Westwing Group Aktie

Ladies and gentlemen, and welcome to the Westwing Group SE H1 2026 Earnings Call. [Operator Instructions] Now ladies and gentlemen, let me turn the floor over to your host, Andreas Hoerning.

Good morning, everyone, and thank you for joining us for our earnings call on the second quarter of 2026. My name is Andreas Hoerning, I'm the CEO of Westwing. I'm hosting the call together with Sebastian Westrich, our CFO.

Looking at today's agenda, I will begin by providing key updates on our business for Q2 2026, after which Sebastian will share the details of Westwing's financial performance. After our investment highlights, we will be happy to take your questions.

Let's take a look at the current state of Westwing. Overall, in Q2, we saw strong top line growth while navigating a challenging macro environment. Our revenue increased by 14% year-over-year to EUR 113 million. This was driven by 2 main factors. First, we saw continued top line momentum from country expansion. Second, we benefited from strong recurring sales events. Both drivers had already contributed significantly to our strong top line growth in the first quarter of the year.

On bottom line, we achieved an adjusted EBITDA of EUR 5.4 million at a revenue margin of 4.8%. This represents a decline of about EUR 800,000 compared to the same period last year. The negative development in adjusted EBITDA stems from expected macro-driven pressure on contribution margin, including transportation cost increases and one-off effects related to a large software transformation.

Free cash flow was negative at minus EUR 9.4 million, including an impact of EUR 9.5 million for the settlement of mostly legacy stock options. Our net working capital was negative at minus EUR 5.5 million at the end of Q2, EUR 11 million better than a year ago.

We ended the quarter with EUR 68 million in net cash, which includes the aforementioned stock option settlements and additionally about EUR 3 million spent on share buybacks during Q2. Overall, net cash was EUR 18 million higher than at the end of Q2 2025, despite option settlements and share buybacks, reflecting the continued improvement in cash generation.

Beyond key financials, we again made good progress on our 3-step plan to unlock Westwing's value potential. Our key achievements included: One, we grew our Westwing Collection business by 11% year-over-year and our third-party assortment by an even stronger 23%, driven by the onboarding of new partner design brands over the past quarters. Two, we continue to build momentum in our expansion initiatives with strong development in the U.K. and the launch of 3 additional countries at the end of July. Three, we strengthened our physical retail presence by opening a new store in Frankfurt and moving our Munich store to its permanent location. Four, we launched new order and warehouse management systems, replacing our proprietary legacy system and completing the final major step in modernizing our technology stack. Five, we successfully opened a third-party operated U.K. warehouse in July.

To complete the summary, the overall development is in line with our guidance that we published in March and which we confirm today. Revenue is now expected to land in the upper half of the guided range.

As always, let's have a look at our 3-step value creation plan, which we initiated in 2022. We're happy to report that we are well on track with the execution of the third phase, scaling with operating leverage. As we grow both in pre-2024 as well as in new Westwing markets, we remain focused on cost discipline for operating leverage. Because of that, we are able to invest throughout the cycle.

Let me now briefly guide you through our progress on 2 key levers of the third phase of our plan, that's market share gains in existing geographies and country expansion. As outlined in previous earnings calls, besides improvements in product assortment, we see offline store expansion as a lever for share gains in existing markets. In Q2, we opened a store in Frankfurt and relocated the Munich store to its permanent location.

Let's have a look at some pictures. In Munich, we relocated from our so-called Walmart stores to the permanent location at Residenzstrasse, one of the city's premier shopping streets. Munich is especially meaningful to us as it is where our journey began and where most of our central teams are based, enabling us to learn and refine the customer experience even faster. The new Munich store is also the first to feature our enhanced in-store shopping concept to allow for an even better customer experience.

Next to Munich, we are also very proud to now have a permanent store in Frankfurt located in the heart of the Financial District. So far, we had a great start in both new locations. In total, we now offer enhanced branded product experience to our customers in 6 stand-alone and 4 store in stores.

Let's move on from gaining market share in existing geographies to entering new markets. Our expansion markets, that is countries launched since May 2024, accounted for 12% of group GMV in Q2 2026. Back in February, we reached a major milestone by entering the United Kingdom, representing our largest expansion so far. In just a few months, it has already become the biggest expansion market in terms of GMV. This early success reflects our focus on delivering great customer experience from day 1. Alongside our curated product assortment, we launched the U.K. with our interior design service, Westwing delivery service and B2B service.

To serve U.K. customers even better, we opened a local third-party operated warehouse in July. This will help us to reduce delivery times while improving supply chain efficiency over time. Beyond the U.K. warehouse launch, we continue to expand our geographic footprint. At the end of July, we entered 3 additional markets: Estonia, Latvia and Lithuania, bringing our total footprint to 26 markets.

We are pleased with the traction in the new markets, and we'll continue to invest into customer acquisition and long-term growth. 2026's marketing investments will be weighted towards the fourth quarter, including brand building initiatives.

I now hand over to Sebastian for details on our financial performance.

Thank you, Andreas, and good morning, everyone. I'm Sebastian Westrich, the CFO of Westwing. Let me start, as always, with our top line performance. Growth continued in the second quarter with revenue increasing by 14% year-over-year, bringing revenue growth for the first 6 months of the year to 13%. As Andreas highlighted earlier, our Q2 performance was once again supported by our country expansion initiatives, the continued strength of our recurring sales events and strong growth in both the Westwing Collection and our third-party assortment.

Let us now take a closer look at our top line performance on segment level. We are pleased to report growth across both segments with revenue increasing by 10% year-over-year in DACH and by 19% in international. In the DACH segment, growth was supported by the continued expansion of our physical store network. And in the International segment, our country expansion initiatives continue to deliver strong results, with the U.K., in particular, maintaining very encouraging momentum after our launch earlier this year.

Q2 adjusted EBITDA came in at EUR 5 million, down EUR 800,000 year-over-year. Profitability was impacted by the expected macro-driven pressure on contribution margin, including fuel costs and unfavorable shifts in demand mix. In addition, we incurred temporary one-off costs related to the migration to our new order and warehouse management systems. These costs mainly reflected implementation-related expenses, lower warehouse productivity during the ramp-up phase following the system go-live, which required additional shifts as well as lower freight efficiency. While some migration-related costs will continue into Q3, we expect them to be significantly lower than in Q2.

At the same time, we have already started to realize the first efficiency gains from the new systems, particularly in our inbound processes, with the full benefits expected to materialize from Q4 onwards. Beyond efficiency improvements, the new platform will enable faster shipping and flexible delivery options for an enhanced customer experience.

Looking at the first half of 2026 compared to the previous year's period, adjusted EBITDA remained broadly flat.

Let me continue with an overview of our P&L development with a focus on the second quarter of 2026. In Q2 2026, gross margin decreased by 0.7 percentage points year-over-year to 51.9%. This was driven by a slightly lower Westwing Collection share of 63% compared to 65% in Q2 2025 as well as overall margin pressure across the portfolio. The fulfillment ratio increased by 2.6 percentage points year-over-year to minus 21.7%.

This development was driven by 3 main factors: First, we incurred temporary one-off costs related to the migration to our new order and warehouse management systems as discussed earlier. Second, transportation costs increased year-over-year, mainly due to the temporary fuel surcharges following higher oil prices. In addition, the increase was driven by our targeted investments in freight quality in the DACH segment and regular carrier price increases. Third, we continue to experience unfavorable mix effects, reflecting macro-driven changes in consumer demand. These included trading down behavior and a shift away from larger furniture items, both of which had a negative impact on our unit economics.

Overall, contribution margin decreased by 3.3 percentage points year-over-year to 30.2%. Our marketing ratio improved by 0.2 percentage points year-over-year to 13% despite our ongoing investments into country expansion. Please keep in mind that brand marketing investments will be concentrated on the fourth quarter, as Andreas mentioned already earlier, which means that marketing ratio is expected to increase in Q4 compared to the previous year's fourth quarter. Our G&A ratio, including other results, improved by 2.1 percentage points year-over-year to 15.9% driven by significant scale effects despite additional G&A costs for our new stores. This marks our seventh consecutive quarter of operating leverage in G&A. As a result, adjusted EBIT margin came in at 1.3%, down 1 percentage point year-over-year. G&A ratio improved by 0.5 percentage points year-over-year to 3.5%, also driven by scale effects.

Overall, adjusted EBITDA margin amounted to 4.8% in Q2 2026, down 1.5 percentage points compared to 3.6% in the previous year. While we are, of course, not happy about the year-over-year decline in adjusted EBITDA margin and absolute profitability, it is important to note that the pressure on our contribution margin was primarily driven by temporary factors, including one-off system migration costs and macro-driven headwinds. At the same time, we continued to benefit from significant operating leverage in G&A and D&A, demonstrating that the structural efficiency measures we have implemented remain firmly on track.

With that, let's move on to profitability on segment level. In Q2 2026, negative one-off effects from the migration to new order and warehouse management systems affected profitability in both segments as related costs were allocated based on gross sales. Adjusted EBITDA margin declined in both segments as a result of these one-offs as well as the aforementioned additional negative margin effect. The DACH segment was to a large extent, impacted by unfavorable mix effect and deliberate investments in freight quality, including a shift in shipment volumes towards carriers offering higher delivery service levels. Consequently, adjusted EBITDA margin declined more than in the International segment. A very encouraging signal is that adjusted EBITDA in the International segment increased year-over-year in both Q1 and Q2 despite the pressure on contribution margin. This demonstrates that our expansion initiatives contribute positively to adjusted EBITDA, with only the countries launched in 2026 still below breakeven as they continue to ramp up.

Let us now take a look at our net working capital. At the end of Q2 2026, net working capital remained negative at minus EUR 5 million, a year-over-year improvement of EUR 11 million. This mainly reflects a favorable development in trade payables versus last year's period. I would also like to highlight our disciplined inventory management during the quarter, which made a positive contribution to net working capital as well. Despite top line growth and inventory investments into U.K.-specific product lines to support the U.K. launch, we maintained inventory levels broadly flat year-over-year, demonstrating continued focus on working capital efficiency.

On the next slide, you can see CapEx and CapEx ratio for the first half of 2026 compared to the first half of 2025. The first half of 2026, CapEx came in at EUR 6 million, an increase of EUR 1 million year-over-year, corresponding to a slightly increased CapEx ratio of 2.4% of revenue compared to 2.1% in the prior year period. This temporarily increased CapEx was mostly driven by investments in intangible assets related to the migration to new order and warehouse management systems and some minor investments into our ERP system. Overall, our capital expenditure continues to reflect our disciplined approach and CapEx-light business model.

Let us now take a look at our net cash position. We are pleased to report a strong net cash balance sheet position of EUR 68 million at the end of June 2026. Free cash flow was at minus EUR 9 million in Q2 2026, which includes a cash out of EUR 9 million related to the settlement of employee stock options. IFRS 16 lease payments amounted to EUR 3 million leading to a free cash flow after lease payments of minus EUR 12 million for the quarter. Other financing cash flow amounted to minus EUR 3 million related to the purchase of treasury shares.

As free cash flow in 2026 was significantly impacted by stock option settlements, I would like to provide a clear view of the underlying cash generation in the first half of 2026 compared with the prior year period. This slide shows free cash flow after lease payments and before stock option settlements for the first half of 2025 and 2026.

The stock option settlements are split into 2 categories. The purple bars represent cash settlements related to legacy stock programs -- stock option programs, which were established before 2020. The light green bars represent settlements under newer programs introduced after 2020, including our employee equity participation programs and management program.

As you can see, around 2/3 of the stock option settlements in the first half of 2026, so approximately EUR 6 million, were related to legacy programs, while around EUR 3 million related to newer programs. In the same period last year, virtually all stock option settlements related to legacy programs.

Looking at the underlying cash generation, free cash flow after leases and before stock option settlements improved by around EUR 9 million year-over-year from minus EUR 17 million in the first half of 2025 to minus EUR 8 million in the first half of 2026. As I mentioned earlier, this improvement was primarily driven by stronger net working capital performance. Overall, the negative free cash flow in the first half of the year should not come as a surprise. Our business has a pronounced seasonal cash flow profile with Q4 typically generating the strongest cash inflows due to higher profitability and favorable net working capital movements. These working capital effects naturally reverse in the first half of the following year, resulting typically in temporarily negative free cash flow.

Let me now provide some additional color on the stock option settlements in the first half of 2026 and what you can expect going forward. As we mentioned in previous calls, we have been actively accelerating the reduction of our outstanding legacy stock options by exercising our rights to force the exercise of vested options. Combined with the higher exercise volume due to the increase in our share price earlier this year, this resulted in cash settlements of around EUR 9 million in the first half and reduced the number of outstanding stock options from 3.5 million at the beginning of the year to 3.1 million today, already including additional grants under the new program. The reduction was primarily driven by the settlement of legacy stock options from programs established before 2020.

The number of outstanding legacy options declined from around 2.5 million to 2 million during the first half. Importantly, the legacy options exercised in the first half of 2026 had an average exercise price of just EUR 3.10. The remaining legacy options have an average strike price of more than EUR 18, meaning the potential dilution from these programs has been reduced significantly, especially if you expect an increase in share price over time.

Looking ahead, we expect the number of outstanding legacy stock options to decline by around 70% until the mid-2027, driven by continued force exercises and the scheduled expiry of several programs. As a result, by the end of Q2 2027, we expect our outstanding stock option base to consist to a very large extent of our newer long-term incentive and employee participation programs with only very limited dilution risk remaining from legacy programs established before 2020.

Let us now turn to capital allocation. With EUR 68 million of net cash at the end of June, a CapEx-light business model and a completed turnaround, disciplined capital allocation remains a key priority, and we remain fully committed to our 5 capital allocation principles, which we introduced earlier this year. I already covered this third principle, reducing dilution from outstanding stock options on the previous slides, and we talked about the latest settlements.

I would now like to turn to our fifth capital allocation principle, returning excess capital -- excess capital to shareholders through share buybacks and EPS accretive share cancellations. We are very pleased to report that we successfully completed the share buyback program, which was launched in February 2026. In total, we repurchased approximately 512,000 shares representing 2.6% of our share capital for a total consideration of EUR 8 million. The average purchase price was EUR 15.62 per share.

Looking ahead, we will continue to evaluate capital allocation opportunities across all 5 principles, including the potential for further share buybacks where we believe they create value for shareholders.

Turning now to our outlook with some comments on current trading. We confirm our full year '26 guidance with revenue expected in the range of EUR 470 million to EUR 495 million, representing 5% to 10% year-over-year growth, and an adjusted EBITDA of EUR 36 million to EUR 48 million, corresponding to a margin of 7.7% to 9.7%. Given our strong top line performance in the first half of the year, we expect revenue in the upper half of our guidance rate.

