Birkenstock Holding plc Ordinary Shares

Good morning, and thank you for standing by. Welcome to Birkenstock's second quarter fiscal 2024 earnings conference call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question and answer session. The company has allocated 60 minutes in total to this conference call. I would like to remind everyone that this conference call is being recorded. I will now turn over the call to Megan Kulik, Director of Investor Relations.

Hello, and thank you, everyone, for joining us today. On our call are Oliver Reichert, Director of Birkenstock Holding PLC and Chief Executive Officer of the Birkenstock Group, and Eric Mossman, Chief Financial Officer of Birkenstock Group. David Kahn, President of the Americas, Nico Boyov, President of Europe, Klaus Baumann, Chief Sales Officer, and Alexander Hoff, VP of Finance, will join us for the Q&A section. Please keep in mind that our fiscal year ends on September 30th. Thus, our second quarter of fiscal 2024 ended on March 31st, 2024. You may find the press release and a supplemental presentation connected to today's discussion on our investor relations website, birkenstockholding.com. Additionally, we have included in the press release tables and presentation the quarterlies for fiscal year 2023 in order to aid in your year-over-year comparisons. We would like to remind you that some of the information provided during this call is forward-looking and accordingly is subject to the safe harbor provisions of the federal security laws. These statements are subject to various risks, uncertainties, and assumptions, which could cause our actual results to differ materially from these statements. These risks, uncertainties, and assumptions are detailed in this morning's press release, as well as in our filings with the SEC, which can be found on our website at birkenstockholdings.com. We undertake no obligation to revise or update any forward-looking statements or information except as required by law. During the call, all revenue growth rates will be cited on a constant currency basis unless otherwise stated. We will also reference certain non-IFRS financial information. We use non-IFRS measures as we believe they represent operational performance and underlying results of our business more accurately. The presentation of this non-IFRS financial information is not intended to be considered by itself or as a substitute for the financial information prepared and presented in accordance with IFRS. Reconciliations of IFRS to non-IFRS measures can be found in this morning's press release and in our SAC filings. With that, I'll turn the call over to Oliver.

