MYT Netherlands Parent BV ADR

Greetings and welcome to the MyTheresa fourth quarter and full fiscal 2024 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. If you would like to ask a question, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. It is now my pleasure to introduce your host, Martin Beer, MyTheresa's Chief Financial Officer. Thank you, sir. Please begin.

Thank you, operator, and welcome everyone to MyTheresa's Investor Conference call for the fourth quarter and full fiscal year 2024. With me today is our CEO, Michael Kieger. Before we begin, we'd 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.mytheresa.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 fourth quarter and the full fiscal year 2024. We are very pleased with our results in a still challenging macro environment. With strong revenue growth and positive adjusted EBITDA in the fourth quarter, we continue our very positive business momentum from the third quarter and have achieved a significant step up in financial performance in H2 compared to H1 of fiscal year 2024. We have reaffirmed our leadership position in a clearly consolidating sector. We still see slower demand from aspirational customers and promotional intensity in the market by competitors, but our clear focus on the high-spending, wardrobe-building top customers allows us to win market share and growth. Strong top customer growth, a record high average order value, and excellent customer satisfaction scores demonstrate our relentless customer focus, which is a key success factor for MyTeresa. We clearly see ourselves as one of the few winners in the consolidating luxury digital space. I wish to highlight today three key messages you that make us stand out in the fourth quarter and demonstrate the strengths of the myTereza business despite ongoing macro uncertainties. First, we see clear evidence that after a difficult period last autumn our business is back on track for strong profitable growth. Our business fundamentals have further improved and the United States continues to be a strong driver of our growth. Second, our core value of building a community for luxury enthusiasts and creating desirability with digital and physical experiences is paying off greatly. Our success with top customers is very evident in our results, and our focus on big spending wardrobe building top customers continues to drive the desire for luxury brands to partner with us for exclusive activations. Third, our very resilient and consistent business model allowed us to significantly improve our business compared to Q4 of fiscal year 2023. Outstanding customer satisfaction, record high average order value, decreasing customer acquisition costs, and stable operating cost ratios were again highlighted in the fourth quarter. In summary, We have accelerated our top-line growth and profitability. We have reinforced our unique positioning with top customers. And we have delivered excellent business KPIs in the fourth quarter of fiscal year 2024. Let me now comment in more detail on these three messages. First, let's look at the continued improvement in top and bottom line. We grew our gross merchandise value, GMV, by plus 7.8% in Q4 of fiscal year 2024 compared to Q4 of fiscal year 2023, leading to a double-digit GMV growth of plus 11.4% in the second half of fiscal year 2024 as compared to plus 2.5% in the first half. For the full fiscal year, our GMV growth reached plus 7.1% compared to full fiscal year 2023. The United States continues to be a significant growth driver for our business, generating an outstanding growth of plus 22.8% in full fiscal year 2024 compared to fiscal year 2023, and with a growth of plus 25.2%, in the second half of full fiscal year 24. Also for the full fiscal year, the US accounted for 19.9% of the GMV of our total business. It is clear that our highly curated selection of true luxury brands resonates very well with the big spending US luxury customers looking for multi-brand inspiration. We also experienced net sales growth in Europe in the fourth quarter with plus 7.2% compared to Q4 fiscal year 23. China and Asia continue to be impacted by ongoing macro headwinds and uncertainties. In the fourth quarter, we also continued our improvement at adjusted EBITDA margin with plus 4.7%. In the second half of fiscal year 24, we thus achieved an adjusted EBITDA margin of 4.3% versus 1.7% in the first half of fiscal year 24 and versus 2.3% in H2 of fiscal year 23. Our strong double-digit growth and almost doubling of profitability in H2 of fiscal year 24 is clearly demonstrating the strengths and the consistency of our business model, delivering profitable growth despite ongoing macroeconomic headwinds. Second, our essence of building a community for luxury enthusiasts and creating desirability through digital and physical experiences is paying off greatly and is also driving the desire for luxury brands to partner with us for exclusive activations. Our top customer base grew by plus 3.4% in the fourth quarter. And in addition, the average spend per top customer grew at plus 4.6%. in Q4-24 versus Q4-23. Overall, the share of top customers in our business in terms of GMV has increased from 32.6% in full fiscal year 21 to now 39.2% in full fiscal year 24, a continual growth over the past four years. The positive result of our top customer focus is