Viva Wine Group AB

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 CEO Emil Salnes and CFO Lynn Gavir. Please go ahead.

Good morning, everyone, and welcome to our Q3 2025 presentation. My name is Emil Salnes, and I will, together with our CFO, Lynn Gavir, present today. This is the agenda for today. And before we go into the quarterly update and financials, I want to start by giving you a short introduction to Viva Wine Group. Today, almost 90% of our business is in our B2B segment, which includes the Nordic monopoly markets, as well as retailers and restaurants in both the Nordics and Europe. With the acquisition of Delta Wines, our B2B business is now present in seven markets and operate through 12 companies. In the Nordic Monopoly market, we are the market leader in wine. With the acquisition of Delta Wines, we also entered the open market in Europe, and we are the leading wine distributor in the Netherlands. Just over 10% of our sales is in the B2C segment, which consists of our profitable e-commerce business based in Germany. We operate via our three platforms, Vecampo, Weinfjost, and Wine&Black, selling to 11 markets in Europe. And we are one of the leading online wine retailers in Europe. So now let's move on to the Q3 update and our performance summary. When summarizing the quarter, I'm very pleased to report that we delivered a strong third quarter. Net sales increased significantly by 49%, mainly driven by the acquisition of Delta wines. Organic growth was positive at 2.8%, with growth in both segment B2B and segment B2C. Adjusted EBITDA increased year on year as an effect of the consolidation of Delta wines, while the adjusted EBITDA margin was lower, which is a reflection of the lower margin profile of Delta. Since our last quarterly call, we have communicated that we are in the process of moving to the main list. For us, this is the next step in our growth journey and the natural progression after the IPO in 2021. Moving to the main market is a quality stamp and makes the share more attractive to investors. To align with the shareholding profile of mid-cap companies and to broaden the investor base, we also, in the end of the quarter, issued a limited distribution of shares. The issue was oversubscribed and we welcomed 3,500 new shareholders. We expect the change of listing venue to be finalized in the near future. Now, let's look in more detail at the financial performance. I will hand over the word to Lynn.

Thank you, Emil. We have a strong net sales growth of 49% in the quarter, mainly driven by the acquisition of Delta Wines. Organic growth was positive at 2.8% with growth in both segments, which reflects that we continue to have a solid underlying business. In our B2B segment, Delta Wine's performance and integration is going according to plan. The underlying Nordic business was also performing well and was slightly up in the quarter. B2C reported positive organic growth for the third quarter in a row and also continued to grow its customer base. Looking at the profitability, adjusted EBITDA increased versus previous year, mainly as an effect of the consolidation of Delta wines, but also excluding Delta wines, adjusted EBITDA increased versus prior year. The lower adjusted EBITDA margin is a result of the lower GM percentage in Delta wines. The adjusted EBITDA margin for the underlying business exceeded previous year's levels with improved gross margins. Over to the net working capital. Net working capital is according to plan and the ratio of net working capital to net sales is down to 12.9% from 14.5% in the last quarter. A high level simulation including net sales for 12 months shows that the ratio is slightly below numbers pre-acquisitions. Our net debt to EBITDA is also developing according to plan and is down from 4.1 in Q2 to 3.6. We expect to continue to deleverage as the EBITDA is consolidated month per month. A high-level simulation of adding 12 months of EBITDA reduced the number from 3.6 to approximately 3. We expect to continue to deliver and reach our financial targets of 2.5 during next year. Cash flow. We have a very strong cash flow from operating activities in the quarter, supported by an improvement in working capital. We have cash flow from investing activities that includes the business combination of Vinguide and Nordic, with a cash flow effect of 8 million Swedish crowns. Cash flow from our financing activities includes repayments of term loans according to plan and change in overdrafts. The cash flow from the previously mentioned distribution issue of shares will be reported in the cash flow in Q4.

