Global Blue has reported a significant increase in its financial performance for the third quarter, with CEO Jacques Stern and CFO Roxane Dufour announcing a 41% rise in revenue over the first nine months compared to the same period last year. Adjusted EBITDA saw an impressive 103% increase to €115 million, with an acceleration to an annualized €159 million.
The company's strategic moves, including the successful refinancing of senior debt, have led to an improved net leverage ratio of 3.6x. The earnings call also highlighted solid January 2024 performances and confirmed the company's guidance, with an EBITDA target above €200 million for fiscal years 2024-2025 and a leverage ratio goal below 2.5x.
Key Takeaways
- Revenue increased by 41% in the first nine months of the year.
- Adjusted EBITDA grew by 103% to €115 million, with an annualized figure of €159 million.
- Net leverage ratio improved to 3.6x following the refinancing of senior debt.
- Strong sales increases were reported in the TFS and AVPS divisions, with moderate growth in RTS.
- Strategic equity investments from Tencent brought in an inflow of €45 million.
- Net financial debt stood at €508.6 million as of December 31, 2023.
- Positive performance trends observed in January 2024, with recovery in European and APAC markets.
- The company is on track to achieve an EBITDA above €200 million for '24-'25 and a leverage ratio below 2.5x.
Company Outlook
- Global Blue confirmed its guidance and targets for the upcoming fiscal years, aiming for an EBITDA above €200 million and a leverage ratio below 2.5x.
Bearish Highlights
- Interest paid increased to around €41 million due to higher interest rates.
- Visa (NYSE:V) issuance constraints and higher flight costs have affected Chinese travelers to Europe and APAC.
Bullish Highlights
- Solid recovery in revenue and adjusted EBITDA, with a 63% drop-through.
- Profitable performance in January 2024, with a 7% recovery in Europe and 11% in APAC.
- Strong recovery in spending by high net worth individuals and affluent customers.
Misses
- Despite the overall recovery, the company still faces challenges with visa issuance delays in France and Germany for Chinese citizens.
Q&A Highlights
- Discussions included the impact of France's recovery on Europe's overall performance.
- The potential EBITDA recovery based on Mainland China's market was simulated.
- Global Blue's position regarding inflation and its strong customer base was emphasized.
In summary, Global Blue has experienced a healthy third quarter with significant improvements in key financial metrics. The company remains optimistic about its future performance, backed by strong January 2024 trends and strategic investments. Despite some challenges, such as visa issuance delays and increased interest payments, Global Blue is confident in its ability to meet its financial targets and continue its growth trajectory.
InvestingPro Insights
Global Blue's financial growth trajectory is reflected in the company's real-time metrics, showcasing a robust performance in the market. The InvestingPro Data indicates that the company's Market Cap stands at a solid 1130M USD. This financial strength is further underscored by a P/E Ratio of 46.7, which, when adjusted for the last twelve months as of Q3 2024, shows a more favorable figure of 33.58. This adjustment suggests a more competitive valuation of the company in relation to its earnings.
The company's revenue growth is particularly noteworthy, with a substantial increase of 53.05% in the last twelve months as of Q3 2024. This impressive growth rate is a testament to the company's successful strategies and the market's positive response to its offerings.
InvestingPro Tips highlight that Global Blue is trading at a low P/E ratio relative to near-term earnings growth, which could indicate a potential undervaluation of the company's stock. This tip aligns with the company's reported revenue increases and EBITDA growth, suggesting that investors may find value in the current stock price given the company's growth prospects.
Additionally, analysts predict that the company will be profitable this year, a sentiment that is supported by the company's strong performance in January 2024 and the positive outlook for the fiscal years 2024-2025. This aligns with the bullish highlights of the company's recovery in revenue and adjusted EBITDA, reinforcing the optimistic view of Global Blue's financial future.
For a deeper dive into Global Blue's financials and additional tips that could guide investment decisions, readers can explore more on https://www.investing.com/pro/GB. There are currently 7 additional InvestingPro Tips available to help investors make informed choices. Use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, offering even more insights to navigate the market effectively.
