MYT Netherlands Parent BV ADR

Greetings and welcome to the MyTeresa second quarter of fiscal 2023 earnings conference call. At this time, all participants are in a listen-only mode. Today's call is being recorded and we have allocated one hour for prepared remarks and Q&A. It is now my pleasure to introduce your host, Martin Beer, MyTeresa's Chief Financial Officer. Thank you, sir. You may begin.

Thank you, Operator, and welcome everyone to Mitrice's investor conference call for the second quarter of fiscal year 2023. With me today is our CEO, Michael Klieger. Before we begin, we would like to remind you that our discussions today will include forward-looking statements. Any comments we make about expectations are forward-looking statements and are subject to risks and uncertainties, including the risks and uncertainties described in our annual report. Many factors could cause actual results to differ materially. We are under no duty to update forward-looking statements. In addition, we will refer to certain financial measures not reported in accordance with IFRS on this call. You can find reconciliations of these non-IFRS financial measures in our earnings press release, which is available on our investor relations website at investors.mytresa.com. I will now turn the call over to Michael. Thank you, Martin. Also from my side, a very warm welcome to all of you, and thank you for joining our call today. We will today comment on the results and performance of our second quarter of fiscal year 2023. Overall, we are pleased with our results. Our business has shown once more excellent financial strength and resilience despite significant macroeconomic headwinds. MyTheresa grew its top line in the second quarter and delivered strong profitability. Our results are even more reassuring given the performance we see with many of our peers and the broader consumer sector. High inflation, the prospect of a recession, The continued war in the Ukraine and the dramatic return of the COVID pandemic in China were just some of the negative factors dampening consumer sentiment in the second quarter. MyTheresa was able to distance itself somewhat from these significant macroeconomic challenges due to our unique focus on the high-end wardrobe building customers our highly adaptive business model built on cost variability, and our excellence in operational execution. These qualities make us confident to deliver against our communicated targets for full fiscal year 2023, despite ongoing economic and geopolitical uncertainties. Let me summarize three key characteristics of our business as evidence in the second quarter of fiscal year 2023 so that you can fully appreciate the strengths and resilience of MyTheresa. First, our focus on the high-end wardrobe building customer and thus also on truly luxury brands make us far less exposed to the aspirational luxury customer who is greatly impacted by negative sentiment at the moment. This is clearly supported by our customer KPIs and our continued success with money can't buy experiences for top customers in the second quarter. Second, we have built a very resilient and agile business model. We are global, active across many luxury categories, uniquely focused on full price selling, and we have a high share of cost variability. Therefore, we can deliver strong profitability even at times of slower growth. Third, a key success factor for MyTheresa has always been the operational excellence in the business. We consistently achieve high quality levels of service and creative productions. This can be seen in the high customer satisfaction and loyalty we enjoy, as well as the continually growing trust-based relationships we have with luxury brand partners, that support us with exclusives and capsules. Let me now comment in more detail on those three key qualities of the MyTheresa business. First, let's look at the success with high-end wardrobe building customers in the second quarter. We grew our gross merchandise value, GMV, by plus 7.8% compared to Q2 of fiscal year 2022. On a two-year basis, we grew our GMV by plus 36.1% compared to Q2 of fiscal year 2021. This solid growth in the second quarter sets us apart from other digital platforms in the same period. It is driven by the clear focus on the true high-end water building luxury customers and not the aspirational occasional luxury shop. The latter are and will be impacted significantly by an economic downturn while the true luxury customer is more resilient. In the second quarter of fiscal year 2023, our top customer base grew by plus 25.3% compared to Q2 of fiscal year 2022, while the total number of customers grew by plus 8.8%. It is evident that the occasional aspirational customer shopped less in this quarter compared to Q2 of fiscal year 2022. The holiday season is typically an important moment for aspirational customers. This is also visible in the repurchase rate of customers acquired nine months ago, which dropped in December compared to the repurchase rates in December 2021. Please see our investor presentation for more details on the cohort repurchase rates. It is noteworthy to mention that the average spend per top customer grew by plus 1.8% in the second quarter of fiscal year 2023, and the average spent for all customers grew by plus 1.9%. It shows our focus on the quality of customers and not simply the pure number of them. To engage and serve our high-end customers, we partnered again with many leading luxury brands to create true money-can't-buy experiences for our top customers. Luxury brands are more and more interested to partner with us in clienteling activities given the increasing importance of top customers