Good morning, ladies and gentlemen, and a warm welcome to the Financial Year 2023 Earnings Call of Westwing Group SE. At this time, all participants have been placed on a listen-only mode. The floor will be open for questions following the presentation. Let me now turn the floor over to your host, Andreas Hoerning.
Good morning, everyone, and thank you for joining us for our full year 2023 earnings call. My name is Andreas Hoerning. I'm the CEO of Westwing. Sebastian Westrich, the CFO of the group, is joining me on the call. Looking at today's agenda, I will begin by providing key updates on our business for 2023, after which Sebastian will share the details of Westwing's financial performance. I will then outline our path to full value potential, and Sebastian will present the financial implications of it, including our guidance for 2024. After our investment highlight summary, we will be happy to take your questions. Let's take a look at Westwing's key achievements of the past year. Firstly, I am pleased to report that we managed to deliver strong financial results in a declining market.
We were able to keep our top line stable with revenue of EUR 429 million, and delivered an Adjusted EBITDA of EUR 18 million, both in the upper half of our updated guidance. Free cash flow was very strong at EUR 30 million. Secondly, we improved our margins and cost structure and kicked off further improvements. The cost savings were a result of the EUR 30 million savings commitment we had made in 2022. The most important upcoming improvement lies in our project to move from a proprietary in-house technology platform to a mostly Software as a Service-based solution, which we kicked off towards the end of last year. Thirdly, we are also very pleased with the performance of our Westwing Collection, which is our gorgeous, sustainable, private label product brand.
Its share of the group's growth, merchandising volume or GMV, grew further by 6 percentage points year-over-year, to an all-time high of 47% for the full year. Fourth, we implemented the One Westwing commercial model for seamless customer experience, such as a single site and app across our Shop and Club Sales business in the DACH region, and mostly in our International segments in line with our plan. Fifth, we successfully strengthened our premium positioning in 2023. This was done mainly through product assortment updates, investments into a refreshed brand identity and brand awareness, better on-site content, collaborations, and first steps in offline presence. Sixth, we made progress on our ambitious sustainability targets. We continued our focus on products, planet and people, and got the official validation for our long-term science-based targets on the reduction of greenhouse gas emissions.
Let's take a look at our 2023 top line and its drivers. As I just mentioned, we kept our top line promise by delivering EUR 429 million in revenue, which corresponds to a GMV of EUR 481 million. Important KPIs I would like to highlight are the GMV per active customer and the number of active customers. The GMV per active customer improved by 4% year-over-year. This metric reflects how much each of our active customers, that is anyone who made a valid order within the last 12 months, purchased from us on average in 2023. The positive trend is very promising as our customers are spending an increasing amount of money with us. The number of our active customers itself is promising as well.
Mid-2023, we reached a post-pandemic turning point, and since then have been able to slightly increase the number of active customers quarter-over-quarter, both in Q3 and in Q4. At the end of 2023, the number of active customers stood at 1.3 million. Let's briefly put our top line into perspective by looking at market development. As you can see on the left-hand side of the slide, the German online home and living market declined by 10% for the full year 2023, with a slight recovery in Q4, but still at -6% year-over-year. We clearly outperformed this market development. For the full year, our DACH segment achieved -3% year-over-year, compared to the -10% for the market.
In Q4, we achieved a +2% growth compared to a -6% in the market. We believe that the return to growth in a shrinking market proves that we're right on track with our One Westwing commercial model. Besides top line, we also delivered on our profitability promise. Cost savings and operational improvements paid off in 2023, leading to an Adjusted EBITDA of EUR 18 million at a 4.1% margin. This marks an improvement of five percentage points year-over-year. Returning to financial stability and profitability was the number one priority of ours in 2023, and we clearly delivered on it.
The good profitability in combination with a fantastic Net Working Capital development resulted in a strong Free Cash Flow of EUR 30 million and a great net cash balance of EUR 82 million with no debt by the end of 2023. Sebastian will share details in a few minutes. As I said, returning to profitability was the clear priority of ours in 2023. Let me briefly outline what we focused on last year besides the completion of the EUR 30 million cost savings.... Next to our Westwing Collection, which I already mentioned, main strategic initiatives were the completion of our One Westwing commercial model, the strengthening of our premium brand positioning, and our progress in sustainability. Regarding One Westwing, we now have all our offerings for our customers on one site and one app in all Westwing countries.
