Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Westwing Group SE (XTER:WEW, Financial) achieved a 5% increase in GMV and a 4% increase in revenue year-over-year despite a challenging market.
- The company reported an adjusted EBITDA of EUR4 million, representing 4% of revenue, driven by improved contribution margins and sustained investments in brand awareness.
- Westwing Collection's share of group GMV reached an all-time high of 53% in Q2 2024, supporting both top line and profitability.
- Successful launch of a new SaaS-based technology platform in Portugal and the Netherlands, which will be rolled out to other countries.
- Strong progress in sustainability initiatives, with 60% of Westwing Collection products featuring the We Care label and 76% of packaging materials based on recycled content.
Negative Points
- Free cash flow for Q2 2024 was negative at minus EUR7 million, impacted by timing of payments and seasonal inventory effects.
- The switch to a mostly global product assortment in Italy and Spain led to a short to midterm detrimental top line impact, with some existing customers lost.
- The company's marketing ratio increased by 3.2 percentage points year-over-year, driven by continued investment in brand awareness, which impacted profitability.
- The transition to a SaaS-based technology platform resulted in temporarily higher depreciation and amortization (D&A) costs, affecting G&A expenses.
- Net working capital increased quarter-over-quarter, negatively impacting free cash flow by minus EUR8 million in Q2 2024.
Q & A Highlights
Q: Can you provide more details on your marketing investments, particularly in the DACH region, and your strategy moving forward?
A: Andreas Hoerning, CEO: We are pleased with our marketing investments in brand awareness, which have positively impacted brand perception metrics. We expect the marketing ratio in the second half of the year to be similar to the first half, with potential elevation in Q3 due to seasonal effects and early investments for the Christmas and Black Friday seasons.
Q: What are the main reasons for the negative free cash flow in Q2 2024?
A: Sebastian Westrich, CFO: The negative free cash flow of minus EUR7 million was primarily due to a EUR7 million decrease in payables and a seasonal increase in inventory of EUR2 million. Additionally, restructuring expenses and resumed lease of warehouse assets impacted the free cash flow.
Q: How did the complexity reduction measures impact your financial performance?
A: Andreas Hoerning, CEO: The complexity reduction measures, including the switch to a global product assortment and restructuring in Italy and Spain, had a short to mid-term negative top line impact. However, these measures are essential for building a lean and scalable platform and strengthening our premium brand positioning.
Q: Can you elaborate on the performance of the Westwing Collection?
A: Andreas Hoerning, CEO: The Westwing Collection's share of group GMV grew to an all-time high of 53% in Q2 2024. This strong performance supports both top line and profitability due to higher contribution margins compared to third-party products.
Q: What is the outlook for your financial guidance for the rest of 2024?
A: Sebastian Westrich, CFO: We confirm our guidance for 2024, expecting top line growth between minus 3% to plus 4%. We remain cautious due to the weak economic outlook and the impact of switching to a global and more premium assortment, which will be stronger in the second half of the year.
Q: How are you progressing with your sustainability targets?
A: Andreas Hoerning, CEO: We have increased the use of sustainable materials in the Westwing Collection, with 60% of products featuring the We Care label. Additionally, 76% of our packaging materials are based on recycled content, and we have assessed 82% of our European suppliers for social aspects.
Q: What are the key achievements in your technology platform migration?
A: Andreas Hoerning, CEO: We successfully launched our new SaaS-based technology platform in Portugal and the Netherlands. This migration aims to reduce complexity and support our OneWestwing commercial model. We plan to migrate all other existing country web shops over the next quarters.
Q: How did the DACH and International segments perform in Q2 2024?
A: Sebastian Westrich, CFO: The DACH segment grew by 8%, outperforming the market, while the International segment showed a slight revenue decline of minus 1% year-over-year. The decline in the International segment was mainly due to the complexity reduction measures in Italy and Spain.
Q: What are your plans for country expansion?
A: Andreas Hoerning, CEO: We successfully launched our web shop in Portugal, serving as a pilot for our new technology platform. We plan to leverage this model to launch more new country websites in 2025, aiming to expand our business model internationally.
Q: How did the gross margin and fulfillment ratio develop in Q2 2024?
A: Sebastian Westrich, CFO: Our gross margin increased by 0.4 percentage points to 50.6%, driven by strong Westwing Collection share gains. The fulfillment ratio improved by 1.4 percentage points due to efficiency gains and an improved freight ratio, leading to a significant year-over-year improvement in contribution margin.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