Full transcript - Global Blue (GB) Q3 2024:
Jacques Stern: Good morning. Good afternoon. I am, today with Roxanne Dufour, CFO of the group. I am Jacques Stern, the CEO of the group, and we will comment to you our Q3 figures. I will start by an executive summary to draw the main key points to have in mind. First, the first nine months of the year has been strong in terms of revenue with 41% increase. The EBITDA at the end of nine months have increased by 103% at €115 million and this translates a drop through of the revenue into adjusted EBITDA of 62.8%. We are also in this Q3, seeing an acceleration of the annualized adjusted EBITDA at €159 million. Roxane will comment on that. And if we go to January figures, the January have confirmed the strength of the recovery in continental Europe with a recovery of 125% versus 118% in Q3, and same in APAC with a recovery which is now reaching 161% of 2019 in January versus from 115% in Q3. I will give you much more information on that in the coming minutes. Just to mention in this main takeaway, you may remember that we have closed the refinancing by early December 2023, which resulted into a new senior debt of €610 million and FCF of almost €100 million with a maturity of seven years, and alongside also to mention that, we see a very strong improvement of the net leverage ratio at 3.6x versus more than 6x last year. And we confirm our objective to go below 2.5x in terms of net leverage ratio. These are really the takeaway and now I will give the floor to Roxane to give you more detail on Q3 and the nine months financial performance.
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 sub-quarter nine months period ended 31st of December 2023. As a reminder, our financial year runs from April to March and all the reconciliations to the nearest IFRS metrics are included into the appendix. Let's move to Slide 7 for our adjusted P&L of the third quarter. We are pleased here to report another solid quarter with significant progress across the business. TFS and AVPS reported sales in store increased by €1.5 billion an increase of 27.7% versus Q3 last year, group revenue increased by 26.2% to €109.4 million versus the same period last year. Turning to adjusted EBITDA, we have delivered a significant improvement to €39.8 million resulting in an 8.5 point increase in the adjusted EBITDA margin to 36.3% and with a 69% revenue drop through to adjusted EBITDA. Finally, we recorded an adjusted net income for the group of €9.1 million versus €6.6 million in Q3 last year. Let's turn now to Slide 8 for the revenue. Here you can see that we have delivered another strong quarter significant growth, delivered a 26.2% increase in revenue versus the same period last year. I will go into the detail per division on the following slides, but you can see here, TFS, EVPS and NTS contributed to further €22.7 million in revenue with a further €1 million scope effect from TFS and NTS. We then have a €1 million FX impact which gives us at the end to €109.4 million of revenue in Q3 this year versus €86.7 million last year's same period. Turning now to the revenue performance per division. TFS 74% of our revenue in Q3. TFS delivered a strong performance with an increase in revenue of 24.8% on a reported basis to €80.3 million. On a like-for-like basis revenue in continental Europe increased by 17.7% to €68 million while revenue in Asia-Pacific increased by 83.5% to €12 million revenue. This strong performance in Asia reflects the ongoing recovery across all origin nationality with the reopening of Chinese border in January 2023 being the key driver of the revenue improvements, especially in Asia, as I mentioned, where sales in store of shoppers from mainland China has already recovered to 105% in Q3 this year versus 2019. And Jacques will cover that in more details later. Turning now to AVPS. AVPS, this is 20% of our group revenue. This division also delivered a strong performance with an increase in revenue of 37.4% on a reported basis to €22.3 million, reflecting a strong performance across both business segments. On a like-for-like basis, revenue in FX solution increased by 64% to €10.6 million while revenue in the acquiring business increased by 26.2% to almost €12 million. As with TFS, AVPS is also benefiting from the ongoing recovery in the travel industry. Turning now to RTS. RTS 6% of the group revenue in Q3 this year. As a reminder, RTS reflects the acquisition of ZigZag in March '21, consolidation of Yogoda from September '21 and the acquisition of ShipUp in November '22. Here you can see RTS revenue increasing by 11.6% on a reported basis to €6.8 million revenue in Q3 this year. There was an organic growth of 3.9% and an additional 500,000 from the acquisition of ShipUp. While like-for-like revenue growth was moderate at 3.9% as a result of the cessation of sales of carriage to ZigZag clients, which is revenue with lower contribution, the like-for-like contribution growth of the segment, which is after carrier cost, was very strong at 80%. Turning now to detail on adjusted EBITDA, the significant improvement in revenue together with the ongoing focus on the cost base led to a 65.2% increase in adjusted EBITDA in Q3 this year. And the revenue drop through is 69.2% and I will take you through the details here. We begin with our adjusted EBITDA, which was €24.1 million last year. If we look at the additional contribution of each business, contribution being the marginal revenue minus marginal direct variable cost, we have a further €19.4 million in Q3 this year. Then considering the €3.8 million impact of fixed cost and then the scope effect from TFS and RTS and the FX impact, the group delivered an adjusted EBITDA of €39.8 million