in today's environment. Examples for these in the second quarter include a party in Paris to celebrate the launch of a capsule with Balmain in attendance of the creative director Olivier Rostand, the highly visible launch of the Pucci FUSAD collection with a multi-day experience in St. Moritz in attendance of the creative director Camille Micheli, as well as a private dinner for our top customers at the home of Diego de la Valle, chairman of the TOTS Group. Please see our investor presentation for more details on our top customer activations in the second quarter of fiscal year 2023. Our unique ability to excite and engage with true high-end luxury customers and build long-lasting relationships with them provides us with a very sustainable and growing revenue driver, even in a challenging macroeconomic environment. We have increased our top customer base by plus 111% since Q2 of fiscal year 2020. Second, let's look on the resilient and agile MyTheresa business model. In the second quarter of fiscal year 2023, we experienced slower growth in Europe with plus 3.7% compared to Q2 of fiscal year 2022 and saw a contraction in mainland China by minus 32.3% in GMV compared to Q2 of fiscal year 2022, both clearly driven by macro factors. In the United States, which continues to be one of our key growth markets, we achieved again and an above-average GMV growth was plus 12.7% compared to Q2 of fiscal year 2022. The share of the United States of our total GMV increased to 16.9% in the second quarter of fiscal year 2023. We drove this growth with a strong lineup of customer and brand events across the United States. One highlight was the cocktail event at the Saga restaurant in New York City with the creative directors of Oscar de la Renta in celebration of an exclusive capsule launch. Please see our investor presentation for more details on our events in the United States in the second quarter of fiscal year 2023. In terms of categories, we saw solid growth in women's clothing, kids' wear, as well as our recently launched life category featuring home and lifestyle products. These are incidentally categories that have a high top customer share of revenues, while bags and sneakers showed much slower growth as they typically attract more aspirational customers looking for investment pieces. As in the previous quarters, we achieved our GMV growth with a continued focus on full price selling. Our average LTM order value increased by plus 4.3% in the second quarter of fiscal year 2023 compared to fiscal year 2022, underlining the focus on the true luxury assortment. Our customer acquisition costs increased by plus 15.5% in the second quarter, but this has to be seen in the context of a much higher quality of new customers with predicted higher lifetime value. Due to our disciplined cost management and the high cost variability, we kept all cost ratios within our budgeted ranges, despite slower growth. Martin will talk in a few minutes about how all this translated into strong bottom-line results for the second quarter of fiscal year 2023. Third, let's look at a key strength of my Teresa, the operational excellence. A key indicator for this is customer satisfaction, which reached a very high level as measured internally with a net promoter score of 79.5% in the second quarter of fiscal year 2023. This is only achievable with a very high consistency and quality across all functions and, in particular, warehouse operations, customer care, and technology service. All this drives the almost 100% revenue retention of newly acquired customer cohorts as of year two of the relationship with us. Our very high quality and creative campaign and digital asset production is also visible in the flawless and impactful execution of brand campaigns. We partnered once more like no other platform with many leading luxury brands for exclusive capsule launches or pre-launches of collections. We produced impactful digital content and campaigns that attracted our unique high-value multi-brand customer. Our focus on high-end customer engagement is ultimately a key driver for luxury brands to continually partner with us. Examples for exclusive brand collaborations from the second quarter include the exclusive launch of the Loro Piana Cocooning collection, the first Dolce & Gabbana ski collection exclusively available at MyTeresa, exclusive capsule collections only available at MyTeresa from Etro, Christian Louboutin, Kate, and Oscar de la Renta, as well as an immersive shoppable video created by MyTeresa to celebrate exclusive styles of Montclair Grenoble, and featuring professional skills. Please see our investor presentation for more details on brand collaborations. With all the above, it should come as no surprise that we are pleased with our performance in the second quarter of fiscal year 2023, despite macroeconomic headwinds. We believe that our results demonstrate the fundamental strengths and consistency of our business model delivering profitable growth. We see ourselves as one of the few winners in the clearly consolidating luxury e-commerce space. And now, I hand over to Martin to discuss the financial results in detail. Thank you, Michael. I will now review the financial results for the second quarter of fiscal year 2023, ended December 31st, 2022, and will provide additional details on some of the previously mentioned factors influencing our performance. Unless otherwise stated, all numbers refer to Euro. As Michael already indicated, given the difficult macroeconomic headwinds and tough comparisons to last year's Q2, we are pleased with our plus 7.8% top-line growth in the quarter and plus 13.7% in H1 of fiscal year 23. Even in