Global Blue Group Q3 2024 Earnings Call Transcript

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Provided by Quartr
February 22, 2024

There are 2 speakers on the call.

Operator

Good morning. Good afternoon. I am today with Roxanne Dufour, CFO of the group. I am Jacques Sten, the CEO of the group, and we will comment to you our Q3 figures. I will start by an executive summary to draw the main key points to have in mind.

Operator

First, the 1st 9 months of the year has been strong in terms of revenue with 41% increase. The EBITDA at the end of 9 months increased by 102% at €152,000,000 and this translates a drop through of the revenue into adjusted EBITDA of 62.8%. We are also in this Q3 seeing an acceleration of the annualized adjusted EBITDA at €159,000,000, Roxanne will comment on that. And if we go to January figures, the January have confirmed the strengths of the recovery in Continental Europe with an increase recovery of 1 25% versus 118% in Q3 and same in APAC with the recovery which is now reaching 100 and 61% of 2019 in January versus 1.50% in Q3. I will give you much more information on that in the coming minutes.

Operator

And just 2 elements to mention in this main takeaway, you may remember that we have closed the refinancing by early December 2023, which resulted into a new senior debt of EUR 610,000,000 and FCF of almost EUR100,000,000 with a maturity of 7 years. And alongside also to mention that we see a very strong improvement of the net leverage ratio at 3.6x versus more than 6x last year. And we confirm our objective to go below 2.5x in terms of net leverage ratio. So these are really the takeaway. And now I will give the floor to Roxanne to give you more detail on Q3 and the 9 months financial performance.

Speaker 1

Thank you, Jacques. I'm Roxanne Dufour, the CFO of Global Blue, and I will take you through the group's financial performance for the Q3 9 months period ended 31 December 2023. As a reminder, our financial year runs from April to March and all the reconciliation to the nearest IFRS metrics are included into the appendix. Let's move to Slide 7 for our adjusted P and L of the Q3. We are pleased here to report another solid quarter with significant progress across the business.

Speaker 1

CFS and IVPS reported sales in store increased by €1,500,000,000 an increase of 27.7% versus Q3 last year. Group revenue increased by 26.2 percent to €109,400,000 versus the same period last year. And turning to adjusted EBITDA, we have delivered a significant improvement to €39,800,000 resulting in an 8.5. Increase in the adjusted EBITDA margin to 36.3% and with a 69% revenue drop through to adjusted EBITDA. Finally, we recorded an adjusted net income for the group of €9,100,000 versus 6.6 percent in Q3 last year.

Speaker 1

Let's turn now to Slide 8 for the revenue. Here, you can see that we have delivered another strong quarter, significant growth, delivered a 26.2% increase in revenue versus the same period last year. I will go into the detail per division on the following slides, but you can see here, TFS, EVPS and NTS contributed to a further €22,700,000 in revenue with a further €1,000,000 scope effect from TFS and NTS. We then have €1,000,000 FX impact, which gets us at the end to €109,400,000 of revenue in Q3 this year versus €86,700,000 last year same period. Turning now to the revenue performance per division.

Speaker 1

TFS, 74% of our revenue in Q3. TFS delivered a strong performance with an increase in revenue of 24.8% on a reported basis to €80,300,000 On a like for like basis, revenue in Continental Europe increased by 17.7 percent to €68,000,000 while revenue in Asia Pacific increased by 83.5 percent to €12,000,000 revenue. This strong performance in Asia reflects the ongoing recovery across all origin nationality with the reopening of Chinese border in January 2023 being the key driver of the revenue improvement, especially in Asia, as I mentioned, where sales in store of shoppers from Mainline China has already recovered to 105% in Q3 this year versus 2019, and Jaks will cover that in more details later. Turning now to ABPS. ABPS, this is 20% of our group revenue.

Speaker 1

This division also delivered a strong performance with an increase in revenue of 37.4 percent on a reported basis to €22,300,000 reflecting a strong performance across both business segments. On a like for like basis, revenue in FX solution increased by 64 percent to €10,600,000 while revenue in the acquiring business increased by 26.2 percent to almost €12,000,000 As with CFS, AVPS is also benefiting from the ongoing recovery in the travel industry. Turning now to RTS. RTS, 6% of the group revenue in Cutury this year. As a reminder, RTS reflects the acquisition of Zig Zag in March 'twenty one, consolidation of Yokuda from September 'twenty one and the acquisition of Shipup in November 'twenty two.

