Haypp Group AB (publ)

Good morning, everyone, and welcome to our Q4 2025 conference call. Our CFO, Peter Deli, and I, Gavin O'Dowd, will take you through our results. Starting at slide four, I would like to focus on four key aspects of our operational highlights, beginning first with our nicotine pouch Q4 volume, year-on-year growth of 28%. Nicotine pouches now accounts for over two thirds of our volume. Strong acceleration in the US supported by the return of zinc and strong acceleration in the UK were important drivers. Our growth segment now accounts for over 40% of our nicotine pouch volumes. Secondly, net sales grew 19% for the period at constant rates. despite continued decline in traditional snus. Third, gross margin percentage reached 17.4% for the quarter and gross margin amount rose by 29% in 2025 versus 2024. And lastly, we completed our infrastructure overhaul in December and we can already see rapid deployment of features in January which are valued by the consumer. Moving to the next slide in slide five. The growth in sales was underpinned by robust growth in nicotine patch active consumers, which in turn is being driven by both an acceleration in new consumers and continued improvement in our robust retention rates, reflecting record high consumer satisfaction rates. Moving to the US, I would like to cover and our performance. starting with the US environment on slide six. Category growth remains strong with circa 35% increase in volume during Q4 of an already sizable base. The FDA's pilot program to accelerate the PMTA process has already led to marketing-granted orders being granted for six products in December 2025. Other manufacturers are expected to have their products processed in the first half of this year. However, this doesn't guarantee that they will receive NGOs. A broader suite of improved products not only supports the category growth, but greatly enhances the value of the hype offer to both consumers and brand owners. The rapid growth of nicotine pouch category is leading to state tax proposals across a range of states. Amongst the highest of these tax levels is New York State, which is proposing a 75% tax on the wholesale price and would equate to approximately $2 per can. In our experience across multiple markets, a step change in the consumer price tends to trigger consumers to search for better value, which greatly benefits Hype. Hype believes that taxes on nicotine patches increase the fiscal relevance of the category for state governments and as such are beneficial, so long as the tax rates reflect the risk differential of nicotine patches. Moving to the next slide, slide seven, which shows how the different components of our US plan fits together. During the second half of 2025, we built up the competencies in our local US organization to drive accelerated growth. In parallel, in Q4, we completed a detailed analysis of the offline nicotine pouch consumer to fully understand both their trigger points and friction points for buying nicotine pouches online. The process was very insightful in highlighting the potential of our offer to a large and growing consumer segments and how we can refine our offer and our messaging to accelerate our growth. Some of the findings are already implemented, positively impacting the results, which I will share on the next slide. Many more of the refinements are planned to be implemented in the coming months relating to both customer experience and messaging. These changes should further boost our growth rates. In addition, we intend to further accelerate new consumer on the second half of 2026 with broader consumer communication activities. Moving to the next slide, slide eight, which looks at our performance in the US. The continued acceleration in quarter on quarter growth led to a year on year volume growth of 95% for the quarter. The acceleration continued into this year with circa 120% year-on-year growth in January. But part of this growth was driven by the reactivation of old Zing consumers who have shown strong retention rates since their return, the stronger signal of sustained growth rates, comes from the rapid acceleration in new customers, with almost 200% year-on-year growth in the quarter, and that continued to accelerate to circa 250% year-on-year growth in January. This, combined with our highest ever Net Promoter Score of 82, provides us with high confidence in the overall growth trajectory for 2026 and beyond. I would like to reiterate that the US is our top priority market. Moving to slide nine on the UK, which is our second priority market. We expect that the UK will be the largest nicotine patch market in Europe by the end of this decade. In parallel, the pending regulatory changes bode well for both the category sustainability and especially for hype, as it will force all retailers to raise the bar for mute access prevention and product standards to be in line with hype. We continue to see acceleration in the quarter-on-quarter growth rates, driven by both increases in new consumer inflow and excellent retention rates. Much of this acceleration is attributed to the combination of dedicated resources to the market and the structural advantages of the investment in infrastructure across the group in 2025. Feeding on from there to slide 10 and infrastructure. At various points in recent quarters, I have provided an update on our progress on our infrastructure overall. I'm happy to say that the last piece of the jigsaw went live in December. Already we can see significant improvements in our ability to launch features and bring meaningful value to our consumers and rapidly scale them across our markets. I have picked out three examples from the past months. Firstly, subscriptions. We have already improved the user experience on the subscription feature for our Scandinavian sites, and this is creating a notable uptick in new subscribers. And then we have launched this subscription service across the UK and Germany. Secondly, payments. We have easily onboarded a range of payment services, again across a range of markets, effectively simultaneously. These services are clearly appreciated by our consumers given the take-up rates in the early weeks. And third, we launched Vape on our network back store in Sweden, using our new architecture and our content creation tools to populate the majority of the content. The result has been our fastest ever growth in traffic for a new category on the site, resulting in excellent sales performance. While I highlight these as some of the many examples of what we've seen in recent weeks, I would like to also highlight that the significant effort which went into building a bespoke architecture for the nicotine category is expected to support many more such examples in the months and years ahead. Moving to slide 11 and looking at the regulatory outlook. For the UK, I would like to reiterate the positive signs that the tobacco and vape bill is moving the industry in line with the standards which Hype implemented many years ago. In the EU, we expect drafts for the TTD and the TPD to be released in the first half of this year. We expect this draft to undergo significant revision in the coming years as Member States and the European Parliament enter into negotiations, and we intend to keep abreast of these negotiations. In Austria, due to legislation classifying nicotine pouches as tobacco products, sales will only be allowed via the national monopoly in licensed physical shops from mid-2026. Hype expects to exit Austria at the end of June. Austrian sales account for less than 1% of the group's sales. In Sweden, the decision to revoke Snusbolag of Norden AB's license to sell traditional snus was upheld. Hype fundamentally disagrees with the ruling and is appealing it to the Supreme Administrative Court. We do not expect any material financial or operational impact on our Swedish business. With that, I will now hand over to Peter for an update on our financial performance.

