MYTHERESA(MYTE) - 2022 Q3 - Quarterly Report

Financial Results and Key Operating Metrics This section provides an overview of the company's financial performance and key operational indicators for the reporting period Key Operating and Financial Metrics The company reported strong nine-month growth in GMV and active customers, with improved gross profit margin, but Q3 showed moderated growth and an Adjusted EBITDA decrease Key Operating and Financial Metrics (Three and Nine Months Ended March 31, 2022) | Metric | Three Months Ended Mar 31, 2022 | YoY Change | Nine Months Ended Mar 31, 2022 | YoY Change | | :--- | :--- | :--- | :--- | :--- | | Gross Merchandise Value (GMV) | €186.6M | 13.2% | €550.6M | 22.4% | | Active Customers (LTM) | 755k | 21.6% | 755k | 21.6% | | Total Orders Shipped (LTM) | 1,703k | 23.1% | 1,703k | 23.1% | | Net Sales | €169.5M | 2.9% | €514.9M | 14.5% | | Gross Profit Margin | 48.8% | +490 BPs | 50.5% | +390 BPs | | Adjusted EBITDA | €10.2M | (8.1%) | €52.6M | 20.2% | | Adjusted Net Income | €5.6M | 25.8% | €32.7M | 33.5% | Reconciliation of Non-IFRS Measures This section reconciles non-IFRS measures like Adjusted EBITDA and Net Income, primarily adjusting for IPO-related share-based compensation Reconciliation of Net Income to Adjusted EBITDA (€ millions) | Line Item | Nine Months Ended Mar 31, 2021 | Nine Months Ended Mar 31, 2022 | | :--- | :--- | :--- | | Net income | €(24.6) | €(9.5) | | Finance expenses, net | €(14.8) | €0.7 | | Income tax expense | €13.5 | €12.4 | | Depreciation and amortization | €6.1 | €6.7 | | EBITDA | €(19.8) | €10.3 | | IPO preparation and transaction costs | €7.0 | €0.0 | | Other transaction-related costs | €0.0 | €1.3 | | IPO related share-based compensation | €56.6 | €40.9 | | Adjusted EBITDA | €43.7 | €52.6 | Reconciliation of Net Income to Adjusted Net Income (€ millions) | Line Item | Nine Months Ended Mar 31, 2021 | Nine Months Ended Mar 31, 2022 | | :--- | :--- | :--- | | Net Income | €(24.6) | €(9.5) | | IPO preparation and transaction costs | €7.0 | €0.0 | | Other transaction-related costs | €0.0 | €1.3 | | IPO related share-based compensation | €56.6 | €40.9 | | Finance expenses on shareholder loans | €(16.0) | €0.0 | | Income tax effect | €1.6 | €0.0 | | Adjusted Net Income | €24.5 | €32.7 | - IPO-related share-based compensation is a significant adjustment, totaling €40.9 million for the nine months ended March 31, 2022. The company does not consider these expenses indicative of core operating performance[15] Unaudited Interim Condensed Consolidated Financial Statements This section presents the company's unaudited interim condensed consolidated financial statements, including profit, financial position, and cash flows Statements of Profit and Comprehensive Income Net sales and gross profit increased for the nine months, leading to an operating income of €3.6 million and a narrowed net loss Consolidated Statement of Profit (Nine Months Ended March 31, € thousands) | Line Item | 2021 | 2022 | | :--- | :--- | :--- | | Net sales | 449,728 | 514,914 | | Gross profit | 209,614 | 260,199 | | Operating income | (25,925) | 3,574 | | Net income (loss) | (24,621) | (9,546) | | Basic & diluted EPS | €(0.33) | €(0.11) | Statements of Financial Position Total assets increased to €569.8 million as of March 31, 2022, driven by higher cash and equity, while inventories decreased Consolidated Statement of Financial Position (€ thousands) | Line Item | June 30, 2021 | March 31, 2022 | | :--- | :--- | :--- | | Total Assets | 521,941 | 569,761 | | Cash and cash equivalents | 76,760 | 93,527 | | Inventories | 247,054 | 226,117 | | Total Liabilities | 136,223 | 151,800 | | Total Shareholders' Equity | 385,718 | 417,961 | Statements of Cash Flows Operating activities generated €22.9 million in cash, a significant improvement driven by inventory management and non-cash expenses, increasing cash and cash equivalents Consolidated Statement of Cash Flows (Nine Months Ended March 31, € thousands) | Line Item | 2021 | 2022 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | (39,751) | 22,907 | | Net cash (used in) investing activities | (1,511) | (1,702) | | Net cash (used in) provided by financing activities | 87,922 | (4,400) | | Net increase (decrease) in cash | 46,659 | 16,806 | - The positive shift in operating cash flow was largely due