this unprecedented macroeconomic situation, MyTheresa proved again its resilience and profitability in the quarter with a 9.3% adjusted EBITDA margin, 7.9% adjusted operating income or EBIT margin, and 5.8% adjusted net income margin. Let's look at the numbers in more detail. And as this is an unprecedented microeconomic situation, also gives some guidance for the second half of the full fiscal year, ending in June 2023. Please bear in mind that we will not be doing this on a regular basis. In the second quarter of our fiscal year 2023, ended December 31st, 2022, GMV was at $215.9 million. growing at 7.8% compared to the prior year quarter at $200.2 million. At constant currency, the growth was at plus 5%. This growth was on top of a high growth comparable in Q2 of the last fiscal year at plus 26%. The solid growth achieved in this quarter was above most industry peers. but still showed a temporary slowdown, as Michael explained, especially in December, compared to the growth rates that you're used to seeing at Mitresa. Given the mentioned macroeconomic headwinds, our focus has been on the continued successful expansion of our top customer base, as well as the acquisition of new high-potential customers. we were able to grow the number of our top customers by 25.3% in the quarter, in addition to a GMV increase per top customer of 1.8%. This is in line with our impressive results in the previous quarters. In H1 of fiscal year 23, we grew our top customers by 26.2% and GMV per top customer by 1.2%. In Q2 of fiscal year 23, our total active customer base grew by 8.8%, with a GMV increase per all customers of 1.9%. In H1 of fiscal year 23, our total active customer base grew by 9.6%, with a GMV increase for all customers of 4.3%. On a LTM December basis, we had 814,000 total active customers. We view the slowdown in December as temporary, driven by aspirational customers, as Michael explained. The economic news in regard to inflation, energy supplies, and GDP growth has started to improve. We are already seeing that the luxury customer is coming back the earliest. our GMV growth quarter to date is very strong and align what we have seen in Q1 of this fiscal year. In addition, given the lower comes of the quarterly growth rates during the last fiscal year of plus 13% in Q3 and plus 18% in Q4, we are confident in our ability to achieve our GMV guidance at the lower end of the given range for the full fiscal year. This would imply a growth in H2 of fiscal year 23 of about plus 17% to 19%. On a two-year basis, this translates into growth in H2 of about plus 36% to 38% compared to 45% growth achieved in the just finished H1 of fiscal year 23. And this growth expectation for H2 No extraordinary geographical pickup is built in. It reflects an improving macroeconomic environment that is already visible throughout the regions, including China. Also, for the medium and long term, we have no doubt about the success of the MITREESA positioning and business model, and therefore confirm our communicated medium to long term target of GMV growth rates above 20%. During the second quarter of this fiscal year, net sales increased by 1.3%, 190.1 million. As in preceding quarters, net sales reporting is impacted by trends transitioning to our curated platform model. During the second quarter of fiscal year 23, we had seven brands operating under the curated platform model. In Q2 of the previous fiscal year, we already had six brands under CPM, but five just started in the quarter with early sales of the spring-summer 22 season. Therefore, the CPM impact of the sales of these five brands in Q2 of the preceding year was limited to early sales of spring-summer 22. The growth gap between GMV growth and net sales growth due to brands transitioning to the CPM, is narrowing as expected. In Q1 of this fiscal year, the growth gap was 1,000 basis points, and in this Q2, it was 650 basis points. We expect the growth rates of net sales in the remaining quarters of the fiscal year to be much closer to the GMV growth rates. fiscally at 24 and beyond growth rates will align even further we know around 100 to 300 basis points as stated before the difference in growth rates between gmb and net sales is purely a one-time financial accounting effect as for the cpm brands we book the platform fee as net sales 12 months after the full transition of those brands this one-time effect will be over and net sales will grow in line with GMB again. The curated platform model offers special financial characteristics to MyTresa. It enables a stronger top-line growth due to in-season replenishment, and overall yields a similar profit profile for MyTresa. In addition, inventory risk stays with the brands as they maintain ownership of the inventory, And MyTheresa has a much better cash cycle as we only pay the brand once the customer has paid us. We achieved the 8% GMB growth ahead of industry peers in the quarter despite negative growth in China and weaker growth throughout most regions, especially in Europe. But with the sales pick up in January and February, we already see promising customer developments in all regions. including Europe and China. Our net sales share outside Europe increased from 41% in Q2 fiscal year 22 to 45% in Q2 fiscal year 23 towards a more diversified global customer base. The gross profit margin in Q2 was at a strong 54.8%, an increase of 140 basis points compared to 53.4% in the prior year period. The improvement is based on increasing share of CPM with a positive margin effect of 190 basis points. Our operative gross profit margin decreased by 50 basis points as the promotional intensity in Q2 of the last fiscal year had been