Let me share some comments on this with a focus on current trading. Despite our strong performance in the second quarter, we ended the third quarter with a year-over-year growth remaining broadly flat. We believe this was largely driven by exceptionally hot, sunny and dry weather across Europe, which typically reduce online shopping activities and which temporarily shifted consumer spending towards seasonal products such as fans, portable air conditioners and heat protection products rather than home furnishing. Finally, the year-over-year comparison is also affected by a stronger prior year base as July 2025 in contrast to this year's holiday season, the above-average rainfall across large parts of Europe, providing more favorable conditions for online shopping.

As we expect these effects to be temporary, we remain confident that growth will return over the remainder of the quarter. However, given the softer start to the quarter and the stronger prior year comparison, we expect growth for the third quarter as a whole to remain below the levels achieved in the first half of 2026. As a result, the growth rate achieved in the first half of 2026 should not be annualized. Nevertheless, we remain confident that top line growth will continue.

Overall, we are well on track to deliver on our guidance for both revenue and profitability. We remain focused on executing our 3-step value creation plan with a key objective to further improving profitability and cash flow while unlocking Westwing's full value potential.

With that, I hand back to Andreas to conclude the presentation with our investment highlights.

Thank you, Sebastian. Let me briefly recap the investment highlights. First, we have a unique relevant customer value proposition through the specific assortment and the way we serve our customers. Second, the market potential is huge, both in our existing geographies and beyond. Third, we are developing the super brand in design with high loyalty and true potential to grow further. Fourth, we have high and increasing margins as well as operating leverage while we scale. Fifth, we have a great balance sheet with a strong cash position and no debt, strong net working capital and low CapEx.

All this will lead us in the midterm to 10% plus adjusted EBITDA with a continued strong cash conversion. This also allows us to continue to invest through the cycle even in the presence of temporary headwinds from the ongoing conflict in the Middle East.

Sebastian and I are now happy to take your questions.

[Operator Instructions] So we already have the first question. This one is from Volker Bosse from Baader Bank.

Volker Bosse, Baader Bank. Congratulations on the great top line momentum you achieved in the second quarter. And this brings me to the first question. I don't know if it's possible, but what would your task on like-for-like growth. So if we exclude the expansion effects online, offline expansion, what would be like-to-like, if that is possible to break out, so to say?

And second question is on the adjusted EBITDA. Could you be more precise, how much of the one effects were related to the new order and warehouse management system and perhaps a bit of more meat on the bone regarding what does it mean this warehouse management system? You said more flexible options and faster deliveries, but how can that be achieved perhaps a bit more details on what you changed here and why you expect here this positive outcome to come through over time? And last but least, for clarification and as a reminder, so to say, on your expansion plans, you are now in 26 markets. Where do you want to be until when? And also on the offline side, now 6 stand-alone and 4 store in stores, as I got it right. What is your target until when?

So Mr. Bosse, just a short moment. The speakers have to dial in again. I think the connection was lost. They will be back in a second. [Technical Difficulty]

Have they got the questions?

Yes, they heard everything. They're just...

We seem to be back from Westwing side. Can you please confirm that you can hear us?

Yes, we can hear you.

Okay. Good. Then Volker, will go ahead with the answers to your questions. We'll answer number one. And I will answer #1 and 3, and Sebastian will take your question on the warehouse migration. So the first question you asked for like-for-like growth without expansion markets and without stores. So that means the kind of pre-2024 markets, excluding offline, and here, growth was low to mid-single digits, actually. So very different from market to market. For instance, we had a very strong performance in Switzerland. We had a not-so-strong performance in some of the Southern European countries, especially Q2 was already affected by stronger or better weather conditions, actually, especially in the southern part. So that would be a like-for-like growth comparison, low to mid-single digits.

And your third question was on expansion plans, both new geographies and offline. So yes, in terms of countries, we are now in 26 markets. We still have a few European markets that we want to cover. We will likely also open 1 or 2 more new markets this year, and potentially remaining questions in the remaining countries over the next 1, 2 years. But our focus at the moment lies on kind of completing the European country expansion as far as it makes sense. We don't have specific plans on 2027 and '28 yet for that, but we will let you know as soon as we have them.

And then our expansion plans in terms of offline what we -- we have 10 offline locations at this point in time. As you know, our focus right now is on improving the customer experience further and top and bottom line in the stores. We are actually very pleased with the results so far, but we believe that we need to optimize further. This is a new business model for us. We launched the first store in 2022, and we are learning constantly how to -- how to serve the customers in the store, how to connect online with offline, and this is best done with a limited number of stores, and this is our focus at the moment. It might be that we open 1 or 2 more offline locations over the next 12 months. but not -- no more than that.

We will then, in about 12 months' time, we believe that we will be able to judge better on whether we have found the model that we would like to roll out further, and kind of scenarios from what we believe could happen is from keeping the stores that we have right now up to a broader rollout. But this is -- at the moment, we have not taken any decision. We are focusing on the operational excellence of the stores that we have, and we will come back with information on what we believe we should be doing when the time is right for that. I now hand over to Sebastian for the question that you had on the operations system migration.

Volker, thanks for your question. So the first part of your question was how much of the one-offs relate to the order and warehouse management systems migration. So the entire one-off effect that we reported now in Q2 relates to the systems migration of our order and warehouse management systems. To give you a rough idea about the amount, it's about EUR 1.4 million of impact in the second quarter.

And coming to the second part of the question. So what are the actual improvements that we see? I would distinguish between benefits for the customers and then benefits for our warehouse costs, starting with the customer benefits. So there are 2 main advantages for customers. First advantage, which you can already experience in Germany is that we were able to reduce the expected delivery times for on-stock large furnitures by 2 days, for example. So we are able to reduce the promised delivery times towards customers, which, of course, is a very good benefit for customers.

And on top of that, we are able to allow for more flexible delivery options. To give you one example there. Today, for us, it's a very manual process to consolidate large orders and to deliver, I don't know, for a complete new furnishing of a new house all orders on a specific delivery date that the customer requests. And with our new order and warehouse management system, we will be able to allow exactly this, so to consolidate large orders and deliver them on a specific date. This is great for B2C customers that have large orders, but it's also a very, very important requirement to -- for our B2B business. So also there a really, really good benefit for our customers.

In terms of efficiency gains, so the 2 main areas where we expect efficiency gains going forward is the inbound process and also the picking process. Regarding to the inbound process, we are now able to move from bulk inbounding process, which significantly increases the inbound productivity, and with regard to the picking processes in the warehouse, we will be able to optimize the storage of items within the warehouse to optimize the picking distances. So this will improve the warehouse efficiency going forward. So it takes some time to really fully materialize. But as I said, from Q4 onwards, we expect that the efficiency gains should fully materialize. And with regard to the inbound process efficiencies that we already see an impact. Does this answer your questions, Volker?

Yes, absolutely.

[Operator Instructions] So the next question is from [ Michael N ].

I only have 2. So first, I would like to ask you to give some color on the recent U.K. expansion, how that worked out so far. I know that there was one line in the presentation, but perhaps you could give some additional information how this played out, whether hot weather was also a factor there or -- and my second question relates to the implementation of the recent shareholder resolutions of the June AGM. I understand that this basically also enables potentially dividend distributions going forward. And I wanted to ask whether this is something you would consider perhaps even a special dividend given the negative working capital and the relatively high liquidity the company carries forward.

Michael, for your questions. So I will take the first one on the U.K. expansion and then hand over to Sebastian. So U.K. expansion, we've actually been really happy about what we've been seeing there, as we said in the presentation that it's already our largest market of all the expansion markets that we launched. So it's actually -- all the expansion markets are about 12% of GMV in Q2, and the U.K. was already at about 3% of our total group GMV in Q2. So that's a very strong momentum and is then the strongest market of those.

How kind of -- how are we doing right now with the heat wave? Actually, we continue to grow in the U.K. It's one of the markets where we just see month-over-month growth also throughout the summer. So last week, we actually recorded our strongest week ever in the U.K. So very, very confident there.

How will it kind of -- how do we expect it to continue? As we said, we launched a specific -- a U.K.-specific warehouse now in July. This will help us to reduce delivery times for U.K. customers on items that we store locally in the U.K. That is mainly U.K -specific items and bestsellers as we grow in the U.K. And this will likely then improve conversion on the website through better customer experience. So we believe that, that will contribute to improved top line also further. And it will also, over time, contribute to a better cost structure. We obviously don't have to ship back returns to our central warehouse logistics center in Poland. And we will be able to, at a later point in time, inbound more products from our suppliers directly to the U.K. and all of these things. So it will both benefit top line and bottom line, I believe, over time. But of course, the second part requires a certain volume to go through the warehouse.

Also, the kind of forward-looking, we will actually be investing into growth in the U.K. specifically because we see such good traction still this year. As Sebastian and I mentioned that our marketing investments, specifically on the brand side will be focused on Q4, and we plan to have the heavy spending actually on brand investments to be done, not just in Germany, but also in the U.K., probably the second most important market for our brand investments, next to then France and Poland as our second and third biggest market actually currently in terms of GMV. So we will continue to invest in the U.K. also this year, which will then bring top line upside, we believe, also into 2027. So this will weigh on margins in Q4 because of the additional brand investments, but we believe that it will be very fruitful, especially in the U.K. Then handing over to Sebastian for the question on the recent shareholder resolutions and the effect on potential dividend payments.

Yes. Thanks a lot, Michael, for your question. So maybe to give everyone the background here, I'm referring to the contribution of shares of the Westwing GmbH into the newly founded Westwing Management GmbH, which was approved by the AGM this year. Next to operational advantages that we see from this with the new structure. And this is also expected to increase the free capital reserve, which in turn is a prerequisite for capital allocation measures like share buybacks, but also dividends.

And as mentioned earlier in the call, so we remain committed to our capital allocation principles. This includes different initiatives. Dividends can be one of them, like also sharebacks can be future use of excess capital. But there's, at the moment, no plan to introduce a dividend or to suggest a dividend payment to the AGM this year. As mentioned in the earnings call, we are constantly evaluating all available options, and we will then decide in the future about the respective investments. As I said, the free capital reserve is expected to increase as a prerequisite for dividends and also share buybacks. But at the moment, no plans to suggest a dividend policy.

Michael, does that answer all?

Yes, yes. Answers my question.

Next question comes from Michael Heider from Berenberg Bank.

I have one remaining question on your current business. You said that you are not -- or you started at least into the Q3 without growth on flat. Is this now also the case for the international markets? Or were you just showing to the DACH region?

Michael, thanks for the question. So we were referring to the group top line. So overall, on group, we are -- we were flat in July. And this is then obviously a combination of growth from the new markets and actually negative top line development in existing markets typically. So there are differences in the country, but an overall flat development with good contribution from new markets, but the shrinkage in many of the existing markets. And as we said, we believe -- so this is a very different picture to what we saw in Q2, where, as you know, we, for instance, grew by 10% in DACH, which we believe is actually one of the strongest parts of the Q2 performance. And we saw a sudden shift then in July. And as we don't see anything that we changed in marketing or on-site, et cetera, et cetera, we believe that this is mainly weather-driven plus probably what we also saw in figures on consumer sentiment and a decreased consumer sentiment even into July.

So when you think about -- for instance, when you look at the markets, actually in July, France was shrinking quite heavily, which is a new picture for us, and this was clearly related to the weather issues in France at that point in time, including the fires, we actually saw a significant drop during specifically those weeks. So we believe it's weather related, but of course, that weighs on the expectation for Q3 top line. That's why we said there is -- we believe that there's no chance that it will be on Q2 levels. It will be significantly below Q2 levels. but we believe that we also return to growth once actually the hot wave, the weather wave actually subsides. Michael, does that answer your question?

Yes, very clear.

We have another question from Volker Bosse from Baader Bank.

A follow-up also on the current trading statement, which you made and an add on to what Mr. Heider said. You said flat growth in July, but is it fair -- on group level, yes, thanks for the clarification. But is it fair to assume that customer growth should have continued on the back that the new countries came on stream, but this was then, so to say, compensated by less orders in total and lower order baskets on average, right? Is that a fair assumption?

The active customer number is a view on the last 12 months, right? So anyone who placed an order essentially within the last 12 months counts into the active customer base. And so if you have a month where previously active customers actually -- or like a customer placed an order like 13 or 14 or 15 months ago, and you have a very weak month in existing markets, and of course, active customers might actually drop in the existing markets. That is then potentially compensated by active customer growth in new markets. How this will pan out exactly for Q3, we will see at the end of the quarter, and we'll report then, obviously, on active customers, on average order value, et cetera.

Thanks for that reminder on the LTM figure.

[Operator Instructions] And I think there are no more questions coming. So I'll hand over to Andreas Hoerning for some closing words.

Thank you. As we haven't received any additional questions, we're ending today's earnings call. Thank you for joining, and goodbye.

Good morning, ladies and gentlemen, and welcome to the Westwing Group SE Q1 2026 Earnings Call. [Operator Instructions] Now dear ladies and gentlemen, let me turn the floor over to your host, Andreas Hoerning.

Good morning, everyone, and thank you for joining us for our earnings call on the first quarter of 2026. My name is Andreas Hoerning, I'm the CEO of Westwing. I'm hosting the call together with my colleague, Sebastian Westrich, our CFO. Looking at today's agenda, I will begin by providing key updates on our business for Q1, after which Sebastian will share the details of Westwing's financial performance and how the current macroeconomic environment is impacting our business.

After our investment highlights, we will be happy to take your questions. Let's take a look at the current state of Westwing. Overall, in Q1, we saw strong top line growth. Our revenue increased by 11% year-over-year to EUR 120 million. This was driven by 2 main factors. First, we benefited from a highly successful mega sales event in January, which we already mentioned in the last call.

Second, we saw continued top line contributions from our expansion initiatives. In Q1 of last year, we operated in only 4 new markets and ran 4 offline stores. Since then, we expanded to 8 additional markets and added 3 more stores. It is great to see that these expansion efforts are already delivering a strong top line impact even against rather weak consumer sentiment.

On bottom line, we increased adjusted EBITDA to EUR 9.6 million and an adjusted EBITDA margin of 8.0%. This represents an improvement of EUR 0.5 million compared to the same period last year. While we saw strong top line growth, the increase in adjusted EBITDA remained limited due to the investments into expansion. Free cash flow was negative at minus EUR 2.0 million, which represented an increase of nearly EUR 6.9 million year-over-year.

