Embellence Group AB (publ)

Papelina is the brand that has the highest share of online sales of our brands and we expect this development to continue in the coming quarters since we're actively working on refining our platform with new features and more content. This will build an even stronger connection with consumers and builds loyalty and ultimately a more robust business model. We are gaining market share with the brand and are also continuing to expand more broadly internationally where we in the quarter changed our distribution model in North America, which was launched in the end of April. This has started out well and we have participated in a few fairs and we'll continue with this going forward where the next big fair is already in the beginning of August in New York. This is also the brand where we hire new personnel in marketing and e-comm and brought in a new managing director during second half year of 2025. And the new team led by Henrik Andersson is performing well. So we expect that the growth will continue for the brand going forward both domestically and internationally. Borås AP Fabrik reported an increase of 14% in the quarter. We are gaining market share in both digital and traditional printing driven by continued strong demand across our core segment. Growth is coming from both existing customers where we're deepening in our relationships and from new customers. The focus here is on developing new materials and substrates, but also on broadening our product offering overall. This allows us to meet the wider range of consumer needs while also strengthening our brand's portfolios with new and exciting products. Over time, these initiatives support the build out of a broader brand portfolio and creates a stronger foundation for continued growth across the group. If we move on to our strategic focus areas, these remain unchanged and they are working well for us. If we start off by focusing on the DTC channel, this is a channel that is strategically important for us at this delivers higher margins. It acts as a growth accelerator and it enables a closer and more direct relationship with our consumers. More than 50% of our growth in the next years should come from the channel, and we see that all brands are delivering double-digit growth. Papelina, as I said before, is standing out in the quarter with 130% growth, and this gives us confidence that the investments we're making in both the consumer experience and digital capabilities are generating results. In end of April, Borås Tapeto also transitioned to the new platform, meaning four out of our five brands now operate on the same platform. While this creates operational efficiencies, the more important benefit is the opportunity to deliver a significantly improved consumer experience across our portfolio. Our focus is not only making it easier to shop, but on creating a more inspiring and engaging brand experience. We continue to invest in storytelling, richer content and enhanced product presentation and a more seamless customer journey from inspiration to purchase. At the same time, we are expanding our marketing mix and reducing reliance on individual channels by building a broader ecosystem of consumer touchpoints. As digital advertising cost continues to increase, the ability to engage consumers through multiple channels become increasingly important. Through stronger content creation, improved customer journeys, and a more diversified approach to marketing, we are creating a more relevant and engaging experience for consumers while strengthening the long-term economics of the brand. Ultimately, these investments are about building stronger consumer relationships, increasing engagement and conversion, and creating sustainable growth. Our second strategic focus area is to expand internationally. All our brands continue to focus on international markets, and in the quarter, we deliver growth across all major export markets. In parallel, we are actively working to optimize our sales networks. This means that we are reviewing our current setup, and where needed, we are replacing selected distributors, retailers, and agents. The focus here is to ensure we have the right partners in place in each market, improving market coverage, strengthening customer relationships, and ultimately creating better conditions for sustainable growth over time for our brands. In the quarter, we changed the distribution model for Papalina in North America, a rather large intervention, I would say, which has had a great start, and we expect this to continue going forward with an increased focus on the market with both more agents and more presence on fairs across the country. We have also started a broader review of our distribution network for both Wall & Deco and Colon Sun, where we're making adjustments to have the right setup to deliver growth. The third focus area is strengthening our presence in the hospitality channel, which remains strategically important, both as a growth driver and as a way to increase brand visibility and build long term relationships with professional customers. The channel provides larger projects, recurring business and valuable reference installations that support growth across our brands and sales channels. During the period, we continue to strengthen the commercial organization with clear responsibilities and dedicated resources focused on hospitality. We have also expanded and strengthen our network of agents and partners in key markets to increase our market presence and improve access to architects, designers and project stakeholders. At the same time, we have further developed our service offering, improving project support and creating a more professional and scalable approach throughout the customer journey. These initiatives strengthen our competitiveness and position us for continued growth within the hospitality segment. If we then turn and look at some of the brand-specific happenings in the quarter, we can start out with Borås Tapeto, where we, in the beginning of May, launched our first window film collection as a new product category, featuring a curated selection of some of our most popular wallpaper designs adapted for glass surfaces while maintaining the same design expression as our wallpapers have. Initial customer feedback has been highly encouraging with particular appreciation for the product's premium quality and that we can offer our wonderful designs as well in a new category for homes, hotels and offices around the world. Window films provides privacy without compromising natural lights, making it an elegant and practical alternative to curtains or blinds. It's just a peel without adhesive and can easily reposition or remove whenever needed. Shown on the left is the Rosenvinge design, which is based on one of Boråstabetos most iconic heritage designs. The pattern here was recreated from an oldest known wallpaper in the Nordic region, dating back nearly 500 years and was originally discovered in the ceiling of a historic building in Malmö in the south part of Sweden. Today, this piece of wallpaper history has been reinterpreted as window film, bringing a pattern to glass surfaces while preserving its original character. On the two smaller images in the middle of the slide, we see two wallpaper murals, one called Blue Bell Magic, which is a hand-painted mural created for children's rooms, broadening the current offering for families. And we also see Dawn Forest from the Soft Blur Collection, which is designed to meet the growing demand for calm and harmonious interiors, combining hand-painted artistry with soft, timeless expressions. The design features delicate hand-painted watercolor foliage cascading across the wall. Moving on to Papelina, we continue to strengthen the brand awareness and stakeholder engagement through physical activations, industry collaborations and international design events. At three days of design in Copenhagen, Papelina hosted a pop-up presenting selected pieces from the autumn-winter collection in an inspiring Scandinavian setting. In parallel, Papelina participated in the Atlanta Market, one of the leading home and lifestyle trade events in the US. And together, these activities strengthened our international presence and supported our continued growth in key markets. In the quarter, we also introduced a mini-drop featuring six new colorways of our iconic Vera pattern, building on one of Papelina's most recognized designs. Vera was also launched in a larger area rug format, expanding its application across a wider range of living environments, including dining areas, living spaces, and outdoor settings such as Pechos. By continuously evolving our existing icons, rather than replacing them, we strengthen long-term relevance and build on the heritage that has made Papelina a trusted and recognized brand. For Artscape, we launched three new window film designs on Artscape's website. And on the slide, you see two of them, the Metropolis and the Sunshine design. And we also in the quarter launched nine new designs of bird deflectors, expanding our offering from the original square design into different themes, such as flowers, birds, Celestial themes and circles. Bird deflectors are designed to bring a sense of nature to your window and combines bird-friendly function with botanical beauty, creating a vibrant display that helps birds recognize glass more easily. And with that, I'll hand over to Karin for some more information about our improved cash flow.

