Greetings, and welcome to the Mytheresa First Quarter Fiscal 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. Today's call is being recorded and we have allotted one hour for prepared remarks and Q&A. It is now my pleasure to introduce your host, Mr. Martin Beer, Mytheresa's Chief Financial Officer. Thank you, sir.

Please begin..

Thank you, operator, and welcome, everyone, to welcome, everyone, to Mytheresa's Investor Conference call for the first quarter of fiscal year 2022. With me today is our CEO, Michael Kliger. 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 previous 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 IFS 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 investor.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 first quarter fiscal year 2022. We are extremely pleased with our results and performance.

We believe they clearly show the fundamental strengths and long term growth potential of our business as we hopefully leave the pandemic behind us. First, we delivered again excellent growth and consistent profitability, which is quite unique in our sector.

Second, we have delivered growth consistent with the recent quarters, demonstrating that our long term expansion is based on a fundamental change of consumer behavior that has maybe been accelerated by the pandemic, but has still long runway.

Third, our superior business model and excellence in execution was again evidenced by many of our strong performance KPIs and business milestones, while other players continue to struggle. Let me now comment in more detail on these three key messages for today.

First, in the first quarter, we grew our gross merchandise value GMV by 29.7%, compared to Q1 of fiscal year 2021. This was above our continued long term guidance of 22% to 25% annual GMV growth. We combined that growth with a gross margin of 49.0% compared to 46.4% in Q1 of fiscal year 2021 driving continued strong profitability.

We believe that our sharp multi brand luxury customer focus, strong brand partnerships and a focused profit making business model will allow us to continuous scaling and delivering consistent profitability. In our view, this makes Mytheresa quiet unique in this sector.

Second, our multiyear growth potential evidenced by the two year growth rate in GMV of 65.3% in the first quarter of fiscal year 2022 over Q1 of fiscal year 2020.

From the last four quarters, we have delivered two year gross rate and net sales of 58.4% in Q1 of 60.4% in Q2, of 66.1% in Q3 and of 60.5% in Q4 of fiscal year 2021 over the corresponding quarter in fiscal year 2019.

We believe the fundamental drivers for our growth are the changing consumer behavior and luxury shopping and our superior business model. It is estimated by some consulting firms that over 30% of the personal luxury goods spend will be online by 2025.

So while the shift of consumer demand to online in luxury has been accelerated by the pandemic, we clearly believe this trend will continue probably at a lower pace in the post pandemic world, but it will continue.

Third, we believe that we have delivered again, many significant proof points over the last quarter of our superior business model and our excellence and execution.

As explained before, our business focuses on a highly curated multi brand offer that tuned to the big spending wardrobe building customer segment, which provides us with the best customer base in luxury. We have successfully expanded our LTM active customer base by 35.2%, year-over-year to 705,000.

This was of course fuelled by new customer growth, and we were once more able to reduce our customer acquisition costs, while the repurchase rate of new customer cohorts remain very stable.

In addition to new customers, we also again grew our top customer base, which is a key source of profitable growth over proportionally by 41.0% in the first quarter compared to Q1 of fiscal year 2021.

Our best customers we introduced a new resale service in Q4 of fiscal year 2021, together with best year quality that not only allows you support the circular economy, but we can also clearly see the positive spending impact of the additional funds that our customers can generate through simply reselling items to this chair collective and receiving immediate payment in the form of Mytheresa store credit.

Customers that have earned store credit through this service exhibit significant higher AOV in their next purchase. One of the key attractions for our wardrobe-building customers is privileged access to exclusive product and pre-launches through our outstanding brand partner relationships.

We were again honored with outstanding support from our brand partners in Q1 in fiscal year 2022. We launched exclusive collections and styles as well as executed pre-launches with brands such as Saint Laurent, Gucci, The Row, Christian Louboutin, Tom Ford, Chloé and many more.

For our top customers being invited to Money-can’t-buy experiences is a key benefit to the relationship with Mytheresa. In the first quarter we were finally able to organize such experiences and top customers events again, around the world.

