Good morning, ladies and gentlemen, and a warm welcome to the Westwing Group SE Financial Year 2024 Earnings Call. At this time, all participants have been placed on a listen-only mode. The floor will be open for questions following the presentation. Please note that it is only possible to state questions orally in the conference call, so please dial in if you have a wish to raise a question. The combination to state a question and to enter the queue is nine-star on your telephone keypad. Please keep in mind that we can only accept questions from participants who provided their full names and their company information within the registration process. 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 2024. 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 2024, after which Sebastian will share the details of Westwing's financial performance. I will then outline the next phase of our path to full value creation, and Sebastian will present the financial implications of it, including our guidance for 2025. After our investment highlight summary, we will be happy to take your questions. Let's take a look at Westwing's key achievements in 2024. I'm pleased to report that we managed to deliver on all our financial commitments in a challenging market.
We were able to increase revenue by 4% year-over-year and delivered an adjusted EBITDA of EUR 24 million, both at the upper end of our guidance. Free cash flow was at EUR 9 million, including our restructuring costs, and net cash amounted to EUR 69 million after share buybacks. Working capital stood at negative EUR 10 million at the end of 2024. Beyond current financials, we again made good progress on our three-step plan to unlock Westwing's full value potential with measures related to our technology platform, the announced reorganizations, the switch in product assortment, our premium brand positioning, and the Westwing Collection share. I will share details on these achievements in a minute. Last but not least, we made good progress on all our sustainability focus areas. Specifically, we published our first CSRD report. Let's now take a quick look at our 2024 financial performance.
As I just mentioned, we kept our promises and delivered both revenue and adjusted EBITDA at the upper end of our guidance. Revenue grew by 4% year-over-year to EUR 444 million. It is worth noting again that we achieved this while switching to a global and more premium product assortment and actively cutting back on non-premium products, which had a negative impact on our active customer base and subsequently also on top line. We believe that our growth in a still challenging market proves that we're right on track with our One Westwing commercial model and the business positioning of our brand. Besides top line, we also delivered on our profitability target. Cost savings and operational improvements paid off in 2024, leading to an adjusted EBITDA of EUR 24 million or 5% margin while we continued to invest into brand awareness.
This marks an improvement of one percentage point year-over-year. All of the above resulted in a free cash flow of EUR 9 million after restructuring related one-off cash costs of EUR 8 million. To have a look at what we achieved last year beyond financials, let's go back to the three-step value creation plan, which we've referred to numerous times in our earnings calls. The year 2024 was marked by the second phase of the plan, building a lean and scalable platform. We did this very successfully and achieved all of the operational targets we set ourselves. Let's briefly have a look into the details. The first lever was complexity reduction. We completed the reorganizations in Italy, Spain, Central and Eastern Europe, and at our headquarters. This included the consolidation of our logistics center footprint and the restructuring and consolidation of business functions, including the closure of offices.
The total restructuring costs were lower than expected. Sebastian will share details on this in a bit. Equally aiming at lowering complexity and finalizing the One Westwing commercial model, the move to a largely SaaS or software as a service-based technology platform was implemented across all countries and ahead of plan. Customers now have access to our newly designed website and app, tailor-made for design lovers. Important e-commerce back-end systems were also subject to change, and we're currently finalizing the migration. The next lever, setting both top line and bottom line, is the Westwing Collection share. In 2024, we were very pleased with the performance, with the share of Group GMV growing further by eight percentage points year-over-year to an all-time high of 55%. The last lever meant working on our premium brand positioning.
Alongside the above-mentioned restructuring and closure of offices, we switched to a mostly global and more premium product assortment across all countries. This means that less premium and lower margin products were phased out, and customers with this preference can't find at Westwing anymore what they came for in the first place. As stated during our earnings call in August, this change not only had a negative top line impact in the second half of 2024, but the year-over-year figures will also be impacted this year, especially in the first half of 2025. We made this change because it will strengthen us in the mid to long term by allowing us to concentrate on our target audience, design lovers, and ultimately to maximize profitability and cash generation. At the same time, we continue to implement other premium positioning drivers, for example, through our iconic Pieces brand awareness campaign in Germany.
All of the above means we've completed the first two phases of the three-step value creation plan. Over the past two and a half years, we transformed Westwing from the ground up. We implemented One Westwing, the single-site, single-app commercial model across our shop and back-then club, all accessible without subscription. We evolved our marketing model accordingly, from a primary focus on newsletter sign-ups to a comprehensive full-funnel approach, actively managing the entire journey from brand awareness to conversion. We implemented a single and more elevated brand appearance through aspects like a refreshed premium brand and corporate identity, top-notch collabs, brand awareness campaigns, or the merge of our local Instagram accounts to an elevated global one with a following of 8.6 million. We changed the product assortment, as explained. It is much smaller today, and it is a lot more premium, both in Westwing Collection as in third-party products.