to a €20.9 million cash inflow from decreased inventories, compared to a €63.4 million outflow from increased inventories in the prior year[32] Notes to the Financial Statements Notes detail accounting policies, external impacts like the Ukraine war, the Curated Platform Model, segment performance, and significant share-based compensation Impacts from External Factors (Note 3) External factors like the war in Ukraine, sanctions, and COVID-19 effects moderated Q3 growth and impacted customer sentiment - The company experienced lower growth in net sales in Q3 2022 compared to the prior year, partially due to the war in Ukraine, sanctions on Russia, and COVID-related effects in Asia, which affected customer sentiment[49] - Mytheresa has stopped all services to Russia, Belarus, and Ukraine; however, direct business impact from sanctions was not significant due to no major operations in Russia[49] - To date, the company has not incurred significant supply chain or logistics disruptions with its brand partners or shipping providers[44] Significant Accounting Policies (Note 4) The company introduced the Curated Platform Model (CPM), recognizing revenue on a net commission basis when goods are delivered - The company introduced the Curated Platform Model (CPM), where it acts as an agent for brand partners, recognizing revenue on a net basis for the agreed-upon commission when goods are delivered to the end customer[52][54] Segment Information (Note 6) The online segment generated the vast majority of net sales and EBITDA, significantly outperforming retail stores Segment Performance (Nine Months Ended March 31, 2022, € thousands) | Segment | Net Sales | EBITDA | | :--- | :--- | :--- | | Online | 503,371 | 64,827 | | Retail Stores | 11,543 | 3,502 | | Total Segments | 514,914 | 68,330 | Geographic Information (Note 7) The United States emerged as a key growth market, increasing its share of net sales to 15.8% for the nine-month period Net Sales by Geographic Location (Nine Months Ended March 31) | Region | 2021 Sales (€ thousands) | 2021 % of Total | 2022 Sales (€ thousands) | 2022 % of Total | | :--- | :--- | :--- | :--- | :--- | | Germany | 84,468 | 18.8% | 95,712 | 18.6% | | United States | 54,378 | 12.1% | 81,578 | 15.8% | | Europe (ex-Germany) | 187,486 | 41.7% | 206,035 | 40.0% | | Rest of the world | 123,396 | 27.4% | 131,589 | 25.6% | | Total | 449,728 | 100.0% | 514,914 | 100.0% | Share-Based Compensation (Note 13) Share-based compensation expense totaled €42.7 million, primarily from IPO award packages granted to key management - The company recognized a total share-based compensation expense of €42.7 million for the nine months ended March 31, 2022, primarily related to IPO award packages granted in January 2021[98] - The IPO-related awards consist of an Alignment Grant of 6.5 million share options and a Restoration Grant of 1.9 million phantom shares granted to key management[78][79][80] Management's Discussion and Analysis (MD&A) This section provides management's perspective on the company's financial condition, results of operations, and factors influencing performance Overview Management attributes moderated Q3 growth to global luxury demand reduction from geopolitical events and COVID-19, while maintaining long-term growth forecasts - Management attributes lower GMV and net sales growth in Q3 2022 to reduced demand for luxury products due to the war in Ukraine, sanctions in Russia, and COVID-related effects in Asia[116] - Despite the Q3 slowdown, management states that the company's GMV growth forecast remains in-line with communicated mid and long-term growth targets[117] Factors Affecting Performance Performance is driven by economic trends, brand investment, luxury partner relationships, online shift, category expansion, inventory management, and the Curated Platform Model - Key performance drivers include: - Growth in brand awareness through marketing campaigns and events - Maintaining exclusive relationships with top luxury brands - Capturing the ongoing shift of luxury spending to online channels - Expanding newer categories such as Men's and Kidswear - Leveraging the Curated Platform Model (CPM) to improve capital efficiency and product access[134][135][138][141] Results of Operations Analysis Nine-month GMV grew 22.4%, but net sales grew slower due to the CPM, which