Speaker 1

Here you can see RTS revenue increasing by 11.6 percent on a reported basis to €6,800,000 revenue in Q3 this year. There was an organic growth of 3.9% and an additional $500,000 from the acquisition of ShipUP. While like for like revenue growth was moderate at 3.9% as a result of the cessation of sales of carriage to Zig Zag clients, which is revenue with lower contribution. The like for like contribution growth of the segments, which is after carrier cost, was very strong at 80%. Turning now to detail on adjusted EBITDA.

Speaker 1

The significant improvement in revenue together with the ongoing focus on the cost base led to a 65.2% increase in adjusted EBITDA in Q3 this year. And the revenue drop through is 69.2 percent, and I will take you through the details here. We begin with our adjusted EBITDA, which was €24,100,000 last year. If we look at the additional contribution of each business, contribution being the marginal revenue minus marginal direct variable cost, we have a further €19,400,000 in Q3 this year. Then considering the €3,800,000 impact of fixed costs and then the scope effect from TFS and RTS and the FX impact, the group delivered an adjusted EBITDA of €39,800,000 with an increase in the adjusted EBITDA margin of 8.5 points to 36.3%.

Speaker 1

Turning now to Slide 13 for further detail on the net finance cost. We are showing here a significant increase of €8,300,000 in net finance cost. Few points to consider. First, we have an increase in interest cost of €5,300,000 This is due to an increase in interest rates from 3.26 percent in October, November 'twenty 2 last year to this year same period, 6.5%. And in December, it raised to 8 point 4% as a result of the refinancing.

Speaker 1

And then we have a negative foreign exchange variation of €3,000,000 versus the same period last year. As a reminder, Q3 last year was impacted by the foreign exchange related to the satellite equity transaction and also the supplemental shareholder facility, which was denominated in USD while Global Group report in euro. Turning now to the detail of quarterly adjusted EBITDA. Here we are showing the annualized adjusted EBITDA for the group based on the quarterly recovery. You can see here a steady and consistent improvement in the annualized quarterly adjusted EBITDA.

Speaker 1

And now based on the Q3 recovery, the annualized quarterly adjusted EBITDA is at €159,000,000 This has led to a significant improvement in terms of margin from 28.8% last year same period to this year, 36.7%. Now I will take you through the financial detail for the 9 months performance. Here, we are showing the adjusted P and L for the 9 months over the year. And again, we see the same trends as with the Q3. CFS and ADPS reported sales in store increased by €5,900,000,000 an increase of almost 45% versus the 9 months last year.

Speaker 1

Group revenue increased by 41% to €317,000,000 And then turning to adjusted EBITDA, we have delivered a significant improvement to almost €115,000,000 and with a big improvement in terms of margin, 11 points improvement and the margin now at 36.2%. Finally, we recorded an adjusted net income for the group at €25,300,000 again, a significant improvement versus last year, which was negative at €7,100,000 Let's turn now and getting further details on our adjusted EBITDA. Similar to Q3, we are showing the detail for the 9 months. We achieved a 102% increase in adjusted EBITDA versus last year, and we have a drop through of 63%. Starting with our adjusted EBITDA at €56,700,000 last year for the same period.

Speaker 1

If you look at the additional contribution for each business, we have a further €73,300,000 in 9 months. And then taking into account the fixed cost, €30,000,000 the scope effect, about €2,000,000 and then the foreign exchange impact, about €500,000 The group delivered an adjusted EBITDA of €114,700,000 with an increase, as I mentioned, of the adjusted EBITDA margin at 36.2%, that means plus 11 points. Moving now to the D and A and the net finance cost. In terms of adjusted D and A, so we have a slight increase of €600,000 and now we are at €27,600,000 for the period. On an annualized basis, this give us a D and A of €36,000,000 which is in line with our current level of CapEx.