extremely low and is now at more normalized levels. For the next two quarters, we expect this operative cross-margin slippage to be much lower in light of the margin levels we had in H2 of the preceding fiscal year. For the full fiscal year, we maintain our gross profit guidance at the low end of the communicated range. The continued strong gross profit margin also reflects the unique and high quality of our customer cohorts and thus our industry leading ability to achieve a high full price sales trend. Despite the lower top line growth in the quarter, our inventory levels as of December 22 are only up by 26% compared to December 21, fully on budget level. More than 80% of inventory is related to the current and the upcoming season, and will enable us to grow at the targeted level in the upcoming months. The share of older seasons is at a record low. In addition, please bear in mind that for our CPM business, there is no inventory risk for us, as the brand owns the inventory until it is sold. We expect the CPM share of GMV for this fiscal year to be around 20%. In sum, inventory levels are where we want to have them, and we stay true to our strategy, offering the best merchandise at targeted price levels for a high-value customer base. Shipping and payment costs increased by 10.9% to $28.3 million, as compared to $25.5 million in the prior year quarter. the shipping and payment cost ratio in relation to GMV increased by 40 basis points from 12.7% in the previous fiscal year quarter to 13.1%. The 40 basis points higher cost ratio is due to stronger growth outside of Europe. As a result of implemented changes in our payment and custom setup, we expect to mostly offset these cost increases and therefore achieve stability in the cost ratios in the upcoming quarters compared to last year's quarters. The shipping and payment cost ratios in the remaining quarters of the last fiscal year were between 13.5% to 14%. We continue to invest in acquiring high-quality new customers in Q2. we acquired a solid number of 120,000 new customers in the quarter. We deliberately maintained our marketing budget on target despite higher cash as we captured market share among top customers. During the second quarter, marketing expenses increased to 28.8 million compared to 23.8 million in the quarter of the previous year. As a percentage of GMB, marketing expenses grew from 11.9% in Q2 of fiscal year 22 to 13.3% in Q2 of fiscal year 23. The marketing cost ratio in Q2 of the last fiscal year was exceptionally low as we could not execute all marketing activities planned due to the pandemic. In the last full fiscal year, we had a marketing cost ratio of 12.9% of GMV. We expect to achieve approximately this level also in fiscal year 23. One driver of our stable marketing cost ratio, despite strong new customer growth, is also our excellent existing customer performance with increasing GMV per total customer, plus 4.3%. in H1 of fiscal year 23. Adjusted selling general and administrative expenses grew by 4.1 million to 27.6 million in the second quarter of fiscal year 23. Adjusted SG&A expenses as percent of GMB increased by 100 basis points from 11.8% to 12.8% compared to the prior year quarter. The increase of the cost ratio is due to higher personal costs, especially in logistics, as well as higher energy costs. The adjusted SG&E cost ratio in the quarter at 12.8% has been coming down from around 13 to 14% in the two preceding quarters. The increase in personal costs is fully aligned with our budget, and we will continue to manage those cost pressures throughout fiscal year 23. or H2 of fiscal year 23, we expect the adjusted SG&A cost ratio to stay below 30% of GMB. We will continue to invest in the quality of our personnel to position the company for growth, and we will make no compromise in our service excellence. This will be key to sustain our medium and long-term growth strategy capturing market share, thus fortifying our leadership position. In the second quarter of fiscal 2023, we achieved an adjusted EBITDA of $17.7 million despite significant macroeconomic challenges. The adjusted EBITDA margin was at a strong 9.3%, which is an industry-leading performance, and it shows the strength and the resilience of our unique and profitable business model. The adjusted EBITDA margin in last year's Q2 had been exceptionally high at 15.4%, mostly due to exceptionally low marketing expenses due to COVID and lower adjusted SG&A expenses. In H1 of the current fiscal year, 23, We achieved an adjusted EBITDA margin of 8.3%, and in H2, we expect a higher profitability. As mentioned before, the current Q3 already shows signs of improvement, and Q4 is expected to be strong on top and bottom line. In the last full fiscal year, we achieved an adjusted EBITDA margin of 9.6%. This fiscal year, we confirm our adjusted EBITDA margin guidance at the lower end of our communicated range for the full fiscal year. Depreciation and amortization expenses in Q2 slightly increased to 2.8 million or 1.3% of GMB as compared to 2.3 million or 1.1% of GMB in the prior year quarter. The resilience of our proven business model, even in times with macro headwinds, is again apparent also on operating and net income level. In Q2 of this fiscal year, MyTheresa reported an adjusted operating income, or adjusted EBIT, of $14.9 million at a 7.9% margin and an adjusted net income of $11 million at a 5.8% adjusted net income margin. We target to continuously deliver profitable growth, which is clearly visible in our focused business model. Also, as a reminder, we run a highly efficient capital-light model with an adjusted return on capital employed at 28% in fiscal year 22.