Our net working capital remained negative at minus EUR 5.6 million at the end of Q1, which also showed an improvement from the minus EUR 2.1 million at the end of Q1 last year. We ended the quarter with EUR 84 million in net cash, which includes EUR 3 million spent on share buybacks during Q1. Overall, that's a EUR 27 million higher than at the end of Q1 last year, reflecting the continued improvement in profitability.

This once again underscores the success of our business transformation as outlined in our previous earnings call. The overall development is in line with our guidance that we published in March and which we confirmed today. Beyond financials, we again made good progress on our 3-step plan. Most recently, in February, we successfully launched in the United Kingdom, where we're already seeing early customer traction and demand. As always, let's have a look at our 3-step value creation plan, which we initiated in 2022.

We're happy to report that we are well on track with the execution of the third phase, scaling with operating leverage. As we continue to grow both in our existing markets through our store portfolio and in our new markets through recent country launches, we remain focused on maintaining cost discipline.

This way, we can continue to invest throughout the cycle while sustaining a high level of profitability. Overall, we continue to make strong progress towards unlocking Westwing's full potential as we advance through this phase.

I now hand over to Sebastian for details on our financial performance.

Thank you, Andreas, and good morning, everyone. I'm Sebastian Westrich, the CFO of Westwing. Let me start with details on our top line. Our GMV increased by 7% to EUR 135 million, and revenue increased by 11% year-over-year to EUR 120 million. In addition, we see a positive development in the Westwing Collection. Its share of total GMV increased by another percentage point to 63%.

As Andreas highlighted in the business update, Q1 top line performance was supported by a successful January sales event, which we mentioned already in our last earnings call. Both the DACH and International segment benefited from this. While the DACH segment achieved a 3% year-over-year growth for the quarter, the International segment recorded a remarkable revenue increase of 22% year-over-year due to the contributions from the newly launched countries.

While we were pleased with the Q1 performance, the macro environment remains uncertain, and we continue to focus on developing our business through disciplined execution of our growth initiatives, continued investments in attractive expansion opportunities and a clear focus on long-term value creation. Let me continue with an overview of our P&L development in the first quarter of 2026.

I'm pleased to share that we delivered an adjusted EBITDA margin only slightly below previous year and an adjusted EBIT margin same as last year. Now let's go through the P&L line by line. In Q1 2026, gross margin increased by 1.3 percentage points year-over-year to 52.9%. This was supported by lower inventory depreciation effects compared to Q1 2025, which we don't expect to see in the upcoming quarters.

In addition, our gross margin benefited from better purchasing prices and a slight increase in the share of Westwing Collection. The fulfillment ratio improved by 0.5 percentage points year-over-year to minus 18.8%. This was mainly driven by increased warehouse efficiencies from scale effects. However, this improvement was partially offset by higher freight costs as rising fuel prices increased linehaul and last mile carrier rates in March.

Overall, contribution margin increased by 1.9 percentage points to 34.1%. Moving further down the P&L, our marketing ratio increased by 1.4 percentage points year-over-year to minus 13.2%. This reflects planned marketing investments in expansion countries to support growth and market penetration.

Our G&A ratio, excluding other result, improved by 0.4 percentage points year-over-year to minus 15.7%, driven by scale effects and continued disciplined cost management more than offsetting the higher cost base associated with our expanded store portfolio. Other result ratio decreased by 0.9 percentage points year-over-year to minus 0.3%, mainly due to timing and one-off effects related to lower holiday and IFRS 9 provisions in the previous year.

Adjusted EBIT margin came in at 4.9%, unchanged year-over-year. G&A ratio improved by 3.4 percentage points year-over-year to 3.1%, mainly due to reduced G&A of internally developed technology assets that we already discussed in the previous calls. Overall, adjusted EBITDA margin was at 8% in Q1 2026 versus 8.5% in the previous year as the improvement in contribution margin was reinvested into planned expansion initiatives and as we had less tailwind from other results.

The adjustments made in Q1 were minor, except for the higher fair value of stock option programs, which amounted to about EUR 5 million. An overview of these adjustments as well as the unadjusted consolidated income statements can be found in the appendix to this presentation and in our Q1 financial report.

Let's move on to profitability on segment level. As expected, adjusted EBITDA margins developed differently across the 2 segments in Q1. In the DACH segment, adjusted EBITDA margin decreased by 1.1 percentage points year-over-year to 8.3%. This was mainly driven by the ramp-up of new stores. In the International segment, adjusted EBITDA margin improved by 0.2 percentage points year-over-year to 7.6%, mainly driven by the successful ramp-up of our expansion countries.

Let us now take a look at our net working capital. At the end of Q1 2026, net working capital remained negative at minus EUR 6 million, improving by roughly EUR 3 million compared to the previous year. The improvement reflects disciplined net working capital management and was supported by higher customer prepayments in line with GMV growth as well as better inventory management.

On the next slide, you see CapEx and CapEx ratio for Q1 2026 compared to Q1 2025. CapEx remained at a healthy level of around EUR 2 million, corresponding to a CapEx ratio of 2% of revenue. Investments in intangible assets increased by EUR 2.8 million year-over-year, and this was mainly driven by implementation costs related to the transition from legacy systems to SaaS-based order and warehouse management systems.

We plan to complete the implementation by Q3 this year. At the same time, investments into property, plant and equipment decreased by EUR 0.5 million due to higher previous year spend for store openings. Overall, CapEx remained broadly stable year-over-year and reflects our continued CapEx-light business model. Let us now take a look at our net cash position. We are pleased to report a strong net cash balance sheet position of EUR 84 million at the end of March 2026.

Free cash flow was at minus EUR 2 million in Q1 2026, in line with normal seasonal patterns and significantly better than last year's Q1. Lease payments amounted to EUR 3 million, leading to free cash flow after lease payments of minus EUR 5 million. Other financing cash flow amounted to minus EUR 3 million, mainly driven by the purchase of treasury shares. Overall, our balance sheet remains strong with no debt other than IFRS 16 lease obligations and IFRS 2 liabilities from cash settled stock option programs.

With EUR 84 million of net cash at the end of March, a CapEx-light business model and a completed turnaround, disciplined capital allocation remains a key priority. Our capital allocation continues to be guided by 5 principles. First, we maintain a strong balance sheet to navigate a volatile macro environment and preserve strategic flexibility. Second, we invest selectively in high-return opportunities.

Third, we actively reduced dilution from outstanding stock option programs. In the latest exercise window, outstanding stock options were further reduced by more than 500,000 shares with very low strike prices corresponding to a reduction of about 15%. These exercises will lead to a cash out in Q2 of around EUR 9 million.

Fourth, we retain an appropriate level of treasury shares to hedge dilution and cash risk from remaining stock option programs. And fifth, we return excess capital to shareholders through share buybacks and earnings per share accretive share cancellations. Since the start of the 2026 share buyback program, we have bought back 262,000 shares, representing 1.3% of share capital with an investment of EUR 4 million as of and including April 30.

Overall, this demonstrates our continued progress in actively managing dilution and returning capital to shareholders while maintaining financial flexibility for attractive growth opportunities. The next slide provides an update on how the conflict in the Middle East impacts our business as well as further risks connected to it.

While the initial impact on our business in Q1 remained limited, we continue to monitor the situation closely across several dimensions and expect to see more negative impacts, especially on our contribution margin in the upcoming months. From a top line perspective, we are seeing a noticeable deterioration in consumer sentiment across Europe. This weighing on average order value and creating negative effects on unit economics.

If consumer confidence remains weak, we expect these trends to persist or potentially intensify. On the cost side, some logistics carriers have already introduced surcharges due to higher fuel prices, and we expect further adjustments across the industry. In addition, several product suppliers have indicated rising raw material and production costs.

If oil prices remain elevated, we expect broader inflationary pressure on shipping and sourcing costs, which would negatively affect our contribution margin. We are also monitoring potential second order effects, including energy-related production constraints in Asia and possible disruptions to global freight flows.

At this stage, we only see limited constraints at a small number of suppliers and no significant disruptions to freight, but the situation could deteriorate if restrictions become more widespread. Overall, these risks remain broadly in line with the assumptions we outlined during our full year 2025 earnings call. While the scope for short-term mitigation measures is limited, our business model provides a degree of resilience.

This includes a diversified supplier base and a significant share of fixed container rates, which helped to partially mitigate cost volatility. In addition, our strong margin profile and healthy balance sheet position us well to navigate the current uncertainties. Turning now to our outlook with some comments on current trading.

We confirm our full year 2026 guidance, which was shared in our last earnings call for revenue of EUR 470 million to EUR 495 million and adjusted EBITDA of EUR 36 million to EUR 48 million. The guidance reflects to a certain extent, top line and margin risk related to the Middle East conflict as well as upside potential from a stronger-than-expected country expansion and a fast recovery in consumer sentiment reflected in the upper end of our guidance.

Let me also share some comments on current trading. Q2 is showing top line trends similar to Q1 so far, but at a slightly lower magnitude with a successful sales event early in the quarter, followed by an expected normalization. At the same time, our expansion initiatives continue to contribute positively to top line development. As highlighted in previous calls, comparables will become more demanding in the second half of 2026.

In the first half of 2025, top line performance was still impacted by the transition to a more global premium and curated assortment, while contributions from expansion initiatives remained limited. From Q3 onwards, these headwinds started to ease and country expansion began contributing more meaningfully to growth.

In addition, Q4 2025 benefited from a particularly strong Black Week performance. As a result, we expect tougher year-over-year comparisons in the second half of 2026. Overall, we are well on track to deliver on our guidance for both revenue and profitability. We remain focused on executing our 3-step value creation plan with a clear objective of further improving profitability and cash flow while unlocking Westwing's full value potential.

And with that, I hand over to Andreas to conclude the presentation with our investment highlights.

Thank you, Sebastian. Let me briefly recap our investment highlights. First, we have a unique relevant customer value proposition through the specific assortment and the way we serve our customers. Second, the market potential is huge in our existing geographies as well as beyond.

Third, we are developing the Superbrand in design with high loyalty and true potential to grow further. Fourth, we have high and increasing margins as well as operating leverage while we scale. Fifth, we have a great balance sheet with a strong cash position and no debt, strong net working capital and low CapEx.

All of this will lead us in the midterm to 10% plus adjusted EBITDA with a continued strong cash conversion. This also allows us to continue investing through the cycle even in the presence of temporary headwinds from the ongoing conflict in the Middle East.

Sebastian and I are now happy to take your questions.

[Operator Instructions] The first question is from Volker Bosse, Baader Bank.

Volker Bosse, Baader Bank. I would like to ask 3 questions. First, starting with the new markets. Does the overall perception acceptance of consumers meet your expectations here?

I mean it's too early to speak about sales, obviously, but perhaps you can give us an indication on click rates or website visitor figures, which you could provide and which gives, of course, also an early and good indication for traction in the markets.

Second question would be in Westwing Collection, 63% after 62%, I mean the top was 65% historically. Would you agree that with 65%, 66%, you would reach the ceiling here in regards to Westwing Collection share? And final one, could you please repeat what you said on U.K.? I did not get it and perhaps give also some add-ons on the progress in the U.K.

Thank you so much, Volker, for your questions. So basically 2 on new markets, right, generally and top line, what we see and then specifically on the U.K. and then a question on Westwing Collection share expectations in the future. So in terms of new markets, as you also said, it's too early to really share details on top line. Eventually, we will do that.

What we shared last time was a bit on profitability so that 10 out of the 11 countries that we had launched in '24-'25 had reached profitability of full payback actually or are on track to deliver full payback within the first 12 months of operations that we continue to see. In terms of top line or consumer reaction to us entering the new markets, we, of course, have our internal target expectations, and they are currently met or even slightly overperforming.

So we are actually overall very happy with the contribution. And you can see that, Volker, obviously, in the growth of the international segment, which in Q1 amounted to 22%. So that is primarily driven by the new markets and not by existing international markets such as France, Italy and Spain, where demand due to the current consumer sentiment is also rather weak. And details on click rates, website visitors, et cetera, we don't share them.

But as I said, eventually, we will share information on top line development when we go a bit deeper into the international segment. And then you asked us to repeat what we have said on the U.K. So we launched on the 24th of February. And the U.K. is, from our perspective, provides the biggest growth opportunity from all the markets that we entered into. I mean, obviously driven by size of the customer -- potential customer base there.

And this is holding true also in the first few months that we see so far. So the U.K. is ramping up faster in terms of absolute numbers than the other markets that we entered into. And we will, throughout this year and into next year, also put special emphasis on this market. So we expect that actually to continue.

So overall, we're very happy with what we're seeing there. It's obviously too early to tell what the overall potential of this market could be, but we are very pleased with the development. Besides launching our website and our app, we also already launched our premium services in the U.K., such as design service or the Westwing Delivery Service in London is already active, has already delivered a 3-digit number of orders in London and the vicinity.

So we're actually very happy with what we see so far. Then the last question of yours related to Westwing Collection share. We did give a hint so far, and I can confirm what we said about it, and that is that last year, Westwing Collection share actually increased significantly by several percentage points, and we expect that to slow down quite a lot and only to see gradual increase in Westwing Collection share for the next quarters. So for instance, in Q1, it increased by 1 percentage point, and we expect something similar to happen over the next quarters.

So as you rightly say, Volker, the big -- kind of the big increases in Westwing Collection share, those times are likely closed now. The main reason being actually the change in assortment that we actually did over the last years.

So we actively took out especially third-party providers with low margins and that did not fit our positioning anymore and also the local assortment in the countries where we closed down the local assortment.

And this was besides, of course, improving the Westwing Collection, which we do all the time was an additional very strong driver of Westwing Collection share increase over the past years, actually. I hope that answers your 3 questions.

The next in line is [indiscernible].

First of all, congratulations on your very remarkable and respectable results for the first quarter. I basically have only 2 questions. My first question is, given that you have a nearly full coverage of presence in the European markets, I would be interested in what are your mid- and long-term perspectives on further country expansions.

My second question relates to your AGM invitation and your top item #9, where you plan to institute a 3-tier Group structure. I would be interested to learn what the rationale for this.

Thank you so much, Michael, for your questions. I'll take the first one and then hand over to Sebastian for your second one. The first one was related to international expansion, and you asked whether now with nearly full coverage in Europe, we're also thinking of expanding outside of Europe. So answer first, no concrete plans. I don't want to rule it out.

But right now, we are focusing on the expansion initiatives that we've already implemented. So specifically U.K., but also the markets that we opened last year. And we have a few smaller markets that we might enter into still this year. So that's the focus for the time being, but I don't want to rule it out for the mid-term, long-term future. And then I hand over to Sebastian for your questions on Item #9 for the AGM.

Thanks for your question. With regard to the three layered Group structure, first of all, there is a more detailed report on the reasons, the rationale and consequences of it among the documents that we published on our website under the Annual General Meeting section. So there, you find a larger report.