Thank you, Linn. So now over to the performance by segments. First out is our B2B segment. In the Nordic monopolies, we remain the clear market leader and we increase market shares in all markets. We continue to see weak consumer sentiment and sales volumes in the Nordic monopolies, which decreased by 2.9% compared to last year, while our sales volume decreased by 1.9%. Please note that these numbers relate to volume, and as you can see in the quarterly report, the organic growth for the B2B business, sorry, growth for the B2B segments, which excludes Delta wines, is 2.0. For the Nordic markets combined, Viva Wine Group reported a market share of 22.4% for Q3, which is a slight increase from last year. Our B2B business in Europe is estimated to have performed well in relation to the market.

Looking at the net sales in segment B2B, it increased significantly by 57.4% in the quarter, with an organic growth of 2%, as Emil mentioned. The increase versus last year is driven by Delta wines. This is the first quarter where Delta numbers are consolidated the entire quarter in the numbers. Adjusted EBITDA increased versus last year, while the adjusted EBITDA margin in the quarter decreased and ended at 8.7% versus 10.4% last year. Main reasons for the lower adjusted EBITDA margin percentage are explained by the lower gross margin percentage in Delta wines. The gross margin percentage in the Nordic business increased in the quarter, mainly driven by price increases. Both adjusted EBITDA and the adjusted EBITDA margin was above prior year's level for the Nordic B2B business.

Segment B2C, which consists of our e-commerce business, had a very strong quarter and for the third consecutive quarter showed growth. In Q3, the organic growth was 7.9%. Despite a slow overall market, we have seen a positive trend shift in our active customers due to strong customer acquisition. Our estimate is that we, thanks to this strong performance, now outperformed the market not only in profitability, but also in growth.

In the B2C segment, our net sales was up versus previous year with 4.8% and we have continued positive organic growth reaching 7.9% in the quarter. The gross margin increased slightly due to positive product mix. Adjusted EBITDA margin in Q3 was lower than prior year, driven by our investments in marketing.

So now some final comments. As we communicated yesterday, our board has adopted new financial targets. Our previous targets have served us well, but our recent acquisition of Delta wines and our change of segments was a natural trigger to evaluate the financial targets. After careful consideration, the board decided on the following targets, two updated and two unchanged. For growth, the new target is organic sales growth exceeding market growth. The growth target is now the same for the whole group and is a reflection of our wider footprint as a company, where we now have a business in many more different countries than when the old targets were formulated. We are a company that is built on organic growth and beating the competition. So this updated target shows that it's our intention to continue on that track. In addition, the company intends to grow through acquisitions. For profitability, the new target is 8-10% adjusted EBITDA. Profitability target has been adjusted due to the different margin profile of the Delta Wines business in comparison with our historic business. The capital structure and dividend policy remain the same, but to repeat, capital structure, net debt over EBITDA below 2.5 and dividend policy of 50 to 70% of the annual net profits. To summarize, with Delta fully integrated in the quarter, we are a significantly larger company with a strong footprint in Europe. Sales increased with 489 million SEK, mostly due to Delta wines. Adjusted EBITDA was also significantly higher. We had a strong third quarter with growth in both segments. Especially pleasing is to see our B2C is back on the growth track with positive organic growth for the third quarter in a row. With regards to M&A, we do see an increased activity and steady deal flow in that area. Finally, we are in the last stages of the process of changing list venue and expect to change venue in the near future. And with that, it's now time for the Q&A session.

If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Johan Fred from SEB. Please go ahead.

Yes, good morning, guys. Thank you for taking my questions. A, first one on your updated sales target. You target growth above market or above market growth. In your sort of models and calculation, what do you expect the underlying market growth to be coming periods?

I think in general, we do see and also, I mean, even at the IPO, we did not communicate that we thought that this is a growing market in terms of volume. So we do expect volumes to go down slightly in the near future in all our markets. However, we do expect sales value to be flat or slightly growing if you extend the time period a little bit more than in the coming year.

And that also includes the e-com market, which you previously assumed or targeted a growth of between 10% and 15%. I suppose that is driven by increased online penetration, etc. So you also expect the online market to grow at a significantly lower pace than previously?