Highlights included a dinner with Givenchy creative director in Paris, a dinner at the estate of the della Bella family owning Tod’s, the lunch at the private Bofur estate in the Hamptons, and an event at the TRB temple in Chengdu. We also demonstrated again, the first quarter of fiscal year 2020 to the quality of our execution.

We maintain business continuity across all operations with a focus on health and wellbeing of all Mytheresa employees as the top priority. This highly correlates with the very high customer satisfaction, measured internally with a net promoter score of 83.0% in Q1 of fiscal year 2022 significantly up compared to Q1 of fiscal year 2021.

The help of our business was also demonstrated by the high full price share of our sales driving very robust, gross margin. Finally, in the first quarter of fiscal year 2022, we also launched the curated platform model with the first major brand partner. This model for selected brand partners is an evolution of our partnership approach.

It gives brand partners full control over the inventory until it is sold by us to the Mytheresa customers, but it is not a marketplace model. We continue to curate the assortment under the CPM. And the inventory is shipped from our warehouse. There's no drop shipping under the CPM.

This ensures that we continue to achieve the high customer satisfaction we enjoy today for our product curation, and service excellence. However, the CPM provides us with better access to highly desirable products and in season replenishment not available to us today.

This will be greatly appreciated by our customers and provides us with top line upside. With all the above, it should come as no surprise that we are very satisfied with our performance in the first quarter of fiscal year 2022 and have full confidence to continue achieving strong results in fiscal year 2022.

And now I hand over to Martin to discuss the financial results in detail..

Thank you, Michael. I will now review the financial results of the fiscal first quarter, July to September 2021. And we'll provide additional detail on some of the key topics previously mentioned. Unless otherwise stated, all numbers refer to Euro.

As Michael highlighted, we're very pleased with our performance during the first quarter above expectations, where we delivered strong gross merchandise value or GMB and net sales growth due to robust new customer growth and strong existing customer cohort performance.

With our proven business model, we could scale significantly in the first quarter without any compromise on the quality of our profits. GMV during the quarter was €163.9 million, a 29.7% increase from €126.4 million in the prior year quarter.

As you will recall, we made the decision to shift the focus of our top line reporting to GMV or gross merchandise value as an operating measure, which is fully in line with our strategy as it captures the total amount of merchandise that our customers transact on our platform and it shows the full depth of our customer relationships.

We also confirm our full fiscal year guidance of 22% to 25% GMV growth. Customer engagement and retention continue to track very well as our active customers who shop with us in the last 12 months grew by 35.2% to 705,000. This underlines our absolute and successful focus on our customers.

Mytheresa is uniquely positioned to attract new customers with the highest value and retain the best ones visible in our strong top customer growth. During the first quarter, net sales increased by €31.5 million or 24.9% year-over-year to €257.8 million. This is in line with our strong GMV growth and the plant slow ramp up of the CPM business.

As planned, for spring summer 2022 and especially for winter 2022 additional brands will shift from the wholesale model to the CPM. With more clarity now on the agreed season for the model switch, we expect the CPM share for the full fiscal year 2022 to be well below the 20% maximum share guides.

For this reason, we increased our net sales guidance for fiscal year 2022 to be in the range of €700 million to €720 million. This equals a 14% to 18% net sales growth compared to fiscal year 2021.

We expect similar growth rates in fiscal year 2023 due to selected brands shifting from the wholesale model to the CPM, after which net sales will be growing again, more in line with GMP yearly growth rates. We were able to grow significantly, and with double digits in all regions of the world. The U.S.

remains a top growth region with 49% net sales growth compared to the prior year quarter. We continue to invest in growing our local team and increasing the number of marketing as well as PR events. Our total orders shipped in the last 12 months increased by 35.3% to over €1.58 million.

Gross profit of €77.3 million was an increase of €18.6 million or 31.8% year-over-year. The gross profit margin of 49.0% improved by 260 basis points compared to the prior year period of 46.4% driven by our continued higher level of full price sell-through.

This continued strength and our gross profit margin reflects the unique high end positioning of Mytheresa and the market with our focus on the high end customer. Shipping and payment costs grew by €5.1 million to €20 million, driven by an increase in total orders shipped.