Moving to the cash flow statement, during the six months

ended December 31st, 2022. Operating activities used 45.1 million net cash. The main driver was the seasonal inventory buildup and in comparison to last year, with no major changes in the inventory status due to brands switching from bold sales to CPM. Inventory levels as of December 22 are up by 26% compared to December 21, fully on budget level. More than 80% of inventory is related to the current and the upcoming season and will enable us to grow at the targeted level in the upcoming months. Net cash used in investing activities was at 12.4 million, driven by the buildup of the new warehouse in Leipzig, which will enable us to better serve our customers through quicker shipping times. Including last year's CapEx, $25 million, or about 65% of the assumed total costs for the new warehouse, between $35 to $40 million, have been paid already. The remainder will be paid during the current fiscal year, except for about $5 to $7 million in the next fiscal year upon finalization. The warehouse will go live as planned in fiscal year 24. We ended the second quarter with cash and cash equivalents of 52 million, no bank debt and 60 million unused cash availability under the revolving credit facilities as of December 31st, 2022. That sum up our expectations for the current fiscal year ending June 30th, 2023. We confirm our previous guidance at the lower end on top and bottom line achieving strong profitability levels more specifically we confirm our guidance at the lower end of the following ranges gmv of the range of 865 to 910 million representing 16 to 22 percent growth net sales at the lower end of 755 million to 800 million representing 10 to 16 percent growth Gross profit at 410 to 435 million, growing in line with GMB, also representing 16 to 22% growth, and adjusted EBITDA in the range of 68 to 76 million, and an adjusted EBITDA margin between 9 and 9.5%. We are pleased with our good performance in Q2 of fiscal year 23, despite macroeconomic challenges, especially to achieve an adjusted EBITDA margin in the quarter above 9% is excellent in the current macro situation. Business is already showing signs of picking up in January and February, and we are very confident to achieve the low end of our guided ranges for the full fiscal year as stated before. I will now turn the call back over to Michael for his concluding remarks. Thank you, Martin. We are pleased with the second quarter of fiscal year 2023 earnings results. We see ourselves very well positioned to achieve our short-term targets, despite a challenging macroeconomic environment. We will continue to benefit from the ongoing shift to online and luxury spent. We also see strong signs of market consolidation among digital platforms, and we see continued global market share gains for us. We are convinced that MyTheresa offers high-value consumers the best multi-brand digital shopping experience there is. And with that, I ask the operator to open the line for your questions.

If you would like to ask a question at this time, simply press the star followed by the number one on your telephone keypad. To withdraw your question, press star 1 again. To be fair and allow each person time to participate, we are requesting you stick to one question and one follow-up. Your first question comes from the line of Matthew Boss with J.P. Morgan. Your line is open.

Great. Thanks. So, Michael, you cited a clear focus on the high end, the true high end versus the aspirational shopper in the release and then multiple times on the call. So maybe can you speak to changes or just elaborate on changes in the spending that you saw with the aspirational side, maybe by category? And if you could just elaborate on trends in the business that you've seen post-holiday, maybe breaking down what you've seen from the true high-end customer. Relative to this aspirational base and if you could maybe by region or also by category would be really helpful on on this Level of acceleration or rebound that you cited Happy happy to do so Matt so Let's start first with was the aspirational customer and the behavior we see if you if you go by category and