Thank you, Gavin. Good morning, everyone. Let me walk you through the financial section of our Q4 results. We conclude the year with continued momentum across our key markets, supported by strong nicotine pouch demand, meaningful progress in infrastructure, and ongoing scaling investment, particularly in the US, that positions us well for 2026. On slide 12, let me begin with our sales development. We crossed an important milestone this quarter. Net sales surpassed 1 billion SEC for the first time in a single quarter, growing 15% reported and 19% excluding the negative exchange impact. Supplier finance discounting in the US reduced all reported sales by around 2.6 percentage points versus Q4 2024. We do expect price competitiveness to remain on the US market, which allows us to present more and more attractive offers to our consumers. Separating the ZIN impact is not straightforward in this quarter, particularly due to a sustained, very attractive ZIN offer since relaunch. We saw a clear impact on other brands' performance. A big portion of our consumers who bought other brands from us before switched to ZIN. So simply comparing Q4 excluding ZIN versus Q4 2024 is not giving us a clear picture. SNU's revenue decline moderated in Q4 compared to Q3 as the Swedish excise-driven price effects rolled off. Nicotine pouches remain the clear growth engine, contributing 21% excluding FX growth, while vape and heat not burn contributed modestly at around 2%. So overall, the top line is strong and we are confident to maintain or even to accelerate this momentum into 2026. Moving to slide 13, you can see our long-term gross margin development. Q4 adjusted gross margin increased by nearly 0.6 percentage points year over year, reaching 17.7%, in line with the structural trend. The key drivers remain unchanged. Increased contribution of media and insights, and scale efficiencies in fulfillment. Part of this was offset by increased U.S. fulfillment costs and the vape inventory write-off of a specific brand in Sweden, but the overall trajectory remains firmly positive. Our annual negotiations for media and insights and campaign pricing support from the brand owners was completed in late 2025 for calendar year 2026. The demand for our enhanced services continues to grow significantly, enabling us to provide even better consumer offers in 2026. As I underlined in earlier quarters, the sustainability of our gross margin is the foundation for our global and US growth strategy, enabling the investments required to build the next chapter. I also want to reiterate the core principle of our business model. The value we create is shared among our consumers, business partners, and shareholders. Our constant priority is to increase the value we deliver to consumers, which in turn depends on strengthening the value we provide to our business partners. By continually enhancing our media and insights offerings, we can offer greater convenience and value to consumers while supporting healthier profit margins. Moving to slide 14 and overheads. Our overhead base increased to 130 million sec in the quarter, up 29% versus Q4 last year. The main drivers mirror what we highlighted in Q3. Strengthening our US local team and capabilities, ongoing investments in the media and insights, and brand building and online channel awareness initiatives. Just as in previous quarters, these increases are both planned and necessary. The US business requires elevated investment intensity at this stage, but the underlying return profile supported by strong consumer acquisition and retention remains highly attractive. This is the first quarter where we can see the site of scaling positively impacting the overhead as percentage of sales ratio. Over time, scale will reduce this ratio in the P&L. Moving to slide 15, and or adjusted EBIT. Adjusted EBIT in the quarter amounted to 31.3 million SEC, a 16% reduction year over year, with margin rates reduced from 4% to 3%. Looking on the chart on the left, let me start from a segmental EBITDA view. In our core markets where we operate at scale, we improved our profitability versus the same period last year. The reduction was mainly driven by the increased investments into the US and UK markets, within our growth segment, and the temporary increase of investment into our emerging segment. Looking at the composition of our P&L, as we saw earlier, we maintained our robust gross margin, lifting versus last year, which enabled us to invest into the foundation of future growth manifested in the increase in marketing investments and overheads. The appreciation also increased title infrastructure overhaul completed during 2024 and 2025. Our emerging segment investments reduced group adjusted EBIT by around 1.5 percentage points in the quarter. Underlying EBIT margin for core and growth remained robust, change driven by the previously mentioned investments into the growth segment. Overall profitability remains well aligned with our investment priorities and aligned with our long-term goals for the future. Slide 16, our core markets. Net sales increased to 732 million SEC, up 6%, reported, or 8% in constant currency. EBITDA grew 27% to 77 million SEC, lifting EBITDA margin to 10.5%. Nicotine pouches continue to reshape the segment mix. NP accounted for 57% of our core volume, up markedly from last year. Snooze volume declined as expected, still impacted by