Credit Risk and Financial Exposure - Credit risk exposure: As of September 30, 2024, one customer accounted for 13% of the company's consolidated accounts receivables balance, representing a significant credit concentration[263] - Foreign exchange loss: The company reported a foreign exchange loss of €19.6 million for the year ended September 30, 2024, compared to €36.1 million in the previous year[264] - USD-denominated revenues: A 10% depreciation of the USD against the Euro would result in lower revenues of €75.5 million and a corresponding decrease in adjusted EBITDA of €53.9 million based on the 2024 cost structure[266] - Interest rate risk: A 100 basis points increase in market interest rates would negatively impact net profit by €7.1 million for the year ended September 30, 2024[268] - Foreign currency exposure: The company is significantly exposed to fluctuations in the Euro to USD exchange rate, with a large portion of its indebtedness denominated in USD[279] Revenue and Cost Analysis - Revenue distribution: The Americas accounted for 52% of revenues in fiscal 2024, Europe 36%, and APMA 12%, with APMA showing significant growth potential[275] - Cost of sales increase: Cost of sales increased by €177.9 million (31%) to €744.0 million in fiscal 2024, driven by higher unit sales, premium product mix, and capacity expansion[278] - Inflation impact: Despite high inflation in the EU and US, the company saw strong revenue growth in fiscal 2024, reflecting continued demand for its products[273] Product Portfolio and Market Strategy - Product portfolio: The company's five core silhouettes (Madrid, Arizona, Boston, Gizeh, and Mayari) represent the majority of revenues, with over 700 silhouettes in total[274] - The Company's Chief Sales Officer oversees regional operations in the APMA region, including the 1774 collaboration[300] - The Company's Chief Product Officer oversees all product creation, design, and development[300] Board of Directors and Leadership - Alexandre Arnault has been a Director since October 2023, bringing expertise in fashion, retail, technology, and e-commerce[288] - J. Michael Chu has been a Director since April 2021 and serves as the chair of the board, with extensive experience in global investment and management[288] - Ruth Kennedy has been a Director since September 2023, with a background in luxury brand, retail, and hospitality consultancy[288] - Nisha Kumar has been a Director since October 2023, with experience as Chief Financial Officer and Chief Compliance Officer at Greenbriar Equity Group[290] - Anne Pitcher has been a Director since October 2023, with a career spanning luxury fashion and department store sectors[290] - Nikhil Thukral has been a Director since April 2021, focusing on buyout funds and private equity investments[290] - Oliver Reichert has been the Chief Executive Officer since 2013, leading the company's transformation and innovation[290] - Dr. Erik Massmann was appointed Chief Financial Officer in 2023, bringing over 30 years of financial leadership experience[292] - Markus Baum was appointed Chief Product Officer in 2019, responsible for product creation and sustainability development[293] - Klaus Baumann was appointed Chief Sales Officer in 2015, leading the company's creative and innovation hub, BIRKENSTOCK 1774[293] - The Company's Chief Technical Operations Officer oversees more than 4,000 staff members across manufacturing and logistics sites[295] - The Company's Chief Legal Officer manages a global team of lawyers and legal experts, providing guidance on IP law, compliance, and commercial law[295] Compensation and Incentive Plans - Share-based compensation: The company recognized €3.6 million in share-based compensation expense for the year ended September 30, 2024, compared to €65.4 million in the previous year[283] - Aggregate compensation for senior management for the fiscal year ended September 30, 2024 was €19.9 million, with €0.8 million allocated for pension, retirement, or similar benefits[296] - Non-employee directors receive 75,000 under the 2023 Omnibus Incentive Plan[297] - Senior management members are eligible for discretionary annual cash bonuses based on pre-determined performance criteria, including corporate and individual goals[299] - The Company's 2023 Equity Incentive Plan reserves 11,265,925 ordinary shares for issuance, with no more than 11,265,925 shares available for incentive share options (ISOs)[303] - Non-employee directors are limited to receiving awards valued at 1,000,000[306] - Senior management members, including executive officers, have the opportunity to acquire indirect ownership in the Company through investments in ManCo, a management ownership vehicle[298] - The company has reserved a total of 3,756,511 ordinary shares for issuance under the Employee Share Purchase Plan[312] - The purchase price of ordinary shares under the Employee Share Purchase Plan is 85% of the lower of the fair market value on the first or final trading day of the offering period[314] - Employees are eligible to participate in the Employee Share Purchase Plan if they meet the eligibility requirements, but cannot own 5% or more of the company's total voting power or