the share of top customer is the highest and ready to wear. And the aspirational customer is much more important, particularly in shoes and they're in the subcategory sneakers and in the bags. And so a slowdown in the demand by aspirational customers is evident by a slowdown in shoes and bags overall in our business in the second quarter. versus a ready-to-wear category, much less impacted. And then, simply put, the aspirational customer is a customer that buys once a year in a very simple manner. And so if this aspirational customer buys once a year, it is the seasonal, the festive season, the holiday season, the Christmas time. And so the importance of aspirational customers is even higher during in our fiscal year logic in our Q2. And so the impact of their slowdown is evident in categories of bags and categories of shoes, particularly iconic pieces that they take some time before they decide to buy. And in this quarter, it seems a lot of the aspirational customers decided to take a pause and buy later. And so what we see in current trading is twofold. One, the importance of aspirational customers, particularly in January, February, is not as high as in October, November. If you immediately buy luxury products again in January, February, you're much more in the wardrobe building camp. But the recovery, the rebound, the statement that the results in January, February so far are much more in line with levels of q1 is therefore of course also reflected more in bags and shoes than it is in in ready to wear in terms of geography there are of course two stories there is not only the aspirational customer slowdown story but for china there is clearly the story of a complete change in in the approach of fighting covert in mainland China as well as in Hong Kong and Macau. And so the second quarter was characterized by half of the population, big cities, feeling ill and half of the population not feeling comfortable going out. And so that was really what we saw in November, December, and still in January. What we are seeing now is a return to a more normalized life. The strategy of having the virus go around seems to, at least now, I mean, the process to get there was horrific, that people are going out. Our numbers for Hong Kong and Macau are picking up. We are seeing growth in greater China again. And so there is a rebound. This is, of course, fickle. It's hard to predict, but if it continues like that, we will see in that geography a rebound. And in Europe and in the U.S., the slowdown of the aspirational customer has improved. We believe the economic news has improved, but again, also, the aspirational customers far less important so to speak in in in the current and the next quarter I mean people buying now spring summer this is much more the high-end luxury customer that's great color and then Martin as a follow-up could you just help break down the drivers of gross profit dollar growth in the back half of the year and in particular

relative to the second quarter, just the acceleration. I'm assuming some of the more current business gives you confidence. And then just lastly, your overall comfort with the composition and quantity of your inventory today would be helpful.

Yeah, of course, Matt. I'm happy to do so. Let's start with the inventory. As said, I mean, we are at a record low of older sales. So we kept our inventory buildup to fuel the growth. And as we see that a lot of regions, most regions are coming back, especially the top customers are coming back really early. And that will enable us to fuel and provide for the growth of the upcoming quarters where we are bullish. And so the The inventory level is 26% compared to December, and we are fully in line with our budgets and feel very comfortable around that. Gross profit margin in the first half, or basically in the quarter that was just finished, we had a 50 basis point slippage in operative gross profit margin. but still on a very high level. We have an overall cross-profit margin of 54.8%. Remember, we used to have a 47%. I mean, this shows our strength and focus on continued focus on this high-end customer, on our positioning, and the ability to achieve a really high full-price sales share. There was some operating margin slippage compared to the previous year. It's always in comparison to the previous year quarter, and so you have to always understand the previous year quarter, and there was a bit less promotional intensity due to the pandemic. Now it's coming back to normalized levels. That was the reason for this 50-point slippage. Going forward, we see that slippage to reduce, especially if we look at the gross margins of the last fiscal year, because it's always a comparison of the last fiscal years. Overall, the CPM effect, which drives just the numerical gross profit margin in relation to net sales, will slow down, will calm down. As the overall effect described in the growth rate difference between GMV and net sales, the same is on gross profit level. So the gross profit margin in the second half is then very comparable to the preceding H2 of the last fiscal year.

That's great color. Best of luck.

Your next question comes from the line of Michael Benetti with Credit Suisse.

Hi, good afternoon. This is Dan Silverstein on for Michael. Thanks for taking our questions. Just firstly, it was nice to see top customer growth and the number of first-time buyers accelerate in the quarter. Given the pressure cited on the intermittent luxury shopper, what are you doing today to turn recent customer ads into top customers? And can you speak to any positive indicators within recent cohorts which kind of show the evolution of turning those recent ads into top customers? um and then if you could also speak to uh the cac increase shown in the fiscal second quarter uh what were the drivers behind that is that just a function of you know spending more to gain you know the top customers which have a higher ltv or um or anything to call out there thank you thank you dan uh let me start with the second question indeed as as i

