MYTHERESA(MYTE) - 2023 Q1 - Quarterly Report

Dutch Statutory Directors and Supervisory Board Report Introduction This section details the annual report's preparation basis, defines key performance indicators, and includes a forward-looking statements disclaimer - The annual report has been prepared by management and approved by the management and supervisory boards, complying with the Dutch Civil Code (DCC) and International Financial Reporting Standards (IFRS) as adopted by the EU[7] - The report defines several key performance indicators used by management, such as "active customer," "Adjusted EBITDA," "Gross Merchandise Value (GMV)," and "lifetime value (LTV)," which are crucial for understanding the company's performance analysis[8][9] - The report contains forward-looking statements that involve risks and uncertainties. Key risk factors mentioned include industry competition, consumer demand shifts, the impact of health epidemics like COVID-19, and general economic conditions[10][12] Company and Business Overview This section outlines Mytheresa's history, corporate structure, and operations as a leading luxury e-commerce platform, detailing its value proposition, strengths, and growth strategies - Mytheresa is a leading luxury e-commerce platform shipping to over 130 countries, offering curated products from more than 200 coveted brands. It originated from the Theresa boutique in Munich, founded over 30 years ago, and launched its digital platform in 2006[20] Fiscal 2022 Performance Highlights | Metric | FY 2022 | Growth vs FY 2021 | | :--- | :--- | :--- | | Net Sales | €689.8 million | 12.7% | | Gross Merchandise Value (GMV) | €747.3 million | 21.3% | | Active Customers | 781,000 | 16.4% | | Adjusted Net Income | €44.5 million | 38.6% | | Adjusted EBITDA | €66.4 million | 20.7% | - The company targets high-income, time-constrained luxury consumers. In fiscal 2022, approximately 3% of customers, part of the "Top Customer program," generated about 35% of the company's GMV[21] - Mytheresa's growth strategies include profitably acquiring new customers, expanding share of wallet with existing customers, and accessing new complementary categories such as Kidswear (launched 2019), Menswear (launched 2020), and Life (launched 2022)[59][61][62][64][66] Financial Overview This section provides a detailed financial review for FY2022, including key metrics, non-IFRS reconciliations, management's analysis of operations, and impacts from global events Selected financial data Key Performance and Financial Metrics (FY2020-FY2022) | Metric | FY 2020 | FY 2021 | FY 2022 | FY22 vs FY21 Change | | :--- | :--- | :--- | :--- | :--- | | Gross Merchandise Value (GMV) (in € millions) | €449.5 | €616.1 | €747.3 | 21.3% | | Active customers (LTM, in thousands) | 486 | 671 | 781 | 16.4% | | Total orders shipped (LTM, in thousands) | 1,092 | 1,505 | 1,765 | 17.2% | | Average order value (LTM, in €) | 600 | 595 | 626 | 5.2% | | Net sales (in € millions) | €449.5 | €612.1 | €689.8 | 12.7% | | Gross profit margin | 46.7% | 46.9% | 51.5% | 460 BPs | | Adjusted EBITDA margin | 7.9% | 9.0% | 9.6% | 60 BPs | | Adjusted Net Income (in € millions) | €19.3 | €32.1 | €44.5 | 38.6% | Reconciliation of Net Income to Adjusted EBITDA (in € thousands) | Line Item | FY 2020 | FY 2021 | FY 2022 | | :--- | :--- | :--- | :--- | | Net income (loss) | 6,350 | (32,604) | (7,898) | | Finance income (expenses), net | 11,119 | (15,091) | 998 | | Income tax expense | 3,441 | 15,534 | 11,734 | | Depreciation and amortization | 7,885 | 8,232 | 9,088 | | EBITDA | 28,795 | (23,929) | 13,922 | | IPO preparation and transaction costs | 5,206 | 6,984 | - | | Other transaction-related, legal and other expenses | - | - | 2,493 | | IPO related share-based compensation | 65 | 71,889 | 49,919 | | Adjusted EBITDA | 35,400 | 54,944 | 66,334 | Reconciliation of Net Income to Adjusted Net Income (in € thousands) | Line Item | FY 2020 | FY 2021 | FY 2022 | | :--- | :--- | :--- | :--- | | Net Income (loss) | 6,350 | (32,604) | (7,898) | | IPO preparation and transaction costs | 5,206 | 6,984 | - | | Other transaction-related, legal and other expenses | - | - | 2,493 | | IPO related share-based compensation | 65 | 71,889 | 49,919 | | Finance expense (income) on shareholder loans | 9,645 | (16,224) | - | | Income tax effect | (3,306) | 2,073 | - | | Adjusted Net Income | 19,294 | 32,118 | 44,514 | Management's discussion and analysis of financial condition and results of operations - Net sales grew 12.6% to €689.8 million in FY2022, while net loss decreased from €32.6 million to €7.9 million. Adjusted Net Income improved to €44.5 million from €32.1 million in the prior year[93] - Customer acquisition and engagement are key performance drivers, measured by Customer Acquisition Cost (CAC) and Lifetime Value (LTV). The fiscal 2016 cohort demonstrated a 3.2x 6-year LTV to CAC ratio, indicating efficient marketing spend and long-term customer profitability[98][101][104] - The company maintained strong customer loyalty, with approximately 83% of net sales from prior year cohorts retained in fiscal 2022. Cohorts from 2019 and earlier showed net sales retention greater than 100%, indicating increased spending from loyal customers over time[109][110] - The Curated Platform Model (CPM) is a key strategic initiative that integrates with brand partners' retail operations. Under CPM, Mytheresa acts as an agent, earning platform fees recorded as net sales, which improves capital efficiency but affects the comparison between GMV and