And hopefully, this answers all the questions. But in a nutshell, the changes will provide us with a much clearer and more efficient structures in terms of our leadership structure and also in terms of our operational setup in the Group. And as a consequence, we will also have some positive effects in terms of balance sheet restructuring which also are beneficial for potential capital allocation measures.

We don't expect negative consequences in terms of tax, et cetera. So a straightforward measure. As said, it provides a much clearer structure in terms of management structure and operations and comes also with some positive effects on our balance sheet.

There are no more questions in the queue so far [Operator Instructions] And there is a question from Michael Heider, Berenberg Bank.

Yes, I'm looking for more detail on the current trading and the impact of the Middle East. I mean you've given lots of explanations already. But is it correct that I understood you that Q2, you entered in a similar -- I think you said in a similar way than the Q1 growth level. That's at least how I understood it.

And can you confirm this? And then the second question is on the production constraints that you are highlighting in your presentation. Can you elaborate a little bit more on this? I mean is this like -- I mean, do you see like just single problems here or would you -- is this also just concerning your Asian suppliers or is this also on the European side or just a little bit more detail on that side?

Thank you, Michael, for your questions. I'll hand over to Sebastian.

Thanks, Michael, for your questions. First one on current trading and the start into Q2. As you rightfully mentioned, so we saw a strong start into Q2, but at a lower level compared to the super strong start into January with a January sales event. We also had a sales event beginning of Q2, also was successful, but as I said, at a lower scale, but still positive start into the quarter.

On the topic of production constraints, so this refers mainly to a very small number of producers in India because India has some issues with gas supply. That's why there are some restrictions on production. And so far, this has not really a material impact on our supply base, but it's definitely a risk.

And if the gas shortage should continue and especially would become more severe, then, of course, also the impact on our supply base could become bigger. But as I said, so far, only a very limited number of suppliers that face some effects from this, but overall no constraint at the moment. Does this answer your questions, Michael?

Yes. But maybe again, a little clarification on the Q2 start because now I understood you that Q2 start was very strong because had a sales event, not as strong as the Q1 start, which I would then into my understanding would be then that the start into Q2 is stronger than what your Q1 delivered overall. Is this understood correctly?

So for the start of Q2, that's a fair assumption, but -- the start was lower compared to January -- normalization effects like we also saw during Q1. So again, there's nothing that you can extrapolate [ over next month ].

So we had a strong sales event beginning of Q2. Afterwards, we see the normalization. And the uncertainty remains. We see the macro environment deteriorating a lot. So the indicators significantly dropped now -- with the latest April, May figures. So we expect the macro headwinds to rather increase going forward.

At the moment, there are no further questions in the queue. [Operator Instructions] All right. There seems no more questions to be incoming. So with that, I'm closing the Q&A session and hand the floor back over to the host. Thank you.

Thank you. With no additional questions, we're ending today's earnings call. Thank you for joining, and goodbye.

Good morning, ladies and gentlemen, and welcome to the Westwing Group SE Financial Year 2025 Earnings Call. [Operator Instructions] Now dear ladies and gentlemen, let me turn the floor over to your host, Andreas Hoerning.

Good morning, everyone, and thank you for joining us for our earnings call on the full year of 2025. My name is Andreas Hoerning. I'm the CEO of Westwing. I'm hosting the call together with Sebastian Westrich, our CFO.

Looking at today's agenda, I will begin by providing key updates on our business for the full year 2025, after which Sebastian will share the details of Westwing's financial performance. We will then walk you through a financial recap of the first two phases of our 3-step value creation plan and share what we will focus on in 2026. Sebastian will then present our strategy and current expectations translate into our guidance for 2026. After our investment highlights summary, we will be happy to take your questions.

Let's take a look at Westwing's key achievements of 2025. We were able to increase our adjusted EBITDA by 84% year-over-year, reaching EUR 44 million at an adjusted EBITDA margin of 9.8%. Revenue increased by 1.1% year-over-year. GMV growth was slightly stronger at plus 2% year-over-year.

Free cash flow more than doubled year-over-year to EUR 34 million with a net cash position of EUR 92 million at the end of 2025. Free cash flow after leases amounted to EUR 23 million, representing an increase of EUR 25 million compared to 2024. Net working capital stood at negative EUR 9 million at the end of 2025.

Beyond financials, we again made good progress on our 3-step plan to unlock Westwing's full value potential by completing Phase 2 and entering Phase 3. Measures included the completed switch to a mostly global or premium and smaller product assortment, which led to negative top line effects. The launch of our website and app in 10 new countries, the opening of 7 new stores, the 17% year-over-year growth of our Westwing Collection business and the strengthening of our premium brand positioning.

Last but not least, we made good progress in all our sustainability focus areas. Specifically, we reinforced our climate targets and social standards with suppliers and expanded the sustainability offer within the Westwing Collection. Further details on our progress can be found in our CSRD statement and will also be included in our annual sustainability report to be published on the 1st of April.

Let's now take a quick look at our 2025 financial performance compared to our guidance. We kept our promises and delivered both in terms of revenue and adjusted EBITDA. With a strong top line in the fourth quarter, we reached the upper half of our full year revenue guidance with a growth of 1.1%. Guidance was minus 4% to plus 2%.

In terms of profitability, we significantly exceeded our initial target of EUR 25 million to EUR 35 million at a corresponding adjusted EBITDA margin of 6% to 8%. We closed the year with an adjusted EBITDA of EUR 44 million, as just said, representing an adjusted EBITDA margin of almost 10%. This performance generated free cash flow of EUR 34 million according to the IFRS definition and EUR 23 million of free cash flow after lease payments. This demonstrates the strong cash conversion of our business.

Overall, these results highlight the positive financial effects of the company's successful business transformation over the past 3 years, which we are going to explain in more detail in the recap section.

As always, let's have a quick look at our 3-step value creation plan, which we initiated in 2022. 2025 marked a year of transition for us as we completed the second phase of building a scalable platform. We also entered the third phase where we began to focus on key growth levers to be able to scale with operating leverage from 2026 onwards. More on that in a few minutes. But first, I hand over to Sebastian for details on our financial performance of '25.

Thank you, Andreas, and good morning, everyone. I'm Sebastian Met, the CFO of Westwing. Let me start with details on our top line. We achieved revenue growth of 1% for the full year 2025 and 7% for the fourth quarter of the year despite a dampening effect on top line due to the changes in product assortment. As communicated in our trading update, the fourth quarter was largely driven by the strong Black Week sales event and a strong year-end. Thanks to high productivity and smooth operations in our logistics center, we were able to successfully ship and deliver a significant share of peak orders.

While growth in the DACH segment throughout 2025 was impacted by the changes in product assortment, the International segment already showed a nice revenue growth rate of 15% in the fourth quarter, driven by the positive country expansion effects.

Looking at our P&L, we see improvements across all P&L lines in the fourth quarter as well as full year 2025. These are the strongest results in Westwing's history, excluding the exceptional COVID-driven peak in 2020, both in terms of relative margins as well as absolute profits.

Our 2025 adjusted EBITDA increased by EUR 20 million to EUR 44 million. That's plus 84% year-over-year. This was mainly driven by our performance in the fourth quarter in which more than doubled our adjusted EBITDA year-over-year.

In the following, I will walk you through our P&L line by line, starting always with comments on our performance in the fourth quarter. Let us start with a closer look at our gross margin.

In Q4, we increased our gross margin year-over-year by 3.7 percentage points to 54.3%. In addition to the positive effect from a higher Westwing Collection share, we benefited from lower sea freight costs. Furthermore, the strong growth in Q4 reduced the impact of reach-based inventory depreciation while increasing volume-related discounts.

For the full year 2025, we realized a gross margin increase of 2.1 percentage points. The fulfillment ratio improved by 0.4 percentage points for both Q4 and the full year. This improvement was mainly due to an increased average order value, which typically is beneficial for fulfillment cost ratio as well as efficiency gains in our warehouse. These improvements overcompensated negative effects from country expansion, which include lower line haul utilization rates during ramp-up as well as longer line haul distances.

The improvement in gross margin and fulfillment ratio led to an increase in contribution margin of 4.1 percentage points in Q4 and of 2.6 percentage points for the full year. We are very pleased with these significant margin gains.

Moving down the P&L. Our marketing ratio improved significantly in Q4, declining by 2.1 percentage points year-over-year. The ratio also showed a clear improvement on a full year basis. While we had and still have higher marketing investments for the new countries, the ratio in Q4 was positively impacted by the very strong Black Week sales event, which came with a large scale effects and high marketing efficiency. In addition, we spent less on brand-related investments compared to the fourth quarter of 2024.

Our G&A ratio, which also includes other results, decreased in line with the trend of previous quarters by more than 2 percentage points, both in Q4 and for the full year 2025. This reflects the efficiency gains of our 2024 complexity reduction measures and demonstrates that we have built a truly scalable platform.

Overall, this led to an adjusted EBIT margin of 13.2% in Q4, up 8.5 percentage points year-over-year. Full year adjusted EBIT is up by 5.6 percentage points, reaching a 6.5% adjusted EBIT margin.

D&A ratio slightly decreased in Q4 as we had less D&A for internally developed tech assets given the switch to a mostly SaaS-based platform. For the full year 2025, D&A decreased year-over-year also due to the full year impact from our 2024 complexity reduction measures, including office and warehouse closures, which were implemented in the first half of 2024.

Please note that both G&A and D&A include cost increases from our 2025 store expansion, which will also lead to full year effects in 2026.

Let us now finish the P&L review with comments on our adjusted EBITDA margin. In Q4, the adjusted EBITDA margin improved by 8.1 percentage points year-over-year to 15.8%. Our full year adjusted EBITDA margin improved by 4.4 percentage points year-over-year to 9.8%. We are very pleased with this result as it reflects the significant effort we have put into transforming our business and allows us to see now the true potential of the company more clearly.

To provide you with a full picture, let me also comment quickly on the adjustments to our EBITDA for the full year 2025 and our net result.

In total, we adjusted restructuring expenses of EUR 2.3 million and EUR 7.8 million related to share-based payments. Only EUR 0.8 million were cash effective, the majority of the adjustments related to revaluation effects of outstanding stock options as a result of the significant share price increase in 2025.

Our unadjusted consolidated income statement for 2025 shows earnings before tax of EUR 80 million, up by EUR 23 million year-over-year and earnings after tax of EUR 29 million, up by EUR 34 million, so also really strong results. The higher increase in net income of about EUR 11 million year-over-year compared to the increase in earnings before tax is driven by a positive impact from deferred tax assets.

Let's now move on to profitability on segment level. We significantly improved profitability, both in terms of absolute numbers as well as in terms of adjusted EBITDA margin in both segments. I want to highlight and comment on two aspects.

First is the strong increase in adjusted EBITDA across both segments. For the full year 2025, adjusted EBITDA nearly doubled in the International segment and increased by around 70% in the DACH segment. The second aspect is the 15.5% adjusted EBITDA margin that we achieved in Q4 in both the DACH and the International segment.

The similarly high margins in both segments reflect the successful execution of Phase 2 of our 3-step value creation plan focused on building a scalable platform. Compared to 2024, we now operate a centralized and scalable platform, combined with a largely global, more premium and more focused product assortment. As a result, margins across both segments are converging with only minor differences in gross margin and fulfillment ratios between countries, which largely offset each other at segment level.

While both segments benefit from the same platform and assortment, the profitability impact of expansion initiatives differs. In the DACH segment, our 2025 expansion focused on store openings with ramp-up investments in personnel, operating expenses and lease costs affecting both G&A and D&A. In contrast, expansion in the International segment is primarily driven by entry into new countries where ramp-up investments are more heavily weighted towards marketing, leveraging our existing platform.

While the expansion effects did not cause a major difference between the 2 segments in Q4, they may lead to differences in the coming quarters depending on the timing and scale of investments. We are very pleased with the progress on segment level, which clearly demonstrates that the levers of our 3-step value creation plan are delivering the intended results.

Let us now take a look at our net working capital and our net inventory. By the end of 2025, net working capital remained clearly negative at minus EUR 9 million. Although our net working capital increased slightly year-over-year, our net inventory levels decreased compared to 2024 despite a 17% year-over-year growth in the more inventory-intensive Westwing Collection. This is a result of our ongoing initiatives to improve inventory management and a stronger-than-expected Q4 top line.

On the next slide, you see CapEx and CapEx ratio for the full year 2025 compared to 2024. Despite investing about EUR 2 million for store openings in 2025, our overall CapEx decreased by EUR 2 million year-over-year with a CapEx ratio of 1.9% of revenue in full year 2025. The decrease in CapEx is attributed to the decline in our investments into intangible assets as we transition to a Software-as-a-Service-based technology platform.

We expect our CapEx ratio to benefit from scale effects as we grow our top line. In other words, without major investments such as additional store openings, the CapEx ratio should gradually decline with increasing revenue as we operate a CapEx-light business model.

Moving on to net cash. We are pleased to report a strong net cash balance sheet position of EUR 92 million at the end of December, EUR 23 million above previous year's levels. This increase includes a negative cash out of EUR 4 million for stock option settlements. Free cash flow was at EUR 35 million in 2025, which takes into account the negative effects from the above-mentioned stock option payouts.

In 2025, we had lease payments of EUR 11 million for offices, our logistics center as well as our stores, which is shown in the financing cash flow according to IFRS standards. This led to a free cash flow after lease payments of EUR 23 million.

Also important to mention is that we maintain a strong balance sheet with no debt other than the IFRS 16 lease obligations and IFRS 2 liabilities from cash settled stock option programs.

Please note that the net cash position of EUR 92 million at the end of 2025 is slightly below the unaudited number that was published in our trading update in January. The reason for this is a reclassification within current assets from cash and equivalents to receivables from payment service providers.

With EUR 92 million of cash, a CapEx-light business model and a completed turnaround, disciplined capital allocation becomes increasingly important. We are clearly committed to maximizing shareholder returns beyond operational performance guided by five key principles.

First, we maintain a strong balance sheet to navigate a volatile macro environment and preserve strategic flexibility. Second, we invest selectively in opportunities that offer attractive returns.

Third, we actively manage dilution from outstanding stock options. This includes forcing the exercise of legacy programs without an end date of former employees at relatively low share price levels with settlement in cash. Further details on our progress can be found in the appendix to this presentation.

Fourth, we retain an appropriate level of treasury shares to hedge dilution and cash risk from remaining stock option programs. And fifth, we return excess capital to shareholders through share buybacks and earnings per share accretive share cancellations.