value[312] - The Employee Share Purchase Plan allows participants to purchase shares through payroll deductions, with the administrator setting the maximum percentage of eligible compensation that can be deducted[312] - The company may adjust the number of shares subject to the Employee Share Purchase Plan for changes in capitalization or corporate transactions[312] - The Employee Share Purchase Plan is designed to align employee interests with shareholders and provide a retention incentive[309] - The company may modify award terms or establish subplans to comply with non-U.S. laws or stock exchange rules[309] - The Employee Share Purchase Plan permits participants to withdraw and receive accrued payroll deductions or exercise their option at the end of the offering period[314] - The company's clawback policy applies to all awards granted under the Equity Plan, allowing for reduction, cancellation, or recoupment[309] - The Equity Plan remains in effect for ten years unless terminated earlier by the board of directors[309] Workforce and Employment - The company employed approximately 7,400 individuals as of September 30, 2024, including 6,200 full-time employees and 930 contingent workers[321] - Full-time employees were distributed as follows: 360 in corporate-owned stores, 190 in distribution (logistics), 4,140 in production, and 1,500 in selling, general, administrative, and other functions[321] - The workforce was 55% female and represented more than 95 nationalities as of September 30, 2024[321] - The company's workforce increased from approximately 6,300 employees in September 2023 to 7,400 employees in September 2024[321] - The company's production sites in Germany employed approximately 4,140 full-time employees as of September 30, 2024[321] Shareholder and Ownership Structure - Entities affiliated with L Catterton owned 135,218,071 ordinary shares, representing 72.0% of the company's outstanding shares as of November 30, 2024[325] - Financière Agache SA owned 10,352,863 ordinary shares, representing 5.5% of the company's outstanding shares as of November 30, 2024[325] - The company's total number of ordinary shares issued and outstanding as of November 30, 2024, was 187,829,202[324] - As of November 30, 2024, the company had 23 shareholders of record, with approximately 98% of outstanding ordinary shares held by 15 U.S. shareholders[329] Tax and Financial Agreements - The total balance of the Tax Receivable Agreement (TRA) liability as of September 30, 2024, amounted to €359.9 million[329] - The company expects to utilize tax attributes created by the pre-IPO owner, MidCo, which will reduce future tax payments[329] - Payments under the TRA are based on 85% of tax savings from U.S. and German tax attributes, with interest accruing at SOFR plus 3.00% per annum[331] - The TRA liability is measured at amortized cost, considering current expected cash flows and the original effective interest rate[329] - The company may be required to make lump-sum payments under the TRA in certain circumstances, such as early termination or changes of control[331] - Restrictions under the TRA could limit the company's ability to obtain financing, potentially affecting working capital and growth[333] Legal and Governance - The company's board of directors consists of seven members divided into three classes serving staggered three-year terms[317] - The audit committee is composed of Ruth Kennedy, Nisha Kumar, and Anne Pitcher, with Nisha Kumar serving as chairperson[319] - The company has entered into employment and indemnification agreements with executive officers and directors[334] - The company has entered into a Registration Rights Agreement with MidCo, allowing MidCo to require the company to register ordinary shares under the Securities Act and pursue underwritten offerings or block trades[335] - MidCo can issue an unlimited number of demand registration requests and the company will bear all fees, costs, and expenses of registrations, excluding underwriting discounts and commissions[335] - The company has entered into a Shareholders' Agreement with MidCo, granting MidCo the right to designate a majority of the board of directors as long as it owns at least a majority of the company's shares[335] - MidCo is entitled to designate a proportional number of directors based on its ownership percentage if it owns less than a majority but at least 5% of the company's ordinary shares[335] - The company is subject to litigation in the ordinary course of business, but no current legal proceedings are expected to have a material adverse effect on its business or financial position[341] - The company may enter into commercial transactions with L Catterton and its portfolio companies, but none of these transactions are expected to be material[338] - No significant changes have occurred in the company's operations since the date of the financial statements included in the Annual Report, other than those described in the report[343] Dividends and Financial Strategy - The company has not declared or paid cash dividends on its ordinary shares and intends to retain all available funds for business development and expansion[342]
Birkenstock plc(BIRK) - 2024 Q4 - Annual Report