also reflected in the growth of our US top customer base that grew by plus 39.4% in fiscal year 24 compared to fiscal year 23. Our successfully growing global top customer base and our unique access to such big spending wardrobe building customers makes us a highly desired platform for luxury brands seeking partnerships. In the fourth quarter of fiscal year 24, we saw again many high-impact campaigns and exclusive product launches, underlining our strong relationships and the sustained support from our brand partners. We launched an exclusive capsule collection with Dolce & Gabbana of womenswear and kidswear with over 50 styles, and exclusive Missoni capsule collection featuring womenswear beachwear styles and home lifestyle products, as well as capsule collections with Valentino and Givenchy, only available at MyTeresa. We also launched exclusive styles from Loewe on, only available at MyTeresa, and we're exclusive pre-launch partner for collections from Saint Laurent, Tots, Leroux, Etro, and Gucci. providing MyTheresa customers exclusive first access to these products. In addition to creating desirability for our top customers with highly exclusive digital campaigns and product launches, we also bring together our top customers for amazing physical experience. In the fourth quarter, we hosted various VIC events for our top customers across the globe. We invited a group of top customers to the Dolce & Gabbana Beach Club in Saint-Tropez, welcomed top customers to the Bulgari Eterna event in Rome, and the Saint-Laurent Geoponty Cocktail at Salone del Mobile in Milan. We hosted further events in London, Stockholm, New York, Connecticut, Shenzhen, Xiamen, and Singapore. Please see our investor presentation for more details on top customer events. The essence of MyTeresa is to build a community for luxury enthusiasts through physical money can buy experience. In the fourth quarter, we hosted several unique multi-day experiences in partnership with luxury brands. One such outstanding highlight was a two-day Italian experience we created together with Brunello Cucinelli at Lake Dorta, including an intimate dinner and picnic joined by Brunello Cucinelli himself. Only a few weeks later, we hosted another beautiful event together with Dolce & Gabbana in the form of a two-day car-tree experience on the picturesque island to also celebrate the launch of the exclusive Dolce & Gabbana capsule collection only available to MyTeresa customers. A third highlight, in collaboration with Valentino, was a private dinner and cruise on board of the iconic Christina O yacht along the French Riviera. the launch of the Valentino Escape 2024 capsule collection. In addition to engaging with our top customers, such events also create global brand awareness for MyTheresa through press and global social media amplification. Please see our investor presentation for more details on these unique money can't buy experiences. As the US continues to be a key driver for our growth, We also continue to strengthen our brand-building efforts here. Following the success from last year, MyTheresa, in partnership with Flamingo Estate, created another eight-week shopping pop-up experience to inspire and entertain our guests with an immersive physical luxury shopping destination in East Hampton. The highly successful immersive physical luxury shopping experience attracted over 6,000 registered guests offering them programming each week, including monogramming and embroidering with Missoni, Etro, Globetrotter, Ananias, Ruslan Baginski, Savette, and Josef Althusser. Our cooperation partner, Porsche, displayed their not-yet-on-the-market Macan and Taycan electric cars for clients to test drive. Please see our investor presentation for more details on the pop-up experience in East Hampton. Let me conclude my statement by commenting on the third accomplishment in the fourth quarter. Our very resilient and consistent business model allowed us to significantly improve our business performance. Martin will talk in a few minutes about the details of our bottom line results for the fourth quarter of fiscal year 2024, But let me provide you with some key operational highlights. Our customer satisfaction, which we measure by our internal net promoter score, reached an outstanding 83% in Q4 fiscal year 24, showcasing the consistent excellence of our customer services. Our average order value increased to a new record high of €703, underlining the success of our focus on selling high-end luxury products. Finally, our customer acquisition costs decreased by 2.5% in the fourth quarter of this year, 2024. This shows our continued ability to unlock efficiencies in our proprietary customer targeting algorithms. We also successfully continued the ramp-up of our operations at our distribution center in Leipzig with more than 80% of all customer orders already processed at the end of July. As part of our strategic focus on global growth, operational excellence and continued profitability, we have made the decision to close our legacy distribution center in Heimstetten. We expect that this will result in increased customer satisfaction and cost efficiencies thanks to the unique location of the Leipzig distribution center at the airport allowing for much faster international shipping. With all the above, it should come as no surprise that we are very pleased