Only the single checkout and purchase across Shop and Club Sales offering is still missing in some geographies, in line with our rollout plan. We continue to see more activity across the business models, and especially more activity in our Shop offering in the single app. About the strengthening of our premium positioning, here I will provide some details later during the call, but let's have a closer look at our achievements and sustainability in 2023. Sustainability is at the core of our strategic development. We cluster the initiatives in three categories: Products, Planet, and People. On products, most importantly, we increase the use of sustainable materials. For the Westwing Collection, 48% of the products now feature our We Care label, meaning the products and/or their input materials are made according to referenceable and credible sustainability standards.
On top, we've implemented 100% sustainable packaging for all Westwing Collection products. We also improved on sourcing and social responsibility throughout our supply chain. We evaluated all non-EU suppliers and a large share of our EU suppliers on social aspects in 2023. Let me jump to the third category, people. Our fantastic team is what constitutes this company, and in the context of our sustainability efforts, we've been investing ever since in the well-being, health, and safety of team members at offices, logistics centers, and our stores. For instance, we were able to reduce lost time accidents significantly in 2023. Coming to the second point on the slide, planet. This is about greenhouse gas emission reduction. Two points are worth mentioning here.
Firstly, thanks to consolidation of our operations and improved energy efficiency, we were able to reduce our Scope 1 and 2 emissions significantly in 2023. Secondly, and moving to the next slide, we received validation for our long-term carbon targets by the Science Based Targets initiative, SBTi. These targets include a 75% reduction in greenhouse gas emissions for Scope 1 and 2 until 2030, and the commitment that 80% of our suppliers by spend, will have science-based targets in line with a 1.5 degrees Celsius Paris Agreement in place themselves by 2027. I want to highlight this in particular, not only because it showcases our commitment to transforming our business practices in line with climate science, but also because it will underpin our sustainability efforts over the coming years.
We are in the process of developing our climate transition plan that outlines specific initiatives to achieve our emission reduction targets. If you would like to learn more on our efforts and sustainability, please also refer to our 2023 sustainability report, which will be published on April 4 in a few days time. I now hand over to Sebastian for details on our financial performance.
Thank you, Andreas, and good morning, everyone. I am Sebastian Westrich, the CFO of Westwing. Let me start with a quick review of our 2023 financial results in comparison to our guidance. Our initial guidance for 2023 net revenue between EUR 390 million and EUR 440 million, and an Adjusted EBITDA of EUR 4 million-EUR 13 million, which corresponded to an Adjusted EBITDA margin between 1% and 3%. At the beginning of November 2023, we were able to raise our guidance. We communicated expected revenues in the upper half of the guidance and increased the guidance for Adjusted EBITDA to EUR 13 million-EUR 19 million due to the positive outlook for Q4 2023. We are very proud to have delivered both revenue and Adjusted EBITDA in the upper half of our updated guidance.
We closed the year 2023 with revenue of EUR 429 million and an Adjusted EBITDA of EUR 18 million. In addition, this performance enabled us to achieve positive free cash flow for the full year 2023, and I will go into more detail on top line profitability and cash flow in the following slides. Let us start with the development of our top line. We achieved a stable top line in 2023 and returned to growth in the second half of the year. While we realized GMV for the full year, slightly above 2022, revenue was very slightly below previous year's levels, decreasing by 1%. After the return to growth in Q3 2023, we were also able to continue growth in Q4.
Given the weak home and living market that Andreas mentioned in the beginning, the stable top line indicates market share gains and therefore is a great achievement. If you now take a closer look at the revenue development by segments, you can see that the International segment grew by 2% year-over-year in 2023, while the DACH segment showed a slight decrease by -2%. The stronger development of international compared to DACH, remained also in Q4, with a stable year-over-year top line development of DACH and a 4% growth of our International segment. As we are often asked about the reasons for the stronger growth of the International segment, I can only repeat our previous statements. The stronger performance of the International segment is probably due to better consumer sentiment in some of the countries compared to DACH.
In addition, we rolled out our One Westwing commercial model earlier in international, and there will be difference in terms of competition, market share, et cetera. There are many different factors influencing the development of individual countries, and we cannot point to one major driver. On the next slide, I would like to highlight one of the key drivers of our top line recovery, that is the development of our active customers. The number of active customers, they are customers with a valid order within the last 12 months of the reporting period, peaked during the pandemic and has been declining since then. However, in Q3 2023, we reached an important turning point and returned to growth, looking at quarter-over-quarter numbers. This positive trend continued in Q4 2023, with a 1% growth in active customers quarter-over-quarter.