boosted gross profit margin to 50.5%, while operating costs increased Gross Merchandise Value (GMV) GMV grew 22.4% to €550.6 million for the nine months, driven by customer growth, despite a slower Q3 due to external issues - GMV grew 22.4% to €550.6 million in the nine months ended March 31, 2022, driven by growth in active customers. Q3 growth was slower at 13.2%, affected by geopolitical and pandemic-related issues[154] Net Sales Net sales grew 14.5% to €514.9 million, with slower growth compared to GMV due to the Curated Platform Model's net revenue recognition - Net sales for the nine months grew 14.5% to €514.9 million. The slower growth rate compared to GMV is a direct result of switching brands to the Curated Platform Model (CPM), where revenue is recognized as a net platform fee rather than the full merchandise value[155] Gross Profit Gross profit margin significantly increased to 50.5% for the nine-month period, primarily driven by the high-margin Curated Platform Model revenues - Gross profit margin for the nine-month period increased significantly to 50.5% from 46.6% year-over-year. This improvement was primarily driven by increasing CPM revenues, which generate a 100% gross margin[158] Shipping and Payment Costs Shipping and payment costs increased to 12.8% of GMV, mainly due to a higher share of international sales where the company covers customs duties - As a percentage of GMV, shipping and payment costs increased from 11.5% to 12.8% for the nine-month period, mostly due to a higher share of sales to countries where the company pays all customs duties for the customer, such as the US[159] Selling, General & Administrative (SG&A) Expenses Total SG&A expenses decreased due to lower IPO-related share-based compensation, but adjusted SG&A increased as a percentage of GMV - Total SG&A expenses decreased due to lower IPO-related share-based compensation (€40.9 million in 9M 2022 vs. €56.6 million in 9M 2021)[165] - Adjusted SG&A (excluding IPO costs) as a percentage of GMV increased from 12.0% to 12.5% for the nine-month period, driven by higher personnel, insurance, and IT expenditures[166] Liquidity and Capital Resources Primary liquidity sources include cash from operations and €60 million in revolving credit facilities, with €93.5 million cash and equivalents as of March 31, 2022 - As of March 31, 2022, the company held €93.5 million in cash and cash equivalents[178] - The company has access to €60 million in revolving credit facilities, which were unused as of March 31, 2022, and are deemed sufficient for future operating requirements[177][180] Cash Flow Analysis Operating activities generated €22.9 million in cash, a significant improvement driven by inventory reduction and non-cash compensation, contrasting with prior year's financing inflow Summary Consolidated Cash Flow (€ thousands) | Nine months ended March 31, | 2021 | 2022 | | :--- | :--- | :--- | | Net cash from operating activities | (39,751) | 22,907 | | Net cash from investing activities | (1,511) | (1,702) | | Net cash from financing activities | 87,922 | (4,400) | - The improvement in operating cash flow was driven by a decrease in inventory and non-cash share-based compensation of €42.7 million[187][188] Market Risk Disclosures This section outlines the company's exposure to market risks, particularly foreign exchange fluctuations, and its mitigation strategies Foreign Exchange Risk The company faces foreign exchange risk from significant non-Euro revenues, mitigated by Euro-denominated expenses and active hedging in seven major currencies - The company has significant sales denominated in U.S. Dollars and Pound Sterling, creating foreign currency exposure[194] - To mitigate this risk, the company uses hedging contracts for seven major currencies, though this strategy does not eliminate the risk entirely[196] Legal Proceedings This section provides a summary of the company's involvement in legal proceedings and management's assessment of their potential impact Legal Proceedings Summary The company is involved in ordinary course legal proceedings but does not anticipate any material adverse effects on its business or financial condition - The company is not currently party to any legal proceedings which, if determined adversely, would be expected to have a material adverse effect on the business[199]