Actually not. I wouldn't say that, but we do still see a low consumer sentiment, but we do have a positive outlook on our growth. But in terms of the market, we don't expect it to grow significantly in the near future. But if you extend the period over the... mid-term, which is where our financial targets are set, we do expect the ECOM or the B2C segment to outperform the B2B segment so that they will be on the upper part of, they will grow more than the other segments in general. But it all depends on the market growth as well. I mean, the more the market grows, now we are beating the market uh quite significantly because the market is going the other way as we see it and we are increasing so if the market starts growing our growth will be higher as well so you're right it's not the same for the two different segments that's correct okay cool got it uh and and speaking of the b2c segment eight percent organic growth in the quarter um despite us you you you stated a weak consumer sentiment

That's quite the sequential step up from Q2. Could you elaborate on what drove the growth and if you've done something differently in this quarter in terms of marketing, et cetera?

No, I think this is an effect of many smaller adjustments of the marketing that we do in the customer acquisition. And I think we did... a year ago or so, talk about changing a little bit the way we're working. So now that change of way of working has also been coming out in the growth figures. So I would say it's many different small things. There is not one recipe, but a lot of hard work from the teams, but especially that we organized our marketing teams differently than we had before.

And do you expect this trend to continue or is there anything during Q3 to start off but Q4 that might impact the current growth trajectory?

We have a positive view on Q4. Then, of course, for any e-commerce business, the Black Week will be very, very important. And, of course, that is yet to come. But we are positive for Q4. For the slightly longer future, we are very, very... careful that of course with this market going up and down and the consumer sentiment in in especially germany our main market also going up and down a lot it might vary a little bit but overall we do have a positive view on the growth of the ecom and the final one if i may before i jump back in the queue um any any chance that you could break out the opex contribution from from delta wines in the quarter

We don't do a breakout of the segment. That's OPEX total that we present to the market.

Okay, fair enough. Those were all my questions for now. Thank you so much.

Thank you.

The next question comes from Niklas Elmhammer from Carlsquare. Please go ahead.

Yes, good morning. Thank you for taking my questions. Sorry if you already commented on this, but is it possible to say something regarding markets in Q4 so far?

What I just mentioned is that we have a positive view on the e-com or business-to-consumer segment in Q4. There is no guidance for the rest of the B2B segment, the rest of the business.

Okay, fair enough. And regarding the growth margin, looks like a notable improvement in the Nordics. Do you have any guidance going forward? For the end of the year, the gross margin?

Yes. High level estimate is that we will strengthen the gross margin a bit more in Q4 versus Q3. A slight improvement to Q4 is expected for the Nordic markets, but also for the European markets. um and that will mean that we expect it to increase for the overall view of wine group as well where we see the b2c segment is stable and has been over the last year around 40 percentage but we see increases small increases quarter by quarter in the b2b segments that will make a total level of a small increase also in q4 from q3

Okay, yeah, got it. And regarding Delta wines, is it possible to comment on the sort of underlying growth there? You mentioned the weak market in the Dutch market.

We don't have, as you know, the organic growth for Delta wines. It was reported differently. What we can say is that the market is weak, but according to our estimates, we are outperforming the market in the Netherlands. And it's going according to plan. And according to plan is pretty much what we communicated when we bought the company.

Okay. Regarding profitability, if I'm calculating correctly, it's quite a bit lower than the Nordics, which is a bit expected. But is the profitability somewhat more depressed in the court? Is there something related to costs? And do you expect the margin gap to narrow to the rest of the B2B in Q4?

No, I mean, this is the first quarter where we have Delta fully integrated. So it's a good reflection. However, we have seasonality effects as we also have in our existing business. And for Delta wines, we expect an improvement of gross margin in Q4 versus Q3. So we have previously communicated that we... expect the margins cross margins for this acquisition to be around 14 percentage and that is for a full year but it is the highest is of course in q4 okay thank you very much the next question comes from rauli juva from india's please go ahead

Hi, Rauli from Inderes. Two questions for me. First of all, looking to next year, what kind of cost inflation or cost pressures do you see? On the other side, what kind of pricing development do you see? I guess you have pretty good visibility already to the first half of the year.