Another important key performance indicator that I would like to highlight is our Westwing Collection share. Andreas already mentioned the increase in 2023 to an all-time high of 47%. This strong development supports our profitability as our Westwing Collection products allow us to realize higher contribution margins compared to third-party brands. On the next slide, I will show you the positive development of our contribution margin in more detail. The graphic on this slide shows the development of our contribution margin per order in EUR over the last five years, as well as the contribution margin as percent of revenue in the boxes above the bars.
The chart shows that we earn more money with every single order, and it shows that we realized huge improvement in 2023, increasing the contribution margin in Europe per order by 23% from EUR 35 in 2022 to EUR 43 in 2023. This improvement in unit economics is showcasing the strengths of our One Westwing commercial model. It is driven by three main effects. Firstly, by higher average basket size, driven by both Westwing Collection share and the premiumization of our offering. As a result, the average basket size increased by 10% year-over-year in 2023. Secondly, by improved gross margins, again, driven especially by the higher Westwing Collection share, and last but not least, by efficiency improvements and cost reduction in warehouse operations and freight. Let us now move on to our management P&L.
Looking at our management P&L, we see improvements across almost all P&L lines. In 2023, our gross margin increased by 2.6 percentage points compared to the previous year. In the fourth quarter of 2024, we even achieved an increase by 4.2 percentage points year-over-year. As a result, we achieved a gross margin well above 50%. As mentioned before, one of the key drivers, the higher share of the Westwing Collection, which comes with better margins. We were also able to improve our fulfillment ratio by 0.7 percentage points for the full year, but due to one-off costs related to the consolidation of our Polish warehouse footprint, our fulfillment ratio increased by 1 percentage point in Q4 year-over-year. We expect the logistics ratio, however, to decrease again in 2024.
All this led to a significant improvement in our contribution margin of more than 3 percentage points in both full year 2023 and Q4 2023 compared to previous year. We are very proud of this development, and it proves the strength of our commercial model. Moving down the management P&L, you can see that our marketing ratio increased by 1.5 percentage points for the full year 2023, and increased by 5.1 percentage points in Q4. This was mainly driven by investments into our refreshed premium corporate identity and brand awareness campaign, Live Beautiful, that Andreas already talked about. Please keep this in mind when looking at the segment profitability, as the marketing investment mainly was allocated to the DACH region and thus reduced Adjusted EBITDA margin in DACH.
We will continue to invest in our brand in 2024, so the marketing ratio will remain elevated. Looking further down, we made significant progress in our G&A expenses. The ratio improved by around 3 percentage points, driven by the successful implementation of cost savings and clear focus on efficiency improvements. G&A increased compared to 2022. There are two main drivers for this development. The first, the shortened lifetime of our in-house developed technology assets, as we decided to move to a mostly SaaS-based technology platform. The second is high lease payments based on index link rent. All this contributed to a strong improvement of our Adjusted EBITDA margin year over year by more than 5 percentage points for the full year, 2023, leading to a 4.1% Adjusted EBITDA margin.
This is why 2023 marked the turnaround for Westwing in terms of operational efficiency and profitability. As we are looking here at the management P&L, I also want to quickly update you on the adjustments of one-off effects related to the tech migration that we mentioned in our Q3 earnings call in November. As explained, we had to reverse the capitalization of internal tech development as we had decided to move to a mostly SaaS-based platform. This non-cash accounting effect had an impact of EUR 3.9 million in Q4 2023 and was adjusted in the management P&L. In addition, we realized first one-off cash costs for the implementation of the new tech platform, amounting to EUR 0.2 million for severances, which were also adjusted in the management P&L.
The described adjustments are part of the appendix of this presentation, and we will keep you updated on the development of the one-off cash costs, also going forward to allow for full transparency. In addition, you can find the unadjusted consolidated income statements in our quarterly reports. Looking at the profitability of our segments, we see healthy developments in both DACH and international. We are pleased to report that the International segment is catching up with the profitability of DACH segment and shows positive Adjusted EBITDA, both for the full year and Q4 2023, especially driven by positive developments in France and the Netherlands.
The DACH segment achieved an Adjusted EBITDA margin of 6.8% in full year 2023, up 3.5 percentage points year-over-year, while the International segment is now also profitable, with an Adjusted EBITDA margin of 1.1% in full year 2023. This is a significant increase by 7 percentage points year-over-year. This positive development overall is mainly driven by an increased Westwing Collection share and efficiency gains. In Q4 2023, the Adjusted EBITDA margin of DACH was below previous year's level, which is mainly caused by the brand awareness campaign that was focused on the German market so far, and which I already talked about briefly. Without the brand awareness investment, the Adjusted EBITDA margin of DACH would have been well above the previous year's level.
