Global Blue Group Holding AG (NYSE:GB) Q3 2024 Earnings Call Transcript

Global Blue Group Holding AG (NYSE:GB) Q3 2024 Earnings Call Transcript February 24, 2024

Global Blue Group Holding AG  isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Jacques Stern: Good morning. Good afternoon. I am, today with Roxanne Dufour, CFO of the group. I am Jacques Stern, 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. First, the first nine months of the year has been strong in terms of revenue with 41% increase. The EBITDA at the end of nine months have increased by 103% at €115 million 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 million. Roxane will comment on that. And if we go to January figures, the January have confirmed the strength of the recovery in continental Europe with a recovery of 125% versus 118% in Q3, and same in APAC with a recovery which is now reaching 161% of 2019 in January versus from 115% in Q3.

I will give you much more information on that in the coming minutes. Just 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 €610 million and FCF of almost €100 million with a maturity of seven 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. These are really the takeaway and now I will give the floor to Roxane to give you more detail on Q3 and the nine months financial performance.

Roxane Dufour: Thank you, Jacques. I’m Roxane Dufour, the CFO of Global Blue and I will take you through the group’s financial performance for the sub-quarter nine months period ended 31st of December 2023. As a reminder, our financial year runs from April to March and all the reconciliations to the nearest IFRS metrics are included into the appendix. Let’s move to Slide 7 for our adjusted P&L of the third quarter. We are pleased here to report another solid quarter with significant progress across the business. TFS and AVPS reported sales in store increased by €1.5 billion an increase of 27.7% versus Q3 last year, group revenue increased by 26.2% to €109.4 million versus the same period last year. Turning to adjusted EBITDA, we have delivered a significant improvement to €39.8 million resulting in an 8.5 point 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 €9.1 million versus €6.6 million in Q3 last year. 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 further €22.7 million in revenue with a further €1 million scope effect from TFS and NTS. We then have a €1 million FX impact which gives us at the end to €109.4 million of revenue in Q3 this year versus €86.7 million last year’s same period. Turning now to the revenue performance per division. 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 €80.3 million. On a like-for-like basis revenue in continental Europe increased by 17.7% to €68 million while revenue in Asia-Pacific increased by 83.5% to €12 million 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 improvements, especially in Asia, as I mentioned, where sales in store of shoppers from mainland China has already recovered to 105% in Q3 this year versus 2019. And Jacques will cover that in more details later. Turning now to AVPS. AVPS, this is 20% of our group revenue. This division also delivered a strong performance with an increase in revenue of 37.4% on a reported basis to €22.3 million, reflecting a strong performance across both business segments.

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Q&A Session

On a like-for-like basis, revenue in FX solution increased by 64% to €10.6 million while revenue in the acquiring business increased by 26.2% to almost €12 million. As with TFS, AVPS is also benefiting from the ongoing recovery in the travel industry. Turning now to RTS. RTS 6% of the group revenue in Q3 this year. As a reminder, RTS reflects the acquisition of ZigZag in March ’21, consolidation of Yogoda from September ’21 and the acquisition of ShipUp in November ’22. Here you can see RTS revenue increasing by 11.6% on a reported basis to €6.8 million 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 ZigZag clients, which is revenue with lower contribution, the like-for-like contribution growth of the segment, which is after carrier cost, was very strong at 80%.

Turning now to detail on adjusted EBITDA, 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% and I will take you through the details here. We begin with our adjusted EBITDA, which was €24.1 million 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 €19.4 million in Q3 this year. Then considering the €3.8 million impact of fixed cost and then the scope effect from TFS and RTS and the FX impact, the group delivered an adjusted EBITDA of €39.8 million with an increase in the adjusted EBITDA margin of 8.5 points to 36.3%.

Turning now to Slide 13 for further detail on the net finance costs, we are showing here a significant increase of €8.3 million in net finance cost. Few points to consider, first, we have an increase in interest cost of €5.3 million. This is due to an increase in interest rate from 3.26% in October-November ’22 last year to this year’s same period, 6.5%. And in December, it raised to 8.4% as a result of the refinancing. And then, we have a negative foreign exchange variation of €3 million versus the same period last year. As a reminder, Q3 last year was impacted by the foreign exchange related to the Certares and Knighthead equity transaction and also the supplemental shareholder facility, which was denominated in USD while Global Blue 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. And now based on the third quarter recovery, the annualized quarterly adjusted EBITDA is at €159 million. This has led to a significant improvement in terms of margin from 28.8% last year’s same period to this year, 36.7%. Now, I will take you through the financial detail for the nine months performance. Here, we are showing the adjusted P&L for the nine months over the year, and again we see the same trends as with the Q3. TFS and AVPS reported sales in store increased by €5.9 billion an increase of almost 45% versus the nine months last year.

Group revenue increased by 41% to €317 million and then turning to adjusted EBITDA, we have delivered a significant improvement to almost €115 million 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 €25.3 million again a significant improvement versus last year, which was negative at €7.1 million. Let’s turn now and get in further details on our adjusted EBITDA. Similar to Q3, we are showing the detail for the nine 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 €56.7 million last year for the same period, if you look at the additional contribution for each business, we have a further €73.3 million in nine months and then taking into account the fixed cost, €30 million the scope effect about €2 million and then the foreign exchange impact about €500,000.

The group delivered an adjusted EBITDA of €114.7 million with an increase, as I mentioned, of the adjusted EBITDA margin at 36.2%, that means plus 11 points. Moving now to the G&A and the net finance cost. In terms of adjusted G&A, so we have a slight increase of €600,000, and now we are at €27.6 million for the period. On the annualized basis, this gives us a G&A of €36 million which is in line with our current level of CapEx. Then related to the net finance cost, we experienced the same trends here as we had in Q3. The net finance costs increased over the nine months period by €9 million, and this is due mainly to the interest cost because they have increased on a blended basis from 3.17% to 6.37%. This was offset by a decrease of other finance costs by €8.3 million and this is the result of the foreign exchange impact related to Certares and Knighthead transaction and supplemental shareholder facility that I have already explained.