with an increase in the adjusted EBITDA margin of 8.5 points to 36.3%. Turning now to Slide 13 for further detail on the net finance costs, we are showing here a significant increase of €8.3 million in net finance cost. Few points to consider, first, we have an increase in interest cost of €5.3 million. This is due to an increase in interest rate from 3.26% in October-November '22 last year to this year's same period, 6.5%. And in December, it raised to 8.4% as a result of the refinancing. And then, we have a negative foreign exchange variation of €3 million versus the same period last year. As a reminder, Q3 last year was impacted by the foreign exchange related to the Certares and Knighthead equity transaction and also the supplemental shareholder facility, which was denominated in USD while Global Blue report in euro. Turning now to the detail of quarterly adjusted EBITDA. Here we are showing the annualized adjusted EBITDA for the group based on the quarterly recovery. You can see here a steady and consistent improvement in the annualized quarterly adjusted EBITDA. And now based on the third quarter recovery, the annualized quarterly adjusted EBITDA is at €159 million. This has led to a significant improvement in terms of margin from 28.8% last year's same period to this year, 36.7%. Now, I will take you through the financial detail for the nine months performance. Here, we are showing the adjusted P&L for the nine months over the year, and again we see the same trends as with the Q3. TFS and AVPS reported sales in store increased by €5.9 billion an increase of almost 45% versus the nine months last year. Group revenue increased by 41% to €317 million and then turning to adjusted EBITDA, we have delivered a significant improvement to almost €115 million and with a big improvement in terms of margin, 11 points improvement and the margin now at 36.2%. Finally, we recorded an adjusted net income for the group at €25.3 million again a significant improvement versus last year, which was negative at €7.1 million. Let's turn now and get in further details on our adjusted EBITDA. Similar to Q3, we are showing the detail for the nine months. We achieved a 102% increase in adjusted EBITDA versus last year, and we have a drop through of 63%. Starting with our adjusted EBITDA at €56.7 million last year for the same period, if you look at the additional contribution for each business, we have a further €73.3 million in nine months and then taking into account the fixed cost, €30 million the scope effect about €2 million and then the foreign exchange impact about €500,000. The group delivered an adjusted EBITDA of €114.7 million with an increase, as I mentioned, of the adjusted EBITDA margin at 36.2%, that means plus 11 points. Moving now to the G&A and the net finance cost. In terms of adjusted G&A, so we have a slight increase of €600,000, and now we are at €27.6 million for the period. On the annualized basis, this gives us a G&A of €36 million which is in line with our current level of CapEx. Then related to the net finance cost, we experienced the same trends here as we had in Q3. The net finance costs increased over the nine months period by €9 million, and this is due mainly to the interest cost because they have increased on a blended basis from 3.17% to 6.37%. This was offset by a decrease of other finance costs by €8.3 million and this is the result of the foreign exchange impact related to Certares and Knighthead transaction and supplemental shareholder facility that I have already explained. Let's turn now to the cash flow statement. After an adjusted EBITDA of €114.7 million, the level of CapEx is €27.9 million. And then you can see here a working capital inflow of €6.1 million in the period, which I will cover in detail on the next slide. You have also a higher level of interest paid, about €41 million and this is mainly due to the interest rates over the period that has been raised over the period. Then, the strategic equity investments from Tencent, that has been done in November and that resulted in an inflow of €45 million. You can also see here the cost related to our refinancing for about €24 million. Finally, our net debt has improved by €41.2 million. Let's turn now to the next slide in order to have a look on the working capital dynamics. As a reminder, our working capital is driven by timing difference between the moments we proceed the refunds that we make to the international travelers and the moment we receive VAT payments from merchant and tax authorities. We typically refund travelers on average 30 to 45 days before we are paid by the merchant or authorities. As a result, we experienced cash flow seasonality through the year with a larger net working capital needed during spring summer months, when international shoppers travel more frequently followed by working capital and wind during autumn winter season, our low season. As we have seen the travel industry recover, we have also seen a significant increase in volume, which lead to a much higher working capital need. You can see here, where we add a particularly high outflow of €43 million during the nine months previous year, meaning financial year '22, '23 where we were in full recovery. Now, we are in a more settled environment. You can see this stabilize with a more balanced working capital needed during spring and summer followed by working capital excess during the autumn, which has led here to a €6 million inflow but definitely we can say that, we are in a business with working capital neutrals. Now turning to an analysis of our net debt position. As of 31 December 2023, our net financial debt amounted to €508.6 million including cash and cash equivalent of €101.4 million. You