mentioned in the beginning, the CAC increase in the second quarter is majority driven by the fact that we focus even more on high-end customers, prospective customers with high predicted lifetime value. So CAC as an absolute number has gone up in this quarter, but we feel the CAC LTV ratio based on our goals is actually very good. And we felt it's really an opportunity to invest in these customers as they drive the second year cohort loyalty across the board. On the first question, yes, indeed, we are very happy to see again in this quarter, an increase of top customer numbers of 25%. And so we are continuously succeeding even in current microeconomic environments to turn first time buyers, into our highest rank of spending customers. And this is sort of an even higher quality achievement if the total growth of customer is even below the growth of top customers. So we are getting better in attracting the right customers. But to be fair, it is also a kind of self-fulfilling prophecy because the true aspirational customers, they are shopping less, so the first-time buyers we acquire are also of a higher quality, also evident in the increase of AOV, in the increase of revenue per customer, and closing the loop also, of course, allowing us to spend more per pack. And the cohort behavior that we see is very healthy. We always include in our investor presentation the repurchase rates, That was the overall repurchase rate of all customers. You saw the dip in December. But when we look into the patterns right now, we look on average spend right now, we look on AUV right now, we see a very healthy pattern.

Thank you.

Your next question comes from the line of Kunal Madukar with UBS.

Hi, thanks for taking my question. Can you hear me?

Yes, loud and clear. Okay, great. Thanks.

So a couple, if I could, if I could slip in. So one, in terms of the new customer ads, that was about level on a year-over-year basis. So can you talk about, you know, given the macro backdrop, the weaker macro backdrop you saw in the quarter, where did these customers come from, like maybe geographically, and then in terms of the high network individuals that you're kind of selling into, can you talk about two things? One is what percentage of your GMV is the exclusives that you highlighted in your opening remarks? And then for the folks that buy exclusives, what percentage of GMV do they represent?

Thanks. Thank you. I mean, on the last one, this is of course a level of detail we are not sharing, but I'll give you a high level answer. So the exclusive, the capsules are very much a device to attract high-spending customers. They want special. They want newness. They want things that are different. So this is really overly indexing into high-end customers, the capsules and exclusives. In terms of the total share of business, it is not our main business. Capsules and exclusives are not our main business. They are really a device to keep the the loyalty of our best customers because then they know there's always newness, there's always special product on MyTheresa and these are of limited quantity, nowhere else available. So it is a, so to speak, a forcing device to regularly check in, to regularly monitor our campaigns, to regularly monitor our new arrivals. In terms of where we added customers, and Martin may speak in a minute to the the lgm growth and the quarter growth but of course with the special situation uh unfortunate situation we had in mainland china and greater china um the the the geos of us and the geos of europe over indexed in in this quarter in terms of additions of new customers whereas it was only not only business was down in mainland, but also additions of new customers was down because there was just no occasions, no business. And maybe, Martin, on growth of new customers? The top customer, the overall active customers, they grew in the quarter 8.8%, in H1, 9.6%. And if you look at the LTM basis, our active customers grew 10%. But what is also unique, the quality of those customers and new customers is constantly increasing as we, and this is also laid out in the customer, in the investor presentation, but also our GMV per customer increases and increased in the quarter and in the last 6.3% GMV per customer increase. and also on an LTM basis. And that is also reflected in what Michael said, the AOV increased by $26 on an LTM basis. So very strong increase in quality and very focused on potential new customers.

Thank you so much.

Your next question comes from the line of Oliver Chin with Cohen.

Hi, thank you. Hey, Michael and Martin. On the trends that you're seeing lately, what's giving you confidence on improvement in terms of that happening? And also, what's the nature of improvement as you think about aspirational versus non-aspirational? And then second, a lot of the competition is likely very over-inventoried. What are your thoughts on promotions that you may or may not need to execute relative to what you're seeing in the marketplace as well?

