Global Blue Group - Q2 2025

Transcript

Jacques Stern (CEO)

Good morning, good afternoon, everyone. I am Jacques Stern, the CEO of Global Blue, and I am today with Roxane Dufour, the CFO of Global Blue, and we will present to you the H1 figures. Let me first start by the key takeaway of this first half. So, very strong delivery. H1 revenue has shown a 20% increase, translated into a 36% increase of the Adjusted EBITDA at 102. Thanks to our operating leverage, we are happy to report an increase of the EBITDA margin of 40.7% and a drop-through of the revenue to EBITDA of 64%. As a consequence, we noted a solid acceleration of the Adjusted EBITDA coming from 175 this quarter versus 164 the previous quarter, and all of that will be detailed by Roxane in a moment. We have also adapted our financial guidance to 185-205.

I will come back to that later in the presentation, and finally, we communicated this morning on an increased share buyback from 10 million-15 million, the extension of the program until November 2025. With that in mind, I'll give you the floor, Roxane.

Roxane Dufour (CFO)

Thank you, Jacques. Good morning, good afternoon, everyone. I'm Roxane Dufour, the CFO of Global Blue, and I will take you through, as mentioned by Jacques, through the group's financial performance for this second quarter and the six-month period ending at the end of September 2024. As a reminder, our financial year runs from April to March, so this is our Q2 and H1 announcement, and all the reconciliation to the nearest IFRS metrics are included into the appendix. Let's start with the adjusted P&L related to our second quarter. We are very pleased to report another strong quarter with significant progress across the business when comparing performance versus the same period last year. Tax Free Shopping Solutions and Payments reported Sales in Store increased by EUR 940 million, an increase of 14%.

The group delivered revenue of EUR 132 million, a 17% increase, driven by a solid performance in Tax Free Shopping Solutions and payments. Given the strong focus on variable cost optimization, the group delivered a contribution of EUR 105 million, a 19% increase. Then, the group delivered an Adjusted EBITDA of EUR 58.7 million, a 25% increase, reflecting strong revenue growth and the high operating leverage profile of our business. This resulted in an improvement in Adjusted EBITDA margin by nearly three points to 44.5%, with a 62% drop-through. Finally, we recorded an adjusted net income for the group of EUR 21 million versus EUR 14 million last year. Turning now to the detail of the divisional performance. Starting with Tax-Free Shopping Solutions, accounting for 77% of our group revenue in the quarter.

The division delivered a strong performance with constant Sales in Store growth of 15% and revenue growth of 18% to EUR 102 million. You can see here that for the first time, we are reporting revenue growth ahead of our Sales in Store growth. A few things. First, and very pleasing to note, similar to our first quarter, there has been no pricing pressure in the period, which has never been the case in the past. Then, we have several positive mix effects and additional revenues, which has increased overall the TFS revenue by 6%. Those growth drivers were somewhat offset by a negative continental mix of 2%. This is because Asia-Pacific is growing faster than Europe, with Sales in Store at 30% versus 25% last year, and the VAT rate in Asia-Pacific is much lower at around 10% versus 20% in Europe.

Then, moving to contribution, which is revenue less variable cost, here we deliver the 20% increase to EUR 87 million, with a strong improvement in both Europe and Asia-Pacific. TFS has a strong contribution margin of 86%, with the variable cost mainly related to airport refunding cost. Turning now to Payments. Payments accounted for 18% of group revenue in the quarter. Overall, Payments delivered a revenue of EUR 23.4 million, a 16% increase ahead of the 9% growth in Sales in Store, mainly due to increased margin on treasury gains. Then, if we look at the contribution level of just over EUR 13 million, EUR 12 million is from FX Solutions with a strong contribution margin of 96%. Then, EUR 1 million is from Acquiring with a contribution margin of 10%. And then you have for EUR 0.4 million, the Integrated Payment Solutions business, which has a contribution margin of 88%. Turning now to Post-Purchase Solutions.

