Embellence Group AB (publ)

Welcome to the Imbalance Group Q3-2026 report presentation. For the first part of the conference call, participants will be in listen-only mode. During the Q&A session, participants can ask questions by dialing pound key 5 on their telephone keypad. If you are listening via webcast, you can submit written questions using the form below. Now I will hand over the conference to the speakers, President and CEO Johan Andgren and CFO Karin Liden. Please go ahead.

Thank you very much and very much welcome to Embalance Group's interim report for the third quarter of 2026. My name is Johan Andgren and I'm the CEO of the group and together with me today is Karin Liden who's our CFO. Today we will start to go through the development in the third quarter. We will then look at some of the organizational changes that we have made recently, followed by a closer look at sales performance across our brands and update on our strategic focus areas. Since we are a group of several strong and distinctive brands, we will also look at some of the key developments across the portfolio. After that, Karin will take us through the financials in more detail before we end with a summary and a look ahead. So let's start by looking at the business and what we achieved during the third quarter. Q3 was a quarter of modest growth, improved gross margin and strong cash flow. Our net sales increased by 3% to 178 million Swedish krona compared to 174 million last year. Currency adjusted organic growth was 2%, while the impact of a weaker Swedish krona had a positive effect of approximately 1 percentage point in reported sales. Four out of our five brands grew in the quarter, and our growth was primarily driven by the direct-to-consumer channel, which is one of our strategic focus areas. The good development in this channel compensated for a weaker performance in traditional physical retail. Papalina stood out in particular and further accelerated growth numbers from previous quarter and more than double its direct-to-consumer sales. Also Artscape grew more than 100% from its own D2C platform and Bore Stapeto started to see healthy levels of growth. This is encouraging because it confirms that the investment we have made in new platforms, organizational capabilities and the overall consumer experience are beginning to deliver tangible results. At the same time, we should be clear that traditional physical retail remains an important channel for us, and the channel continues to be affected by the consumer shift in the market. Our objective is therefore not to replace one channel with another, but to create a more diversified and resilient sales mix across traditional retail, direct-to-consumer, international sales and hospitality. Colin Sun returned to growth in the quarter. As we have shared in previous quarters, during the first half of the year we took a number of commercial decisions that we knew would impact sales in the short term, but which were the right decisions for the long-term development of the brand. The impact from these changes is now gradually diminishing, while growth in other customers and channels is increasingly offsetting the decline. This gives us confidence that we are moving in the right direction, gradually moving beyond the transition phase and returning to growth. If we continue and look at gross margin development for the Group, the gross margin improved to 62.4% compared to 60.6% last year, plus 1.8 percentage points. The improvement was driven by three principal factors. Number one, a positive channel mix with higher share of direct-to-consumer sales. Number two, a positive product mix. And three, improved manufacturing efficiencies. As we've shared in previous quarters, the growing share of direct-to-consumer sales is changing the structure of our P&L. We capture a higher gross margin through the DTC channel, while at the same time direct-to-consumer sales comes with higher marketing and logistics costs. As a result of this, part of the gross margin improvement is offset further down in the P&L. However, the overall impact on profitability remains positive. EBITDA in the quarter amounted to 24 million Swedish krona, which is in line with last year, and the margin was 13.2% compared with 13.6% in the corresponding quarter last year. The EBITDA also includes restructuring costs related to the change of managing director at Wall & Deco, which I will share light on later on in the presentation. We do continue to invest selectively in initiatives that support our long-term strategy. This includes strengthening our organization, developing our digital platforms and improving our commercial capabilities and establishing more effective go-to-market models. Some of these changes come with costs in the short term, but they are necessary to strengthen the Group's long-term competitiveness and profitability. Our financial position remains strong. Operating cash flow improved to 39 million Swedish krona compared to 32 million last year, and working capital decreased by 8 million Swedish krona during the quarter, primarily as a result of lower inventory. Net debt in relation to EBTA improved by improved at 0.4 times compared to say 0.7 times last year and this provides us with strong financial position and continued flexibility to invest in our brands, our strategic priorities and future growth opportunities. Karin will go through the financials in more detail later on in the presentation. Before we move into the individual brands, I would also like to comment on the organizational development we have gone through. When I joined as CEO, an important part of my mandate from the board was to develop the organization so that it could better support our strategic plan and long-term ambitions. The Group has built strong brands over many years. However, to enter the next phase of development, we have needed to strengthen the organization in three areas. Number one, develop the central team. Number two, add capabilities linked to our strategic growth areas. And number three, strengthen the organizations within our brands and management teams. We've now made significant progress in this transition. We have strengthened the central team and now have the structure and capabilities we need in this team. We've also added capabilities and experience across the wider organization linked to our strategic focus areas. And this means that we are much better equipped to execute our strategy and drive profitable growth