with our performance in the fourth quarter of fiscal year 2024 and the full fiscal year 2024. We believe that our results demonstrate the strength and consistency of our business model, delivering profitable growth. results also demonstrate what we believe is a superior market positioning clearly focused on the big spending top customers we see ourselves as a clear winner in the consolidating luxury e-commerce space we are extremely well positioned to benefit from the tremendous growth prospects as market conditions continue to improve globally to capitalize on these prospects we are actively evaluating opportunities to support and accelerate our investments in future business growth. This also supports our strong confidence in our medium-term growth trajectory and profitability levels, despite the ongoing short-term uncertainties in the macro environment right now. And now I hand over to Martin to discuss the financial results in detail. Thank you, Michael. We are very pleased with our plus 13.8% net sales growth in H2 of fiscal year 24, and almost doubling profitability on adjusted EBITDA margin level in H2, all in line with our previous guidance. Our gross profit margin slippage in Q4 of fiscal year 24 reduced further to just 150 basis points, standing at a strong 47.4% gross profit margin. We are continuing to successfully work through our inventory levels, are now below a DIO of 300 days, and expect to achieve the targeted DIO of 260 days in the next nine months. For the full fiscal year 24, we had a positive operating cash flow and no bank debt in our balance sheet. I will now review the financial results for the fourth quarter. second half, and full fiscal year 24 ended June 30, 2024, and will provide guidance for the fiscal year ahead of us. Net sales increased 13.8% in H2 of fiscal year 24 to 456.8 million, with a solid Q4 growth at 9.7%. For the full year, we achieved net sales of 840.9 million, a growth of 9.8%. GMV for the full fiscal year was at $913.6 million, a growth of 7.1% year-over-year. Our growth is driven by our strong and loyal customer base. Our top customer base is expanding continuously, as today the top 3.7% of our customers drive 39.2% of our total revenues in fiscal year 24. During the fourth quarter of fiscal year 24, GMV per top customer increased by plus 4.6% and plus 7.4% per all customers. Our AOV increased by 49 euros per order delivered to an industry-leading 703 euros in the fourth quarter of fiscal year 24 on an LTM basis. The continuous growth of our AOV clearly improves our order economics and truly underlines our successful focus on full price selling, as well as our unique and superior positioning at the very high end of luxury. With these three spots in digital luxury experience, we expand our leadership position with top customers all over the world, especially in our core markets in Europe, the US, Middle East, and rest of the world. During Q4 of fiscal year 24, gross profit increased by 6.3%, 205.8 million, up from 99.5 million in the prior year period. The gross profit margin during the quarter stood at a strong 47.4%. During the quarter, we were able to again reduce the cross margin slippage to 150 basis points compared to 220 basis points in Q3 and 490 basis points in Q2 of fiscal year 24. We still see the effect of promotional intensity of struggling competitors considering their exit or desperately finding their position in a clearly consolidating market. Our profitable top line growth highlights the success of not following that route but staying true to our uniquely curated offerings with increasing brand support, full focus on full price selling, and achieving high sales flow rates. Adjusted shipping and payment cost ratio during the fourth quarter of fiscal year 24 increased by 70 basis points to 14.7% as compared to 14.0% in the prior year period. This expected increase is due to our broadening customer base worldwide, with an increasing share of shipments to countries where we pay all duties and taxes for all customers. For the full fiscal year, the adjusted shipping and payment cost ratio was at 14.7% as well. We are continuing to successfully implement further cost efficiencies through our high-performing payment and duty system set up worldwide. Our focus remains on the acquisition and retention of top customers. As laid out in our annual report, we see continuously expanding ratios of lifetime value over customer acquisition costs for our customer cohorts. Our CAC decreased again in Q4 of fiscal year 24 by 2.5%. Also for the full fiscal year 24, we were able to achieve a 2.6% lower CAC. With this successful focus in aligning to a still challenged overall market environment, marketing expenses decreased by 250 basis points from 13.1% in fiscal year 23 to 10.6% in fiscal year 24. The adjusted selling general administrative expense ratio decreased 180 basis points in H2 of Fiscal Year 24 to now 13.2% down from 15.0% in H1 of Fiscal Year 24. This successful development mirrors our relentless efforts in achieving cost leverage in SG&A. We are in the process of winding down our legacy distribution center and relocating the remaining operations to our new Leipzig distribution center with clear benefits for the customer experience end-to-end and enabling further cost leverage. On adjusted EBITDA level and in line with our guidance, we significantly