Turning to Free Cash Flow, I am pleased to say that the positive development of our Adjusted EBITDA, Net Working Capital and CapEx enabled a very strong positive Free Cash Flow of EUR 30 million in 2023, and increased by EUR 48 million year-over-year. In Q4, the Free Cash Flow also improved by EUR 5 million year-over-year to EUR 16 million. A key driver was an improvement of Net Working Capital, which was mainly driven by the massive reduction of inventory by EUR 17 million compared to the end of 2022. I will highlight the improvement of the Net Working Capital on the following slide. In 2023, Net Working Capital improved by EUR 11 million compared to 2022, and was negative at EUR -8 million.
This is a great achievement and mainly driven by the significant reduction of our net inventory, with a major driver being the reduction for old stock. I'm very happy about this development as we were able to improve gross margin at the same time as I showed earlier. Let's now look at the CapEx development. We reduced CapEx in 2023 year-over-year by EUR 9 million to EUR 5 million in 2023. The CapEx ratio in 2023 was 1.3% of revenue. I would like to mention that we had a positive effect from CapEx, from the reversal of the capitalization of internally developed tech solutions of EUR 3 million, which is part of the one-off effects related to the tech migration that I mentioned earlier.
The CapEx reduction compared to 2022, without this effect, would be EUR 6 million, which still is a good result. On my last slide, in the financial update, you can see the net cash development year-over-year. As a result of this strong free cash flow, we were able to strengthen our balance sheet with a net cash position of EUR 82 million at the end of 2023. This included investments of EUR 4 million in our share buybacks. Our lease payments, which according to IFRS 16, have to be shown in the financing cash flow and therefore are not part of the free cash flow, amounted to EUR 12 million.
We are pleased to have ended the year 2023 with a strong balance sheet with zero debt, which gives us the strategic optionality and the confidence to focus on our long-term strategy in a challenging market environment. With that, I would like to hand it over to Andreas, who will talk now about our way forward.
Thank you, Sebastian. Let's now look into our way forward to unlock Westwing's full value potential over the next years. We are in the middle of a three-step plan to do exactly that. I will outline the steps on this slide, including the main levers, which you will see on the same slide as we go. The first step was to turn around the company post-COVID and to implement an updated strategy. This phase lasted from mid-2022 to the end of 2023. The second step, which we are currently in and will last into next year, is about building a lean, scalable platform. The third step, which we will enter into next year, is then to grow the business while being disciplined on costs, which means we will make use of the operating leverage potential that lies within our business model.
On the slide, you will now see the main profitability and top-line levers connected to the three phases. For the first phase, the turnaround meant we had to rightsize the organization. In parallel, we increased the Westwing Collection share, which, by the way, is not only a margin driver, but also a top-line driver, since the products are so desirable. We also implemented our One Westwing commercial model, and we started to strengthen our premium brand positioning. For the current phase, we are reducing complexity further across the company, mainly with two initiatives: the technology switch and another one that I will outline in a minute. By the way, when we talk about building a platform, we do not mean things like marketplace or logistics services for third parties. Our platform is about the 360 degrees customer experience for a one-stop destination.
It includes different ways to navigate our product assortment, mainly Shop and Club Sales, but also stores and retail partner channels. It also includes aspects such as our social media presence and our premium services. For example, the interior design service and the Westwing branded delivery fleet. During the third phase, we will be growing the business both within and outside of our current geographies and stay disciplined on costs, as I said. On the slide, you can now also see what we believe the levers mean for bottom and top line. You can see that during the turnaround, our business shrank, and we went from -1% to +4% Adjusted EBITDA from 2022 to 2023.
In the current phase, top line is expected to be rather flat, and you can see that we will have a better profitability on average than in the first phase. Sebastian will talk about this later. From next year onwards, pending market development, of course, we believe we can grow the business again. Over time, we will then get to 10%+ Adjusted EBITDA. Again, Sebastian will share more thoughts on this later. Before I hand over to Sebastian, I will outline three of the levers a bit more in detail on the following slides: complexity reduction, brand positioning, and country expansion. Starting with complexity reduction. The first topic, the switch from a mainly in-house to a mainly external Software as a Service or SaaS technology solution, was announced already last year. I will repeat the main rationale.
