Please go ahead.

Hi and welcome. My name is Gustav Horn, CEO of BHG. I'm here together with Jesper Flemme, CFO, to present our Q2 report. We will also be available after the presentation to do our best to answer your question. Slide two please. We are happy to present another solid and strong quarter for BHG. For the third consecutive quarter, we continue to show strong organic growth. For the second quarter of the year, we report 5% organic growth, bringing the year-to-date growth to approximately 7%. All three business units continue to show organic growth versus the previous year. Based on our available data points, we conclude that we have taken market share during the quarter. We also report significant improved profitability in the quarter, now with a seventh consecutive quarter of profitability improvements year on year. This quarter reporting 118 million SEC in earnings, which corresponds to a 19% improvement versus previous year. It should be noted that underlying profitability improvement is another 9 million SEC better if adjusted for the divested businesses of IP Agency this year and DesignCoop last year. The improvement in earnings comes primarily from top-line growth in combination with high efficiency in marketing cost and SG&A well in control. creating leverage from top line and improving profitability and demonstrating the scalability of our model. We report a strong cash flow of 363 million SEC following the normal seasonal pattern and showing further improvement on last year's already strong cash flow. Slide three, please. A few words about market development. We have seen market turmoil in this quarter, but our assessment is unchanged that the market continues to improve compared to last year and that the market continues to grow in the second quarter of the year. The main driver of market improvements we assess comes from the disposable income on the rise as an effect of lower interest levels in a few of our main markets, including Sweden. We also see positive effects on our largest market of Sweden from government-supported tax reductions from the increased rotavdrag. Most positive is, however, that the main long-term trends remain intact and the migration from the physical channel to the digital channel continues in our categories. And we assess that the online market will grow faster than the total market. Slide four, please. We have now had three consecutive quarters of organic growth. And in the first half of this year, we delivered approximately 7% organic growth. And as mentioned, we assess that we have grown more than the market and taken market share. This year, we had an early start of spring already in March, which had a positive effect on sales of spring products already in the first quarter. This was then followed by a second quarter with a relatively cold May, which is also our most important month in the quarter in terms of sales. In summary, this affected Q1 somewhat positively and Q2 somewhat negatively. On a general level, our view is unchanged that the market is in continued recovery, even if it is at a somewhat lower speed than earlier anticipated. Our assessment of the market outlook remains unchanged. We expect a continued market recovery during the year, driven primarily by improvements in disposable income. 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. So continued growth also in the second quarter. Let me try to further clarify where this growth comes from. From a geo perspective, the main growth comes from Sweden being our largest market and continues to show growth. We also see strong sales development in the important markets of Norway and Germany, driven by successful geographic expansion. The most challenging of our key markets is currently Finland, which trails our other main markets in recovery. With that said, we achieved marginally positive sales growth in Finland, adjusted for the sale of an IP agency. From a category perspective, the main growth comes from strong sales development in indoor furnishing driven by successful development in value home and continued recovery in capital intensive categories such as bathrooms, windows and doors, primarily in our home improvement segments. Following strong sales in Q1, we in the second quarter saw weaker demand in the garden and outdoor furnishing categories as a consequence of the relatively colder than usual weather in May. Slide six, please. Looking ahead, we are leaving the restructuring phase and now with full focus on the profitable growth phase. We operate in the home and household market and we are the largest consumer focused online company in the Nordics. Our goal is to grow more than the addressable market and targeting the 5% pre-pandemic profitability levels in the first phase and then further on to the 7% adjusted EBIT that we have in our financial goals. The categories that we focus on are still low in online penetration and demand in the online channel is further driven by continued migration from the physical to the online channel. The main pillars of our strategy boils down to. We seek to grow by expanding our strong offering into adjacent product categories and by expanding into new geographies. Using and maintaining our leading positions in large categories such as bathroom, garden, etc. And benefiting from the combination of our multi-destination, multi-banner format and our business models ranging from dropship to inventory-based and private label to better than the competition, target and serve multiple consumer segments with our combination of own and external brands. Being primarily online and using the advantage of the asset-light and scalable model enables our core focus on efficiency and cost control to provide the best offer to the consumer. Using our generated cash flow to reduce net debts and strategic growth initiatives, but also increase our focus on bulk on acquisition to fuel growth in existing platforms. With this, I will leave it to Jasper to take us through the numbers. Thank you, Gustav.

And slide seven, please. All three segments drove solid organic growth in the second quarter of the year. Net sales increased by 1%, reaching 2.7 billion SEK, and organic growth was 5.4%. The value home segment had a strong quarter, nearly reaching double-digit organic growth which clearly testifies that our efforts to improve both offering and product availability has paid off. Geographically, as Gustav just said, we continue to experience growth in our largest market of Sweden. We note that the strongest performance in Norway and Germany and Finland remains challenging. Turning now to page eight and profitability. Profitability improved almost 20% compared to last year. Adjusted EBIT amount to 118 million second quarter corresponding to an EBIT margin of 4.3%. The strongest profitability was seen in the value home segment with an EBIT margin of 7.1%. Home Improvement had a solid quarter with an adjusted EBIT of 77 million SEK corresponding to an EBIT margin of 5.2%. And Premium Living managed to improve both profit and EBIT margin over last year. Moving on to slide nine and the EBIT bridge. Our EBIT margin improved by 0.7 percentage points in the quarter. primarily thanks to growth and effective cost control, which enable us to better leverage our fixed cost base. Organizational costs and DNA have decreased by 10 million a second total compared to the corresponding period last year. Also, marketing costs continue to be a positive driver this quarter for improvements in all segments. The lower product margin for the quarter compared with the year earlier period is almost entirely explained by the mixed effect from divesting IP agency, which affects the margin by 0.6 percentage points. All in all, our event margin amounted to 4.3% in the quarter. Slide 10 and cash flow, please. Cash flow from operating activities amount to 363 million SEK, corresponding to a robust cash conversion of 169%. Performa was driven equally by EBITDA and working capital gains, the latter thanks to inventory reduction. The positive development in working capital reflects both our targeted inventory optimization activities and the normal seasonal pattern. The right hand graph showing the development in liquidity walks us through the starting period position of 473 million SEK, adding the cash flow from operations and the impact of investing activities, and finally deducting the financing activities, which are primarily related to utilization of a revolving credit facility and amortization of leasing liabilities, but also include interest payments. Bringing us to the period end, 682 million SEC of liquidity at hand. Slide 11, please. The group's net debt amounted to 1.0 billion SEC at the end of the quarter and net debt in relation to LTM adjusted EBTA ended at 3.0 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 amount to 335 million SEK at the end of the quarter. Cash flow wise, 110 million SEK will be paid out this year and another 100 million SEK in 2026. With that, I will hand it back over to you, Gustav, to summarize and conclude.