We centralized our offices, logistics center footprint, and business functions. This included the closure of three offices and several local warehouses. We replaced our in-house developed e-commerce tech stack with a mostly SaaS-based solution. We piloted the first permanent offline displays of our brand and products at our Hamburg store and Stuttgart store-in-store. Lastly, we piloted the opening of a new country, with Portugal being the first new geography we've served in 10 years. Overall, we transformed Westwing to a premium design destination with a scalable high-margin business and a refreshed brand that is loved by customers and respected by opinion leaders. At the same time, and despite the heavy cuts in our non-premium offering, Westwing has been able to gain market share.
I will elaborate more about what we are today and what it means for full value potential in the third section of this presentation after Sebastian's financial updates on Q4 and full year 2024. Sebastian, over to you.
Thank you, Andreas, and good morning, everyone. I'm Sebastian Westrich, the CFO of Westwing. Let me start with details on our top line. We achieved revenue growth of 4% for the full year 2024 and 2% for the Q4 of the year, despite a challenging market environment throughout 2024. As expected and communicated in our previous earnings calls, the Q4 so far has seen the biggest negative top line impact from the switch to a mostly global and more premium product assortment. As a result, growth in Q4 was lower compared to the previous quarters of 2024. On segment level, revenue and DACH grew both in full year 2024 as well as in Q4 by 7%.
The international segment, being impacted by the changes in the assortment to a much larger extent, showed a -3% revenue decline in Q4 and a flat year-over-year development for the full year 2024. While top line growth was only moderate, we were able to significantly improve our contribution margin per order for two consecutive years, with an improvement by 29% in 2024. This equals an increase in contribution margin as a percentage of revenue by 3.3 percentage points. This improvement in unit economics showcases the strength of our One Westwing commercial model and is driven by three main effects. Firstly, by higher average basket size as a result of a higher Westwing collection share and the premiumization of our offering. Average basket size increased by 16% year-over-year in 2024, allowing us to improve unit economics. Secondly, by improved gross margins, again driven especially by the higher Westwing Collection share.
Last but not least, by efficiency gains and cost reductions in fulfillment operations. These improvements clearly offset the higher container cost that we saw in 2024 compared to 2023. Looking ahead, we expect to be able to further improve this metric. Let us now move on to our P&L. Looking at our P&L with the improvements across almost all P&L lines. I already commented on the previous slide about the significant increase in our contribution margin, which in the Q4 of 2024 was even higher compared to the full year average. Moving down the P&L, you can see that our marketing ratio increased by 2.2 percentage points in the full year 2024 compared to the previous year.
This development was to a large extent driven by continued brand marketing investments that we saw throughout 2024, whereas back in 2023, we invested in brand awareness only in the Q4 of the year. Our G&A ratio, which also includes other results, slightly decreased by 0.2 percentage points to -18.3% in full year 2024. In Q4, the G&A ratio decreased by 1.1 percentage points to -15.7%, showing first visible effects of our implemented cost savings. This led to an adjusted EBIT margin of 0.8% in full year 2024, an improvement of 1.3 percentage points year-over-year, and 4.7% in Q4, up 4.4 percentage points year-over-year. D&A for the full year 2024 remained on the previous year's level and decreased by 1.2 percentage points in Q4.
When comparing 2024 with 2023, please note that throughout 2024, we saw a significant increase in D&A due to the shortened lifetime of internally developed tech assets caused by the migration to a mostly SaaS-based tech platform. In addition, we realized in Q4 2024 a positive impact on D&A from the reclassification of sublease contracts from operating lease to finance lease. Overall, our full year adjusted EBITDA margin improved by 1.2 percentage points year-over-year to 5.4%. In Q4, the adjusted EBITDA margin improved even by 3.2 percentage points year-over-year to 7.7%. To provide you with the full picture, let me also comment on the adjustments to our EBITDA in 2024. In total, we adjusted restructuring expenses of EUR 8.5 million, while there was overall no effect in 2024 from the adjustment of share-based payments.
The EUR 8.5 million consisted of EUR 7 million for restructuring, mainly severance payments, as well as EUR 1.5 million related to our IFRS 16 accounting effects from the reclassification of sublease contracts. An overview of our adjustments, as well as unadjusted consolidated income statements, can be found in the appendix to this presentation and in our annual report. Let's move on to our segment reporting. In Q4, we saw a strong improvement in adjusted EBITDA margin in both segments. The 9% adjusted EBITDA margin of the DACH segment in Q4 is the best result our company achieved so far outside of peak COVID times. Still, for the full year 2024, the DACH segment profitability declined slightly year-over-year, mainly driven by our brand awareness investment, which was focused on Germany and which was higher in 2024 compared to 2023.