I leave the inventory question to Martin, but I hope we clearly say that we are not over-inventory. I mean, whether our competitors are, you're a better judge. But on the first one, I mean, what gives us confidence? The overall business numbers in recent weeks since beginning of the year give us confidence. We also see that the The slowdown that we saw particularly in bags and shoes is improving. That gives us confidence because it shows that the mix and what gives us really high confidence is that it's excellent positive numbers in top customers. Growth of that cohorts, spend per top customer, share in our business of top customers, AOV of top, all these KPIs all show up, all improve. And so we have this very solid core base, core business. It has not suffered in the second quarter. It is pushing fully ahead and the improving economic news, the Angst for energy crisis in Europe, abating, recession abating, we do see a return of the aspirational customers. But also, to be clear, Q2 is the one quarter where aspirational customers are over-indexing in our business because of the holiday season and the one time. But Martin, maybe you take inventory also again. Yeah, I mean, on inventory levels, and Oliver, you know that, you know our different positioning very well also on the promotional landscape and obviously we cannot insulate us totally from the overall promotional environment also of competitors but we are in a different camp we are in a different positioning and have and you know the statistics that also in the last four years we had a very stable operating gross profit margin despite ups and downs, despite competitors being very promotional, less promotional, we are uniquely focused with the least promotional share in our sale. And therefore, we see with the inventory levels that we have and staying true in our positioning, and we see that also in the ramp up of January and February, where we have a have a great support and great success on customer sentiment, we are very confident that we can capture the growth, capture the share and stay true to our positioning and therefore not change any promotional nuance in what we see in the market.

Okay, thank you. And Michael, as we think geographically, is your expectation that Asia and Europe improve sequentially and U.S. holds at this outstanding level? How should we think about that? Also, conversion rates. In the industry, we've been seeing some noise around conversion rates. Are you happy with the traffic relative to conversion digitally? Thank you.

No, I think your view on expectations is absolutely right, but for different reasons. So we do expect in the coming months a good rebound in China, greater China, even spilling into Southeast Asia. So that's one source of rebound. And remember, Q2 minus 33%. But also remember, we are now... with the months of March, April, May, these were the months where Europe last year was heavily hit. I mean, the start of the war in Ukraine was particularly negative for consumer sentiment across the different consumer segments that we served last year. So there will be, in comparison to last year, again, Europe will drive a lot of the uptick. but really because it is very low comparables we are against versus in the U.S. where last year the comparables from the U.S. were good. So I would say what you described is the right view, but it's maybe more a reflection of what happened last year than necessarily what happened this year because the U.S. is doing well. Europe is coming back to normal levels, at least compared to the months of March, April, May that were heavily impacted by the start of the war in Ukraine.

Your next question comes from the line of Abhinav Sinha with Society General.

Hi. A question from my end on the margins. if I look at the lower end of your guidance, it implies that in 2H23, the EBITDA margin would be 10%. But if we look at your history, I mean, we have data for 19, 20, 21, and 22, it has been mostly around the 6% to 7%, 8% range. So how should we, I mean, what's your underlying assumptions on the margin expansion in 2H given that inflationary pressures still exist and the marketing cost is still up. So yeah, on that piece.

Abhinav, thanks for the question. I can take that. Think about it that way.

In the first half, we achieved 30 million adjusted EBITDA.

And the second half, to achieve the 68, which is low end, we need to achieve another 38 million. So in the first half, 38 million. The second half, And the second half always has a higher weight on the overall business, on the GMB. So we are very comfortable to achieve the 38. And also, if you look at the Q4 of last year, we had an 8.2% adjusted EBITDA margin, which is, if you look at the historic ranges, lower than usual. we are comfortable to achieve the adjusted EBITDA and adjusted EBITDA margin as reflected in the lower guidance with staying true to our profitability. I mean, bear in mind that we have in H2 already an 8.3% profitability and in the And the overall profitability levels of the low end is 9%. And so we are very confident of achieving that lower end.

Okay, thanks.

Your next question comes from the line of Liwei Hu with CIBC.

Good afternoon, Michael and Martin. Thank you for taking my question. Question is on the CPM front. So we have already established seven brands under the CPM model. Could you share a bit more details on that? And especially after the CPM partnership is effective, have you seen any change in terms of inventory allocation from these brands? And what will be the impact on us? Thank you.

I mean, on the financial results of CPM, I'll let Martin speak in terms of the inventory allocation. Just to repeat, the logic of the CPM is that we work together as partners as we do in wholesale arrangements. So the assortment, the allocation, let's clarify, the initial allocation is built with our buying team in dialogue with the brand. not unilaterally by the brand or unilaterally by us. It's jointly built. And then as we progress through the season, the model allows us, if inventory exists, which is most prominently on core and carryover styles, but sometimes also in seasonal styles, to replenish. To replenish by size, to replenish if certain styles go out. So the inventory service levels are actually improving on the on those areas where we can replenish and on the initial allocation for items which are only produced per order it's it's a jointly developed otb order book by buying our buying team which continues to be involved also in the cpm logic

Thank you very much.

There are no further questions at this time. This concludes today's call. You may now disconnect.