increased profitability levels in H2 versus H1 of fiscal year 24 and as well in Q4 of fiscal year 24 compared to the preceding year period. In H2 of fiscal year 24, the adjusted EBITDA margin was at 4.3% up from 1.7% in H1. The 4.3% margin in H2 of fiscal year 24 also compares to the 2.3% of H2 in the previous fiscal year. For the full fiscal year, we achieved 25.8 million adjusted EBITDA at a 3.1% margin. compared to 5.0% adjusted EBITDA margin in the previous fiscal year, driven by a weaker H1 of fiscal year 24. In sum, in H2 of fiscal year 24, we were able to achieve increasing profitability levels combined with excellent top-line growth despite continuing market challenges. Depreciation and amortization expenses in Q4 increased only moderately to 4.1 million or 1.7% of GMB from 1.4% in the prior year quarter. This mirrors our effective strategy of not capitalizing IT costs, but to have the full effect of past IT replatforming and continuous IT improvements always already extends in our P&L. With the resulting lower levels of depreciation and amortization, our increased profitability is also visible on adjusted operating income as well as adjusted net income level. For the full year 2024, adjusted operating income was at a positive 10.6 million and adjusted net income at a positive 7.7 million. Let's take a look at the cash flow statement. For the full fiscal year 24, we had a positive operating cash flow of 10 million. In addition, we closed the year with no bank liabilities, full availability of our 75 million revolving credit facility, and 15.1 million cash attempt. In the fourth quarter fiscal year 24, our cash flow from investing activities only used up 2.4 million as we have now almost fully completed the remaining payments of the new warehouse in Leipzig. With no additional major investments planned, we expect our capex to make up around 1% of GMV for the full fiscal year, a unique benefit of our business model. Let me give you an update on our inventory situation. Over the preceding quarters, we have successfully managed to our inventory levels, continuously aligning inventory growth with our overall top line growth and achieving normalized levels of inventory. Inventory growth year over year was a plus 2.9% at the end of the fourth quarter of fiscal year 24, coming down from plus 44.4% in Q1, plus 33.1% in Q2, and plus 11.9% in Q3 of fiscal year 24. In June 23, our DIO stood at 310 days and was at 296 days in June 24. We expect to return to our target range of 260 days by the end of fiscal year 25. Turning to the guidance for fiscal year 25, which runs from July 24 to June 25. We have been continuously gaining market share a consolidating market and will continue to do so. We are growing profitably with our continued focus on top customers and full price selling now curated offer. We are seeing an easing of the current promotional environment, especially with the current fall winter 24 season and expect trends to further ease in calendar 25. But nevertheless, macroeconomic uncertainties persist near term, and we remain cautiously optimistic for the period until June 25. For fiscal year 25, we therefore expect GMV and net sales growth between 7 and 13 percent, adjusted EBITDA margin between 3 and 5 percent. We continue to not guide on quarters, but I want to give you a snapshot of our current expectations. Q1 and Q3 of fiscal year 25 are expected to be quarters with weaker top line growth and weaker profitability, and Q2 and Q4 of fiscal year 25 with stronger top line growth and stronger profitability. In line with the usual pattern, we expect H1 top line growth rates to be similar to H2 of fiscal year 25 and on Profitability levels, H2, to be stronger than H1. Q1 of fiscal year 25, ending September 24, is performing well and in line with our expectations. We're very confident in the medium and long-term outlook of the business, and we will benefit more quickly and overproportionately when the overall luxury market returns to full strength. MyTheresa is already the leading luxury multi-brand digital platform, and we continue to fortify our leadership position, being the best partner, not only for top luxury brands, but also for our top customer base. And with that, I will now turn the call back over to Michael for his concluding remarks. Thank you, Martin. As stated, we are very pleased with our fourth quarter and full fiscal year 2024 earnings results. We have seen a marked performance improvement the second half of fiscal year 2024. With this strength and consistency of our business model, we see ourselves well positioned to achieve our fiscal year 2025 guided target. The first few weeks of the new fiscal year support our confidence. We believe that MyTheresa offers the best digital luxury shopping experience for big spending consumers and true luxury brands. We will further grow our community of luxury enthusiasts through highly desirable digital and physical experiences globally. And with that, I ask the operator to open the line for your questions.

Thank you. The floor is now open for questions. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. If you are called upon to ask your question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Again, press star 1 to join the queue. And your first question comes from the line of Oliver Chen with TD Cowan. Please go ahead.