As a percentage of GMV, shipping and payment costs in this quarter marginally increased to 12.2% from 11.7% in the prior year quarter driven by country mix and a higher share of international sales.

During the first quarter, marketing expenses increased to €22.4 million compared to €17.4 million primarily due to the increase in the number of customers required. As a percentage of GMV, marketing expenses slightly decreased to 13.7% from 13.8% in the prior year period. We were able to again increase performance marketing efficiencies.

But as desired, we are now finally able to spend more on events and PR activations. Selling, General & Administrative expenses grew by €20.6 million to €36.2 million predominantly driven by one time granted share based compensation expenses related to the IPO.

We adjusted a net effect of €15.5 million in relation to these one-time granted share based compensation expenses, as we do not consider them to be indicative of our core operating performance and as they relate to the IPO transaction.

With this adjustment, SG&A expenses as percent of GMV increased modestly to 12.6% from 12.1% due to an increase in insurance and public company costs. Adjusted EBITDA was €14 million as compared to €10.4 million in the prior year quarter. This is a profit increase of 34%.

This growth is driven by robust top line growth and a strong gross profit margin in this quarter. The adjusted EBITDA margin extended by 60 basis points to 8.9% of sales. We confirm our adjusted EBITDA margin guidance being at the upper half of the long term rates of 7% to 9% on net sales for the full fiscal year.

Adjusted EBITDA in this quarter is only adjusted for the one time granted, share based compensation mentioned above. Depreciation and Amortization expenses were relatively slow able at €2.2 million compared to the prior year period at €2.0 million. Mytheresa achieved this strong increase in profitability, also on adjusted operating income level.

The first quarter of fiscal 2022 Mytheresa reported an adjusted operating income of €11.8 million, compared to the €8.4 million in the previous year quarter, and thus representing a solid growth of 14.7%. Adjusted net income was of €8.2 million as compared to €5.4 million in the prior year period and that's representing a solid growth of 51.7%.

We continue to focus on delivering profitable growth, which remains clearly visible in our very simple and transparent P&L with only one adjustment. EBITDA adjusted EBITDA, adjusted operating income and adjusted net income are non-IFRS measures. Moving to the cash flow statement.

During the three months ended September 30, 2021 operating activities used €19.2 million in cash and cash equivalents, primarily driven by a €17.9 million seasonal increase in inventories.

We ended the quarter in a strong financial position, with cash and cash equivalents of €55.7 million and total unused availability under the revolving credit facilities of €90 million as of September 30 2021. Mytheresa has no liabilities to debt and equity ratio of about 75%, and for its size, solid cash position.

For the full fiscal year 2022, we expect a positive free cash flow and therefore target to a positive operating and free cash flow conversion. This underlines our superior capital light model. We expect a positive free cash flow for the full fiscal year, despite our continuous investments in our IT infrastructure.

As we discussed last quarter, and as Michael touched on earlier, we continue to be very excited about our curated platform model or CPM. Our CPM is neither an e-concession model, nor a marketplace. It combines the best elements of 1P and 3P models to truly customer focused and unique Mytheresa hybrid model.

In the first quarter of fiscal 2022, we've already seen some ramp up of this curated platform model. As we're just starting and have contractual confidentiality agreements in place, we are not disclosing the CPM share of GMV and not the level of the platform fee.

As stated before, we expect the CPM share in our business for the full fiscal year 2022 to be well below 20% of our total platform revenues and in the medium term, we expect the share to be not higher than 35%.

We expect the CPM share to gradually increase over time, but Mytheresa expects for the majority of the luxury brands to continue to operate under the wholesale business model as it fits perfectly the needs of the majority of our luxury brands.

CPM integrates Mytheresa with the brand partners direct retail operations and provides access to products at scale and maintain our customer value proposition.

The key value driving characteristics of the CPM are continued product curation by Mytheresa, continued content creation by Mytheresa, financial inventory ownership by the brand partner, inventory sitting in the Mytheresa warehouse until return end of season and regular in season replenishment.

