Haypp Group AB (publ)

Welcome to Hype Group Q1 2026. 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 five on their telephone keypad. Now I will hand the conference over to the speakers, CEO Gavin O'Dowd and CFO Peter Deli. Please go ahead.

Good morning, everyone, and welcome to Hype Group's Q1 results. Our CFO, Peter Deli, and I, Gavin O'Dowd, will take you through today's presentation. Starting at slide three, which is the agenda for today, I will take you through an overview of hype and the Q1 performance highlights, and Peter will take us through the consumer, financial, and segment performances before having a look at the progress on our key strategic priority markets and an outlook. I would like to take you to slide five to remind you of some of the key dynamics around our business. We are a retailer of risk-reduced products with a strong focus on nicotine patches, which as of today make up approximately 70% of our sales. We have multiple storefronts per market, and we operate in six markets in Europe and in the US. Approximately 90% of our revenue comes from product sales, with the sales of media and insights to brand owners accounting for just over 10%. While jurisdictional complexity around the sale of nicotine is often viewed as a hardship, given our expertise and scale, we view it as a barrier to entry. We target to approximately double our 2024 revenue by 2028 and increase our 2024 EBIT by 3 to 4x. Moving to slide six. The scale of market growth potential in our existing geographic footprint is determined by the US and the UK. While the UK is a distant second, it has some very favorable long-term dynamics. Continuing on to slide seven, the US and the UK are also the two markets with extremely low online penetration rates, reflecting the early stages of the category lifecycle. Hence, these are two markets which we have dedicated significant resources to in recent quarters. And we will touch on this more throughout the presentation. Moving on to our quarterly performance updates and starting with slide nine. We're happy to see continued acceleration in nicotine patches, not just for the quarter as a whole, which grew 40%, but continued acceleration within the quarter. Both reporting segments performed exceptionally strong, with the growth segment reflecting the scale of the opportunity in the US and the UK. And in addition, the core segment showed that even there are high market shares, there is still opportunity for additional market share growth. In the past three years, nicotine patches have increased from 45% of our group volume to approximately 70% today. Moving to our performance highlights on slide 10. An increase in active customers was the primary driver of our growth. However, increases in the share of wallet further added to the growth. This is reflected in the higher growth rates for volumes than for consumers. Combined, these led to over 24% revenue growth at constant currency. The performance in the growth markets was exceptionally strong, with 83% increase in volume, driven by over 120% growth in the US and over 100% growth in the UK. And at constant FX, this led to 58% increase in the sales for the growth segment for the quarter. Gross profit was up 20% with a stable gross margin. This consisted of substantial increases in the median insights, which was reinvested into the consumer offer to further accelerate the flywheel. We have materially increased investment in the US and the UK in terms of capabilities. This combined with increases in marketing expenditure, while the window to do so remains open, has led to a reduction in EBIT margins, which we expect to continue for the remainder of this year before trending back towards our 2028 guidance of 5.5 percentage points. On slide 11, we show the actual performance of each of these KPIs and their relative change versus prior year. These reflect the drivers of growth, both the increase in consumers and the further increase in orders and average order size. With that, I will hand over to Peter.