So far, we've demonstrated strong execution against these principles. Between 2022 and 2025, we invested more than EUR 15 million in approximately 1.8 million treasury shares. In early February, we canceled about 1.3 million treasury shares and announced a new share buyback program of up to EUR 8 million or up to 700,000 shares running until the end of July 2026. So far, we have repurchased around 150,000 shares for approximately EUR 2.4 million.

In addition, we reduced outstanding stock options by about 15% from 2023 until the end of last year. On the right-hand side of the chart, you can see the development for our weighted average shares outstanding since 2022, reflecting the impact of our buyback programs. Together with our operational improvements, this supports continued growth in earnings per share, which we will present to you in the recap section.

Over to you, Andreas.

Thank you, Sebastian. For this next section, I will recap the first two phases of our 3-step value creation plan and outline our priorities for 2026. Let me start with a recap.

Now with the completion of Phase 2 in 2025, the financial impact of our strategic transformation is fully visible, and that is what I would like to highlight today. The first phase of our 3-step value creation plan span from mid-2022 to the end of '23 and included the turnaround of the company as well as its transition to the OneWestwing commercial model with a stronger premium brand positioning.

The second phase started in 2024 with a focus on building a lean and scalable platform and was completed mid-'25. Core of this phase was complexity reduction, leading to significant cost decreases, efficiency gains and scalability.

Given the scale of change required to achieve these strategic and operational milestones, it is clear that we planned and executed a true transformation. However, we did not set out to deliver a transformation for its own sake or for short-term gains. We defined a long-term value creation plan. And value creation needs to be reflected in a significantly improved financial performance.

So let's now take a look at how this transformation strengthens our financial model. What you see here is a P&L comparison of full year 2022 and full year 2025. The takeaway is obvious. Our new commercial model plus the complexity reduction fundamentally changed our P&L.

Let us go through the P&L line by line and look at key changes. First is gross margin. Compared to '22, we improved it by almost 6 percentage points. The reason for the improvement is simple. We changed what we sell. I'll share details on this in a minute.

Next is the fulfillment ratio, up by 3.3 percentage points compared to 2022. This ratio also benefited from the assortment changes, which led to increased average order values. In addition, we centralized our logistics operations, closed warehouses and realized efficiency gains across freight and warehouse operations.

Gross margin and fulfillment ratio together amounted to a contribution margin of 34.5% in 2025, an increase of 9.2 percentage points compared to '22.

Let's move on to our marketing ratio. It increased by 3 percentage points compared to 2022. There are three major reasons for this improvement. Firstly, the investments into premium brand positioning. Secondly, we now operate a full funnel marketing model with higher spend on conversion in the lower funnel. And thirdly, in 2025, we invested into the ramp-up of 11 new countries, which mainly requires marketing investments to build awareness and the customer base.

The next P&L line shows our G&A ratio, including other results. It improved by 5.5 percentage points to 15.9%. I'll share details on this topic in a separate slide. It is important to note that we reduced the G&A ratio in absence of meaningful scale effects and while we invested into store expansion. This brings us to adjusted EBIT margin, up 11.6 percentage points since 2022 in just 3 years.

Moving further down, we see additional improvements in D&A ratio as we reduce D&A on internally developed technology assets, as Sebastian just said, and lease through our complexity reduction measures. It also includes lease costs for our new stores. As a result, we improved our adjusted EBITDA margin in 2025 compared to 2022 by almost 11 percentage points. The numbers clearly show that the business we run today is structurally very profitable and attractive.

Let me show you two slides on the topics we changed what we sell and G&A costs. While absolute top line did not change much since 2022, we changed what we sell to a very large extent. The left-hand side of the slide shows the GMV of our Westwing Collection business and of our third-party assortment over time.

In '22, the dominant business model at Westwing was the shopping club, which primarily offered third-party products at a high discount. The new commercial model, which we introduced in 2023, changed this. It put the shop and our high-margin Westwing Collection to the forefront and our marketing activities were adjusted accordingly.

In '24, we accelerated the transition with the introduction of a mostly global, more premium and smaller product assortment to the reduction of non-premium third party, the end to localized assortment and the go-live of new third-party design brands. The change in what we sell is reflected in the compound annual growth rate of the Westwing Collection versus the assortment of third-party suppliers.

While our Westwing Collection grew at a CAGR of 18%, the third-party GMV declined by 13% on average per year. It is important to mention that while our third-party GMV overall is shrinking, the premium or design brand part is growing fast.

Below the chart, you can see that the change also led to a lot less discounting of products versus the original selling price or recommended retail price. The GMV share that came with a discount of 10% or less was only 34% in 2022, and we almost doubled that share to 64% in 2025. In other words, today, we make close to 2/3 of our top line on full price or close to full price, up to 10% off, while that ratio was only 1/3 in 2022.

Let's now briefly talk about the G&A ratio improvement. In 2022, after the COVID bubble in e-commerce got burst, Westwing had unsustainable levels of personnel and related costs. We chose our new commercial model also with the aim of being able to run it with a reasonable team size. What you can see on the chart is that we are able to run our business now with roughly half the team size of '22 with more or less the same top line.

Our new commercial model allowed us to consolidate activities and centralize business functions, including the closure of several offices. It also allowed us to switch from a proprietary in-house developed tech stack to a SaaS-based technology platform. All of that was, as you can imagine, very painful for our teams as we had to part ways with lots of valued colleagues, but it was inevitable if we wanted to provide Westwing with the future.

Last but not least, the new model allows us to now scale with operating leverage, adding increase in personnel costs. We so far added roughly 80 positions from our expansion efforts, mainly for our newly opened stores. This is already included in the numbers you see on the chart.

Putting everything together again and switching from percentage of revenue to absolute numbers, the next slide offers another view on the outcome of our transformation, the improvement in absolute adjusted EBITDA from 2022 to 2025 by P&L lines.

In just 3 years, we improved our adjusted EBITDA by EUR 48 million as one of our analysts recently stated a textbook turnaround. I want to use this opportunity for a shout out to the entire Westwing team as this is the result of lots of hard work and as we say over here, doing business creatively.

Our turnaround is also reflected in our earnings per share, which you can see on the following slide. The dark green bars show unadjusted earnings per share. The light green bars show earnings per share on an adjusted basis. Adjustments include changes in fair value of employee stock option programs as well as restructuring expenses.

The earnings per share are calculated by dividing the respective earnings by the weighted average number of shares in circulation. This means outstanding shares after deducting treasury shares.

The large improvement of 2025 stems primarily from the very profitable fourth quarter as well as positive impacts from deferred tax assets following the successful turnaround that Sebastian mentioned beforehand. In addition, our tender offer at the end of 2024 to buy back shares had a very positive impact on earnings per share for 2025.

Now that we've seen the financial impact of our transformation, let me turn to our key focus areas for '26. phase we've been in since mid-2025 is step 3 of our value creation plan, scaling with operating leverage. In simple terms, this means driving growth while continuing to deliver strong profitability even against rather weak consumer sentiment and other short-term negative macro impacts.

Let's see why we believe we can achieve this in 2026 by looking at the development of the Westwing Collection, potential market share gains in existing geographies and country expansion efforts.

As you can see on this slide, cost discipline is another lever of the third phase as it is embedded in everything we do, I will not address it separately. Let's have a quick look at our Westwing Collection lever.

The Westwing Collection is our gorgeous sustainable private label product brand, which supports both our top line as well as profitability since the products are very desirable, and they allow us to achieve a higher contribution margin compared to third-party products. In the full year 2025, we reached an all-time high GMV of EUR 321 million, representing a group GMV share of 63%.

Looking ahead to 2026, we expect to continue scaling the Westwing Collection supported by three main levers. Firstly, new product launches across both existing and new Home & Living categories, which unlock additional sales potential. Secondly, our store and country expansion, which will make our products accessible to even more design lovers. And thirdly, our investments into brand awareness and positioning, which are typically centered around the Westwing Collection, such as the recent [indiscernible] sofa campaign.

At the same time, when looking at GMV share of the Westwing Collection, we expect the pace of share gains to be moderate compared to previous years. There are three main reasons for this. First, third-party GMV is expected to stabilize in '26. The active reduction in this part of the assortment contributed heavily to the increase in Westwing Collection share in the past.

Second, we're driving growth in a particular segment of third-party assortment, the Design brands, which are growing fast at the moment, also because of the onboarding of new ones.

Third, just recently, we've seen a trading down of customers from larger items to smaller items. As the Westwing Collection is the strongest in large furniture, this is impacting Westwing Collection share at the moment. Sebastian will elaborate a bit more on what we see in a few minutes.

While these three drivers are significant, we continue to see clear top line growth potential across both the key assortment areas of ours, Westwing Collection and third-party design brands.

Besides growth in our premium product assortment, we see off-line store expansion as a lever for share gains in existing markets. Let me start with a quick recap of the strategic rationale behind our stores.

In Home & Living, many customers combine online and off-line experiences in their journey, especially for large furniture purchases. The latter mostly for the touch and feel and simply because basket sizes in furniture are often very large and require many touch points for conversion. Our stores allow us to provide such a holistic shopping experience across the multi-touch customer journey.

In addition, offline stores help us to further strengthen our brand presence and positioning through a real-life brand experience. This is why we believe in stores as a lever for share gains in existing markets.

While we opened 7 new stores in '25, we plan to add only 1 additional store in Frankfurt in 2026. In addition, we will relocate the Munich Warm-up store to its permanent location in the heart of the city, which allows for even stronger physical presence. The main reason for the slower expansion pace in '26 is that we want to focus on operational excellence and improve customer experience across our expanded store portfolio before moving into a potential next phase of store openings.

So far, we are very pleased with the development of our stores. However, given the relatively short time since most of the openings, it is still too early to draw real conclusions.

Let's move on from gaining market share in existing geographies to entering new markets. One month ago, we reached a major milestone by entering the United Kingdom, representing our largest expansion so far. We're doubling down on this market entry as we speak.

Nearly our full product assortment and all our premium services are available to the customer. The latter includes our design service, tailored B2B solutions and our Westwing delivery service with a small number of Westwing branded trucks visible across the London area.

To drive new customer acquisition, we have a full funnel marketing activation in place across both paid and organic channels. Given the significantly larger market potential of the U.K. compared to the countries we entered in 2025, we expect a higher level of marketing investments compared to '25 as we ramp up our U.K. business.

Once we built sufficient visibility on demand patterns, we will store bestsellers and U.K.-specific products, for example, lighting with the local electrical plugs in a U.K.-based warehouse to further enhance customer experience and delivery efficiency.

This warehouse will be operated by a third-party logistics partner, ensuring flexibility as we scale the business and supporting future top line growth in the U.K. U.K. returns are already being handled by this partner today. With this latest development, we're excited to see the impact that the U.K. market might have on our growth and brand trajectory.

In 2026, we will not only drive growth in the United Kingdom, but also across our other expansion countries. In '24 and '25, we launched a total of 11 countries, and we've already seen the early signs of success from these expansion initiatives.

For instance, nearly all of the 11 countries have either already reached full payback or are on track to deliver full payback within the first 12 months of operations. This underlines the strength of our expansion playbook, delivering short payback periods through a lean and scalable setup.

Besides payback time, we are also pleased with top line contributions from our 11 expansion countries. In Q4, our customers in these countries collectively accounted for 6% of our total GMV, and we expect this share to increase further over the next quarters.

To continue to drive growth in 2026, we plan to invest up to EUR 10 million in marketing in our expansion countries with a significant part allocated to the U.K. Key initiatives are scheduled for the second half of '26, including brand investments. The overall investment size will depend on expected return on investment and the overall development of the group over the next months.

In previous calls, we mentioned that we aim to be present in approximately all European countries in the midterm. As the remaining non-served countries are significantly smaller than the U.K., we will focus our efforts in 2026 on the U.K. and the '24, '25 expansion country. We might open a few smaller additional ones such as the Baltics.

In summary, for our Western Collection, offline stores and country expansion efforts, we are well positioned to drive growth in '26 while still delivering high profitability. That being said, there may be temporary headwinds from the ongoing conflict in the Middle East, which could impact our top line and profitability in the near term.

Sebastian will comment on this as part of our financial outlook in the next section. Sebastian, over to you.

Thank you, Andreas. Before sharing our financial outlook with you, let me first provide you with information on current trading and key assumptions on '26, including already visible and expected impact from the recent escalation of the conflict in the Middle East.

I will start with current trading. This slide shows the GMV development year-over-year since Q1 2025 by quarter. The first 2 quarters of 2025 were impacted by the assortment changes and did not yet see a relevant top line contribution from expansion measures. This is why growth rates were negative.

In the second half of 2025, the effects from the assortment changes bottomed out and expansion impact increased, with Q4 2025 showing a strong GMV growth of 9%. Q1 2026 started even better with a forecasted year-over-year GMV growth of about 12% However, we haven't returned to sustained structural growth yet. To put this into context, it is important to understand the key drivers behind our recent performance.

Growth in both Q4 2025 and Q1 2026 was significantly supported by highly successful mega sales events. In Q4, the Black Week sales event exceeded our growth target significantly. Similarly, our January sales event delivered very strong year-over-year growth, significantly lifting the overall performance of the quarter.

Outside of these events, underlying trends were more moderate. GMV growth in February was still solid at around 7%. But following the escalation of the conflict in the Middle East, we observed a slowdown in March, likely reflecting much weaker consumer sentiment. As a result, while we delivered a strong Q4 and an even stronger start to Q1, the current growth rate cannot be seen as the new baseline.

Looking ahead, we expect growth to normalize at a lower level in Q2. Performance in the second half of the year will largely depend on the development of the geopolitical situation and its impact on consumer demand.

Let us now take a closer look at our assumptions for 2026. Starting with country expansion, we are very pleased with the progress so far. The early launch in the U.K. in February provides additional upside potential, and we expect country expansion to be our most important growth driver in 2026.

When it comes to share gains in existing markets, a key focus area for us, the picture is more mixed. While the January sales event was extremely successful, growth moderated afterwards, and the macroeconomic environment remains very challenging alongside increasing competition.

Importantly, consumer sentiment in Germany, our largest market, had already weakened in February even before the escalation of the conflict in the Middle East. Data from research institutes shows declining willingness to spend and a further increase in savings rates, reaching the highest level since [ 2008 ].

Other indicators point in a similar direction. Business climate indicator, for example, was released this week and reported the steepest decline in business expectations of the construction sector since March 2022. At a European level, the European Commission's March flash estimate also showed a sharp decline in consumer confidence, reaching its lowest level since October 2023.

And a recent McKinsey consumer survey from beginning of March identified Home & Living as one of the categories in which people are most likely to reduce spending over the next 3 months.

