Global Blue Group Holding AG (NYSE:GB) Q2 2024 Earnings Call Transcript

Global Blue Group Holding AG (NYSE:GB) Q2 2024 Earnings Call Transcript November 29, 2023

Global Blue Group Holding AG beats earnings expectations. Reported EPS is $0.08, expectations were $0.06.

Jacques Stern: Good morning — good afternoon. I am Jacques Stern, CEO of Global Blue, and I’m with Roxane Dufour, the CFO of the group and we will comment today the Q2 figures for the financial year ’23-’24. Before giving the floor to Roxane, let me give you an overview of this presentation. First of all, you will see that the Q2 and H1 financial results have shown a significant increase, both in terms of growth and profitability. And this is driving a continuous improvement of the annualized quarterly adjustment, EBITDA, to EUR142 million. Roxane will come back in detail on that. Second, in November, Global Blue have concluded two important capital structure transactions. The first one, whereby Tencent have agreed to invest $100 million in Global Blue, consisting in 50% primary and 50% secondary, for a total stake of 7.6%.

This is significant because, one, it validates our leadership. Second, it reflects the confidence in the ongoing travel recovery, in particular from Chinese. And finally, it supports the de-leveraging of the company. Second transaction is the refinancing of all of our debt, which ends up with a new facility of EUR610 million qualified term loan B and a new RCF of EUR97.5 million. And they’re also significant because it extends the maturity of our debt to 2030. Last but not least, following the reporting of Q2, we are pleased to reiterate our financial guidance of the adjusted EBITDA for the fiscal year ’23-’24, 245-265. So with this overview in mind, I now give the floor to Roxane for a detailed presentation of the Q2 financial year.

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 second quarter and half year period, ended on the 30th of September 2023. Again, as a reminder, our financial year runs from April to March. Hence, this is our Q2 and H1 results announcement. Our reconciliation to the nearest IFRS metrics are included into the appendix. Let’s move to slide 8 for the adjusted P&L related to our second quarter. We are pleased here to report a solid start to the year with significant progress against all of our key metrics. TFS and AVPS reported Celsius stores increased by EUR2 billion, an increase of 42% versus Q2 last year. Group revenue increased by 38% to EUR113 million versus the same period last year.

Turning to adjusted EBITDA, we have delivered a significant improvement to EUR47.2 million versus EUR25.8 million in the same period last year. Finally, we recorded an adjusted net income for the group of EUR14 million. Again, a significant improvement versus negative of EUR2.1 million in Q2 last year. Let’s turn now to slide 9 to go into the revenue performance. Here you can see that we have a solid start to the year with strong growth across the business. We delivered a 38.2% increase in revenue versus last year. I will go into the detail per division on the following slides, but you can see here for TFS, AVPS and RTS that they have contributed to a further EUR31 million in revenue in the period with a further EUR1.7 million scope effect from TFS new countries and cheap up acquisitions reported under RTS.

We then have a EUR1.7 million impact related to the FX, which gets us at the end to EUR113.2 million of revenue in Q2 this year versus EUR82 million in the same period last year. Turning now to the revenue performance per division, starting with TFS, accounting for 76% of group revenue in Q2 this year. TFS delivered a strong performance with an increase in revenue of 38% on a reported basis to EUR86.2 million. On a like-for-like basis, revenue in continental Europe increased by 28.5% to EUR75 million, while revenue in Asia Pacific increased by 155% to EUR11.2 million. This strong performance reflect the ongoing recovery across all origin nationalities with the reopening of Chinese border in January, 2023, being the key driver of the revenue improvement, especially in Asia where sales install of shoppers from mainland China has already recovered to 109% versus 2019.