Thank you, Johan. The operational cash flow was strong in the quarter. 21 million kronor compared to 16 million prior year despite a lower operating result. It's primarily the working capital development that has improved this year compared to last, and it's mainly due to three reasons. First, the largest impacts come from accounts receivables, which was reported at 93 million kronor compared to 112 end of first quarter. The difference compared to last year is mainly timing. This year the months and invoices were paid and received prior to end of quarter while we had an opposite situation last year. Secondly, We have built inventory, which ended at 160 million kronor, up 6 million from last quarter. This is a normal seasonal pattern where we build inventory before closing our factories for a couple of weeks during the vacation period. And we had a similar effect last year. Third, we have a negative effect of lower accounts payable. If you remember, in the end of first quarter, we reported that we built inventory to prepare for a change of raw material supplier in Borås Tapetfabrik. These invoices have been paid in second quarter. Towards the second half of this year, we anticipate to come down to normal inventory levels again. During the quarter, we made a dividend of 1.5 Swedish kronor, an increase versus last year when we paid 1.25 kronor per share. In total, the dividend payment was 35 million kronor. Despite the increased dividend payment, the financial position remains strong and our net debt to EvitDA is 0.7 compared to 0.9 last year. And with that, I hand over back to Johan for a closing comment and outlook.

Thank you, Karin. So in summary, Q1 was a quarter which we're not satisfied with, and we saw a sales decline of 6%. Although majority of the decline was linked to last year comparison numbers for Orgscape, which included a refresh with one of our larger do-it-yourself customers. Papalina and Bostapetfabrik grew double-digit in a quarter, while the other brands had a weaker one. We continue to have a high exposure to the traditional retail market, which remains affected by challenging market conditions. To reduce this dependency, we are actively executing on our strategic priorities to further diversify both our sales channels and revenue mix. The investment in our growth areas are beginning to deliver results, where Papelina is leading the way with 130% growth in the DTC channel. And in the quarter, we also launched a new platform for Borås Tapeta. So now we have launched four out of our brands on the new platform, which provides a good foundation for future growth. In the quarter, we also had our new managing director, Jelena Ford, join the business for Kål & Sann, and she has had a good start in the first couple of months with the business. Looking ahead, we remain focused on our three strategic priorities to further diversify our sales and channel mix, accelerating direct-to-consumer sales, expanding internationally, and increasing our presence in the hospitality channel. We continue to see positive momentum in both D2C and international sales. This, combined with our portfolio of brands, enhanced digital platforms, and clear commercial priorities gives me confidence in our ability to deliver sustainable long-term growth. And with that, I'll hand over to questions.