going forward. During the quarter, we also took an important step in this process in regards to the management teams for our brands, specifically at Wall & Deco, where we decided to make a leadership change. The brand has not been performing at the level we believe it should, and we therefore appointed Christian Benini as the new managing director. The transition at Wall & Deco and earlier this year at Coal & Sun has come with certain short-term costs but these are investments that are necessary to strengthen the business for the long term. I'm very pleased to have Christian back leading the brand that he once founded and built before Emblance Group acquired it. Over the past months Christian and I have had several discussions about the future of Wall & Deco and it's clear that we share the same view of the brand's potential How we can take it to the next level and what we need to do to get there. Christian combines creativity and strong product innovation capabilities with a deep understanding of how to create commercial success within the wallpaper segment. He also brings extensive experience from hospitality sector and has strong relationships with the international community of architects and interior designers, areas that are increasingly important for Wall & Deco's future growth. I am convinced that he is the right leader to take Wall & Echo into the next phase of development. At the same time Lars-Erik Henriksson, Managing Director of Bråstapeter, has decided to leave his position, creating a natural leadership transition. I would like to thank Lars-Erik for his contribution to Bråstapeter's development and for Kit continuing to lead the business during the transition period. I'm also very pleased that we have been able to find an internal replacement and appoint Henrik Andersson as the new managing director of Borås Tapeten. Henrik, who is currently managing the director of Papelina, will take up this new position during the first half of 2027. Henrik has played an important role in developing Papelina, strengthening the brand and building a business with clear direction and momentum. What particularly stands out is his energy and drive, his ability to turn ideas into actions, and his constant ambition to move the business forward. I believe these qualities will translate very well to Bråstapeto, and Henrik understands what it takes to develop a strong design brand while at the same time driving commercial performance, and I'm confident that he will bring energy and momentum to Bråstapeto as we take the brand into its next phase of development. We will now focus on finding a strong successor who can continue to drive Papalina's positive development and I'm certain that we will find a good candidate for this position. Alongside these managing director changes we have continued to strengthen the organizations below the MD level particularly within e-commerce and marketing and importantly we are starting to see evidence that this strategic playbook is working. Papelina, which currently has the strongest acceleration in DTC, was the first brand where we combined a new platform with strengthened leadership and additional capabilities in e-commerce and marketing. Artscape followed a similar path and these are now also the two brands where we currently see the strongest sales growth. During the past year, we have taken the same steps as Col & Son and Borås Tapeto, upgrading the platforms, a new managing director for Col & Son and soon also Borås Tapeto, as well as we have strengthened the e-commerce and marketing organizations. The key e-commerce leadership positions were filled during July and August for those two brands, meaning that we have increasingly platforms, people and capabilities in place across the group. What we can see is that when we combine the right platforms with the right people, capabilities and focus, the speed of execution increases significantly and ultimately that starts to translate into growth. We know what needs to be done. The focus now is on execution and increasing the speed at which we do it. If we then move on and look more closely at the performance of our brands. Båstad Petter, our largest brand, increased sales by 2% to 63 million Swedish krona compared with 62 million last year. The shift from traditional physical retail to online in Sweden continued. However, the growth in our DTC channel where we primarily focus on international markets together with a strong development in online retail and on international markets compensated for the softer Swedish retail development. All significant international markets developed positively during the quarter. Direct-to-consumer sales also started to gain momentum, supported by the new e-commerce platform and the strengthened organization. The development is encouraging because it demonstrates that Boråsta Petro is gradually becoming less dependent on Swedish physical retail, although it's still a big portion of our sales. There is still considerable work ahead, but we are building a more diversified sales model with stronger contributions from international markets and from direct-to-consumer sales. Colin Sun reported sales of 31 million Swedish krona compared with 30 million last year and the restructuring of the brand sales channel is now entering its final phase and we expect the negative sales impact from these changes to become more limited going forward. The focus is now on continuing to develop a more diversified channel strategy. International sales developed positively supported by growth in the United States while the UK and European markets were more cautious. We are also seeing positive development in hospitality following the initiatives started during the first half of the year by our new managing director. During the quarter we further strengthened the organization with new capabilities to lead and develop the direct-to-consumer channel and there is still work to do but we now have better organizational conditions to build sustainable long-term growth. Wall and Echo reported the sales of 17 million Swedish krona compared with 20 million last year. The commercial development has remained weak and has not met our expectations. This is the reason why we decided to make the leadership change during the quarter and appointed Christian Benini as the new managing director. The new management team is now working closely with the group with a clear focus on strengthening commercial execution and reversing the negative sales