Speaker 1

Then related to the net finance costs, so we experienced the same trends here as we had in Q3. The net finance costs increased over the 9 months period by €9,000,000 and this is due mainly to the interest cost because they have increased on a blended basis from 3.17% to 6.37%. And this was offset by a decrease of other finance costs by €8,300,000 and this is the result of the foreign exchange impact related to Sarta Health Nitel transaction and supplemental shareholder facility that I have already explained. Let's turn now to the cash flow statement. After an adjusted EBITDA of €114,700,000 the level of CapEx is €27,900,000 And then you can see here a working capital inflow of €6,100,000 in the period, which I will cover in detail on the next slide.

Speaker 1

You have also a higher level of interest paid, about €41,000,000 and this is mainly due to the interest rates over the period that has been raised over the period. Then the strategic equity investments from TENCENT that has been done in November and that resulted in an inflow of €45,000,000 And you can also see here the cost related to our refinancing for about €24,000,000 Finally, our net debt has improved by 41 €200,000 Let's turn now to the next slide in order to have a look on the working capital dynamics. As a reminder, our working capital is driven by timing difference between the moment we proceed the refunds that we make to the international travelers and the moment we receive VAT payment from merchant and tax authorities. We typically refund travelers on average 30 to 45 days before we are paid by the merchant or authorities. As a result, we experienced cash flow seasonality through the year with a larger networking capital need during springsummer months when international shoppers travel more frequently, followed by working capital and wind during autumn winter season, our low season.

Speaker 1

As we have seen the travel industry recover, we have also seen a significant increase in volume, which lead to a much higher working capital need. And you can see here where we add a particularly high outflow of CHF43 1,000,000 during the 9 months previous year, meaning financial year 2022, 2022, 2023 where we were in full recovery. Now we are in a more settled environment. You can see this stabilize with a more balanced working capital need during spring summer, followed by working capital excess during the autumn, which has led here to a €6,000,000 inflow. But definitely, we can say that we are in a business with working capital neutral.

Speaker 1

Now turning to an analysis of our net debt position. As of 31st December 2023, our net financial debt amounted to €508,600,000 including cash and cash equivalent of €101,400,000 You can see here that there has been a strong improvement of the net leverage ratio, which was mentioned in this introduction by Jacques. So from 6.5x at the end of March 'twenty three, we are now at 3.6x at the end of December 'twenty three. As a reminder, November, we took the opportunity to renegotiate our senior debt to strengthen the balance sheet, which at the end meaningfully deleverage the group. The refinancing was closed on the beginning of December and with a senior debt at €610,000,000 with maturity of 7 years and the revolving credit facility at €97,500,000 which was not drawn at the end of December.

Speaker 1

Turning now to the key takeaways. 1st, we are pleased to report a solid recovery with significant increase of 41% of our revenue, which lands at €317,000,000 Then thanks to the strong revenue growth and ongoing management on the cost base, we are pleased to record a strong improvement in 9 months on our adjusted EBITDA. We are at about €115,000,000 an increase of 102% versus the same period last year and a drop through of almost 63% in adjusted EBITDA. On that basis, if we analyze the adjusted EBITDA based on the quarterly performance of the group, there is an acceleration in 9 months at €159,000,000 And to strengthen the balance sheet, the group refinanced its total indebtedness with a senior debt €610,000,000 and a revolving credit facility of €97,500,000 This is in place until 2,030. Finally, we have delivered a strong key improvement in the net leverage ratio to 3.6 times and this is reiterating our objective of being below 2.5 times.

Speaker 1

So this concludes the financial section and I will now hand over to Jacques to present the latest trends and the long term growth. Of Novaru.

Operator

Thank you, Rafael. So quick update on the latest trends, namely January compared to before. We have seen a profitable solid performance, in improvement versus put rate. We can see here the figures with 7 points improvement of recovery in Europe, 11 points in APAC. So a good dynamic in January.

Operator

If we go in detail in Page 25, you can see that in Europe, we have reached now 125% recovery to be compared to 118% in Q3. And this is led in particular by an increase of the spend of 34%. If we look in terms of number of international shopper, we still are below 2019 at 93%. If we go now into the detail of the nationality coming to Europe, Continental Europe as a destination, I think I will make few comment there. 1st, we are seeing and we and I have few slides for you in the coming second on the U.