can see here that there has been a strong improvement of the net leverage ratio, which was mentioned in this introduction by Jacques. So from 6.5x at the end of March '23 we are now at 3.6x at the end of December '23. As a reminder, in November, we took the opportunity to renegotiate our senior debt to strengthen the balance sheet with, at the end, meaningfully deleverage the group. The refinancing was closed on the beginning of December and with a senior debt at €610 million with maturity of seven years and the revolving credit facility at €97.5 million which was not drawn at the end of December. Turning now to the key takeaways. First, we are pleased to report a solid recovery with significant increase of 41% of our revenue, which lands at €370 million. Then thanks to the strong revenue growth and ongoing management on the cost base, we are pleased to record a strong improvement in nine months on our adjusted EBITDA. We are at about €115 million, an increase of c% versus the same period last year and a drop through of almost 63% in adjusted EBITDA. On that basis, if we analyze the adjusted EBITDA based on the quarterly performance of the group, there is an acceleration in nine months at €159 million. And to strengthen the balance sheet, the group refinanced its total indebtedness with a senior debt of €610 million and a revolving credit facility of €97.5 million. This is in place until 2030. Finally, we have delivered a strong key improvement in the net leverage ratio to 3.6x and this is reiterating our objective of being below 2.5x. So this concludes the financial section. And I will now hand over to Jacques to present the latest trends in the long term growth of Nobel.
Jacques Stern: Thank you, Roxane. So quick update on the latest trends namely January 2024, we have seen a profitable solid performance an improvement versus Q3. We can see here the figures with 7 point improvement of recovery in Europe, 11 points in APAC. So, it's a good dynamic in January. If we go in detail in Page 25, you can see that in Europe we have reached now 125% recovery to be compared to 118% in Q3 and this is led in particular by an increase of the spend of 34%. If we look in terms of number of international shopper, we still are below 2019 at 93%. If we go now into the detail of the nationality coming to Europe, continental Europe as a destination, I think I will make a few comments there. First, we are seeing and I have a few slides for you in the coming second. On the U.S., we're seeing a U.S. holding firm SAME for the Gulf country both nationality or group of nationality being around 275% to 300% recovery versus 2019, very strong, and also worse to mention that Mainland China, who used to represent 25% of the spend in 2019 have seen in January an acceleration from 58% in Q3 to 80%. So, those will be the two focus that I would like to share with you. Starting by the American, we are seeing that despite some weakness in terms of consumer demand domestically in the U.S., the international spends are very strong. So, 290% in January, which is driven by a recovery very strong in terms of number of shoppers, almost 200%, namely 195% and also a strong increase of the spend of American going and shopping in Europe at 49%, leading to this 290% recovery of the spend versus 2019. If we go into a little bit more detail trying to understand why this performance, you can see on this chart where we are comparing consumer who used to -- who have shopped in the last quarter of the calendar year. So our Q3, but calendar year Q4, you can see that as it has been the case since the beginning of the recovery, the recovery is really very strong for high network individuals and affluent. You can see that on high network individuals, so people in our segmentation, which are spending more than 20K, they are spending in average more than 3x what they used to spend in 2019, and in the last quarter, it was even almost 4x. In summary, American recovery, very strong, we see no sign of decline and it's led by the, I would say, high spender. If we move for Chinese going into continental Europe as a destination, we see there that the acceleration as mentioned in January with 80% recovery, which is a combination of low recovery in terms of number of shopper, 49%, well below the recovery in terms of air capacity in January. Few explanation, one, the cost of the flight, which remained very high, but also some constraints in terms of the visa issuing, which remains important in particular when traveler wants to go to France or to Germany. I will give a little bit more detail in the next slide, which basically explains why we have this low level of recovery of 49% versus air capacity. On the other hand like for other nationality, we are seeing a strong increase of the spent, 63%, which lead to this 80% recovery in terms of spent. If we move now to the recovery in APAC as a destination, you see that they also in January, the recovery has been stronger than in Q3, 161 versus 150%. And I would say, not like in Europe, it's basically driven by the combination of the strong increase of international shopper. We are well above 2019 in APAC as a destination, one in 18, but also by a strong increase of spend, 36%, in line with what we are seeing in Europe. When we go to the detail of the latest trends per nationality coming into APAC as a destination, the most important thing on this slide is, the acceleration of mainland China, which used to represent 56% of the spend of 2019 and for which we have seen an acceleration from 105% in Q3 to 127% in January. If we go a little bit more in detail on this Chinese recovery, we see that like in Europe, the number of international traveler is still, I would say