net sales growth in the short term[118][120] Consolidated Statement of Operations (in € thousands) | Line Item | FY 2021 | FY 2022 | | :--- | :--- | :--- | | Net sales | 612,096 | 689,750 | | Gross profit | 287,043 | 354,992 | | Operating income (loss) | (32,162) | 4,834 | | Net income (loss) | (32,604) | (7,898) | - Gross profit margin increased from 46.9% in FY2021 to 51.5% in FY2022, primarily driven by the growing share of CPM revenue, for which no cost of sales is recognized by the company[134] Impacts to the consolidated financial statements due to Covid-19 pandemic, cost inflation, sanctions on Russia and war in Ukraine - The company has not experienced material declines in revenue or significant supply chain disruptions from the COVID-19 pandemic, although China continues to be affected by local lockdowns[175][176] - Net sales growth was lower in fiscal 2022 compared to 2021, partially due to the war in Ukraine, sanctions on Russia, and COVID-related effects in Asia, which impacted customer sentiment for luxury products. The company has stopped all services to Russia, Belarus, and Ukraine[182] - The company is exposed to cost inflation on energy, logistics, and labor, but notes that demand for luxury products has been less affected by inflation than other industries[181] Risk Management and Risk Factors This section details the company's risk management framework and key risk factors, including competition, consumer spending, brand relationships, and regulatory compliance Controls and Procedures - Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of June 30, 2022[188] - Management concluded that the company's internal control over financial reporting was effective as of June 30, 2022, based on the criteria from the Committee of Sponsoring Organizations of the Treadway Commission (COSO) framework[189] Risk Factors - The online luxury sector is highly competitive and fragmented. Competition from global multi-brand retailers, mono-brand retailers, and department stores could lead to pricing pressure and loss of customers or brand partners[194][196] - The business is reliant on discretionary consumer spending, which can be adversely affected by economic downturns, inflation, and geopolitical events like the war in Ukraine[222] - A significant portion of net sales comes from a limited number of brand partners. Any deterioration in these relationships could limit the supply of merchandise and adversely affect the business[214][225] - The company's ability to deliver merchandise depends on a single distribution facility in Heimstetten, Germany, creating a risk of disruption. A new facility is under construction in Leipzig to mitigate this[251] - The business is subject to complex and evolving data privacy regulations globally, including GDPR in Europe, CCPA in California, and PIPL in China. Non-compliance could result in significant fines, reputational damage, and operational changes[297][299][301][305] - The company is exposed to risks from international trade laws, including tariffs (such as U.S. Section 301 duties on Chinese goods), customs duties, and regulations related to forced labor (like the U.S. UFLPA), which could increase costs and disrupt the supply chain[338][340][341] Corporate Governance This section describes the company's two-tiered corporate governance structure, board responsibilities, committee functions, and deviations from the Dutch Corporate Governance Code - The company has a two-tiered board structure consisting of a Management Board for day-to-day operations and a Supervisory Board for oversight and advice[506] - The Supervisory Board has two committees: the Audit Committee, which oversees financial reporting and internal controls, and the Nominating, Governance and Compensation Committee, which handles board appointments, governance policies, and executive compensation[531][533][535] - The company does not fully comply with all best practices of the Dutch Corporate Governance Code, citing the need to align with NYSE and U.S. market practices. Key deviations relate to the independence of some Supervisory Board members and the remuneration of board members with share grants[552][556][560] - The company has adopted a Code of Business Conduct & Ethics covering conflicts of interest, compliance, and corporate policies like diversity and inclusion[564] Compensation Report This section outlines the Management Board's compensation policy, comprising base salary, STI cash bonuses, and LTI equity awards, detailing FY2022 compensation amounts - The compensation for Management Board members consists of three main elements: base salary, an annual short-term incentive (STI) cash bonus, and a long-term incentive (LTI) of equity-based awards[571] - The annual STI award is based on two performance goals: a gross profit goal and an adjusted EBITDA goal, set annually by the Supervisory Board[575] - In connection with the IPO, the company adopted the 2020 Omnibus Incentive Compensation Plan, which includes an "Alignment Grant" (stock options) and a "Restoration Grant" (phantom shares) for key management[569][584] Total Compensation for FY 2022 (in € thousands) | Group | Total Compensation | Share-Based Compensation Component | | :--- | :--- | :--- | | Management Board | €43,716 | €39,680 | | Supervisory Board | €1,162 | €524 | Related Party Disclosures This section refers to detailed related party transactions in financial notes, confirms no material conflicts of interest, and notes board indemnification agreements - Details on related party