The international segment showed a significant improvement in adjusted EBITDA margin, both for the full year 2024 and the Q4 of 2024. The main driver for this positive development was the strong increase in Westwing Collection share. We are very proud of this progress, which clearly demonstrates that the levers of our three-step value creation plan are delivering the intended results. Let us now take a look at our working capital. By the end of 2024, working capital remained clearly negative at EUR 10 million, an improvement by EUR 2 million year-over-year. Although we improved working capital, our inventory levels increased compared to 2023, but remained at healthy levels in line with our expectations. Reasons for the increase in inventories are higher average item prices, as well as improved product availability for Q1 and the introduction of new Westwing Collection items.
When comparing inventory levels year-over-year, prepayments on goods should always be included in the equation. Prepayments on goods, which are not part of inventory, were almost eliminated in 2024, while the amount of goods in transit, which are part of inventory, increased. On the next slide, you can see CapEx and CapEx ratio for the full year 2024 compared to 2023. CapEx year-over-year increased by EUR 5 million. However, when comparing 2024 with 2023, it should be noted that in 2023, there was a positive impact on CapEx of EUR 4 million from the reversal of the capitalization of internally developed tech assets. Like for like, the increase only amounted to EUR 1 million and was mainly driven by investments in our warehouse for improved fire protection, which was a one-off investment, as well as automation.
In terms of net cash, we are pleased to report a strong net cash balance sheet position of EUR 69 million at the end of December, EUR 13 million below previous year's level. The decline in our net cash position was primarily driven by one-time cash costs for restructuring expenses of EUR 8 million related to our complexity reduction measures, as well as share buybacks totaling EUR 11 million. In 2024, we originally communicated expected one-off cash costs of EUR 10-12 million for implementing complexity reduction measures. With actual one-off costs of EUR 8 million incurred during the year and additional EUR 2 million in severance payments related to measures initiated in late 2024 but effective in Q1 2025, we successfully kept total one-off cash costs below the anticipated range. Free cash flow was positive at EUR 9 million in 2024, including the above-mentioned restructuring expenses.
In 2024, we had lease payments of EUR 11 million, mainly for our offices and warehouses, which are shown in the financing cash flow according to IFRS standards. This led to a slightly negative free cash flow after lease payments of minus EUR 2 million. If we adjusted the one-off restructuring cash costs, then 2024 would have been clearly positive. Also important to mention is that we maintained a strong balance sheet with no debt other than the IFRS 16 lease obligations. We are not only pleased with our financial results, but also with the progress we have made in sustainability, our core pillar of our strategic development. In 2024, we reached important milestones across our three sustainability focus areas: people, products, and planet. In the area of people, we increased the proportion of suppliers audited for and trained on social and environmental standards.
This supports our goal of ensuring good working conditions and promoting sustainable practices throughout our value chain. On products, we are proud to share that the share of We Care labeled products in the Westwing Collection rose by 18 percentage points, reaching 66% in 2024. The We Care label highlights products made with responsibly sourced materials and enables our customers to make more informed choices, living beautifully and sustainably. A great example can be found on the right side of this slide with our award-winning lamp, Kiani, which is a 3D printed product made with 85%-88% polylactic acid, a type of plastic made out of packaging waste from the food industry, such as blister trays and food bowl plastics. Let me now jump to the third category, planet. This is about greenhouse gas emission reduction, where we set ambitious science-based targets validated by the Science Based Target Initiative.
These targets include a 75% reduction in greenhouse gas emissions for scope 1 and 2 until 2030 compared to our 2022 baseline, and the commitment that 80% of our suppliers by spend will set their own science-based targets by 2027. Thanks to the consolidation of our operations and improved energy efficiency, we've already reduced our scope 1 and 2 emissions by 64% versus 2022, a major step forward. We also made progress on supplier engagement, focusing on suppliers, brand partners, and logistics carriers to explain the Science Based Target Initiative and encourage them to set their own climate goals. By the end of 2024, we had initiated dialogues and trainings with 81% of our suppliers, brand partners, and logistics carriers by spend.
If you would like to learn more about our efforts in sustainability, I invite you to read our 2024 sustainability report, which will be published on the 3rd of April in a few days' time. Of course, our non-financial statement 2024, prepared in line with the CSRD reporting guidelines. Those were our key financial and sustainability highlights for 2024. I will now hand over to Andreas, who will introduce the third phase of our three-step value creation plan to you before we share our financial outlook for 2025 and beyond.
Thank you, Sebastian. Let's now look into our way forward to unlock Westwing's full value potential over the next years, as Sebastian said. For a better understanding, let me briefly state what Westwing is today. First, Westwing is by now a premium design brand.