low, 59% would be compared to an air capacity of 82%. But the increase of spend is much more important, 115%, leading to this 127% level of recovery. And a bit like for the American, this table show per segment for people having shop in the last quarter versus 2019, so send passport what is the multiple of spend that they have. And you see that, surprisingly or unsurprisingly, as you want, we see the same trend then for American, i.e. the recovery is really led by a networked individual which are spending 3x more than what they used to spend in 2019 and the affluence is around 2x. Almost the same, I would say, figures that you have seen a couple of minutes ago for the US. If we project ourselves in terms of next month for mainland China, a few elements to have in mind, first, the willingness to shop and abroad remain very strong. You can see that on this slide, every month we survey more than 10,000 Chinese to judge their willingness to travel and to shop abroad. You see that the willingness is strong at more than 76% and it has been quite stable for the last few months. In terms of air capacity, we have seen this influx of January in Europe and in APAC, which is a very good news. We should remain high in particular February, which is Chinese New Year. Obviously, we will see the acceleration of the consumer coming back. We all know that, after capacity being in place, you need a couple of months or weeks in order to see the benefit in terms of the number of travelers. Good news from that point of view. Just here, just to mention in terms of air capacity, what we are seeing is that the recovery is very strong in terms of Tier 1 city. You see that, it's 84% for Europe and 90% for APAC. Tier 1 city in China going to Europe or going to APAC. The secondary and the third cities of China being a little bit less, I would say recovered, which explain also why for those consumers who are spending less than the one from Tier 1 city, we are seeing this fact that we have a recovery of tourists, which is lower than the air capacity, but an increase of spend which is higher. One of the reasons being this mixed effect in terms of recovery from traveler coming from Tier 1 versus other cities. You have on the left the recovery for the various geographies. You see that France, which is one of the hub for Chinese, but generally for tourists when you come in Europe, still has a low recovery in terms of number of flights. So if in Europe we are now back to almost 80%, the recovery of France is dragging down the performance in Europe because usually choice want first to go in France and then go on other countries. Last element in terms of information about China is the visa issuance, which show that, one, things are going better because we see more and more countries where Chinese can get their visa in less than seven days, but we still see that France and Germany, which are two key countries in terms of traction for Chinese, remain, I would say, difficult if you want or lengthy if you want to get the visa. So those things should improve in the coming months. But for now, obviously, they are still one of the reasons why we see this lower number of shoppers versus air capacity. But again, this should improve. Last but not least, if we project ourselves in the coming months, coming quarter, obviously you know this slide it’s how we simulate based on the recovery on Mainland China what could be the recovery of the EBITDA of the Group. And as usual, I will give you a little bit of detail. So in gray, you will recognize the Q3 annual figures at €159 million that Roxane mentioned a few minutes ago, which implied a 52% recovery in terms of mainland China, if we simulate a recovery, which hopefully will come in the next quarter of this level of recovery. For example, being at 100% of recovery, you can see that the implied level of EBITDA would be around €200 million in this slide to be precise, €202 million. This slide is just there to help you to understand based on different level of simulation of Chinese, what could be the impact -- positive impact on Global Blue EBITDA of next year, which is a good transition to talk about guidance and targets. So, we issue guidance and target in September. So two comments there, first, we are confirming our guidance for full year '23 and '24 of €145 million to €165 million. Having in mind that we reach after nine months, €150 million, and for '24, '25, we are looking for an EBITDA above 200 million. With that in mind, you see also the reiteration of the objective of leverage ratio below €2.5 million. Nothing has changed, but we want to reaffirm those targets and guidance. And last but not least, just to remind you that Global Blue is well aged in terms of inflation, because the top line of Global Blue, i.e., the volume, the SIS is directly linked to the luxury bronze price increase, which have grown and which will continue to grow higher than the inflation. And there and on the opposite side, just to remind you if ever we are getting into a recession, which seems to be not the case in the latest academic scenario, but if ever this is the case, to remind you also that we are well hedged against that, thanks to this high network individuals, which are less sensitive to the economic shock that I was showing to you before. So, in summary, a very healthy Q3 with a positive trend in January and a very strong work of the team in order to strengthen the balance sheet and then leverage the Company. So, thanks for the listening. And as usual, you can contact our Investor Relations, Frances Gibbons, who will arrange a one-on-one meeting between you, Roxane, and myself. Thank you very much.
End of Q&A:
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.