Against this backdrop, we currently expect a negative short-term impact on our top line in Q2. Visibility beyond Q2 remains limited given uncertainties around energy prices and supply dynamics.

On the positive side, we saw growth in active customers and a solid increase in order volumes in Q1. This indicates continued demand, albeit at lower average ticket sizes. And as commented with regards to current trading in Q1, our GMV is growing in March -- in February and March despite significantly worsened consumer sentiment.

Turning to our assortment, we expect the Westwing Collection to continue growing, although at a lower pace in terms of GMV share gains as the tailwind from prior assortment changes normalizes. Andreas just commented on this. This effect is already visible in Q1. At the same time, we are seeing encouraging momentum in our third-party premium brands.

From a profitability perspective, we already saw headwinds in Q1 driven by weaker consumer sentiment. Average order values declined, indicating some degree of trading down, which weighs on gross margin and unit economics.

In addition, we are seeing signs of pricing pressure from increasing competition. We also see first signs of cost pressure from logistics with increasing freight rates driven by higher fuel prices, including rising [ banker ] adjustment factors for sea freight.

Looking at the full year, we expect the headwinds observed in Q1 to continue into Q2. Beyond that, visibility remains limited given the very uncertain macro environment.

Another important factor for profitability is our U.K. expansion. We are confident in its long-term return potential and therefore, plan to invest meaningfully into customer acquisition and brand. Given the size of the opportunity, ramp-up investments are expected to be higher than in our 2025 expansion initiatives.

To summarize, we had a very strong start to the year, supported by a successful January sales event, and we remain confident in delivering growth in 2026, driven by our proven growth levers. At the same time, we have seen February and March trading at lower levels with negative impact from the conflict in the Middle East expected to weigh on our top line, particularly in the second quarter.

Most importantly, we remain confident in delivering strong profitability overall, although we expect some margin and cost pressure, especially in the first half of the year due to the current macroeconomic environment.

Based on these assumptions, we have defined the guidance for 2026 as follows: we expect revenue in the range of EUR 470 million to EUR 495 million, corresponding to a growth of 5% to 10%. We set a wider range to reflect the high uncertainties around the macroeconomic situation, which are captured in the lower end of the range. The lower end of the guidance assumes no recovery following a dip in Q2.

At the same time, we still see a chance for an improvement in consumer sentiment during the second quarter, which would support performance towards the upper end of our guidance. This assumes a return to growth across both segments over the remainder of the year. This outlook is consistent with the ambition outlined last year, including a return to a high single to double-digit growth in 2026.

It is important to note that our 2026 ambition was defined at the beginning of last year based on the assumption of a relatively weak but stable macroeconomic environment. This did not factor in the recent developments in the Middle East and the resulting further decline in macro conditions.

With regards to profitability, we expect adjusted EBITDA in the range of EUR 36 million to EUR 48 million with a midpoint at EUR 42 million. Again, this guidance reflects potential risks from the conflict in the Middle East, which is why I have adopted a wider guidance range. I have already commented on expected margin and cost effects on the previous slide, which are expected to impact our profitability compared to 2025.

The guidance also assumes continued investments in our expansion levers where we see a potential of attractive returns. We believe it is the right approach to leverage our strong financial position and invest through the cycle in a period of temporary market headwinds.

At the same time, a recovery in consumer sentiment could offer upside potential, supporting adjusted EBITDA towards the upper end of the guidance range with the margins approaching 10%.

In terms of cash, we expect continued strong operational cash conversion from adjusted EBITDA broadly in line with 2025. Let me add here a note on potential cash outflows from stock option exercises, which are included in our IFRS free cash flow. As shown in our cash bridge earlier in this call, cash settlements of stock options amount to approximately EUR 4 million in 2025.

Depending on exercise levels and share price development, this figure could exceed EUR 10 million in 2026. This means that if a similar amount of cash was converted in 2026 as in 2025, free cash flow could be significantly lower based solely on the higher cash outflow from stock option exercises. Stock option exercises will be driven by our active management of dilution and cash risk from legacy programs as well as ordinary exercises.

Let me conclude now with some final remarks on our outlook. While our outlook reflects the current trading environment and early signs of inflationary pressure following the escalation of the conflict in the Middle East, it does not assume a scenario of a prolonged conflict or a severe energy crisis, including potential energy supply disruptions and significantly increased inflation. Given the high level of uncertainty, we also are not providing a specific outlook beyond 2026.

At the same time, I would like to emphasize that our underlying performance remains unchanged. We continue to see achievable growth in the high single to double-digit percentage range for our business model alongside further improvements in profitability and strong cash conversion.

We remain focused on executing the growth levers on the third phase of our 3-step value creation plan while navigating the current environment with discipline and foresight and maintaining a clear focus on long-term shareholder value creation.

With that, I hand back to Andreas to conclude with our key investment highlights.

Thank you, Sebastian. So let's briefly recap the investment highlights. First, we have a unique relevant customer value proposition through the specific assortment and the way we serve our customers. Second, the market potential is huge in our existing geographies as well as beyond. Third, we are developing the super brand in design with high loyalty and true potential to grow further.

Fourth, we have high and increasing margins as well as operating leverage while we scale. Fifth, we have a great balance sheet with a strong cash position and no debt, strong net working capital and low CapEx.

All of this will lead us in the midterm to 10% plus adjusted EBITDA and a continued strong cash conversion. This also allows us to continue investing through the cycle, as Sebastian just mentioned, even in the presence of temporary headwinds from the ongoing conflict in the Middle East.

Sebastian and I are now happy to take your questions.

[Operator Instructions] And we have the first question from Volker Bosse from Baader Bank.

Volker from Baader Bank. Congratulations on the great improvement and thanks also for the detailed current trading indications, which you already presented. I would have three questions.

I would like to start with the expansion, expansion into new country. So is it also fair to assume and it is also baked into your guidance that you expect a return to sustainable customer growth in '26 and the years further? So yes, first also on the KPA, customer growth, how do you look at that?

And the second would be on the store expansion. You provided all the details, but how does it play into the expansion of the own delivery service or the interior design services? And how are your plans on that? How did that develop? I know you had some pilots here in Munich, for example, in that regard for these two services. And what is here the outcome and the further planning also for other locations and cities?

And the third one, it was impressed to see that inventory is down despite the expansion country-wise and store-wise. So perhaps more detail, how was that achievable, as I would have expected inventories to go up? So yes, it would be great to have some clarification on the secrets here.

Thank you so much, Volker, for your questions. So I'll take the one on store expansion and the services, and then I'll hand over to Sebastian for the questions on customer growth and inventory regarding expansion.

So on the store expansion, you asked, given that we now have more stores, 9 in total, how does that play into -- or how does that work together with our own delivery service you asked and our Westwing design service, interior design service.

So on the delivery service, while there is obviously -- so the delivery service is actually our Westwing branded service that delivers large furniture in the major European cities.

So we started off in Munich to deliver to our customers, sofas and beds, et cetera, with an own delivery fleet, and we expanded that first to other major German cities and then beyond Germany. So we're also present, for example, as we said in London, in Paris, in Warsaw, in Vienna, for example.

And while the delivery service does support the store also in managing supply, it is largely independent of the stores. So this service operates in cities where we don't have stores.

The main rationale behind this delivery service is the improved customer experience. So this is not an efficiency lever, this is a customer experience lever because last-mile experience, especially for the delivery of large furniture, can be quite tedious for customers. And given our premium brand positioning, we believe that we need to offer a superior service where we can and where it makes economic sense versus what we typically see in the market. So that's the Westwing Delivery service.

The second one you referred to was the Westwing Design service. So what our team in the Westwing Design Service does is to provide our customers with customized designs for their homes. So it can be a full house, a full apartment, can also be individual rooms; where we create close to realistic models of what a room or a house could look like fully furnished with Westwing products. So this service has been increasing and has been growing very nicely.

This one is more closely connected to the stores, and that was your question, because we offer in the stores, not just regular consultation through our sales assistant, but we also offer the Westwing Design Service in nearly all of our stores.

So we have a separate room there in the stores where you can come, you can book an appointment and you can sit down there with a Westwing Design Service colleague of ours and go through the changes that you would like to do to your interior in your house.

We also offer this design service online. This is how we started before we have stores. So this is a nice complementary service for the customers that would like to do this offline, sitting face-to-face with the Westwing interior designer, they can do this also in the stores.

And this is obviously supporting the growth, not only of the design service, but also of the stores. This is actually one of the strong levers that we see over the next years also for the top line growth in our stores. So it's a wonderful combination.

So Westwing Delivery Service, there's only kind of a support on the supply chain. Westwing Design Service is closely interlinked with our stores. Does that answer your question on stores and delivery service and design service, Volker?

Yes. It's good to hear that you already expanded this delivery service so massively that I was not aware of that. So it's also in cities where you have no stores yet?

Yes. That's right. Yes. And maybe a last comment on the expansion of the design service, we launched this first in Germany, and we now are expanding into more countries. As we mentioned, we also already have the design service live in the U.K. And we're also bringing it live, for instance, in Poland, also in local language and in a few other countries in English. So this is also expanding while we speak.

With that being said, let me hand over to Sebastian for the other two questions of yours, Volker.

Volker, thanks for your questions. I will start with your first question on the development of active customers. Let's first recap on the reason for the decline in active customers over the past quarters. So this was driven by the assortment changes, which were implemented first in the International segment and then followed by the DACH segment. That's why we saw this decline in active customers.

The good thing is that you already can see in our Q4 numbers that the active customers grew quarter-over-quarter by 3%. So already the positive trend. And we see also a positive trend in Q1, even with a year-over-year increase. And if you look at our midpoint guidance with about 7.5% of growth, we assume that this is then also driven by some increase in active customers throughout the year. So I hope this answers the question. Overall, we are confident that the negative effects bottom out and as we return to growth in 2026.

And second question was on inventory levels and how we managed to achieve the inventory levels at the year-end. So I think there are two main aspects.

First aspect that, of course, we are continuously looking for measures to improve inventory management in terms of optimizing supply streams, optimizing demand forecasting. So this is one driver.

But another very important driver in Q4, of course, also was the very strong top line in Q4. And there we sold more than expected, and this also drives down inventory levels, of course. But even without such strong top line, we would have been very pleased with our inventory levels at the year-end.

And if I may add because you -- Volker, I think you asked the question also in the context of expansion. The expansion in Continental Europe, so what we did in '24, '25, this actually improves inventory turns because we sell the exact same products in all of those markets. and the increased top line with the same assortment.

In the U.K., it's slightly different. The majority of the assortment is also the same as in Continental Europe, but you have some specific U.K.-specific regulation. So for instance, lighting needs the electric plugs for the U.K.

And then also when it comes to upholster furniture, there's certain regulations on, for instance, foam and fabrics on fire [ retardancy ]. And there, we actually slightly change the products and then have U.K.-specific products that we, at the moment, serve from our central warehouse and will be serving from our U.K. warehouse once that ramps up.

[Operator Instructions] And we have one more question from Michael Heider from Berenberg Bank.

Thank you also from my side for this very detailed presentation. So there's very few questions left. I have two and one you already touched upon on your last answer. But specifically on inventory in the U.K., what is the timeline for the opening of the dedicated warehouse? Would be the first question. And then maybe can you also quantify what the net working capital or inventory impact of U.K.-specific inventory will have, yes, in figures maybe?

And then second question, just like technicality. So you had a very nice tax refund in 2025. What do you expect for 2026 here?

Thank you so much, Michael, for your questions. I'll take the one on inventory in the U.K. and then hand over to Sebastian for the tax question.

So you asked about the warehouse in the U.K. when it goes live. So our partner in the U.K. is already handling customer returns. That means that if a customer purchased a product today on the westwing.co.uk website and if -- which happens not very often, but obviously, sometimes, if they return a product, then this product does not go all the way back to our central warehouse in Poland, but it remains within the U.K. and then can be resold from there.

And the full implementation of the U.K. warehouse happens in July. That is when we also start outbound shipping from the U.K. warehouse. That means we will then start to store locally bestsellers and the U.K.-specific products that I just mentioned. Those we will store their best sellers increasingly over time as we gather data, but we start that in July.

And the last point that you asked there was what is roughly the increase in inventory that we expect from this U.K. warehouse. So for this year, we have an expectation of a very slight increase of our inventory. I mean our inventory December 2025 was roughly in total in our Polish central warehouse, EUR 45 million. And the U.K. warehouse will likely add about EUR 1 million to EUR 2 million throughout the -- from July to December.

We don't have any numbers yet on beyond 2026. That obviously depends on the development of the top line in the U.K. and also the product mix in the U.K. We believe that while this adds slightly on net working capital, we will be able to achieve higher growth and better profitability with this because we will be able to achieve -- offer customers shorter delivery times on the products that are stored in the U.K. And we also have the possibility to reduce logistics costs.

For instance, when we ship products directly from our suppliers to the U.K. warehouse, then we obviously skip the central warehouse, which comes with reduced handling costs and line haul costs. So that's the rationale of the U.K. warehouse.

But it's very flexible. It's handled by our partner. So that's why we can ramp it up and down as we need to, and we can provide more visibility on inventory, obviously, in the following earnings calls whenever we see updates on this.

That said, Michael, I'll hand over to Sebastian for the question on tax, what is expected for 2026. I think that was the question.

Michael, thanks for the question. I think this is related to the impact from the deferred tax assets. Is this correct?

Yes, correctly, yes.

Yes. So we had to account for the deferred tax asset as we now had a really profitable result in the Westwing GmbH. And this ends our history of losses. And according to IFRS 12, we then have to account for the deferred tax asset, which shows the amount of tax loss utilization that we expect going forward.

So for 2026, this means that this -- the deferred tax asset, the positive input would increase. If our outlook for the Westwing GmbH improves, then there would be a write-on. If the outlook decreases, then there could also be an impairment of the deferred tax asset.

That being said, so the impact in 2025 was a significant one-off impact as now for the first time, we had -- we accounted for it. And going forward, it will only be minor changes depending on the outlook of the Westwing GmbH, where our operating business sits in. It's a 100% subsidiary of the Westwing Group SE.

And maybe on the -- is there any cash out tax or taxes that are really cash out and paid?

Yes. So in Germany, we have the minimum taxation on our profit. So this remains. But of course, we always try to optimize the utilization of our existing tax loss carryforwards across our group entities, provides us with an attractive tax yield.

And the next question comes from Christian Sandherr from NuWays AG.

I also have three questions remaining. Maybe first one on the topic of discounting. You mentioned all these challenges when it comes to consumer sentiment. So how much would you be willing to sacrifice margins for the sake of growth? This is one question. Second one, kind of related, do you see different behavior between older customer cohorts and the newer ones?