The CPM enables Mytheresa to continue to do what it does best, unique curation, engaging marketing content and superior customer service. The strategic partnership provides for upside potential on the top line due to in-season replenishment and access to exclusive products without any inventory aging risk.

The unit economics under the CPM are very similar to the unit economics under the wholesale model. In addition the curated platform model provides us with an even better capital efficiency. We only pay for the merchandise after we sold the item. I will now turn the call back over to Michael, for his concluding remarks..

Thank you, Martin. We are very pleased with the strong first quarter earnings results. We see ourselves perfectly positioned to take advantage of the on-going shift to online in luxury spend, the continued consolidation and brand distribution and the global expansion opportunities.

Even more importantly, we continue to see ourselves also perfectly positioned to take advantage of the long term opportunities in the market, where multi brand digital platforms will continue to gain share. And with that, I'd like to ask the operator to open up for your questions..

Your first question comes from the line of Kimberly Greenberger with Morgan Stanley. Your line is open. Please ask your question..

Great, thank you so much. Very, very nice print this morning, and thanks for taking the question.

In terms of the longer term outlook on online luxury spending, Michael I think you mentioned that we've seen a very accelerated shift to luxury online shopping through the pandemic, you expect continued strong growth post pandemic but perhaps at a slower rate.

Can you just talk about your long term outlook and then I have a follow up on your revenue this quarter, this quarter and this year? Thanks so much..

Thanks, Kimberly. Yes, you summarized it very well. We are very optimistic on the long term, online share, and thus overall market growth for us. The epidemic has accelerated it thus we were some quarter’s way above our long term growth of 22% to 25%.

And we have reiterated a couple of times that while there has been an acceleration moving into the post pandemic world and you could argue are we already in it or still sort of moving into it? The only thing we expect was probably a slower rate than what we've seen before more in line with what we always expected 22% to 25%.

But there were some questions in the past whether there would even be a contraction as people would lock back to the stores. We didn't expect that.

And we also don't see that and the momentum that we have shown in top line in this first quarter, in our view strongly confirms our view that it may slow down, but will not take anything away from the huge long term growth potential..

Okay, great. And that takes me to my follow up. And is that sort of expectation longer term for 22% to 25% growth in online luxury goods spend aligns very nicely with your medium term revenue and GMB growth targets. I -- so that makes a ton of sense and I know you laid it out very well on slide 21.

I just wanted to make sure I understood this sort of path between here in the medium term that you talked about today. So it sounds like current year, fiscal 2022 and fiscal 2023 revenue growth through this period of CPM adoption would run in that 14% to 18% range before re accelerating. Just want to make sure I understand that correctly.

And is there a -- do you have visibility in terms of the rate of adoption in CPM, and do you already have the group of brands identified for that, for that shift? And ultimately, over the next two years, how many brands do you contemplate might be on that CPM model?.

Yes, thanks for the question, because indeed, it may require some clarification. I mean, as we transition some of our business, I mean, we always stated that even after fully rollout, we don't expect more than 35% of the total transacted volume on the platform to be in the CPM. But as we know, start there is of course, a transition period.

And thus, the sales growth for technical reasons will slow down as on the CPM, we don't book the transaction that transacted gross merchandise value as revenue, but the transacted fee or the charge platform fee and for us, the business continues to grow fully in line with the 22% to 25%.

But the revenues we book are technically lower, because we switch from merchandise value being booked to fees being booked. And we expect that the 35%, which is the max we project to today will take us into fiscal year 2024.

We have the group of brands identified as Martin explained in his remarks today, we have now also better clarity on in which season, they will switch to this model. I mean, at the moment, we have just one major brand. As you can see the difference between GMV and net sales in this quarter is still quite small.

And as it gradually moves into it, we will we don't expect even this year to have more than close to the 20%. But once this transition period is over, net sales and GMV sales will be in in lockstep again.

And so after that, which we expect for the transition period to be well, well progressed with fiscal year 2024, we come back to our long term expected 22% to 25% GMV. But what we want to stress is the value creation of Mytheresa, the inherent revenue of our business is of course, the customer relationship.