Operator

S, we are seeing a U. S. Held in firm. Same for the Gulf country, both nationality or group of nationality being around 275% to 300% recovery versus 2019, very strong. And also, worse to mention that Mainland China, who used to represent 25% of the spend in 2019, have seen in January an acceleration from 58% in Q3 to 80%.

Operator

So those will be the 2 focus that I would like to share with you. Starting by the American, we are seeing that despite some weakness in terms of consumer demand domestically in the U. S, the international spend are very strong, so 2 90% in January, which is driven by a recovery very strong in terms of number of shoppers, almost 200%, namely 195% and also a strong increase of the spend of American going and shopping in Europe at 49%, leading to this 2 90 percent recovery of the spend versus 2019. If we go into a little bit more detail trying to understand why this performance. You can see on this chart where we are comparing consumer who used to who have shopped in the last quarter or so of the calendar year.

Operator

So our Q3, but calendar year Q4, you can see that as it has been the case since the beginning of the recovery, the recovery is really very strong for high network individual and affluent. You can see that on high network individuals or people in our segmentation, which are spending more than 20 ks. We are they are spending in average more than 3 times what they used to spend in 2019. And in the last quarter, it was even almost 4 times. So in summary, American recovery, very strong.

Operator

We see no sign of decline and it's led by the, I would say, high spend. If we move for Chinese going into Continental Europe in as a destination, we see there that the acceleration as mentioned in January with 80% recovery, which is a combination of low recovery in terms of number of shopper, 49%, well below the recovery in terms of air capacity in January. Few explanation, 1, the cost of the flight, which remained very high, but also some constraints in terms of visa issuing, which remains important, in particular when traveler wants to go to France or to Germany. We'll give a little bit more detail in the next slide, which basically explain why we have this low level of recovery of 49% versus air capacity. On the other hand, like for other nationality, we are seeing a strong increase of the spent 63%, which lead to this 80% recovery in terms of spent.

Operator

If we move now to the recovery in APAC as a destination, you see that they also, in January, the recovery has been stronger than in Q3, 161 versus 150%. And I would say, not like in Europe. It's basically driven by the combination of the strong increase of the international shopper. We are well above 2019 in APAC as a destination, 1 in 'eighteen, but also by a strong increase of spend, 36%, in line with what we are seeing in Europe. When we go to the detail of the latest trends per nationality coming into APAC as a destination, the most important thing on this slide is the acceleration of Mainland China.

Operator

We used to represent 56 percent of the spend of 2019 and for which we have seen an acceleration from 105% in Q3 to 127% in January. If we go a little bit more in detail on this Chinese recovery, we see that like in Europe, the number of international traveler is still, I would say, low, 59% to be compared to an air capacity of 82%, but the increase of spend is much more important, 115%, leading to this 127% level of recovery. And a bit like for the American, this table show per segment for people having shop in the last quarter versus 2019. So, Send Passport, what is the multiple of spend that they have? And you see that, surprisingly or unsurprisingly, as you want, we see the same trend then for American, I.

Operator

E, the recovery is really led by a networked individual, which are spending 3 times more than what they used to spend in 2019 and the affluence is around 2 times. So almost the same, I would say, figures that you have seen a couple of minutes ago for the U. S. If we project ourselves in terms of next month for Mainland China, few elements to have in mind. 1st, the willingness to shop and abroad remain very strong.

Operator

You can see that on this slide, every month, we survey more than 10,000 Chinese to judge their willingness to travel and to shop abroad. You see that the willingness is strong at more than 76%, and it has been quite stable for the last few months. But in terms of air capacity, we have seen this influx of January in Europe and in APAC, which is a very good news. We should remain high, in particular in February, which is Chinese New Year. And obviously, we will see the acceleration of the consumer coming back.

Operator

We all know that after capacity being in place, you need couple of months or weeks in order to see the benefit in terms of the number of travelers. So good news from that point of view. And just here, just to mention to in terms of their capacity, what we are seeing that the recovery is very strong in terms of Tier 1 city. You see that it's 84% for Europe and 90% for APAC. So Tier 1 city in China going to Europe or going to APAC.