development. Wall & Echo is a highly differentiated premium brand with strong product and design capabilities. Our immediate priority is to translate these strengths into improved commercial performance. In the mid-term, we're also working actively on product development to be more relevant in the premium segment of the market. Papelina delivered another strong quarter, with sales increasing to 15 million Swedish krona from 11 million last year. Growth was primarily driven by direct-to-consumer sales, where the already positive development accelerated further during the quarter. All major markets developed well, as did traditional retail. At the same time, sales through digital retailers declined, as a larger share of consumers closed Choose to purchase Papalina's products directly from the brand versus from the digital retailers. This channel shift is strategically positive. It gives us a closer relationship with consumers, better control of the brand experience and improved access to consumer data while also supporting the overall margin. Abelena shows what really can be achieved when the right platform, organization, product offering and marketing model come together and we expect this development to continue for the brand. Artscape reported sales of 29 million Swedish krona compared with 28 million last year. Sales in the United States developed positively, particularly through the brand's own e-commerce platform. However, export sales were negatively affected by increased trade barriers between United States and the neighboring countries. This has led to some of the customers reducing their inventory levels, but we don't see any changes in offtake in the markets. During the year, Artscape has worked on a new product launch and a relaunch with one of the brand's larger customers is planned for the fourth quarter. Combined with positive development in e-commerce, this creates good conditions for good growth during the coming quarter. Borås Tapetfabrik increased its reported sales to 23 million Swedish krona compared with 22 million last year. Both traditional and digital customers contributed to the growth. Following a period of double-digit growth, we expect the external business to move towards lower growth rates. Our primary focus for Båstad Petfabrik is to improve production process efficiency, strengthening cost competitiveness, and provide better service to the Group's own brands. Growth from external production remains positive, but our first priority is ensuring that the factory has the efficiency, service level and capabilities required to support the continued growth of our own brands. If we then move on to our strategic focus areas, these remains unchanged. Number one, accelerating direct to consumer sales. Number two, expanding internationally. And number three, strengthening our position in the hospitality channel. If we start off by focusing on the D2C channel, this is a channel that is strategically important for us as it delivers higher margins, acts as a growth accelerator and it enables us 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 and that the channel continues to develop well, driven by strong international growth, particularly in the United States and in Europe. With strengthened organization and new e-commerce platform now in place, we are better positioned to scale and accelerate the development of the channel, although much work remains. Pablina is the clearest example of the potential. The brand more than doubled its direct-to-consumer sales during the quarter, and we also saw encouraging acceleration at Boråsapetto following the launch of its new e-commerce platform. Our focus is not only on driving traffic and transactions, but it's also about creating more inspiring brand experiences, developing better content and product presentation, and improving the entire consumer journey from inspiration to purchase. During the next quarter, when we summarize the year, we will also share an updated number of our D2C share of our branded sales. The second area is international expansion. Our brands have historically held strong positions in their domestic markets but we see significant potential to grow further in our most important international markets. The work going forward is about prioritizing the markets where we see greatest potential, strengthening our commercial partnerships and continuing to develop our network of retailers, distributors, agents, architects and interior designers. International sales developed positively during the quarter, although the development was partly held back by our lower artscape exports to Canada and Mexico. The United States continues to increase in importance and is becoming a more significant growth market for several of our brands, both through own channels and through partners. Our third strategic focus area is hospitality. We continue to broaden our product and service offering to better address larger and more complex projects. As part of our overall strategy, we are actively expanding our product offering and developing new solutions for the hospitality market. We're also seeing early positive indications from the changes we've made in leadership and from our increased focus on building closer relationships with interior designers and architects. This is strengthening our position in the project market and creating opportunities for larger and more prestigious projects. During the quarter, this included a project for American Royal Household demonstrating strength and relevance of our brands and our ability to compete at the very high end of the hospitality and bespoke project market. Over time, this strengthens our ability to provide broader and more relevant offerings to architects, designers, and other professional customers while gradually improving our position in the hospitality channel. If we then continue to look at some of the exciting brand-specific happenings in the quarter, we will start out with Brå Stapeter. During Q3, Brå Stapeter launched two new exclusive collections. called Flowers and Hargold as part of our continued focus on the premium segment. We see this price segment driving both sales and increased interest in the brand, particularly in markets outside of the Nordic region. On the picture to the left, you see a design called Sofia Magdalena from our Hargold collection, a beautiful example of how we at Borås Tapeto bring together history, Swedish design and craftsmanship. This pattern originates from a