The technology environment in our industry has changed dramatically over the past years. Many e-commerce processes are standardized today and do not offer much potential for competitive advantage. At the same time, various SaaS providers now offer reliable and scalable e-commerce platforms. Also, specialized vendors provide access to a wide range of additional features, and on top of that, the pace of technological innovation is accelerating, driven in particular by artificial intelligence. This is why we are migrating from our internally developed e-commerce platform to a solution largely based on SaaS. Preparations for implementation are underway. It's important to mention that tools that uniquely provide for a differentiated customer experience will continue to be developed in-house. The other three topics on the slide are interlinked. One is the consolidation of our logistics center footprint.
Currently, we have extra logistics centers in Poland, Italy and Spain to serve the needs of our local club sales business. We will consolidate them into our large European logistics center located in Poland, where we still have sufficient capacity and benefit from scale effects. The next topic is about restructuring our corporate functions in Italy and Spain. To date, we have significant local offices in Milan and Barcelona, and the setup needs to become more efficient. Italy and Spain are core markets for Westwing, and we are committed to provide our valued customers with an exceptional service. But to ensure the viability of the Italian and Spanish entities, we have to restructure our organization in these countries and make them profitable. The adapted setup aims at using synergies by implementing a streamlined and less complex structure.
This is closely connected to the last topic, the harmonization of our offering across countries towards a mostly global product assortment. This approach had already been implemented in the Netherlands and France a few years ago and has proven to be successful. Hence, it will be implemented in Italy and Spain as well. All of these measures will help us to build a lean and flexible platform, while the switch to a mostly global offering will likely lead to a temporary top-line loss in Italy and Spain. On the next slide, I will talk about the strengthening of our premium brand positioning. It has six main aspects. First, and most important one is our product assortment. We are doubling down on the uniqueness of it through our own design Westwing Collection and the best third-party design brands. We are building Europe's premium one-stop destination for home and living design lovers.
The second aspect is about building our premium services that complement our retail activities further. These services include our Westwing branded delivery fleet, our interior design service and best-in-class customer care. Thirdly, we are continuing to invest into brand marketing. We refreshed our premium brand and corporate identity in 2023 and launched the brand awareness campaign, Live Beautiful, in Germany. We will continue on this journey and scale it to other countries. Fourth, we are pushing for an even more attractive, inspirational storytelling with refined visuals and tone of voice to support customers' purchasing decisions. Investments are being made, for example, into our content production facilities. Fifth, we will engage much more in collaborations with premium brands and well-known personalities. As an example, in Q4 2023, we collaborated with footballer Lukas Podolski. The collaboration was a great success and addressed new customer segments.
Lastly, we will continue to expand our offline presence. In 2022, we opened our first offline store in Hamburg, in a prime location on Jungfernstieg, a few footsteps away from KaDeWe's Alsterhaus. Earlier this month, we opened our second physical retail space in a special location. Let me show you some impressions of our new store. Our new offline location in Stuttgart is our first ever store-in-store, and it sits within Breuninger's flagship fashion lifestyle house, one of Europe's leading upscale department stores. It's only three weeks ago that we opened this location. Our guests enjoyed an exciting evening event hosted by our founder, Delia Lachance, and Breuninger's flagship store manager, Gerhard Schmalholz. Ever since, customers have been flocking to our gorgeously designed area to touch and feel the Westwing brand and our beautiful Westwing Collection products. That's exactly why we are doing this.
We will continue to selectively expand our offline presence in major cities throughout Europe over the next years. Talking about expansion, we will also be opening new country websites over the next two years. However, it is important to mention that the new country expansion will follow an entirely different setup compared to what Westwing did in the past. In the years after founding, Westwing entered new countries by building up local offices and warehouses with a significant local team set up. The focus was on a local supply base and product assortment consisting of third-party products. The offering was heavily focused on the club sales business, and the setup only allowed for very small scale effects. As I just mentioned, we're currently changing the historic setup in Italy and Spain with a restructuring. For our upcoming country expansion, we will focus on a very lean and flexible setup.
Any new country will be managed by our headquarters team in Munich and served by the European Logistics Center in Poland. We will offer a mostly global product offering and will translate content supported by artificial intelligence to the various languages. The offering will be Shop and Westwing Collection first. This setup will allow us to scale with operating leverage. Westwing is currently active in 11 European countries. We will start the expansion by adding Portugal to our Westwing countries still this year. Based on our learnings, we will then expand to additional European countries from 2025 onwards. Sebastian will now share the financial implications of our path to full value potential and the outlook for 2024.