It has a distinct look and feel and a sizable group of fans, followers, 8.6 million on Instagram alone, and active customers, 1.2 million over the last 12 months. Second, the Westwing Collection, our own product brand, is both fashionable and timeless, with diverse styles but recognizable, and boasts increasingly unique designs. It provides for growth and for high margins. Both the Westwing brand and the Westwing Collection product brand, including its assortment, are assets that are hard to build or replicate. Beyond those two points, brand and product brand, Westwing's uniqueness for its target customers, the design lovers, lies in offering a one-stop destination. It provides for well-known design brands and their products, for example, Gubi, Artemide, or Smeg, where the brand or the specific design is important to the customer.
It provides for beautiful, partially unique designs across all home categories, where the customer is not looking for a traditional design brand. Plus, the way Westwing presents its assortment is very inspirational and truly unique. In other words, Westwing is now clearly a specialized consumer goods company, and by the way, not just an e-commerce platform, addressing customers who are willing to spend money on design. This is a global market segment of home and living, with some local taste preferences, and the size of the sector per country is influenced by purchasing power and other factors. That is Westwing in a nutshell. With this understanding of what Westwing is today and what its moats are, let's now look into the third phase of our three-step plan to unlock Westwing's full value potential.
This third phase of the three-step plan means growing the business both within and outside of our current geographies and maintaining cost discipline. That is what scaling with operating leverage is about. It will allow us to return to proper growth and to get to a 10%+ adjusted EBITDA margin. Sebastian will share more thoughts on this later. I will now outline four of the levers of this phase on the following slides: brand positioning, Westwing Collection share increase, share gains in existing markets, and country expansion. Number two and three will be elaborated together. Starting with brand positioning. Over the past month, we have created many important brand moments. Let me highlight some. In Q3 2024, we launched our iconic pieces campaign in Germany, which included out-of-home advertisement across major German cities.
On the bottom right of the current slide, you can see an example of the brand campaign running in Munich. On the bottom left, we make reference to our collaboration with a renowned fabric house, Dedar Milano, which was launched customer-facing in January 2025. The product drop consisted of a range of seating furniture and cushions with extraordinary colors, exquisite patterns, and excellent fabrics. This very special collection is almost sold out. In Q1 2025, we also published a home story with famous actor Ed Westwick and his wife, Amy Jackson Westwick, in their charming home in the British countryside. It generated quite some buzz on social media. During Paris Fashion Week earlier this month, we brought our beautiful Westwing Collection to Victoria Beckham's showroom and Autumn Winter 2025 show space.
We created an elegant, inviting setting for guests to connect and experience both our contemporary decor and Victoria Beckham's designs. Our presence at one of fashion's most prestigious events reinforces our commitment to style, innovation, and beautiful aesthetics in interiors and beyond. We will be creating a lot more brand moments like these going forward to shape our premium brand positioning further. Next, for share gains in existing markets, we will continue to, one, create the perfect product assortment, and two, offer more offline touch-points. Let's now look into the two building blocks of our product assortment, Westwing Collection and third-party design brands. Before we go there, just a quick reminder that the top-line dampening from 2024's change in product assortment will be felt throughout 2025, especially in the first half.
Starting with the Westwing Collection, as stated above, we are very pleased with the performance of our gorgeous sustainable private label product brand. Its GMV grew double-digit in the past years to EUR 274 million in 2024, accounting for 55% of total group GMV, a new all-time high. We will continue to grow the Westwing Collection at double-digit growth rates by expanding categories, product families, and new desirable products. This 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. On the right-hand side of the slide, you can see some of the products we launched over the past 12 months. Over to the second pillar of our assortment, third-party design brands.
On the slide, you can see some of the brands we've on-boarded over the past 12 months. We are incredibly proud to partner with them and to be able to offer their stunning, partially iconic products to our customers. Westwing is a place where these partners and many others find new fans for their brands in an elevated, inspiring environment. We will continue to shape the perfect product assortment for design lovers by onboarding more design brands, which will help us to gain market share in our existing geographies. Besides improvements in product assortment, we also see offline store expansion as a lever for share gains in existing markets. As you may know, we opened our first offline store in 2022 in Hamburg and a store-in-store with our partner Breuninger in Stuttgart in 2024. We are very pleased with the development of both.
That's why we plan to open a mid-single-digit number of offline stores in 2025, building upon the learnings from these two pilots. Just last week, we opened our new store in Leipzig, Germany, which marks the first opening of 2025. Lease agreements for Munich, Berlin, and Cologne have already been signed, and we will soon open a store in store with our partner Printemps in Paris at their prestigious Haussmann flagship store. Let me show you some impressions of our new store in Leipzig. Our store in Leipzig is located in the historic Specks Hof, Leipzig's oldest preserved shopping arcade from the early 20th century. The store seamlessly integrates with the elegant architectural elements of this iconic building. It spans over two floors with a retail space of approximately 250 sq m.
The store offers customers the opportunity to experience the Westwing brand and our beautiful Westwing Collection alongside designs from selected partner brands. That is what offline stores at Westwing are about. They help us to further increase brand presence and positioning and connect with customers. By providing a holistic shopping experience across the multi-touch customer journey, Westwing will also gain market share. In home and 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 and furniture are often very large and require many touch points for conversion. Let's move on from gaining market share in existing geographies to entering new ones. In 2025, Westwing will launch online sites and apps in five to ten new countries.