Here, the business line accounted for 5% of group revenue in the quarter. This business line saw a slight decline of 1% with a revenue at EUR 6.7 million, with a contribution growth here flat at EUR 4 million. Turning now to Adjusted EBITDA. As I said earlier, the significant improvement in revenue, together with the high operating leverage profile of the business, led to a 25% increase in Adjusted EBITDA in the quarter, with a 62% drop-through. Last year, we were at EUR 47 million, and then with the additional contribution of EUR 17 million coming from all the business lines and fixed cost and FX exchange impact of EUR 5 million, the group delivered an Adjusted EBITDA of EUR 59 million this quarter, with an increase in Adjusted EBITDA margin of nearly three points to 44.5%. Turning now to detail the first half performance.

Here, we are showing the adjusted P&L, so for the first half of the year. And again, we see the same positive trends as with the second Tax Free Shopping Solutions and payments reported Sales in Store increased by EUR 2.5 billion, a solid increase of 22%. The group delivered a revenue of EUR 250 million, a 20% increase year-on-year, driven by a particular strong performance in Tax-Free Shopping Solutions. As I mentioned, given the strong focus on variable cost optimization, the group delivered a contribution of EUR 196.5 million, a 23% increase year-on-year. Turning to Adjusted EBITDA, another significant improvement here with an increase of 36% to EUR 102 million. This boosted the Adjusted EBITDA margin by nearly five points to 40.7%, with a strong 64% drop-through. And finally, we achieved a net income of EUR 27 million for the group, up 66% year-on-year.

Turning now to the divisional performance. Starting with Tax-Free Shopping Solutions. The division delivered a strong performance with an increase in completed SiS of 27% and an increase in revenue of 25% to EUR 193 Tax Free Shopping Solutions delivered an impressive revenue of EUR 193 million, up 25% year-on-year. Continental Europe contributed EUR 162 million, a solid 21% increase, while Asia-Pacific achieved EUR 31 million in revenue, a remarkable 49% growth driven by a strong Sales in Store performance. You can see here the slight difference in completed SiS growth of 27% and revenue growth of 25%. This is due to the positive trends in mix effect and some additional revenue for 5%. And again, very important to highlight, no pricing pressure in the period. This has been offset by the negative continental mix of 7%.

Then, given this strong focus on variable cost optimization, we delivered a 27% increase in contribution to EUR 165 million and a strong contribution margin of 85%. Turning now to Payments. Payments delivered a revenue of EUR 43.7 million, up 12% versus last year, outpacing the 7% growth in Sales in Store, and this was primarily driven by the higher margin on treasury gains. FX solution generated EUR 22 million of revenue, a solid 10% increase year-on-year. Acquiring revenue grew to EUR 20.5 million, reflecting a 14% increase, while the Integrated Payment Solutions business achieved EUR 0.9 million in revenue, a solid 32% year-on-year growth. Here, we delivered a strong contribution growth across all the business lines with an average of 9.3%. Turning now to Post-Purchase Solutions.

Here, the business line delivered revenue of EUR 13 million, a 6% year-on-year decline, while revenue was impacted by management decisions to move away from certain low-contribution ZigZag carrier contracts. The contribution growth of the segment after variable cost is solid at 7%. Turning now to Adjusted EBITDA. Last year, we delivered EUR 75 million in H1. This year, with the additional contribution of EUR 38 million from all the business lines and fixed cost and FX impact of EUR 11 million, the group delivered an Adjusted EBITDA of EUR 102 million, a double-digit increase of 36%, reflecting strong revenue growth and high operating leverage profile of the business. Consequently, the Adjusted EBITDA margin increased by nearly five points to 40.7%. Turning now to Adjusted EBITDA. Here, you can see the breakdown of our D&A. The Adjusted D&A has increased by EUR 6 million in the period to EUR 24 million.