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Q&A Session

Jacques will cover this into more detail later. Turning now to AVPS. AVPS accounted for 18% of group revenue in Q2 this year. This division also delivered a strong performance with an increase in revenue of 32% on a reported basis to EUR20.2 million, reflecting a strong performance across both business segments. On a like for-like-basis, revenue in FX solution increased by 39% to EUR10.4 million, while revenue in the acquiring business increased by 42% to EUR10 million. As with TFS, AVPS is also benefiting from the ongoing recovery in the travel industry. Turning now to RTS. RTS accounted for 6% of group revenue in Q2 this year. As a reminder, TFS reflect the acquisition of Zigzag in March ’21, consolidation of Yogoda in September ’21, and the acquisition of ShipUp in November ’22.

Here you can see RTS revenue increasing by 65% on a reported basis to EUR6.7 million in Q2 this year. There was a strong organic growth of 39% from Zigzag and Yogoda, and an additional EUR1.1 million from the acquisition of ShipUp. Turning now to slide 13 for the bridge from issued CIS to revenue. This is here the bridge detailing a number of items to consider between the issued CIS to the reported revenue. Here we are showing the comparison versus calendar year 2019. We are at 124% recovery for issued sales in store in TFS and AVPS. The issued CIS is presented on a like-for-like basis, meaning at constant parameters. Then we consider the scope effect, one for the UK related to the abolition of the tax-free shopping scheme in January 2021. And as a reminder, prior to the abolition of the scheme, the UK accounted for 14% of group TFS reported CIS, which is no longer the case here.

The impact from the UK abolishment is 18 points. Then you have a further impact of five points due to the FX translation, and one point related to the discontinuation of our TFS business in Russia, which give us at the end 100% recovery in issued CIS in TFS and AVPS reported one, with TFS at 94% and AVPS at 130%. We then have the refund ratio. As a reminder, once the transaction is issued, the traveller has to validate the tax reform and get the refund. At this point in time, the transactions is part of the reported CIS, which triggers the revenue. Today, the actual refund ratio is slightly lower than 2019, but it’s mainly due to the nationality mix effect. Then there are transactions completed of period. This is where transactions are issued in a quarter, but validated and refunded in the following quarter.

This gets us to a 102% recovery for completed CIS in TFS and AVPS. Then we have some leakage from this completed CIS to the reported revenue. First for TFS, we have a merchant mix effect where there has been an increased level of business with larger merchants who get a higher rate of commission. We then have an increase in average expense, which means a higher rate of VAT that is refunded and therefore a lower take-up rate for Global Blue. Second, we have the AVPS mix effect where the AVPS business, which is a lower margin, is growing faster than TFS. This gives us 87% reported revenue recovery for AVPS and TFS. Finally, we have 5% contribution for RTS, which give us 92% revenue recovery for the group. Turning now to slide 14 for details on adjusted EBITDA.

The significant improvement in revenue together with the ongoing focus on the cost base led to 83% increase in adjusted EBITDA in Q2 this year. We have a revenue drop through at 68% and I will take you through the detail here. We begin with our adjusted EBITDA, which was EUR25.8 million last year, in Q2 last year. And then if you look at the additional contribution of each business, contribution being the marginal revenue minus the marginal direct variable cost, we have a further EUR25 million in Q2 this year. Then considering EUR2.5 million of fixed cost, EUR0.5 million of scope effect and EUR0.4 million of foreign exchange impact, the group delivered an adjusted EBITDA of EUR47.2 million with an increase in adjusted EBITDA margin of 10 points to 42%.

Turning now to slide 15 for further detail on adjusted EBITDA. Here we are showing the annualized adjusted EBITDA based on the quarterly recovery. Just to note, the yearly extrapolation include TFS, AVPS and RTS performance in the various quarter applied to the year. Previously, we had excluded RTS from this calculation, now it’s included. You can see here a steady and consistent improvement in the annualized quarterly adjusted EBITDA. Now based on the Q2 recovery, the annualized quarterly adjusted EBITDA is at EUR142 million. This has led to a significant improvement in margin from 27% in Q2 last year to 34.8% in Q2 this year. Now I will take you through the financial detail for the first half of the year. Slide 17, we are showing the adjusted P&L for the first half of the year and again, we see the same positive trends as with the second quarter.