Thank you, Andreas. Now, financial outlook, I will first explain to you how our three-step plan translate into value creation and what it takes in terms of one-time investments. Finally, I will provide you with our guidance for 2024. Let's start with our value creation and the three-step plan first. Our three-step plan will help us to unlock Westwing's value potential with profitable growth and a strong cash conversion. As Andreas explained, we'll focus and invest in 2024 and 2025 into building a scalable platform that will allow us to scale with operating leverage in the mid and long term. I want to summarize the effects of the different levers that Andreas explained from a finance perspective. We have two main profitability levers.
First, we are building a lean and flexible platform with even less fixed costs that will allow for economies of scale as top line increases. Second, with increase of the Westwing Collection share, we will be able to further improve our Contribution Margin, as we already did in the past. To benefit from operating leverage, we need more scale. The main top line levers for this are the following: With our One Westwing commercial model and premium brand positioning, we are improving attractiveness for customers while differentiating us from competition. This will help us to attract new customers and to increase the customer lifetime value of existing customers. This, in turn, will support the gain of market share in existing markets. On top of that, we will expand to new countries, as Andreas explained.
Our expansion strategy follows a very lean model that allows us to leverage our platform in a very efficient way and at low risk. The more countries we add, the more operating leverage we will see, especially in G&A, but also logistics. These are organic initiatives that would help us to increase top line going forward. In addition, we are still convinced that we will benefit from an increasing online penetration of the home and living market. Given the overall very weak market, and this effect currently seems to be very low, but we expect a higher impact in the mid to long term. Now, how would this operating leverage look like? As you know, our current business allows an Adjusted EBITDA margin of 4% at a scale of about EUR 430 million.
Without extraordinary positive effects from inventory reduction, the cash conversion at this scale would be rather low. With our lean and scalable platform, additional revenue would come with only limited additional fixed costs, fully leveraging our centralized functions and our centralized logistics operations. This means that we expect economies of scale, both for our fulfillment costs as well as for our SG&A cost base. An increasing Westwing Collection share will have an additional positive effect on Contribution Margin. Therefore, we expect incremental revenue of EUR 170 million-EUR 370 million to come with an incremental Adjusted EBITDA margin of 25%-30%. This will bring us as a group to EUR 600 million-EUR 800 million revenue and an Adjusted EBITDA margin of 10%-15%.
At this scale, Adjusted EBITDA would translate into a strong positive cash flow, additionally as additional CapEx requirements are limited. To sum up, we have a clear long-term target P&L with Adjusted EBITDA margin of 10%-15%, and we have a clear plan on how to get there and have already kicked off major parts of the transformation. Once we have completed the work to build a scalable platform, we will focus on growth, which we are addressing with organic initiatives in existing and new markets and countries. Any positive market development will help us to reach our target earlier, be it market growth in general or a higher online penetration. To realize the complexity reduction that Andreas talked about, that is key for a lean setup that allows for operating leverage, we have to invest into one-off implementation costs.
Overall, we expect one-off cash costs in 2024 for the implementation of our mostly SaaS-based tech solution, logistics consolidation, as well as the restructuring of corporate functions in Italy and Spain, between EUR 10 million and EUR 15 million. This includes the one-off cash costs related to the tech migration that we communicated last year in the mid- to high-single-digit million EUR. In addition, we expect higher D&A based on the shortened lifetime of our existing in-house developed tech platform, as well as higher depreciation related to the termination of lease agreements in Italy between EUR 3 million and EUR 4 million. Lease-related one-time D&A effects, as well as one-off cash costs for the implementation, will be adjusted in our management P&L. Of course, we'll keep you updated on the effects, and you will be able to see the unadjusted consolidated income statement in our quarterly reports.
With regards to the return on those one-off investments, we have to distinguish between the implementation of the Software as a Service-based tech solution and the remaining measures for complexity reduction. As we have communicated in our Q3 2023 earnings call, we expect a short payback period of only one year after full implementation for the investments related to the implementation of a mostly SaaS-based tech solution. With regards to the complexity reduction in terms of logistics footprint, as well as the restructuring of our function in Italy and Spain, it is different. In Italy and Spain, we have to adjust the cost base of our operations to improve profitability. While the future benefit is clear, allowing us to build a lean and scalable platform at lower cost-...
The return mainly depends on the speed of growth, which still is uncertain given the weak, weak market development and the transformation we are in. In addition, the introduction of a mostly global product offering in Spain and Italy in the short term will likely lead to top line loss, as the new offering in the beginning might not fully match the expectations of the existing customer base. We assume a potential impact in the low- to mid-single-digit percentage range of group revenue. That is why we do not expect a short-term return on this measure. Again, we are convinced that the complexity reduction is the right thing to do in order to build a scalable platform that enables us to grow profitably with operating leverage.