I mean, in general, we don't expect next year to be big price increases to the consumer or from our costs either. So we assume it will be a pretty stable year in costs both coming in and no major price increases to expected for the market.

Okay, clear. And then regarding your margin target, is that range related in any way to market circumstances? In a weak market, we should expect that you are towards the lower end of the range, or is the range dependent on something else?

No, I mean, the change in that respect has only to do with Delta wines. In fact, we have in the last two, three, four quarters actually increased the margins in the Nordic business. while the e-commerce business has been similar.

Yeah, not a change, but the rate you have from 8 to 10 now is kind of the lower end versus the higher end. Is that a function of the market conditions or rather something else?

Of course, always when you have a range, there is some relation to market conditions, obviously, but it has more to do with the different margin profiles of the different businesses that some will drive up the average and others will dilute it. Yeah, right.

Okay, great. Thank you. Thank you.

There are no more questions at this time. So I hand the conference back to the speakers for any written questions and closing comments.

Great. So we have quite a few questions online. So Alexander sent the first one, which is related to Delta. Can you elaborate on the seasonality effects in Delta?

Yes, Delta wines, I would say, have the same seasonality effects as our B2B historic business that was the Nordic segment. So where we have sales the highest in Q2 and Q4 and also the profitability highest in Q4. And for the Nordic segment to repeat, we also have a quite good margin in Q3 historically.

And then the next question from Alexander, gross margin expectations for gross margins in the Nordics in Q4.

Yes, as I said, we expect to see an increase versus Q3 for the Nordic market also in Q4. So a small increase is what we expect.

And then it follows up with 2026. Any gross margins?

The gross margins for 2026, we foresee them to be fairly stable looking compared to this year.

Then there is an FX question, how the currency exposure has changed after the acquisition of Delta Wines?

Yes, the currency exposure, of course, this gives us a bit more hedging that we have more coming in from Euro to our result. However, I would not say it significantly changes the hedge effect.

Then with regards to capital allocation, with a normalized gearing, net debt to EBDA, what is the board view on buybacks with current valuation after the uplisting to Nasdaq? There is no current view from the board on buybacks. However, it was one of the considerations that was in the decision to change to the Nasdaq market. So the board sees positively that they have that option in the future. And then a couple of more questions from Alexander. Also, current market growth in volume as well as price in delta wine regions.

Yes, I would say that it's fairly similar compared to the Nordic market. I mean, the European view, where we include the Nordic, is that the volumes will not grow. I think that the volumes, perhaps somewhere around down one, two percentage points, but we foresee the sales to be a bit more stable than the volume.

And then a question on the B2C. Average order value was down year on year. Was down year on year. Do you expect that average order value is continuing down or stabilize?

We expect it to be fairly stabilized and average order value. We have increased number of campaigns, of course, since we have these new marketing channels that we have seen good effects on and that also have given us more customers. So we are investing in that and seeing results.

Yeah, and putting it in a different way, when acquiring new customers, the order value tends to be lower. So the more new customers we get, which is positive, the order value will go down a little bit. And then last question from Anders Persson. Congrats, blah, blah, blah. Nice. Thank you. I shouldn't say blah, blah, blah. Will the dividend policy and acquisition activities be put on hold until you have reached the debt target? Any particular market that you will target for M&A activities moving forward? Well, I think when it comes to M&A, we will, of course, be careful and always consider our debt profile. However, with targets that are profitable, they do contribute to these targets and the net debt to EBITDA. figures, so there is no halt on M&A, but with careful consideration. And with regards to specific markets, I think we can't really say that we are looking at any specific markets. We have ongoing targets in all segments and also all different regions. Not saying that they are active, I'm saying that we're looking at things all over our area. That concludes the questions, so thank you from our part and see you next time.