hand-painted Chinese wallpaper which was brought to Sweden by the Swedish East India Company in the 18th century. The pattern has once adorned the walls of Orby Manor outside of Gothenburg and inspired by the original which is now preserved at the Gothenburg City Museum, we have created both the pattern and its beautiful color palette using traditional surface printing techniques. It's a wonderful example of how we bring history to life and make it relevant for the homes of today and tomorrow. Boråsa Peter has also continued to develop and expand their range of made-to-measure wallpapers through new launches in the quarter. With Taylor's tweed ground being one example on the picture at the bottom right. This segment gives us the opportunity to explore new creative directions, experiment and test new ideas while ensuring that every design remains true to Borås Tapeto's brand identity and distinctive design expression. This pattern draws inspiration from the classic Scottish tweed and traditional Czech patterns. Our design studio has translated the look and feel of a woven fabric into a wallpaper with fine details, textile-like expression, By enlarging the traditional Czech patterns, we create a contemporary expression where heritage meets modern interiors. On the top right, you can see a pattern called Pasekoträd from the Flowers Collection. Behind the design is a personal story from our designer, Nomi Spange, where the inspiration comes from a peach tree in her mother's greenhouse in Dalarna. Nomi has captured this experience in a hand-painted design producing traditional surface printing techniques at our factory in Borås. And it's a strong example of how personal inspiration, Swedish design and craftsmanship come together at Borås Lapeto. Moving on to Kolen's son, during the quarter we launched our new collection called Formations which reinterpreted the brand's geometric archive through contemporary craft, color and printmaking. The collection was launched during the London Design Festival and received a very strong reception. It also generated significant media attention including coverage in the Financial Times and World of Interiors among others. On the pictures here you can see some of the designs from the collection, which are now also on display at our Design Center and showroom in Chelsea. This is a good example of how we continue to build on Kohlenstein's strong heritage while creating new and relevant expressions for today's market. Moving on to Papelina, the brand continues to strengthen its position through new product launches, increased international visibility and targeted brand building activities across key markets. For autumn-winter 26, Papelina launched two designs called Mimmi and Nils, introducing new textures and weaving techniques while continuing to develop Papelina's distinctive expression. At the bottom right, you can see Nils with a woven It is woven with a linen warp. The linen gives the rug a natural sheen and a richer, more textile-like character, while the structure of the weave creates a subtle pattern and added depth. Internationally, we continue to build the brand's presence in several important markets. In the US, Papalina exhibited at Shop Object in New York in August, while Norway was another focus market during September. The brand also received editorial visibility in France and Germany, highlighting its design heritage and craftsmanship. We continue to invest in brand awareness through selected creative collaborations in key markets, including Sweden and France, which generates strong engagement and showcase Papalina in authentic home environments to relevant design and interiors audiences. This was complemented by seasonal product focused campaigns around outdoor living, hallways and larger rug formats helping us demonstrate the versatility of the collections across different rooms, environments and seasons. And with that, I will now hand over to Karin for some more information about our financials.

Thank you, Johan. As stated earlier, we had a reported net sales of 178 The organic growth was 2% and we had a positive effect of currencies with one percentage point. This means that we are now flat year on year from an organic perspective and we have a year-to-date impact of currencies of minus 2%. Gross margin expansion continued in the quarter thanks to an increasing share of direct to consumer sales and positive product mix. Gross profit was 111 million Swedish kronor and the margin was 62.4% compared to 60.6 same period last year. The EBITDA was reported at 24 million Swedish kronor, which is the same as last year, while this quarter includes a restructuring cost for the change of managing director at Woland Deco. The EBITDA margin was 13.2% and the net profit for the period was 16 million kronor compared to 13 million kronor last year. The improvement compared to last year comes from lower finance costs and positive net exchange rate differences in the finance net. The operating cash flow was 39 million kronor in the period compared to 32 prior year, mainly thanks to the working capital which decreased 8 million kronor. It's in particular the inventory that has decreased during the period with 14 million kronor. Part is seasonality where we build inventory before the manufacturing entities closed for a few weeks during the holiday period. And the rest is raw material. As I shared in the earlier calls this year in Q1 and Q2, We built raw material inventory as a preparation for changing a key supplier in Brås Tapetfabrik. This transition is now complete and the raw material inventory is back on normal level. Looking at the operating cash flow rolling 12, it has continuously strengthened during the last year and is 116 million Kronor rolling 12 compared to 95 last year and the cash conversion is 92%. If we continue with looking at the net debt and leverage, the strong cash flow together with same level of investments and lower financing cost leads to a strong financial position. These charts illustrate how the net debt decrease steadily, both in absolute terms and as share of EBITDA over the last years. As you can see, there is a temporary increase in second quarter during both years following the dividend payments. but the financial position recovers quickly. Reported net debt in third quarter was 53 million kronor compared to 99 last year and the leverage 0.4 times EBITDA compared to 0.7 last year. And with that, I hand over to Johan for a conclusion and looking ahead.