With these measures, we are on the path towards our long-term target of 10%-15% Adjusted EBITDA margin, as well as a strong cash conversion. Let me now provide you with details on our financial guidance for 2024. We had a promising start into 2024, with GMV growth year-over-year at 6% based on preliminary year-to-date numbers. In addition, the DACH segment has been growing stronger compared to the International segment, which could be an indicator for the positive impact of our brand awareness campaign. As a reminder, in the last quarters, DACH always was behind international in terms of growth. The year-to-date growth in 2024 is remarkable, as the overall macroeconomic indicators have not been improving in the beginning of the year.
We have data that shows that the search volume, even declined, in the home and living sector during the beginning of 2024 in the double digits. While we believe that we can continue to grow above market in 2024, our expectation in terms of market growth is therefore low. We expect that the market remains highly uncertain, with consumer sentiment still being weak and volatile. This is why we also remain cautious in our revenue guidance for 2024. In addition, we have to consider that we switched to a mostly global product offering in Italy and Spain, that we mentioned already, which will likely lead to a top-line loss in the low- to mid-single-digit percentage range of revenue.
Therefore, we expect revenue in 2024 between EUR 415 million and EUR 445 million, which is a year-over-year growth between -3% and +4%, respectively. Our guidance for Adjusted EBITDA is EUR 14 million-EUR 24 million, which corresponds to an Adjusted EBITDA margin between 3% and 5%. While we will adjust one-off implementation costs related to the complexity reduction in our management P&L, our guidance does include growth investments into the geographic expansion, as well as investments into our premium brand. Based on the profitability guidance and the one-off cash costs for implementation of the complexity reduction, we expect free cash flow to be around breakeven. As we have shown you, the year 2024 is a transition year in our three-step plan to unlock our value potential.
Thus, the positive impact of our measures do not yet materialize in our P&L in 2024. However, we have a clear plan on how to improve both top line and profitability going forward to reach our long-term goals. We strongly believe in the value potential of our business, and with that, I will hand over to Andreas to conclude our presentation with our key investment highlights.
Thank you, Sebastian. Let me briefly recap the investment highlights of Westwing. 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 have a strong brand 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 to 10%-15% Adjusted EBITDA, with a continued strong cash conversion. Sebastian and I are now happy to take your questions.
So dear ladies and gentlemen, if you are dialed in the conference call and have questions for our speakers, please press nine followed by the star key on your telephone keypad now to enter the queue. Once your name has been announced, you can ask a question. If you find your question is answered before it is your turn to speak, you may press nine, followed by the star key again to cancel your question. So please press nine star now, and we are waiting for the first question. And there it is. It is from Volker Bosse of Baader Bank. Please go ahead.
Hello, Andreas. Hello, Sebastian. It's Volker speaking from Baader Bank. I would have a couple of questions. I would like to take it one by one. First of all, the higher order value per basket, why do you think this is so? Is it a structural trend, and what is your read out of that trend? Thanks. First question.
Thanks, Volker, for dialing in for the question. So first one was about higher order value per basket, which is mainly driven actually by our focus on shop and Westwing Collection. As there we actually have typically higher order volumes, higher baskets than in our club sales area. So that's the most important driver, to focus on shop and Westwing Collection.
You would confirm that this is a structural trend when, given the One Westwing approach, the trend to more shop sales should continue, right?
That's exactly right, Volker. It is a direct consequence of the One Westwing commercial model, and we see that this trend is actually continuing.
... Yeah, perfect. Second question would be on the current trading. Thanks for giving the indication regarding 6% GMV. I mean, the difference between GMV growth and sales growth is not too big, currently. So is it fair to assume that also sales, so to say, is around 6%? And the question also regarding the phasing of the top line growth in 2024, did I get it right, that you expect in the first half, a stronger top line growth than in the second half, than as the second half is affected by the changes in Italy and Spain, right?
Thank you, Volker, for your second question. So yes, between GMV and revenue, typically it evens out over the long term. Sometimes, of course, we have timing effects between the quarters, but in general, we can assume that it's, that it's in line, right?
Yeah.
The second part of this question was regarding the growth throughout the year. Yes, our guidance is, as Sebastian said, we started well into the year, and yes, we expect a lower top line year-over-year growth for the remainder of the year. One, for a likely decline due to the change in the product assortment in Italy and Spain. And the second one is because of the uncertainty in the market.