And the third one on your stores, you are only opening one new one in 2026. Is it fair to assume that after the recent country launches that you are considering opening additional stores in those rather newer countries beyond -- after 2026, of course?

Thank you so much, Christian, for your questions. I will maybe start with the last question on the stores. You asked about whether we will be opening new stores also in new countries and what the pace might be. So as we said for this year, we are only opening one new city that's Frankfurt, and that's because of the reason that we mentioned.

We do believe at the moment, we are confident about the store business, and we do believe that it drives value for Westwing through the value that it drives for our customers and the customer journey. We have not got any specific plans on opening cities or in these in specific countries yet.

I think it's quite -- it's probably realistic to assume that if we decide to open more stores from 2027 onwards, possibly that we typically start with -- so we look for what the opportunity is in a specific city, and that is derived mostly from the online sales that we already have in the city because that means that the brand awareness is the highest. And typically, that also means that the upside is the highest.

So that makes it more realistic that we open new stores in our larger existing countries before going into new countries. But that being said, there might, of course, be individual opportunities where we see, hey, we've got great traction in a certain country or city and there's a good opportunity in terms of real estate because that is a major bottleneck for opening new stores. And then we might actually also open a new store in a relatively new country. So there's no specific plan yet, but we'll keep you updated on this.

Then you asked about discounting and the current consumer environment. You asked how much we would be ready to sacrifice margin for the sake of growth. The short answer is not much beyond what we announced today. So what we basically follow is in our existing countries, so in our larger countries that we've been running for a longer period of time, we are rather cautious with marketing investments because consumer sentiment simply is not there.

Of course, we always try to find pockets of growth that could be store related. It could be in a specific marketing channel. But overall, we don't believe that we will increase marketing significantly in the existing countries nor would we engage in significantly higher discounting.

To a certain extent, probably yes. But let's take into account that the margins are already under pressure through changes in average order value and also cost increases such as in diesel prices. So if we then add more discounting to it, that would put the margins truly under pressure.

Of course, I can't say what the market will look like over the next few months and how consumer sentiment will develop. But we will typically stay away from larger discounting. That's the plan.

When it comes to the new markets, it's not so much a question of discounting. It's more a question of marketing invest. And there, we are actually bullish. We want to invest. We see the traction. And here, it's a question of really delivering on growth. I hope that answers the question.

Yes, it does.

And then I'll hand over to Sebastian for the question on the cohorts, older cohorts versus newer cohorts. What do we -- I assume that the question was directed towards what we see in behavior, et cetera.

Yes, exactly. Okay. thanks for your question. So I would refer to what Andreas already mentioned when he talked about the recap of our business transformation and the changes in the assortment where we showed that in the past, Westwing run a shopping club focused business model and change in the commercial model to a more premium assortment.

And this led, as we have already mentioned, to a churn in customers -- and this churn in customers was predominantly driven by customers that in the past used to shop in our shopping club and being used to high discounts. And as we have shown, we changed our offering there, offering much more premium products, less discounted.

And some of our existing customers in the past churned. They didn't like the new offers. Then there will be a big overlap between the customers that used to shop in the past and the customers that still shop today that like our new positioning. And there will be also customers that we only are able to attract because of our new positioning.

If you look at our customer-related KPIs, I would like to highlight the average order value development. The average order value development alongside our commercial model change increased significantly during the last quarters, so showing that customers are paying much more on average for their purchases.

So this gives some indications that customers are spending more and also the new customers are directly or to the most extent, acquired with our new model, so being used to a premium to our premium positioning and searching for those products.

So I hope this explains a little bit what we see there. So we think that there is some change in positioning with the overlap between the two business models. And we see customer-facing KPIs changing accordingly.

[Operator Instructions] So at the moment, there are no further questions. Okay. I think we have no more questions. So back to you.

Thank you. As we have received additional questions, we're ending today's earnings call. Thank you for joining, and goodbye.

Good morning, ladies and gentlemen, and welcome to the Westwing Group SE Q3 2025 Earnings Call. [Operator Instructions]

Now dear ladies and gentlemen, let me turn the floor over to your host, Andreas Hoerning.

Good morning, everyone, and thank you for joining us for our earnings call on the third quarter of 2025. My name is Andreas Hoerning. I'm the CEO of Westwing. I'm hosting the call together with Sebastian Westrich, our CFO.

Looking at today's agenda, I will begin by providing key updates on our business for the third quarter of 2025, after which Sebastian will share the details of Westwing's financial performance. After our investment highlight summary, we will be happy to take your questions.

Let's take a look at the current state of Westwing. In Q3, we delivered growth and continued to improve profitability significantly. Our GMV increased by 5.4% year-over-year despite changes in product assortment. We improved our adjusted EBITDA by 73%, reaching EUR 6 million at an adjusted EBITDA margin of 6.1%. This marks an increase of 2.5 percentage points year-over-year.

Free cash flow was positive at EUR 10 million in Q3, and we ended the third quarter with a net cash position of EUR 58 million. For the full year 2025, we expect free cash flow to be double-digit positive.

Strategically, we are well on track with the implementation of our 3-step value creation plan. Our own product brand, the Westwing Collection grew 19% year-over-year, which resulted in an all-time high group GMV share of 66%.

As part of our geographic expansion, we achieved our full year objective of launch in 10 new countries, and we continued our store expansion with the opening of 7 new stores this year. The operational progress is fully in line with our targets.

We confirm our financial guidance for 2025 and are currently expecting the adjusted EBITDA at the upper end of this guidance. We also confirm our ambition for 2026, which is the return to a high-single to double-digit growth and further improved profitability.

As always, let's have a look at our 3-step value creation plan, which we started executing in 2022. In terms of levers, we successfully completed the first 2 phases, the turnaround and strategy update phase, and the building of a scalable platform phase.

2025 marks a transition year for us, where we are focusing on the key growth levers of the third phase to be able to scale with operating leverage from 2026 onwards. As in the last earnings call, let me now briefly guide you through our progress across the key levers of the third phase of our plan, beginning with the latest developments of the Westwing Collection, then moving on to how we strengthen our market share in existing geographies, pushing the premium positioning of our brand and finally, the progress we've made in terms of international expansion.

So starting with the Westwing Collection. The Westwing Collection is our gorgeous sustainable private label product brand, and we continue to be very pleased with its performance. It again delivered strong growth of 19% year-over-year, resulting in an all-time high group GMV share of 66%. This represented a total GMV of EUR 75 million in Q3.

The strong development supports our top line as well as profitability since the products are very desirable and they allow us to achieve a higher contribution margin compared to third-party products. As we build Europe's premium one-stop destination for Home & Living, we're creating a unique product assortment for design lovers, consisting of our own brand, Westwing Collection and the best third-party design brands. We still have significant room for improvement on both sides.

As outlined in our last earnings call, besides improvements in product assortment, we see offline store expansion as a lever for share gains in existing markets. In 2025, we opened a total of 7 offline stores. In Q3 alone, we successfully opened 3 stand-alone stores located in Munich, Berlin and Cologne as well as 2 store-in-stores, one in Dusseldorf and one in Copenhagen.

Before I share an update on our geographic expansion, let me show you some impressions of our newly opened stores. In Munich, we opened a so-called warmup store. It is more than just a pop-up. It's a preview of our first permanent Munich store coming next year in the heart of the city. Munich is especially meaningful to us as it's where our journey began and where many of our central teams are based, enabling us to learn and refine the customer experience even faster.

Next to Munich, we are also very proud to now have a permanent stand-alone store in Berlin. This is located on the iconic Kurfurstendamm, bringing Westwing to life in the heart of Berlin's western city center.

On top, we opened our stand-alone store in Cologne, one of Germany's busiest shopping cities. Next to our stand-alone stores, we also opened 2 store-in-stores. One is located at Breuninger Dusseldorf on the prestigious Konigsallee. Following the successful pilot of our store-in-store concept in Stuttgart in 2024, we are proud to continue our partnership with Breuninger, arguably Germany's leading fashion and lifestyle department store chain.

The other one is our very first store-in-store in Scandinavia at the iconic Illums Bolighus flagship store in Copenhagen. This opening marks a new milestone in our Nordics expansion following the successful launch of Westwing in Denmark, Sweden, Norway and Finland earlier this year. By partnering with Illums Bolighus, a destination known for timeless elegance and Danish design culture, we are strengthening our presence in the Nordics and connecting with a design-savvy audience in a uniquely meaningful way.

Overall, offline stores help us to further strengthen brand presence, positioning and top line, providing a holistic shopping experience across the multi-touch customer journey supports Westwing's market share gains.

In Home & Living, many customers combine online and offline experiences in their journey, especially for large furniture purchases. The latter mostly for the touch and feel and simply because basket sizes in furniture are often very large and require many touchpoints for conversion.

On the next slide, you can see impressions of the official opening of our Berlin store, where we welcomed over 250 friends of the brand, key opinion leaders, press and content creators from the world of fashion, art, design and lifestyle. The event generated strong positive press coverage and a high volume of social content, amplifying our brand visibility.

Let's move on from gaining market share in existing geographies and increasing our premium brand positioning to entering new markets. At the beginning of the year, we announced our plan to open 5 to 10 new countries in 2025. We are happy to announce that we successfully opened 10 new countries this year, reaching our full year objectives.

As outlined in our last earnings call, geographic expansion allows us to offer our existing global product assortment to customers in the corresponding market segment for design lovers in other countries. This means selling more of the same products. All Continental European countries follow the same logic with low marginal costs of serving them, translation supported by AI, onboarding of last-mile delivery providers, local influencer marketing and performance marketing with attractive returns within a few months.

Therefore, in the midterm, we aim to be present in approximately all European countries. We do not plan to open any additional countries until year-end as our focus is now fully on the most important season of the year in Home & Living.

To provide for a glimpse into our 2025 country expansion, let me share some impressions of our Nordics launch event. At the end of August, we celebrated our Nordics launch with 200 guests, including brand partners and leading voices across fashion, design, art and lifestyle.

From our styled steamboat experience to sculptural installations at the Westwing Villa, the event showcased our passion for timeless design and cultural connection. It generated extensive positive media coverage and inspired highly shareable social content across the region, achieving exceptional reach, both online and offline. This milestone marks the start of our journey in Scandinavia, bringing beautiful living to even more homes.

Back to results. I now hand over to Sebastian for details on our financial performance.

Thank you, Andreas, and good morning, everyone. I'm Sebastian Westrich, the CFO of Westwing. Let me start with details on our top line.

Our GMV increased by 5.4% year-over-year, while revenue was at plus 3.4% year-over-year despite the negative impact of the changes to our product assortment. I want to highlight here again what Andreas mentioned earlier in this call. Our Westwing Collection business continued to grow by 19% year-over-year.

Now let me also briefly comment on Q3 top line development on segment level. The DACH segment saw a revenue decline of 2.1%, (sic) [ 2.4% ], while the international segment's revenue increased by 10.8%. There are 2 major reasons for this difference in top line development.

Firstly, we began introducing a largely global and more premium product assortment and related restructuring of our local business functions in the international segment as early as Q2 2024. The assortment offered in the DACH segment remained unchanged until late 2024. And as a result, last year's baseline for DACH is stronger than that of the international segment.

Secondly, the international segment benefited from additional revenue generated by our geographic expansion with 10 new countries launched in the first 9 months of 2025.

Regarding top line outlook for Q4, we remain cautious as the performance depends largely on the month of November, including the upcoming Black Friday sales events.

Now let me continue with an overview of our profitability development. In Q3, we improved our adjusted EBITDA by EUR 3 million to EUR 6 million, which represents an increase of 73% year-over-year. In order to show profitability development before D&A, we have also included the EBIT development on an adjusted basis on the right side of the slide. It is also clearly positive at EUR 3 million and showed an even greater increase of EUR 4 million year-over-year.

Excluding adjustments, Q3 showed a negative EBIT of minus EUR 4 million. The adjustment mainly includes the negative impact of a higher fair value of employee stock option programs due to the significant share price increase in Q3. The impact amounted to minus EUR 6 million, which was non-cash effective.

It is important to highlight that we are actively reducing the number of outstanding stock options to reduce both dilution risk for our shareholders as well as negative P&L impact from potential further share price increases.

Let us now take a look at our P&L margins. In the first 9 months of 2025, we realized an adjusted EBITDA margin of 7%. This is a significant improvement of 2.6 percentage points compared to the previous year's period in the absence of any scale effects.

Let us now focus on the P&L development in the third quarter of 2025, which you can see here on the right-hand side. I am pleased to report that we improved our P&L structure in Q3 in almost all areas, leading to a strong improvement in adjusted EBITDA margin by 2.5 percentage points year-over-year to 6.1%. Our gross margin improved by 2.2 percentage points year-over-year, mainly due to strong Westwing Collection share gains.

The fulfillment ratio improved slightly by 0.1 percentage points year-over-year. The fulfillment ratio includes negative effects from expansion as we accept lower logistics linehaul utilization from our central warehouse to the new countries in the beginning. This ensures short delivery times also for our customers in the new markets but comes at higher cost per order. With increasing scale, this negative effect will decrease.

Overall, this led to an increase in contribution margin of 2.3 percentage points to 33.9%, a really strong result for our third quarter. Our marketing ratio increased slightly by 0.3 percentage points year-over-year to minus 13.4%. The main reason for the increase is our investment into expansion.

Our G&A ratio, which includes other result, improved by 2.3 percentage points to minus 17.9%, reflecting the positive effects from our 2024 complexity reduction measures. This led to an adjusted EBIT margin of 2.6% in Q3, up 4.3 percentage points year-over-year. D&A decreased by 1.8 percentage points year-over-year, primarily driven by the full depreciation of legacy technology assets.

Overall, as mentioned before, our Q3 adjusted EBITDA margin improved by 2.5 percentage points year-over-year to 6.1%. The adjustments made in Q3 were minor, except for the higher fair value of our stock option programs following the significant share price increase, which I mentioned before. An overview of these adjustments as well as the unadjusted consolidated income statements can be found in the appendix to this presentation and in our Q3 financial report.

Let's move on to profitability on segment level. In Q3, which is displayed on the right-hand side of this slide, we saw a strong improvement in adjusted EBITDA margin in both segments. In the DACH segment, adjusted EBITDA margin improved by 3.6 percentage points year-over-year to 6%.

In the International segment, we were able to improve our adjusted EBITDA margin by 1.2 percentage points year-over-year to 6.4%. The improvement in profitability reflects the successful implementation of our 3-step value creation plan across both segments.

Let's also briefly look at our earnings per share development. What you can see on this slide is the last 12 months data since Q1 2024. The dark green bars showing unadjusted earnings per share, the light green bars showing earnings per share on an adjusted basis. Adjustment includes changes in fair value of the aforementioned employee stock option programs as well as restructuring expenses.