And the customer relationship in terms of debts and strengths is best captured by the amount of money they transact on our platform.

So I while I fully understand as an accounting measure, net sales remains quite important, I think, to understand the importance of our business, in terms of market share in terms of brand relationships you have to look at GMV and the GMV policies see clearly indicates we have taken massive market share over the last 12 months..

Absolutely very clear. Thank you..

Your next question comes from the line of Matthew Boss from JPMorgan. Your line is open. Please ask your question..

Great. Thanks.

So Michael, as we think about category, recovery by region exiting the pandemic, could you speak to the curve you're seeing in Europe, Asia, in the U.S., and specifically any changes that you're seeing in the assortment tied to broader reopening activity, and just what it means for your model?.

I try my best. This is partly forecasting and predictions. But I can tell you what we see today. So what we see today is not a steep curve in Asia. But that has more to do more to do with the fact there was not real recovery needed because ever since last year, kind of summer, they were in a control mode.

So the recovery curve is not as steep as we see in other regions. But the contraction was also never as steep. The steepest curve we see in the U.S. Ever since late spring consumers in the U.S. have really rebounded in terms of spending.

The curve in Europe is not as steep and of course in Europe you have still some significant variations between regions or countries so to speak. In terms of categories across the globe, it is of course categories that have suffered due to the lack of occasion.

So vacations, swimwear, ski wear, going out in terms of gowns, heels, clutches, going back to office in terms of jackets, in terms of loafers.

So these are the categories that are recovering, indispensables rebounding, whereas the categories that have read, “Benefited” from the pandemic, which were more nits, flats, sneakers cashmere are taking a pause. We believe this is not a long term change of behavior, this is something that has to be was pent up demand.

And so things will come back in more balance. But what we also always believed even before pre-pandemic that is and continues to be a shift away from pure street wear styles, as described by hoodies, caps, jumpers, sneakers, tracksuits to a more dress style.

And that we saw even before the breakup of the pandemic, so that we believe is an on-going trend, more fashion trend than anything related to economic situations or, or lifestyles.

And we feel we can benefit from this because we were never positioned strongly on street wear style, we were always more positioned both in women's wear and men's wear in a more addressed more mature, more timeless luxury positioning..

Great. And then just as a follow up, help us to think about the multiyear margin implications from the scaling of your CPM model.

And more so how do you see this model evolution, should we think about it as accretive to your seven to nine EBITDA margin target over time?.

So as we look at the CPM model, and that's what is both built into our guidance and in our expectation that the CPM has a different sort of gross margin logic has, but also some different cost implications in terms of marketing SG&A.

So, in the end, unit economics under the CPM are very similar to unit economics on the wholesale even though sales that you book are differently. So, we continue to commit and guide towards seven to nine for this season, for this fiscal year to the upper half.

There is always room for improvement and potential but as there is a gradual introduction of CPM and not overnight, we will continue to update our guidance as we see how the model unfolds. So for us, it is strategically accretive because of the replenishment opportunities because of the access to product.

And operationally it is it is a wash in that sense. Financially sorry, not operationally..

Great, best of luck..

Your next question comes from the line of Oliver Chen from Cowen and Company. Your line is open. Please ask your question..

Hi, good morning. Thank you for taking your question. This is Kimberly Hong on for Oliver. Just two questions on CPM.

One, how much interest are you getting from new brands that are currently not working with Mytheresa especially with new brand acquisition or be more likely to come through the -- to the CPM model or through wholesale? And then just on the tech adoption and the software that has to do with the in stock levels and integrating the inventory levels for real time inventory reads? How much CapEx is there needed and how is that adoption integration going on the brand side? Thank you..

Thank you. I mean, let me start with the second question here. So we are already successfully like with one major brand. So in terms of fundamental IT development, it is done. Of course, every time you on board another brand, they're always nuances. They're always specifics that you need to adapt, but that is incremental technology and IT development.