Mm-hmm. Yeah. Thank you. Another question would be also on current trading: Could you confirm that also the number of active customers, it developed quarter-over-quarter, positively? Is that also a trend which continued?
Thanks, Volker. Sebastian will take that question.
Good morning, Volker. Thanks for your question. Yes, so, the growth in active customers that we saw in Q3 and Q4, quarter-over-quarter, is something that we expect to continue also in Q1, 2024.
Oh, great. Okay, cool. CapEx on 2024, could you give us a guidance on CapEx, please?
So as we won't have the positive effect from the reversal of the cap- of the tech capitalization that we saw in 2023, I mentioned the effect of EUR 3 million. CapEx most probably will be higher than the 1.3% of revenues that we saw in 2023. So I would say around 2% of revenue is a good estimate.
Yeah. Fair. Okay. Cool. You mentioned a one-off cash cost of EUR 10-15 million in 2024, given the initiatives you started. Is that... What does it mean, one-off? Is it also, would you exclude from the Adjusted EBITDA? So do you want to say that also adjusted the EBITDA would include one-offs of EUR 10 million-EUR 15 million, or if I'm, do I misunderstand you in that regard? So the question is regarding potential one-offs out of the restructuring, which you are doing in 2024.
Okay. So, we have to distinguish between our management P&L and our management P&L. We have Adjusted EBITDA, and the EUR 10 million-EUR 15 million one-off cash costs, and parts of the D&A will be adjusted in our management P&L. So, this is a cash out. Most of it is a cash out. We won't see it in our Adjusted EBITDA, but in cash flow, of course. Does this answer the question?
Okay, so any indications on how much of the restructuring costs we see in the reported P&L as a one-off, so between EBITDA reported and the EBITDA adjusted?
The 10-15 will completely be adjusted.
In the reported P&L? Yeah. Okay.
Yeah.
Yeah. Thank you. And then my final one is on Portugal. You have said you want to move to Portugal in 2024. I mean, in your presentation, you said country expansion is from 2025 on. So what is the rationale to do Portugal already in 2024? I see you have a lot to do and a lot of work on your plate with all the integrations and restructurings. So why you do it all in one step? What's the rationale to do Portugal already in 2024?
Yes. Thank you, Volker. Very relevant question indeed. There's actually two reasons why we're doing Portugal this year. By the way, Portugal, because it's actually very close to existing geography, and it's relatively easy for us to scale there.
Yeah
... In terms of also logistics, last mile provider, et cetera. But two reasons why we're doing it this year: One is it actually helps us with the technology implementation, because Portugal will be the first country on the new platform, and, for this one, we will not have to migrate the data. So that means that we will test part of the technology platform on an easier ground in Portugal without direct customer impact, without data migration. So this is actually a huge benefit for our technology transition. The second reason why we're doing Portugal this year is that, similar to our approach with stores, we want to gather data and learnings before we actually then move on to a second or third step.
We wanted to do this, gather some data this year, it's on, of course, marketing model, et cetera, so that then in 2025, we can then actually decide on the next steps. So those are the two reasons why we are doing Portugal this year.
Okay, understood. My very last one would be on the gross margin. In midterm, you said the gross margin could be in the range of 48-50. Now, you are already in 2023 at 49.5, so you have reached basically the upper end of the midterm guidance range already. How do you look at gross margins in your target P&L, mid-, long-term, which will lead to 10%-15% EBITDA, given the good Westwing Collection share and the great progress which you made already at gross margins as of today?
Thank you, Volker, for your question. So the improvement in gross margin that we saw in the past was a structural effect from an increasing share of our Westwing Collection. So you can definitely expect that the gross margin will improve further as we grow our Westwing Collection share. And then the gross margin, our target P&L, of course, depends mainly on the Westwing Collection share. So we do not estimate this at the moment, but we definitely expect further improvements of our gross margin going forward as Westwing Collection share increase. We won't stop once we reach 50% of group GMV.
Okay. Thank you very much for the very comprehensive presentation, all the provided answers. I mean, I'm really impressed by the clear vision and your clear view up to the target P&L and come up to 10%-15%. So good luck. All the best, and thanks.
Thank you so much, Volker.
Thank you, Volker.
Thank you very much also from my side. As there are no registered questions anymore, I would close the Q&A session now and turn the floor back over to the host.
Yeah. As we don't have any additional questions, we're ending the 2023 earnings call of Westwing Group SE. Thank you so much for joining, and goodbye.