This is mainly due to two factors. First, there was a EUR 2 million increase in the amortization of capitalized software, which reflects the increase in CapEx related to software development over the last two years. Second, depreciation of leases increased by EUR 3 million, which included EUR 1 million due to a change in accounting related to short-term lease in accordance with IFRS 16 standards. As a reminder, following the ramp-up of the investment in software CapEx, in the coming years, annual software CapEx amortization should converge with the annual software CapEx spent. Turning now to the net finance cost. Here, we are showing an increase of EUR 5 million in net finance cost versus the same period last year. This is mainly due to the increase in interest rates on the senior debt, which was 7.6% in the period versus 6.1% in the same period last year.

Looking to the full year, 2024-25, the expected senior debt cost is EUR 45.3 million, which includes a saving of EUR 3 million from a swap on EURIBOR for half of the senior debt. Turning now to the next slides. Here, we are showing the last 12 months' Adjusted EBITDA over the last eight quarters. As mentioned by Jacques in the introductions, you can see here there has been a solid acceleration in the last 12 months' Adjusted EBITDA to EUR 175 million, up from EUR 164 million in the previous quarter. Turning now to detail the cash flow. After an Adjusted EBITDA of EUR 102 million, the level of CapEx was EUR 26 million in the period, and it's essentially related to technology development. The group delivered a solid improvement in Adjusted EBITDA less capital expenditure of EUR 76 million, a year-on-year improvement of EUR 19 million.

In parallel, reflecting the normalization of working capital, pre-tax and leverage-free cash flow reached EUR 57 million versus EUR 11.7 million last year. Finally, there has been an increase in net debt of EUR 7 million that I propose to analyze in the next slide. At the end of September 2024, group net debt reached EUR 516 million, consisting of gross financial debt of EUR 610 million and cash and cash equivalents of EUR 94 million. This is resulting in a net leverage ratio of 2.9 times, which is a significant improvement from the 4.5 times in September last year. Turning now to the key takeaways. Here, to conclude the financial sections, here are the main highlights. First, very pleased to report a very strong first half of the year with a significant increase in revenue of 20% to EUR 250 million.

Second, reflecting the strong revenue growth and high operating leverage profile of our business, we delivered a strong improvement in Adjusted EBITDA to EUR 102 million, which is an increase of 36% of that reported last year and with a 64% drop-through. Then, if we look at the last 12 months' Adjusted EBITDA, there has been a continuous improvement over the last eight quarters, reaching now EUR 175 million, up from the EUR 164 million in the Q1 quarter. Finally, we delivered a strong improvement in the net leverage ratio to 2.9 times versus 4.5 times in the same period last year, and we reiterate our objective of being below 2.5 times. So this concludes the financial sections, and I will now hand over to Jacques to present the latest trends, guidance, and the long-term growth drivers for the business.

Jacques Stern (CEO)

Thanks, Roxane. Let's start this second part by the latest trends.

So in this slide, you have the figures of October 24, which are really very similar to our Q2. If we start by Europe, where we have the detail in a minute, you see that we are reporting a 12% issued SiS increase versus 11% in Q2, so very similar. And for APAC, we have a 29% increase, slightly slowing down versus Q2. I will come back in a minute on that. If we make a focus on Europe, so the growth was 12% during this October time. We see that Italy and Spain remain very strong, with France coming back to the previous Olympics figures at 10%, while during Q2, the Olympics had a negative impact, translated only into a 2% increase versus previous year.

If we switch on the right side of the slide, looking at the nationality, you see that the main nationality in Europe is the U.S. with 18% contribution, and we are noticing there still a very strong double-digit increase at 10% in October versus 15% in Q2. The European Regionals, which are all the non-EU residents, contribute for 16%, with a 26% increase during October, and probably the last comment I will do is China, which represents 10% of the total business in Europe, has grown by 15% in October, in line with the 22% of the Q2, so overall, a performance in Europe which remains strong, double-digit, 12%, slightly ahead of Q2.