We are happy to be able to show that the very positive development continued also in Q3 2025. The dent in the unadjusted earnings per share in Q3 stems again from the steep increase in Westwing share price in Q3.

Let us now move from profitability to our balance sheet and take a look at our net working capital. By the end of Q3, net working capital stood at minus EUR 1 million, which is EUR 4 million higher compared to Q3 2024, but EUR 7 million lower versus the previous quarter. Compared to the previous year, we still had higher inventory, mostly driven by the newly introduced Westwing Collection items that we already mentioned in previous calls.

Compared to the previous quarter, we managed to reduce inventory levels slightly despite the typical seasonal inventory buildup towards the high season, and we improved trade payables as well as contract liabilities. We expect net working capital to improve further in Q4 due to typical seasonal effects and the respective positive impact on cash flow.

On the next slide, you can see CapEx and CapEx ratio for the first 9 months as well as for the third quarter of 2025 compared to the same period in 2024. CapEx remained broadly stable year-over-year in 2025, both for the first 9 months and in Q3 specifically.

However, when comparing 2025 to 2024, we see a shift between investments into property, plant and equipment and intangible assets. While in 2025, we invested more into store openings, we were able to reduce CapEx for internally developed tech assets as we move to a SaaS-based tech platform.

Let us now take a look at our net cash position. We are pleased to report a strong net cash position of EUR 58 million at the end of September, which is EUR 8 million more compared to the end of June. Overall, free cash flow was at EUR 10 million in Q3. Taking lease payments of EUR 3 million into account, we had a positive free cash flow after lease payments of EUR 8 million in Q3. Our balance sheet remains strong with no debt other than the IFRS 16 lease obligations and IFRS 2 liabilities from cash settled stock option programs.

We remain confident to enable double-digit free cash flow for the full year 2025, driven by both profitability and net working capital. Given our seasonality, Q4 is expected to be the strongest quarter.

On the next slide, I'll comment on the financial guidance for 2025, which we published at the end of March. Our performance in the third quarter and the first 9 months of 2025 in terms of both revenue and profitability is fully in line with our guidance.

In terms of top line, we had, as expected, headwinds from our changes in the product assortment. These negative effects are expected to ease further towards the end of 2025. But as mentioned earlier, top line in Q4 depends largely on a successful November and the Black Friday sales event. In terms of profitability, we expect a typical seasonal peak in the upcoming fourth quarter.

To summarize, we are well on track to deliver on our 2025 guidance in terms of revenue and profitability and also in terms of a clearly positive double-digit free cash flow. Given the strong performance in the first 9 months with an adjusted EBITDA margin of 7% so far, we currently expect to end the year at the upper end of the adjusted EBITDA guidance.

This brings me to our midterm outlook, which was shared for the first time in our full year 2024 earnings call. I want to highlight again that our ambition is to return to significant growth in 2026 while continuously improving profitability.

Significant growth means a high-single to double-digit growth rate driven by our expansion initiatives and the anticipated easing of negative impacts from the product assortment changes. In terms of profitability, we expect scale effects as we grow, as well as positive effects from our improved product assortment.

We remain focused on executing our 3-step value creation plan with a clear goal of driving sustained improvements in profitability and cash flow. Combined with our return to meaningful growth, this will enable us to unlock the full value potential of Westwing.

I'm handing over to Andreas now to conclude our presentation with our investment highlights.

Thank you, Sebastian. Let me briefly recap the investment highlights. First, we have a unique relevant customer value proposition through the specific assortment and the way we serve our customers.

Second, the market potential is huge, especially in our existing geographies, but also beyond. Third, we are developing the superbrand in design with high loyalty and true potential to grow further. Fourth, we have high and increasing margins as well as operating leverage while we scale. Fifth, we have a great balance sheet with a strong cash position and no debt, strong net working capital and low CapEx. All of this will lead us in the midterm to 10% plus adjusted EBITDA with a continued strong cash conversion.

Sebastian and I are now happy to take your questions.

[Operator Instructions] And we already have one person who wants to ask a question, this would be Volker Bosse from Baader Bank.

Volker Bosse from Baader Bank speaking. So first of all, of course, great results and congratulations, especially that you are able to specify your guidance to the upper end in this challenging times, very an outstanding achievement. Perfect.

I would have 3 questions, if I may, starting with your still decline in orders and number of active customers year-over-year. So how do you see the momentum evolving? Do you see an improving momentum, means is the worst triggered by the transformation process is behind you, so to say? I mean, your outlook on the forward-looking on these 2 KPIs, please, would be the first question.

Second question is on your country expansion. Yes, great to hear that you achieved also here the upper end of your given guidance range, so to say, 5 to 10, so 10 new countries. Can you already share initial developments in the new countries? I think Portugal is most advanced as it was the first country which you opened. How do you see the acquisition of new customers and incremental sales is progressing here or in other countries? Perhaps you have first thoughts already for us on that.

And the third question would be on the new physical stores, which you opened. Do you see here an increased online activity be it in click rates or be it in sales in the catchment areas of the stores. So do you have this granularity of data on hand to share basically the stores do what they are supposed to do, meaning drive sales and brand attention?

Thank you, Volker, for your questions. And also, thank you for the congrats. We're also pleased about the development of the EBITDA. So the first question was related to decline in orders and number of customers, and your question was how this will be evolving, whether the worst is already over? So generally spoken, the decline in order and number of customers is expected to ease in the same way as the negative GMV effect from the change in product assortment is also expected to ease. And we did this in a phased approach.

So first, we changed the product assortments quite heavily in -- especially in Italy and Spain, where we also closed offices and warehouses and went from a local -- very local assortment to a global assortment. And there, we saw a pretty steep decline in number of customers simply because the offering that we had there beforehand to customers was different to the one that we have today, and the churn in customers was quite significant. This has already eased in those countries quite significantly. We're actually happy with the development now.

And then the subsequent development was that we also changed the product assortment in our larger markets, Germany and also CEE. By the way, so DACH and CEE a bit later. And this effect we are seeing this year this is also why we were so cautious with our guidance on top line this year. And at the moment, we are fully in line with that. And it stems from exactly your point, the number of orders and number of customers, it is the same reason.

You can also see that in the increase in average order value that we are reporting because there you can see that with the shift from a more impulse buying and smaller products to more Westwing Collection and more furniture, we see a strong growth in average order value and the decline of the number of orders and number of customers as it eased in Italy and Spain, it is also easing in Germany or in DACH and in CEE. So we can expect that the worst is over, as you say. And into next year, we actually expect a much, much lower effect of that, if even any. I hope that answers your question number one.

Number two was on country expansion. You were asking about the development here. So as you rightly said, Portugal was the first one. And when we look now at the countries that we opened this year, so the 10 new countries, we, of course, compare the development of those to the one that we saw in Portugal in the first months and quarters. And we're actually very pleased with the development. It's in line with what we saw in Portugal. We see new customer growth there. Everything that we report from there is obviously incremental. That's the beauty of opening new countries.

And our kind of the first results in terms of absolute numbers that we won't share now. Next year, I think we will give a bit more indication because it's very early still. But when you look at the absolute numbers, we're actually really happy with what we see in Sweden, in Denmark, in Norway and in Croatia also. Despite Norway and Croatia actually being relatively small markets, but we see really nice developments there. We'll give more updates throughout next year when the numbers become more meaningful, because at the moment, though we are happy, the relation to our overall GMV is, of course, still very small. So that was the second question on country expansion.

And the third one was on the physical locations on our stores. And here, you asked whether we see besides the top line that we make in the stores, whether we also see an increased online activity in the catchment areas, and that's exactly the case. We don't share any numbers on the online catchment area uplift also for the reason that we don't have an A/B test in place. What we do is we compare catchment areas with stores against the catchment areas without stores. And there, we can see a significant effect of the stores. But of course, it's not 100% proof of this effect.

But for instance, when we had Hamburg and Stuttgart as the only stores in Germany, those 2 catchment areas were the best performing in the whole of Germany. The reason behind this is, obviously, what you also pointed towards is that we have sales in the stores themselves. And then we also have the effect that is what we call also a marketing effect. So when people walk past our stores, it's like a billboard that's out there or even when they walk into the store and they have a look at products, they don't necessarily decide straightaway to convert to a buyer. That often happens only after their visit to the store.

We have found that, for instance, when customers decide to buy a sofa, there are roughly 30 touchpoints involved between the first -- very first one and the purchase in the end. So these are many, many online touch points and increasingly so also our offline touchpoints. But this explains why we see this catchment area uplift in the cities where we have the stores. So it's absolutely positive. I can confirm what you said, Volker. Does that answer your 3 questions?

Yes. And I would have a follow-up, more general remark on your Page 23, you give an indication on '26 already, very much appreciated. On market, you have a stable or a flat arrow, so to say, or how to say. I mean the question is for -- do you see any -- do you see no market tailwind, but also no market headwinds for next year? So what is your general assumption behind your '26 guidance in regards to what is the market providing?

Thanks Volker. Your question on market development, how we see that in 2026, I'm handing over to Sebastian.

Volker, thanks for your question on our view on the overall market development. So we expect overall no tailwind from overall consumer sentiment and market growth. But of course, there will be regional differences. So there are some areas within Europe, CEE, for example, where I think the overall conditions are more promising compared to what we see, for example, in the DACH segment where when you look at consumer sentiment indicators, there is no real improvement. And that is why we remain cautious.

And our outlook or ambition for 2026, as we already mentioned in earlier calls, is based on our strength and executing our 3-step value creation plan with the share gains in existing markets and the expansion to new countries. And so far, we feel very confident to achieve those targets based on the financial and operational progress that we achieved so far in 2025.

Next question comes from Jose Antonio Perez Parada from NuWays AG.

Congratulations again on the strong quarter. I would like to ask for -- I have a couple of questions, if that's okay, I will just land them. The first of them is if has anything changed regarding the capital allocation over the quarter or if there's anything it's important to know for the near future?

The second question will be that we already understand or we see that there will be no further geographic expansions in the rest of 2025. But could you give us any notion on the direction of the geographic expansion in 2026, maybe towards any region? That's another one.

And the third one is that, you told us earlier that fulfillment ratio included some negative effects from expansion. So I would like to ask you again, if you could please guide me through the underlying dynamic again. Sebastien clearly mentioned something about the centralized distribution center in Poland, but I would like to grab the logic again. That would be it.

Thank you, Antonio, for your questions. I'm going to hand over to Sebastian for the questions on the change to -- on the capital allocation and on the fulfillment ratio. And before I do that, I'll just briefly comment on your question on expansion. So you were wondering what the expansion in 2026 might look like.

We're not going to share any specifics, but our general ambition is to be present in nearly all countries in Europe. And this also includes Great Britain, but of course, Great Britain is a bit more complex because it's not in the EU, and it also requires a bit more complex logistics setup. So we will likely expand also geographically in 2026, and we'll share more details on that when the time is right to do it.

That clearly answers my question.

And I hand over to Sebastian for capital allocation and fulfillment.

Okay. Yes. Thanks a lot for your question. Let me start with the fulfillment question related to our expansion countries. So linehaul means the trucks that we send from our central logistics center in Poland, for example, to Portugal, and for new markets, we decided to already send those trucks even though they might not be fully utilized. So that means, of course, that the cost per item that we ship is higher, but this allows us to ensure better shipping times for our customers. So we accept the higher costs for a better customer experience.

As we scale those new countries, Portugal, Nordics, et cetera, of course, also then the utilization of those trucks improves. So the cost should go down. And this is the effect that we briefly mentioned earlier.

And it's also the effect that we are seeing in Portugal because there we already have significant volumes. We also combine this with Spain. So in Portugal, we actually see a very low logistics costs. And the same will happen to, for instance, the Nordics region, because there we are also able to combine certain shipments.

Then on your question on the capital allocation strategy, and if anything changed over the quarter. So no, our capital allocation priorities remain disciplined and focused on long-term value creation, of course. So in line with this approach, we have demonstrated our commitment to shareholder value already in the past when we performed some share buybacks. And we may consider further measures going forward, but this, of course, is subject to market conditions and also regulatory requirements. So overall, no change to our capital allocation strategy.

Again congratulations on the strong quarter and lots of success for the closing of the year and the upcoming holiday season.

Thank you so much, Jose.

At the moment, there seem to be no further questions. [Operator Instructions] Once again, Jose Antonio, please state your question.

Thank you very much. Just taking advantage of the final question. You already answered some of the question to Volker. But we understand the underlying dynamic of the customer and orders. However, if I could have a little bit more color on the underlying dynamics of customer number and number of orders, given that they decreased, for example, our expectation of number of customers was lower and the expectation of orders was a little bit lower as well. So how does it look like going forward? Or what can we expect?

Jose, thank you for your question. Let me better understand. So the -- you want to have -- you would like to have an outlook on the development of this in the future in more specifics. Is this what you would like to have?

Yes, that would be perfect. I fully understand the dynamic behind it that we are expecting less customers, less orders due to the less impulse buy from smaller ticket items. But how does it in general look like going forward? Or what can we expect in --

Yes. So what we absolutely see for the future is that we will return to active customer growth and also to the growth of the number of orders. So this is absolutely the plan, not just from the expansion countries where we, obviously, see every customer that we gain there is a new customer, right, but also for the existing markets.

So we have a clear commitment also to share gains in existing markets. And this, in the end, we cannot do without also active customer growth. We believe that a better assortment, better marketing and last but not least, also our physical presence, for instance, in Germany, will drive this. And actually, we see the beginning of this. So the stores enable us also to convince our customers that we previously weren't able to convince maybe because they required an offline step in their journey to actually then purchase with us.

And as we came from 9 off-line stores, for instance -- from -- sorry, 2 offline stores at the beginning of this year and are now at 9, you can imagine that the full year effect can only be seen next year and actually in the years to come because the store has a certain trajectory of the first 3, 4 years of its existence. It needs to establish itself, if you like, in a city. So this is actually one important reason why we believe that also in the existing geographies, we will be increasing the number of active customers. It's a matter of time.

We believe that next year, so we're not going to give a guidance on this, but we believe that next year we'll look a lot more positive than this year due to the easing of the effect that you also mentioned beforehand and the growing effects from our expansion measures plus stores. So no specific -- we don't have a specific forecast here, but you can expect that this significantly improves. And absolutely, our commitment is to going back to increasing number of active customers and orders.

[Operator Instructions] And for some final words, I would like to hand over back to the management.

Thank you. As we haven't received any additional questions, we're ending today's earnings call. Thank you for joining, and goodbye.