underlying category contraction. But this is the first quarter where the Swedish tax-driven price reduction does not influence the comparison base. The shift toward fast-growing nicotine pouch supports improved future growth rates. Within the consumer base, we see the same dynamics. NP users grew, while Swedish snooze decline offset it. We also seeing an increase in our share of wallet from our consumers, supporting volume and top line growth. Media revenues again supported EBITDA expansion, similar to the trend we highlighted in Q3. Slide 17 and our growth markets. Net sales grew 41% year over year to 279 million sec with nicotine pouch volume up 61%. As Gavin mentioned, the growth segment NP volume now represents over 40% of the total group NP volume. You can see the difference between volume and sales growth. The net negative price mix is mainly driven by US, where we saw a significant increase in supplier finance discounting, negatively impacting our sales, however keeping our gross margin intact. Active consumers increased 52% to 169,000. The US and UK were the standout performers. US driven by new consumer inflow and retention. The UK by accelerating MP penetration, as Gavin explained earlier. EBITDA was minus 4.4 million with a margin of minus 1.6%. As in Q3, profitability reflects increased US investments. This is exactly the pattern we expected at this stage. Strong revenue scaling, rising nicotine pouch penetration, and elevated capability investment that will reduce as a percentage of sales as we expand. On slide 18, our emerging segment. Net sales increased 40% to 41 million sec, driven by strong Swedish and German performance. During Q4, we scaled down and seized our operations in UK. We focused on inventory sell-off without replenishing sold out SKUs. This resulted weak UK vape sales performance, decline versus Q3 and also versus last year. In contrast, the way business in Sweden and Germany remained robust. We see solid new customer intake and the growing consumer base on these markets. Net sales for Sweden and Germany grew by 89% versus same period last year. EBITDA was minus 15.5 million, reflecting both commercial investments, stock write-offs, and the disproportionately high share of fixed costs for the current scale of this business. On slide 19, turning towards selected KPIs. Inventory increased during Q4, similar to previous years. The increase manifested across all markets where we expected inbound price increases affected January 1st and focused on brands with the highest level of increases. This stock build allow us to decide either to increase our price competitiveness or realize a higher gross margin during the sellout period. Importantly, this is a temporary increase, the inventory level is going back to normal during Q1. Our accounts receivable growth was driven by the growth in media and insights revenue, while our closing accounts payable balance increase was driven by the inventory purchases. Net debt remained low at 0.6 times last 12 months adjusted EBITDA, consistent with our longstanding capital discipline. Financially, we exit 2025 in a strong position with continued growth, stable growth margin, healthy working capital, and ample capacity to support expansion. With this, I will hand back to Gavin.

Thank you, Peter. Moving to our outlook on slide 21. In our view, a long-term future for Nicotine Patches, the online channel and Hype Group with its many strengths remains very encouraging. Conditions within the US and the UK in particular continue to evolve in a positive direction for Hype. Hype Group's operating model continues to generate increasing value for our consumers, the brand owners, and while also providing margin expansion opportunities over the medium term. The expected increase in regulatory requirements are manifesting, which further differentiates us given our sustained focus and investment in long-term compliance. As we execute on the priorities outlined in our April 2025 Capital Markets Day, we remain confident that our regulatory preparedness, operational discipline, consumer-centric approach, and major growth opportunities, notably in the US and the UK, position us to create long-term value and strengthen our leadership in the category. And feeding on from there, on slide 25, I would like to touch upon the medium-term guidance from our Capital Markets Day in April 2025, which runs out to 2028. We envision revenue growth rates of 18% to 25% CAGR over the period, with the US market being a material contributor. This takes into account the lower reported growth rates for 2025 due to the comparatively narrower consumer base in the US. We also guide towards 5.5% EBIT at the end of the period, plus or minus 150 basis points. While we have been materially increasing our EBIT over the past two years, we intend to reinvest into the US to accelerate our market share growth over this period. I would kindly direct your attention to our CMD material, which is available on our group site, and this provides more detail behind these targets. Lastly, the company does not intend to issue a dividend over this period, instead reinvesting surplus cash flows into the company's future expansion. Before I open up for questions, I would like to take the opportunity to thank my colleagues for the dedication and hard work in delivering these strong results. And with that, I will hand over to the operator for questions.