If we move to APAC, as I was mentioning, we have seen a slowdown of the APAC growth at 29% versus 40% in Q2, mostly linked to Japan, with a 32% performance versus 57% performance, mostly linked to the strengthening of the Japanese yen. There also, if we look to the nationality in this part of the world, Mainland China is the main contributor with 36%. We see a very strong growth of China, with 50% in October, which is more or less in line with the Q2 figures of 58%. Let's now turn to the short-term guidance and the long-term target. I will start by the guidance of 24-25, where we have adapted our guidance to EUR 185 million-EUR 205 million, with the following context. We see still a very positive trend in the travel industry, in particular in the high-end segments, which is benefited from Global Blue.

As you know, around 85% of our consumers take a plane in order to go abroad and shop abroad. So the fact that the travel industry remains strong is a very good indicator for us. We are also pleased to report a strong progress in the implementation of the management initiative, which translates into improvement in penetration of our solution in our clients and usage and more usage by customers, which translates by an incremental growth versus just the market growth. Having said that, obviously, I'm sure that all of you, you have noticed that the luxury market in itself has reported figures which are clearly showing a slowdown. This has not been the case for the last quarter for Global Blue, and you can see the comparison between Global Blue figures and the luxury market in the last two quarters.

This is mainly thanks to our exposure to affluent and high-net-worth individuals. But having said that, we are not totally immune, I would say, from this market. So with that in mind, but also the fact that during the year, we have decided to accelerate some investment in future growth drivers, which had an impact of EUR 5 million on additional fixed cost. We have guided to this EUR 185-EUR 205. Coming back just a second on this new initiative, three to mention, which will be providing further growth in the future, new country, where the pipeline is very healthy and where we believe that in the next two to three, in the next 15 months, we will be able to open two to three countries, and therefore, we are accelerating our investment in this field.

Second is Japan, where the Japanese government has decided to change the regulation in 2026, going from a system where there's no validation like in most of the countries to a system where there will be a validation and where, like in Europe, consumers will pay in store the VAT and will, after the validation, receive their refund. Thanks to that, we believe that we will be able to increase the take-up in Japan, which is, as you know, one of the lowest in the world, having in mind that in terms of volume, it's one of the biggest.

With that in mind, it's really a very sizable opportunity for us, and therefore, we are ramping up in order to bring all our expertise and know-how that we have developed for 40 years outside of Japan into the Japan organization, which means there are also some investments, but which will translate into a real sizable opportunity of growth for us in 2026. Last but not least, in the payment side, I've already talked a little bit about our Hospitality Gateway. A lot of traction in the market there with the potential of growth in terms of rolling out new hotels in the next 15 months, and there also, we have speeded up the growth in that perspective. With all that in mind, as mentioned, we have an Adjusted EBITDA guidance of EUR 185-EUR 205. For the long-term target, I would say in short, no change.

We remain committed to a target of 8%-12% in terms of revenue growth, with a drop-through of 50%, CapEx between 40%-45%, neutral working capital in terms of cash flow, and a tax rate of between 24%-26%. As mentioned before by Roxane, we remain with this long-term objective to be below 2.5 times EBITDA versus net debt in terms of net leverage. Last but not least, I'd like to finish by this slide which reminds all of us that Global Blue is well hedged against inflation or recession risk. Just to remind you that in the last four years, our underlying business, which is luxury, has increased the price by 27% versus inflation, which was only about 20%, which means that the revenue of Global Blue has been indexed on this luxury price increase, and therefore, we have benefited from that.

On the other side, on the recession case, in particular in Europe, we have seen in 2008 and 2009 that Global Blue was very resilient at that time, being capable to post flat SiS growth, while the luxury market was negative by 8% and the travel market by 16%. The main reason for that being that, as I've already mentioned, we are really skewed to this high-net-worth individual and affluent network, which are, I would say, more resilient to any economic shock. So in summary, not sensitive to inflation and resilient to recession. So in conclusion, very strong H1 figures. I will not go to the detail, but I think the acceleration of the last 12 months' EBITDA at 175 is a very good indicator on our capability to reach for the full year 185-205, which is our guidance.

As mentioned in the introduction, we have decided to increase our share buyback from 10 million-15 million with a program which will endure until November 2025. Thank you very much for listening.