Thanks, Megan, and welcome to the Birkenstock team. We are very happy to have you with us, bringing the Birkenstock language to capital markets and helping us further develop this super brand. Good morning, everybody, and thank you for joining today's call. We are happy to be here with you to discuss another exceptional quarter. Once again, we achieved the highest revenue level for the second quarter in our company's history, driven by growing demand for our products across all segments, all channels and categories. Accordingly, revenue grew by 23% versus our second quarter last year. We continue to see strong demand growth in our core markets, And in the largely untapped white space areas, we identified across segments, channels, categories, and usage occasions. Given the strong results achieved in the first half of fiscal 2024 and the continued demand growth we are seeing, we are pleased to be raising our fiscal 2024 guidance, continuing the 10-year 20% growth trend we highlighted during our IPOs. we are increasing our fiscal 2024 revenue growth forecast to 20% on a constant currency basis, up from our prior guidance of 17% to 18%, and an adjusted EBITDA margin in the range of 30% to 30.5%. Our second quarter revenue growth was driven equally by an increase in ASP and units. ASP benefited from the continued shift to premium products, a favorable channel mix towards DTC and the targeted sale price increase. Unit growth was strong across all segments, but especially strong in APMA, one of the key wide space markets we have been highlighting. The additional production capacity we have brought online over the past six months in Germany and Portugal to fuel our supply capabilities is allowing us to meet the growing global demand for our products. While the overall global consumer market remains weak, Birkenstock achieved 23% growth, beating the market soundly as we continue to take share and become a must-have brand for key retail partners. As we and others have observed, consumers are increasingly becoming more selective and intentional in their spending. Consumer across all ages Segments and price points are seeking brands they love. And Birkenstock is definitely one of these global super brands. The strength of the Birkenstock brand is evidenced by continued full price realization of over 90% at key distribution partners in our D2C business. Our D2C channel was, once again, our fastest growing channel in the second quarter of fiscal 2024, with 32% growth against the same period last year. We opened six new owned retail stores, bringing the total to 57. Our digital business also continues to perform very well, increasing 29% from the prior year quarter. Members of our fast-growing membership program are highly engaged and most apt to expand their purchases of our brand, spending more per transaction than non-members. Growing the membership base of loyal fans through priority access to new products and limited editions is proving successful and remains a key focus for us in fiscal year 2024. Our B2B business, which represented 76% of our revenue in the second quarter, achieved healthy revenue growth of 20% against the same period last year, supported by high sell-through rates. This growth came despite a challenging wholesale market you have heard discussed by many of our peers. As a reminder, the second quarter is seasonally the highest B2B quarter due to sell-in for the spring and summer seasons. We saw a continued shift towards closed-toe silhouettes, including clogs, and premium products during the quarter. Closed-toe penetration was over 25% up 900 basis points from the prior year period. The premium offering across our range continues to resonate with the consumers, driving ASP up double digits in the quarter. As an example of this, our big buckle line grew over 28% and sales of our newer braided styles have almost doubled year over year. During the quarter, two of our new premium styles, our new sandal, the Catalina, and the clothes show, Lutri, ranked in our top 20. While we have generated significant momentum and compelling top line performance from our new styles, our momentum with our core silhouettes remains strong. Revenue from our top five core silhouettes, most of which have been around for close to 50 years, was up over 20% in the quarter. Highlighting the commercial relevance of these iconic models and most recognizable styles. Now let's move to our discussion of segment performance. Within our largest segment, the Americas, strong consumer momentum and demand for our brand continued in the second quarter. Revenue in the region was up 21% compared to the same period a year ago. DTC channel growth continued to outpace B2B growth. increasing our DTC share by over 200 basis points. Notably, 46% of digital DTC sales were from styles other than sandals as our brand fans continue to add Burtonstock products for different usage occasions. Over half of our digital revenue was generated from members of our membership program, who on average spend 15% more than non-members. And while our DTC revenue in America continues to be driven by our strong digital presence, revenue from our own retail doors continues to grow above average. Our newest flagship store in the Miami Design District has performed ahead of expectations, with average order value 13% higher than other stores in the U.S., driven by a strong penetration of our premium 7074 collections. The second quarter was another strong one for the Americas B2B channel. Our key wholesale partners recognize the strength of the brand and appreciate the rapid turnover of our products. Accordingly, they have allocated more space to Birkenstock and increased purchases by over 30% compared to last year. Driven by expansion of categories like close-toe silhouettes, new points of distribution in the Americas accounted for a single-digit percentage of revenue with a heightened focus on specialty retailers, including sport-specific running retailers, where the benefit of our footbed as a recovery from sport is finding strong end-use demand. In Europe, we delivered exceptional growth-based growth in the second quarter of fiscal 2024, underpinned by a strong consumer demand. While the European retail market remained soft, Birkenstock continues to perform strongly, up by 21%, far outpacing any other brands. We saw strength in both the DTC and B2B channels. The strong growth in Europe is directly related to the distribution transformation efforts we have made in the region, designed to grow ASP through more strategic placements that drives more premium price products. We saw ASP increase double digits as demand for styles priced at over €100 grew by over 60% and reached over 50% of total sales. Closed-toe silhouettes grew by over 80% in the second quarter, with some of our fastest-growing models, like the Bostons, up over 100%. DTC growth outperformed B2B growth, due to the continued strong online demand, led by over 100% growth in France. Online demand for closed-toe premium leather, big butter, and other premium products was up over 40% in the quarter. Our membership program more than doubled in the quarter versus last year, and average order value was 25% higher than non-members. In B2B, we are increasing our shelf space and continue to be one of the top performing brands for our wholesale partners in Europe. The spring-summer order book was the highest ever with double the order book for closed-toe from a year ago. Key retailers are increasing their purchases and shifting their volumes towards earlier delivery dates and, like the Americas, the majority of the growth is coming from existing distribution partners. It is indicative of the strength of our brand that our fully implemented spring-summer 2024 price increases had no adverse impact on demand. And our full price realization in Europe remains very strong. APMA was again our fastest growing segment in the second quarter of fiscal 2024, with revenue growth of 42%, driven almost equally by volume and ASP. Growth in the region was largely driven by our DTC channel, with the digital portion of the channel nearly doubling compared to last year. In addition, we added five new owned retail stores, including four in India and one in Japan, bringing the total to 19. We also saw a healthy increase in B2B in the second quarter of fiscal 2024, which was driven by an expansion of our monobrand partner stores with 11 newly open stores. Demand in APMA is broad-based and, like other regions, has benefited from closed-door silhouettes, including clocks, which more than doubled compared to the year-ago quarter. I will now turn it over to Eric to discuss our financial results in more detail.