Thank you, Gavin. Good morning, everyone. Let me move to the consumer section and starting on slide 13. In this slide, we are highlighting the continued strength in our consumer base during the first quarter. Active consumers reached a new all-time high and grew by 17.8% on group level. we have two reinforcing trends, rapid growth in growth markets supported by core markets turning into growth. The real standout is the growth segment. Active consumers increased 66% year on year, driven primarily by the US and UK. Our marketing efforts in these markets are showing clear early traction with strong conversion and repeat purchase behavior. In core markets, active consumers grew 5% year on year, which is a meaningful improvement compared with the declines we saw earlier last year. This is driven by a growing number of nicotine pouch consumers and a stabilizing snooze consumer base. Overall, the momentum we are seeing in both core and growth markets gives us confidence that our consumer acquisition strategy is working, paired with sustained strong retention, and that we are building a strong foundation for continued volume and sales acceleration. Moving to slide 14. On this slide, we are showing the continued acceleration in nicotine pouch volumes across the group. Nicotine pouches now make up 69% of our total volume, compared with 45% in Q1 2023. That shift in mix is a major structural driver of our long-term margin expansion. Group nicotine pouch volumes grew 40% year on year, which is a clear step up from the mid-teen growth rates we saw through most of last year. The U.S. and U.K. remain the strongest contributors, both delivering triple-digit growth. Our core markets also performed well. Nicotine pouch volumes grew at high teen rates, taking market share, and nicotine pouch now represents more than 56% of core volume. Snooze declines continue to moderate, helped by improvements in our consumer offer to cater for mixed-category purchases in Swedish households. And while the UK vape discontinuation affected the vape and heat not burn category, we saw strong growth in Germany and Sweden. These two markets together up by 119% versus Q1 last year. Overall, the category dynamics remain very supportive and our scale positions as well to capture the ongoing shift toward reduced risk products. Moving into the financial performance section, slide 16. Before we go into the quarterly performance, I would like to touch on our increase disclosures, which we have introduced this quarter. We recognize that as our business grows and the importance of our growth segment increases, some of you may wish to have more information to better understand our performance. For this reason, we are disclosing group and segment total volume and share of nicotine pouches, gross profit by segment, group sales by revenue stream, group overhead cost breakdown by marketing fulfillment and GNA costs. We have also folded or emerging vape and heat not burn segment into the other two segments as they have moved out of introductory stage and are now being managed by the local teams. Since Vape UK was shut down, this leads Germany, which will be folded into gross markets, and Sweden, which will be folded into core markets. For transparency purposes, we will continue to provide details on their performance. See the Q1 2026 report and the published KPI file for full details and historical data. Moving to slide 17 and looking at our net sales momentum. Net sales grew by 19.6% year-on-year, and when we adjust for currency effects, growth was even stronger at 24.3%, making this the highest constant currency growth rate we've delivered in the last six quarters. The 180 million SEC absolute year-over-year growth is the highest quarterly growth we ever achieved. The negative FX translation impact is mainly driven by the SEC to US dollar translation with NOC to SEC contributing as well. On the macro level, you can see that our top line grew faster in constant currency than our volume. The positive mix impact is driven by media and insights revenue, which continues to grow faster than our product sales. What makes me particularly happy that all critical parts of our business contributed to this excellent result. Looking on the different product categories, we can see that nicotine pouch remained the key growth driver. Considering that nicotine pouches makes up almost 70% of our volume, strong growth paired with increasing share of sales creates a positive mix impact on our overall sales performance. Within nicotine pouches, US and UK are the key growth drivers with solid mid-teen growth in our core markets. Price mix for the nicotine pouch segment was negative in the quarter, driven by the U.S. business unit. Without going too much into the details now, I would like to highlight that the promotions are driven by manufacturers, and this is a margin neutral for us. There is an offset in our cost of goods sold. Our smooth sales stabilized, and after a few challenging quarters in 2025, the decline is slower than what we anticipated in our capital markets day outlook. The improved performance is mainly driven by a targeted improvement in our consumer offer in Sweden to better cater for household purchases where a mixed snooze and nicotine pouch order is common. Vape and heat not burn products reported sales increase contributed by 0.8 percentage points to the overall growth, which is an exceptional performance considering the negative impact of the UK vape and heat not burn discontinuation. Sweden and Germany volume, as I mentioned, was up by 119%. Moving on to slide 18, gross profit and gross margin. First time ever, we delivered gross profit about 200 million sec in a quarter. It's a major step up in absolute terms. Gross profit growth is in line with our net sales growth. Gross margin remained stable. A marginal increase of 0.1 percentage point was realized. Within our gross margin, we experienced two opposite impacts. The fast growth of media and insights across all four markets increased the gross margin level by 1.7%. Media and insight accounted for 11.6% of the group revenue in Q1 2026. The incremental benefits from media and insights about last year were partly invested into our consumer offer in the form of targeted pricing and free shipping offers, resulting in a 0.1 percentage point increase in our overall gross margin. On slide 19, you can see the details of our overheads. Overheads increased in the quarter, and this was fully expected. In order to better understand our overhead base, starting from this quarter, we are breaking it down into the three important elements. Marketing, fulfillment overheads, and the pure G&A. Marketing spend increased as we leaned into consumer acquisition, while the opportunity window remains open. Our paid marketing efforts are concentrated mainly to US and UK. In US and UK, we see substantial increase in our new nicotine pouch consumer acquisition rates. Fulfillment overheads reflect the labor cost, utilities, and other external costs connected to our own warehouses. This cost category grew slower than the volume. cost up by 17% versus 23% volume growth, which shows that scale benefits are counting to materialize. In G&A, you can find the salary of the office population and external costs like legal, tax advisory, audit, license fees, et cetera. The primary drivers for the increase were our organizational build out in the US and UK and central organization around AI. We also recognized costs connected to building upper operations in new geographies, which will benefit the group in the medium term. We expect overhead intensity to moderate as revenue scales through midterm. Moving on slide 20 and our adjusted EBIT. Adjusted EBIT for the quarter was 27 million SEC with a margin of 2.5%, down from 5.2% last year. This decline is fully aligned with our investment plan. We are prioritizing consumer acquisition and market share in the US and UK, and the growth segment accounts for the majority of the margin compression. We expect this investment phase to continue through 2026 with margin expansion resuming as scale benefits flow through in 2027 and 2028. Moving to slide 11, Our working capital and leverage. Working capital improved meaningfully in the quarter, with inventory normalizing after the year-end stock build. Inventory turns and net working capital growth improved, supported by strong top-line growth. Leverage remains very low at 0.2 times. We remain disciplined in managing working capital, especially as we scale in the US and UK. Moving into the segments and let me start with the growth segment on slide 23. This is where we continue to see the most significant acceleration. Active consumers grew 66% year on year and total volume increased 71%. Both the US and UK delivered exceptional performance with volumes up more than 100% in each market. This reflects strong category momentum, improved assortment, and the early benefits of organizational build-out. Net sales in the segment grew 41% or 58% at constant currency. Gross margin remained stable at around 20%, which is a strong result given the level of investment into our consumer offer. The growth markets represents 28% of our Q1 net sales, which is an increase of 4 percentage points versus Q1 2025. This shift expected to continue into the future as well. EBITDA for the segment was negative at 23 million SEG. This is expected and reflects the deliberate investment phase we are in as we build local teams and scale consumer acquisition. These investments accelerate the long-term market share capture and are already translating into strong consumer and volume growth. Overall, the growth segment is performing in line with our expectations and is the primary driver of our long-term revenue and EBIT expansion. Moving to slide 24 and our core segment. In the core segment, we delivered steady and predictable performance consistent with the role this segment plays in our portfolio. Active consumers grew 5% and total volume increased 9% driven by the nicotine pouch category and supported by improvements in the snooze consumer offer. Net sales grew 13% with rising orders per consumer clear signs that we are increasing share of wallet among our existing consumer base. Gross margin was stable at 18.1%, and EBITDA increased to 75 million. The driver for the EBITDA margin reduction is the inclusion of the vape category. The core segment continues to generate strong cash flow and remains the foundation of our margin profile. Nicotine pouch penetration in the core markets reached 56%, up 3 percentage points year on year. This shift in category mix supports long-term margin expansion and reinforces the structural advantages of our business model. With that, I hand back the word to Gavin.