So in terms of being able to run the model, we are already able to run the model as evidenced by already we have made run running on CPM. On the first part, that is more speculation, we believe the CPM offers for brands to quite interesting alternative to traditional wholesale with some specific advantages for them.

And thus, we believe strongly that offering an alternative model or an additional model makes us even more attractive to brand partners and hopefully will allow us to attract brands that we don't carry today, but this is pure speculation at this stage..

Got it. Thank you. If I can just ask one more on shipping and payment expenses. In the near term, how are you thinking about that line given the inflationary environment and the supply chain delays, especially with your carriers? And then in the long term, are there any automation opportunities to leverage that line item? Thank you..

So, the view we have on shipping and payment and also in marketing is we will be facing cost pressures as in the past. We will be facing efficiency requirements as in the past. So we are convinced that we will be capable, as we have done in the past to manage these cost lines, to be very stable, as is a core element of our economic model.

And automation, in terms of data management, data processing, automation, also, in terms of material goods, flow is certainly one element of it.

But the biggest opportunity for savings is closer integration, closer data exchange, there's still a lot of paperwork involved in the whole process of getting a good shift, getting a good through customs, and there is massive still efficiency gains to be made.

So we recognize there are cost pressures out there, you see that there are inflationary pressures, but also very strong conviction that as in the past, we will manage those with continuous scale deficiency..

Got it? Thank you so much..

Your next question comes from the line of Michael Binetti from Credit Suisse. Your line is open. Please ask your question..

Thanks. Good morning. This is Rick Patel on for Michael.

Can you help us better understand the drivers for the revenue guidance increase? How should we think about what's embedded in terms of higher demand versus what you expected 90 days ago versus the potential impact that CPM might be having in the coming quarters? And as far as your guidance for EBITDA goes, that is intact? I know, it's a fairly wide range.

But can you help us think about the puts and takes there in light of the higher revenue expectations?.

I mean, the change in net sales is more kind of a technical. So I hand it over to Martin and because he's also well positioned to comment on the EBITDA expectations..

Yes, sure, happy to do so. Exactly I mean, the driver for the net sale, increasing guidance is a pure technical with the, with the CPM ramp up, and now knowing when the brands will ship the seasons being a bit later, and that's why the net sales increases to seven from seven to 700 million to 720 million.

And the EBITDA adjusted EBITDA margin guidance at the upper half of the range of 79%. We think it's quite unique, it's quite good and it's quite narrow and obviously, it relates to the higher net sales guidance..

Great.

And can you also help us think about the outlook for marketing? How should we be thinking about the potential for leverage there and now that you have more visibility on CPM, what are the puts and takes on that line?.

On the marketing costs as we as we stated always we, we want to reinvest the continued performance marketing efficiencies into more brand building activities into more PR events post pandemic world. And therefore, we guide more towards a stable marketing cost ratio, and that includes also CPM..

Thanks very much..

I mean, I think the best way to think about it is medium term high growth rates 22% to 25% medium term, we will manage cost pressures, we will take advantage of reinvestment opportunities of cost savings so that the EBITDA margin will be well deserved well, within 7% to 9% because as we have done over the last couple of months, we want to continue to grow and take market share.

That is inherent leverage in our model. As new customer acquisition becomes less important for the overall growth number that will come at some point of course, because the base continues to grow and grow and the importance of new customers to drive the growth will relatively become smaller, but we don't see that point at the moment.

There's so much business to be grabbed outside of our current base and we want to grab it at the moment..

That's helpful. Thank you..

Your next question comes from the line of Geoffroy de Mendez from Bank of America. Your line is open. Please ask your question..

Hi there thanks for taking my question. Just have one for me please, can you just comment a little bit on any change of trends that you've seen in the last few weeks versus the Q1 fiscal year 2022. And if you're seeing acceleration slow down any comments on trend trading would be interesting. Thank you..

I mean, the best way to describe is that we see continued good momentum, details billing model as we don't give any updated guidance by quarter but we are we are very pleased with the Q1 and we see continued good momentum in our business..

Okay, thanks..

. There are no further questions at this time. This concludes today's conference call. Thank you for participating. You may now disconnect..