We've already expanded to two new countries so far this year, Luxembourg and Denmark. On the slide, you can see a list of countries we are preparing for short-term expansion, many of them still to come in 2025. In the midterm, we aim to be present in approximately all European countries. The rationale behind geographic expansion is to offer our existing global product assortment to customers in the corresponding market segment for design lovers in other countries and sell more of the same products. All continental European countries follow the same logic with low marginal costs of serving them. Translations supported by AI, onboarding of last-mile delivery providers, local influencer marketing, and performance marketing with attractive returns within a few months. This recipe has worked perfectly in last year's country pilot, Portugal, where we have been very pleased with the results. Now we're looking forward to the next launches.
Going back to our three-step plan, what will all of this lead us to? Sebastian will talk about what to expect financially. From a customer and design market segment perspective, we have the vision to create something very special. We want to go from being the leading one-stop destination in premium home and living to the super brand in design, the ultimate aspiration in home and living. We will not only be selling products; we will be enabling our customers to design their lives. Every product, every brand experience, every story will be driven by this vision. We will not ever settle for the ordinary. We will create moments that resonate deeply and leave an unforgettable mark. How will we achieve this? We will merge bold, premium aesthetics with accessible, exceptional designs, and we are working on delivering excellence across all touch-points design lovers have with our brand.
By staying true to our values, we will inspire and engage design lovers everywhere, leaving a lasting impact on the industry. This is what we will be: the super brand in design. I now hand over to Sebastian for our financial outlook.
Thank you, Andreas. Before sharing the guidance for 2025, let's look at the key assumptions behind it. Overall, we expect a slightly negative to stable year-over-year top-line development while realizing strong improvements in profitability. Our top-line guidance is based on the following key assumptions. Firstly, we do not expect a rebound of consumer demand in 2025, rather a decline based on the weak economic outlook, especially in Germany, our biggest market. This is also underpinned by data on market searches volume that we received from service providers.
Secondly, we expect ongoing year-over-year top-line losses in 2025 from the introduction of a mostly global and more premium product assortment in 2024. This effect is expected to peak in the first half of 2025 and to gradually decline towards the end of 2025. Thirdly, our expansion as a new growth lever is expected to support revenue development in 2025. However, as new countries and stores will be launched progressively throughout the year, with each one gradually ramping up, the impact will be limited in the beginning and only become more significant towards year-end. Overall impact on the full year 2025 is therefore expected to remain rather small. Taking all these effects into consideration, we expect a slightly negative to stable top-line development in 2025, with the revenue contribution of our new expansion growth lever being difficult to predict at this stage.
This top-line outlook is well in line with our current trading. Year to date, we see a negative mid-single-digit GMV growth rate. Revenue, however, is performing better with only a slight decline year-over-year so far. Despite the slightly negative to flat short-term top-line outlook, we expect strong improvements in profitability in 2025. This is based on three main assumptions. First, the introduction of a mostly global and more premium product assortment will lead to an increasing contribution margin well past 2024. Second, we will see savings in the P&L from our 2024 complexity reduction measures. Third, the improvements from the first two levers are expected to overcompensate ramp-up costs caused by expansion measures. Expansion in 2025 will require some investments, part of it being operational ramp-up costs in our P&L and the other part being CapEx for new stores.
Based on these assumptions, we have defined the guidance for 2025 as follows. We expect revenue in 2025 between EUR 425 million and EUR 455 million, which is a year-over-year growth between -4% and +2%, respectively. Our guidance for adjusted EBITDA is EUR 25- 35 million, which corresponds to an adjusted EBITDA margin between 6%-8%. Based on the profitability guidance, we expect free cash flow to be clearly positive in the double-digit numbers. As of today, we do not expect any significant restructuring adjustments in 2025. Let us now look at the midterm outlook. In terms of top-line development, 2026 is expected to look much better compared to 2025. Our ambition for 2026 is to achieve a high single to double-digit growth rate and consistent improvements in profitability. Let us first look at how we want to return to significant growth.
We cannot anticipate the market for 2026 and therefore expect neither tailwinds nor headwinds. However, we expect the negative effects from the switch to a mostly global and more premium product offering to bottom out towards the end of 2025. Without this negative effect, the growth of our Westwing Collection business and the introduction of third-party premium brands will become clearly visible. Andreas shared with you the 22% growth rate of our Westwing C ollection in 2024 earlier in this presentation. On top of that, expansion effects will fully kick in, driven by two effects. First, we will see significant full-year effects from our expansion measures that are spread over 2025. Second, this effect will be combined with additional ramp-up effects. Maybe we will see even further expansion measures in 2026. This expansion is expected to contribute significantly in 2026 while having only limited impact on top-line in 2025.