transactions for fiscal 2022 can be found in Note 26 of the Consolidated Financial Statements[599] - No material transactions involving a conflict of interest with members of the management or supervisory boards occurred in fiscal 2022[599] - The company has entered into indemnification agreements with its management and supervisory board members, as required by its articles of association[601] Protective Measures This section describes protective measures in the company's articles of association, including binding board nominations and board-approved proposals for key shareholder resolutions - The company's articles include protective measures allowed under Dutch law to safeguard company interests[603] - Board members can only be appointed via a binding nomination from the supervisory board, which can only be overturned by a two-thirds majority vote representing at least half of the issued share capital[605] - Material resolutions, such as issuing shares, amending articles, or mergers, can only be adopted by the General Meeting upon a proposal from the management board that has been approved by the supervisory board[605] Financial Statements Fiscal Year 2022 Consolidated Financial Statements as of June 30, 2022 This section presents the audited consolidated financial statements for FY2022, including profit and loss, financial position, equity, and cash flow statements, with detailed notes on accounting policies and disclosures Consolidated Statement of Profit and Loss (in € thousands) | Line Item | FY 2021 | FY 2022 | | :--- | :--- | :--- | | Net sales | 612,096 | 689,750 | | Gross profit | 287,043 | 354,992 | | Operating income (loss) | (32,162) | 4,834 | | Net income (loss) | (32,604) | (7,898) | | Basic and diluted earnings per share (€) | (0.42) | (0.09) | Consolidated Statement of Financial Position (in € thousands) | Line Item | June 30, 2021 | June 30, 2022 | | :--- | :--- | :--- | | Total Assets | 521,941 | 614,776 | | Inventories | 247,054 | 230,144 | | Cash and cash equivalents | 76,760 | 113,507 | | Total Shareholders' Equity | 385,718 | 431,667 | | Total Liabilities | 136,223 | 183,109 | Consolidated Statement of Cash Flows (in € thousands) | Line Item | FY 2021 | FY 2022 | | :--- | :--- | :--- | | Net cash (outflow) inflow from operating activities | (16,486) | 54,840 | | Net cash outflow from investing activities | (2,894) | (11,923) | | Net cash (outflow) inflow from financing activities | 86,790 | (6,095) | | Net increase (decrease) in cash | 67,411 | 36,822 | - In fiscal 2022, share-based compensation expense recognized was €52.3 million, primarily related to the IPO Alignment Grant (€49.8 million). This is a decrease from the €75.3 million recognized in fiscal 2021[863] Separate Financial Statements as of June 30, 2022 This section presents the separate financial statements for MYT Netherlands Parent B.V. for FY2022, including the statement of financial position and profit and loss, with notes on accounting principles and intercompany balances Separate Statement of Financial Position (in € thousands) | Line Item | June 30, 2021 | June 30, 2022 | | :--- | :--- | :--- | | Total Assets | 395,464 | 458,414 | | Participating interest in group companies | 385,847 | 430,188 | | Total Shareholders' Equity | 385,290 | 431,313 | | Total Liabilities | 10,174 | 27,101 | Separate Statement of Profit and Loss (in € thousands) | Line Item | FY 2021 | FY 2022 | | :--- | :--- | :--- | | Share in results from participating interests, after taxation | 43,452 | 33,426 | | Other income and expenses, after taxation | (76,056) | (41,324) | | Net result | (32,604) | (7,898) | - The parent company's financial fixed assets consist primarily of its participating interest in group companies, which is accounted for using the equity method. The value increased from €385.8 million in FY2021 to €430.2 million in FY2022, driven by the subsidiary's profit and capital contributions related to share-based compensation[902][907] Other Information Other Information This section outlines the rules for profit appropriation as per the Articles of Association, detailing requirements for distributions from equity exceeding legal reserves - Under the company's Articles of Association, distributions can be made from equity that exceeds legally required reserves[961] - Resolutions to make distributions can be made by the management board with supervisory board approval, or by the general meeting based on a proposal from the management board that has been approved by the supervisory board[962][963] Independent Auditor's Report This section presents KPMG's unqualified auditor's report for FY2022, confirming true and fair financial statements and highlighting revenue recognition as a key audit matter - The independent auditor, KPMG Accountants N.V., issued an unqualified opinion on both the consolidated and separate financial statements for the year ended June 30, 2022[968] - The materiality for the financial statements as a whole was determined to be €4.6 million, based on 0.66% of net sales[972][973] - The key audit matter identified was the "Correct cut-off of revenue recognition." This was significant due to the presumed fraud risk related to management override of controls and the judgment required in estimating returns and determining when control of goods is transferred to the customer at year-end[972][993][994] - The auditor concluded that the other information in the annual report is consistent with the financial statements and does not contain material misstatements[1001]