Operator

The secondary and the third cities of China being a little bit less, I would say, recovered, which explain also why for those consumer who are spending less than the one from Tier 1 City, we are seeing this fact that we have a recovery of tourists, which is lower than the air capacity, but an increase of spend, which is higher. One of the reasons being this mixed effect in terms of recovery from traveler coming from Tier 1 versus other city. And you have on the left, the recovery for the various geography. You see that France, which is one of the hub for Chinese, but generally for tourists when you come in Europe, still has a low recovery in terms of number of flight. So if in Europe, we are now back to almost 80%, the recovery of France is dragging down the performance in Europe because usually Choice want first to go in France and then go on other country.

Operator

Last element in terms of information about China is the VA Visa issuance, which show that, one, things are going better, because we see more and more country where Chinese can get their visa in less than 7 days, but we still see that France and Germany, which are 2 key countries in terms of traction for Chinese, remain, I would say, difficult if you want or lengthy if you want to get a visa. So those things should improve in the coming months. But for now, obviously, they are still one of the reason why we see this lower number of shoppers versus air capacity. But again, this should improve. Last but not least, if we project ourselves in the coming months, coming quarter, obviously, you know this slide, it's how we simulate based on the recovery on Mainland China, what could be the recovery of the EBITDA of the Group?

Operator

And as usual, I will give you a little bit of detail. So in gray, you have you will recognize the Q3 annual figures at €1, 59,000,000 that Roxanne mentioned a few minutes ago, which imply a 52% recovery in terms of Mainland China. If we simulate a recovery, which hopefully will come in the next quarter of this level of recovery, for example, being at 100% of recovery, you can see that the in place level of EBITDA would be around €200,000,000 in this slide to be precise, €202,000,000 So this slide is just there to help you to understand based on different level of simulation of Chinese, what could be the impact, positive impact on Global Blue EBITDA of next year, which is a good transition to talk about guidance and targets. So we issue guidance and target in September. So 2 comment there.

Operator

First, we are confirming our guidance for full year 'twenty three and 'twenty four of €145,000,000 to €165,000,000 having in mind that we reached after 9 months €150,000,000 And for 'twenty four, 'twenty five, we are looking for an EBITDA above €200,000,000 With that in mind, you see also the reiteration of the objective of leverage ratio below €2,500,000 So nothing has changed, but we want to reaffirm those targets and guidance. And last but not least, just to remind you that Global Blue is well hedged in terms of inflation, because the top line of Global Blue, I. E. The volume, the SIS is directly linked to the luxury brand price increase, which are which have grown and which will continue to grow higher than the inflation. And there and on the opposite side, just to remind you, if ever we are getting into a recession, which seems to be not the case in the latest academic scenario, but if ever this is the case, to remind you also that we are well hedged, again that thanks to this high network individuals, which are less sensitive to the economic shock that I was showing to you before.

Operator

So in summary, a very healthy Q3 with a positive trend in January and a very strong work of the team in order to strengthen the balance sheet and deleverage the company. So thanks for the listening. And as usual, you can contact our Investor Relations, Francis Gibbons, who will arrange a 1 on 1 meeting between you, Roxanne and myself. Thank you very much.

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Key Takeaways

  • Global Blue reported a 41% increase in nine-month revenue to €317 million and a 102% surge in adjusted EBITDA to €115 million, lifting the margin to 36.2% with a 63% drop-through rate.
  • The annualized adjusted EBITDA accelerated to €159 million, while January recovery metrics reached 125% of 2019 levels in Continental Europe and 161% in APAC.
  • In December the group refinanced €610 million of senior debt (plus a €97.5 million revolving facility), cutting net leverage from 6.5x to 3.6x and targeting below 2.5x.
  • Recovery is driven by premium shoppers: US spend climbed to 290% of 2019 and Chinese spend recovered to 80% in Europe and 127% in APAC, with further upside as visa issuance and air capacity improve.
  • Management reaffirmed FY24 EBITDA guidance of €145–165 million and set a FY25 target above €200 million, supported by luxury price inflation and a resilient high-net-worth customer base.
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Earnings Conference Call
Global Blue Group Q3 2024
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