In terms of profitability, we will continue to focus on improving contribution margin based on the premiumisation of our assortment and improvements in our fulfillment ratio. While we won't see any additional impacts from our 2024 complexity reduction measures, we will, of course, remain cost-conscious. Finally, the expansion measures that we will launch in 2025 are expected to quickly contribute positively to adjusted EBITDA margin, driving profitability in 2026 and beyond. This is why we are very confident that based on a return to significant growth, an adjusted EBITDA margin of more than 10% can be reached in the midterm. Let me explain the levers for our different P&L lines in more detail. The most important lever with impact especially on fulfillment and G&A, but also gross margin, is scale.
Scale will help us to leverage the fixed cost base of our lean platform and to improve margins thanks to higher purchase volumes. Another important lever for both gross margin and fulfillment ratio is a higher share of Westwing Collection products as well as premium design brands. This will result in higher gross margins and favorable unit economics. Improvements in marketing ratio are expected to be limited. While we expect some scale effects and improvements in performance marketing, we plan to continue investing in our brand as a key asset and differentiator of Westwing. Finally, looking at G&A, I already mentioned scale as the main driver, compensating for any increase in G&A costs from our expansion measures. Overall, we see a clear path to realize an adjusted EBITDA margin of 10% plus in the midterm as we return to significant growth and realize the described levers across our P&L.
We are also confident that our profitability will translate into compelling cash generation. Before I hand back to Andreas, let me summarize our short and midterm outlook. As Andreas outlined earlier, we have just fundamentally transformed our business with ongoing year-over-year impact on 2025, guided by our three-step value creation plan. This journey takes some time and has negative short-term implications on top-line development. However, it lays the foundation for a high-margin cash-generative business model, and we are able to show improvements in profitability even with a temporarily flat top line. While we have not yet reached our full potential, 2024 represented a significant step forward. We achieved key operational milestones and now have a clear roadmap to further enhance profitability and to deliver against our midterm objectives. We remain very confident in the significant value potential of our business. With that, I hand back to Andreas to conclude with our key 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're 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 with a continued strong cash conversion. Sebastian and I are now happy to take your questions. Thank you very much.
Dear ladies and gentlemen, if you are dialed into the conference call and would like to ask a question, please press nine and then the star key on your telephone keypad now. If you find your question answered before it has your turn to speak, please press three and then the star key. Please press nine, star now. We have already some questions incoming. The first one is from Volker Bosse of Baader Bank. One moment, please. Over to you, Volker.
Yeah, thank you. Congratulations on all your achievements by executing your strategic three-step plan. Thanks for also all the details which you provided, especially for sharing the thoughts on fiscal year 2026. Already very, very much appreciated. I would like to start with three questions. The first question would be on Westwing, One Westwing, which you introduced in all countries, as you said. My question would be, what do you see? What was the effect by introducing One Westwing country by country? What effect did that have on customer conversion, customer loyalty, and finally on sales? Did you see the hoped upgrade in sales and conversion as promised? The second question would be on your physical store expansion. What would you answer here, investors, who are concerned that you somewhat diluted your positioning by moving from a pure online retailer to a multi-channel retailer by adding store rental fixed costs as well as salespeople salaries to your P&L? Basically, the question is about the rationale, why to move into the physical store world. Last, the third question is perhaps a bit of clarification. You guided for 2025 and 2026 year-on sales and earnings.
Is it fair to assume that working capital will remain negative in 2025 and 2026? Could you also give a bit of light on the CapEx in absolute EUR million amount or in percentage of sales, of course, for 2025 and 2026, which you have baked into your plans? Thank you very much.
Thank you, Volker, for your questions. Very happy to take them. I'll answer the first two, and then Sebastian will talk on working capital. The first question of yours was on One Westwing that we introduced country by country, and you asked what was the effect of this, and you also asked on which KPIs did we follow. Of course, we tracked all the KPIs, traffic, conversion, etc., category splits, and all of this. In the end, it was actually country by country, and that's why we also continued with the rollout.
It was the effect that we had expected. There was, on the one hand, of course, an effect that was detrimental together with the change in assortment that we also did step by step. That was that we actually lost some customers that beforehand had a specific preference. This was not in line with our positioning that we wanted to achieve, so that's why we actually accepted this. The main things that we gained was that we put the permanent assortment together with the Westwing Collection at the forefront of everything. This drove the massive increase in contribution margin that you see today. It drove also the basket size increase that you see today. This is the basis of us building a high-margin business.
On customer satisfaction, etc., we actually got extremely good feedback, and increasingly so on aspects like the new website that also came along with One Westwing. Overall, we are very, very satisfied with the results. It's a change in position that we also prepared with One Westwing. Some effects that we accepted would be negative, but other effects are very positive and provide the basis, as I said, for building this very high-profitability company. The second question of yours was related to the physical store expansion, and you asked whether this would not dilute our positioning of being a pure-play e-commerce company. I can understand the question. I think if Westwing is seen only as an e-commerce company or an e-commerce platform, like maybe some of the companies that were or are considered competitors in the past, then I think you're right.
What we are building is not specifically an e-commerce platform. What we are building specifically is a brand. This, we believe very strongly, will provide for the much, much better value upside over the next few years. I think the indication and also partially the evidence that we see in the numbers today, they prove this. What we will not do is we will not develop into a mainly offline player. This is not our plan. What we plan to do is, and this is what we are driving at the moment, mainly in Germany, we plan to flank the customer experience that our customers have online, on social media, etc., that we flank that with offline experience.
It is really to get in touch more with our brand and also have some physical interaction with our products to be able to touch and feel them. It is not going to be a huge part in terms of sales in the end, but it is going to be a significant part. This is our expectation today when it comes to brand. Ultimately, of course, things like the willingness to pay and our pricing power. This is where we see the significant upside. I hope, Volker, one Westwing and physical store expansion, any remaining questions on those two?
Yes. Thank you very much for the explanation.
Sebastian, for the question on working capital.
Hello, Volker. Thanks for your question on working capital. If we are able to keep working capital negative. In general, we are confident that our business model can maintain with negative working capital. However, there might be, especially in the first half of 2025, some temporary negative effects on working capital as we expand our Westwing Collection product assortment. Andreas talked about our Westwing Collection and the plans we have in the presentation. This requires some ramp-up investments for those items. This is why we might see some negative impact on the first half of 2025, but on a full-year basis. In general, looking at the Westwing business model, we are confident that we will be able to keep working capital overall in the negative numbers. Thank you. CapEx, please. That was the last one. CapEx.
The amount of CapEx without expansion is expected to be somewhat in the range that we saw in 2025, maybe even a little bit less as we do not see any more effects from our tech migration. On expansion CapEx, this depends mainly on the number of stores that we will open in 2025. We talked about a mid-single digit number. Assuming this, we expect a mid-single digit million euro amount, not more, but as I said, mainly depending on how many stores we launch in the end.
Okay. That gives a good indication. Thank you very much and all the best. Thanks.
Thank you, Volker.
Thank you very much also from my side. Dear ladies and gentlemen, just a little reminder. If you would like to state your question, please press nine and then the star key. The next question comes from Henry Wendisch. One moment, please. Over to you.
Hi. I think I'm up already. Can you hear me fine?
Yes, we can hear you, Andreas.
Yeah, cool. We have a couple of questions. Shall we take them all at once or one by step by step, whatever you prefer?
It's fine if you like. Go ahead with all your questions.
Okay. Okay. Then I'm just going to go through it. Okay. First one. First of all, you have some two million treasury shares right now. I think that's more than enough for any share-based compensation plans you have installed. What are you going to do with the excess treasury shares? You plan to cancel them or just keep them for any other reasons? If so, what reasons could we think of to keep the treasury shares? Next question is, I've seen that you have some large share of your cash, some EUR 30 million in overnight and short-term deposits. I'd like to know at what average interest rate you've locked in for those deposits.
The third question is also regarding the 2025 EBITDA margin outlook. You said you have no restructuring. One-off expenses baked into this. Is there any initial setup costs or any other one-offs that you expect for country expansions that you've mentioned that is baked into this, or is there no adjustment whatsoever planned for this year in your budget? The fourth question is regarding the headcount. I've seen it went down. Do the personnel expenses, which were up on a per headcount basis by 16% or so, does it include severance payments, or was there a wage increase by that big 16% number that we've seen?
Also, the last question regarding country expansions. Maybe you can give us a little bit more color on the timeline. You have done Denmark and Luxembourg already this year. You have a lot more countries planned in the short term. That is what it says in the presentation. What can we think of as short term? Is it all going to be in this year? Is it towards the end of Q4 and until early next year? What is the timeline there you have in mind? I mean, there could be changes, of course, but what are you planning to launch timely-wise? That is it. Thanks.
Henry, thank you so much for your questions. The first four will be answered by Sebastian after I answer your last one, which is on the timeline for country expansion, where you asked what does short term mean, what to expect there.
Short term means generally for us something like 12 to, let's say, 18 months. We listed the countries that we want to expand into short term in the presentation. For this year, we aim to open five to 10, and it all depends on how well the rollout goes. We've opened two already, as we said, and we've got the next ones lined up. If all goes well, of course, we will accelerate the rollout. As I said, we don't have a lot of complexity related to opening a new country these days because of the scalable platform that we've built. Of course, we always remain cautious, and we want to get it right. That's why we don't publish a specific number for this year, but fve to 10.
The list of countries that you see in the presentation, we aim to do this either this year or next year. I hope that answered your question on the timeline of expansion. I would now hand over to Sebastian for your questions on treasury shares, on the interest rate for deposited cash, on the margin outlook 2025, the adjustment question there, and the question that you had on headcount, etc. Over to Sebastian.
Hi, Henry. Thank you for your questions. First one on treasury shares. We have, as you said, two million treasury shares at the moment. Please keep in mind that it is not only for future share-based compensation. We have in total about four million stock options outstanding. With two million treasury shares, I think it is a really good hedge for any future dilution for shareholders once our share price increases. I think this is a really good measure that we took last year. Of course, it would also be a great investment as we assume that share price might go up once we realize our midterm ambition. This being said, of course, there are also other options to use the treasury shares. Cancellation is one option, but there are no plans at the moment to do this. It is really a great hedge against dilution for existing shareholders. Does this answer your question?
Yes. Perfect. Thanks a lot. On interest rates, we have spread our cash across several banks. Our highest interest rates at the moment are 2.8%. On our operational accounts, we realize between 1.8% and 2%. We, of course, try to optimize our interest yield on a daily basis. Does this answer your question?
Yeah It's just a rough idea of what we can think of in terms of interest income.
On any adjustments planned with regard to our expansion, we won't do any adjustments there. Expansion is part of our operational business. We will see some ramp-up investments, but these are included in our guidance for adjusted EBITDA. Perfect. On the wage increase on a headcount basis, all the severance payments are included in our personnel costs. If you use this number, then you will, of course, get to a much higher wage increase, which makes no sense to calculate in that way.
Yes. Okay. Thanks. Cool. That's it then. Thank you very much. Congrats on the strong results. Thank you so much, Henry.
Thank you very much also from my side. The next question is a follow-up from Volker Bosse. Again, over to you, Volker. Yeah.
Thanks for taking my question. Again, as there's not so much demand, I would like to jump in again. A question would be on logistics. You're entering five to ten new countries. Is it right to assume that all the logistics will be done from Poland, from your central warehouse? That would be the first question. The second question on the expansion. Is it right to assume that you enter all the new countries with your Shoppable Magazine as well as with your permanent assortment? Last but not least, is a more general question on competition. How do you see the competition evolving? You play against really big boys from the physical store side, and they are also all investing into their online capabilities. How do you see the competitive landscape evolving? Yeah. Thanks.
Thanks a lot, Volker, for your follow-up questions. On logistics, you asked how we will handle the 10 new countries or up to 10 new countries. Yes, indeed, we will serve all of those countries also from our central warehousing in Poland. You asked whether we will also have the Shoppable Magazine or our specials in all the new countries. The answer lies actually in scalability. Where we can scale it to the other countries as well, we will do it, which means that, yes, we will also have the Shoppable Magazine in the new countries.
Actually, if you go to our Portuguese website today, you will actually see that we have some of the specials or the Shoppable Magazine running there, but not all of them because some campaigns, for instance, in the Shoppable Magazine that are profitable in Germany are not profitable in Portugal due to logistics costs, for instance. That is why the offering differs a bit from country to country. It is because it is related to margin targets, etc. In general, yes, our offering is the complete offering as a one-stop destination. That comprises our permanent assortment with Westwing Collection and the best third-party design brands, and also the Shoppable Magazine, and also other aspects like home stories and looks, etc., that we offer to all of our customers with the caveat of profitability and co. Thank you.
Your last question was on the competitive landscape, how we see it evolving with lots of also offline incumbents developing superior online capabilities. I agree fully with you, Volker. I think after an initial, maybe if you go back 10 years or so, initially, the large offline incumbents, they actually neglected the online part because they wanted the customers to actually come to their stores. They have by now realized that customers actually want a multi-touch customer journey.
They have invested a lot into this. I fully agree. That is why I think competition generally for onliners has increased because offline is also there, online. We have chosen a different path. We are not in mass market. We have chosen a specific segment of the market. Of course, there are overlaps, right? Someone who generally invests into design will also every now and then buy a product from a mass market retailer, online or offline. In general, we have evolved into a market segment where we see that we have competitive advantages that go beyond our e-commerce capabilities.
Those were the moats that I talked about beforehand, especially with our Westwing Collection offering, then this one-stop destination with also the different ways of presenting products and so forth to our customers, like the Shoppable Magazine or our specials. All of these things, with all of these things, we feel very comfortable in terms of competitive position, also versus offliners. I think that also the fact that we've gained market share shows that we are on the right path. Does that answer your question, Volker?
Yep. Thank you very much. Very helpful. Thank you.
Thank you.
Thank you very much also from my side. At the moment, there are no more questions in the queue. Our last call, the combination is nine star. If you would like to state a question. There seem to be no more questions incoming.
I'm handing the floor back over to Andreas Hoerning. Thank you.
As we haven't received any additional questions, we're ending today's earnings call. Thank you for joining, and goodbye.