International Blue Group Holding AG (GB) Q3 2024 Earnings Name Transcript

International Blue Group Holding AG (NYSE:GB) Q3 2024 Outcomes Convention Name February 23, 2024 8:00 AM ET

Firm Contributors

Jacques Stern – CEO

Roxane Dufour – CFO

Frances Gibbons – Head of IR

Jacques Stern

Good morning. Good afternoon. I’m, at this time with Roxanne Dufour, CFO of the group. I’m Jacques Stern, the CEO of the group, and we are going to remark to you our Q3 figures. I’ll begin by an government abstract to attract the principle key factors to bear in mind.

First, the primary 9 months of the 12 months has been robust when it comes to income with 41% improve. The EBITDA on the finish of 9 months have elevated by 103% at €115 million and this interprets a drop by way of of the income into adjusted EBITDA of 62.8%. We’re additionally on this Q3, seeing an acceleration of the annualized adjusted EBITDA at €159 million.

Roxane will touch upon that. And if we go to January figures, the January have confirmed the energy of the restoration in continental Europe with a restoration of 125% versus 118% in Q3, and identical in APAC with a restoration which is now reaching 161% of 2019 in January versus from 115% in Q3. I provides you with rather more data on that within the coming minutes.

Simply to say on this major takeaway, chances are you’ll keep in mind that we now have closed the refinancing by early December 2023, which resulted into a brand new senior debt of €610 million and FCF of virtually €100 million with a maturity of seven years, and alongside additionally to say that, we see a really robust enchancment of the online leverage ratio at 3.6x versus greater than 6x final 12 months. And we verify our goal to go beneath 2.5x when it comes to web leverage ratio.

These are actually the takeaway and now I’ll give the ground to Roxane to provide you extra element on Q3 and the 9 months monetary efficiency.

Roxane Dufour

Thanks, Jacques. I am Roxane Dufour, the CFO of International Blue and I’ll take you thru the group’s monetary efficiency for the sub-quarter 9 months interval ended thirty first of December 2023. As a reminder, our monetary 12 months runs from April to March and all of the reconciliations to the closest IFRS metrics are included into the appendix.

Let’s transfer to Slide 7 for our adjusted P&L of the third quarter. We’re happy right here to report one other stable quarter with vital progress throughout the enterprise. TFS and AVPS reported gross sales in retailer elevated by €1.5 billion a rise of 27.7% versus Q3 final 12 months, group income elevated by 26.2% to €109.4 million versus the identical interval final 12 months.

Turning to adjusted EBITDA, we now have delivered a major enchancment to €39.8 million leading to an 8.5 level improve within the adjusted EBITDA margin to 36.3% and with a 69% income drop by way of to adjusted EBITDA. Lastly, we recorded an adjusted web earnings for the group of €9.1 million versus €6.6 million in Q3 final 12 months.

Let’s flip now to Slide 8 for the income. Right here you may see that we now have delivered one other robust quarter vital progress, delivered a 26.2% improve in income versus the identical interval final 12 months. I’ll go into the element per division on the next slides, however you may see right here, TFS, EVPS and NTS contributed to additional €22.7 million in income with an additional €1 million scope impact from TFS and NTS. We then have a €1 million FX affect which supplies us on the finish to €109.4 million of income in Q3 this 12 months versus €86.7 million final 12 months’s identical interval.

Turning now to the income efficiency per division. TFS 74% of our income in Q3. TFS delivered a powerful efficiency with a rise in income of 24.8% on a reported foundation to €80.3 million. On a like-for-like foundation income in continental Europe elevated by 17.7% to €68 million whereas income in Asia-Pacific elevated by 83.5% to €12 million income.

This robust efficiency in Asia displays the continuing restoration throughout all origin nationality with the reopening of Chinese language border in January 2023 being the important thing driver of the income enhancements, particularly in Asia, as I discussed, the place gross sales in retailer of consumers from mainland China has already recovered to 105% in Q3 this 12 months versus 2019. And Jacques will cowl that in additional particulars later.

Turning now to AVPS. AVPS, that is 20% of our group income. This division additionally delivered a powerful efficiency with a rise in income of 37.4% on a reported foundation to €22.3 million, reflecting a powerful efficiency throughout each enterprise segments. On a like-for-like foundation, income in FX answer elevated by 64% to €10.6 million whereas income within the buying enterprise elevated by 26.2% to nearly €12 million. As with TFS, AVPS can also be benefiting from the continuing restoration within the journey business.

Turning now to RTS. RTS 6% of the group income in Q3 this 12 months. As a reminder, RTS displays the acquisition of ZigZag in March ’21, consolidation of Yogoda from September ’21 and the acquisition of ShipUp in November ’22. Right here you may see RTS income rising by 11.6% on a reported foundation to €6.8 million income in Q3 this 12 months. There was an natural progress of three.9% and a further 500,000 from the acquisition of ShipUp.

Whereas like-for-like income progress was reasonable at 3.9% on account of the cessation of gross sales of carriage to ZigZag shoppers, which is income with decrease contribution, the like-for-like contribution progress of the phase, which is after service value, was very robust at 80%.

Turning now to element on adjusted EBITDA, the numerous enchancment in income along with the continuing give attention to the price base led to a 65.2% improve in adjusted EBITDA in Q3 this 12 months. And the income drop by way of is 69.2% and I’ll take you thru the main points right here. We start with our adjusted EBITDA, which was €24.1 million final 12 months.

If we take a look at the extra contribution of every enterprise, contribution being the marginal income minus marginal direct variable value, we now have an additional €19.4 million in Q3 this 12 months. Then contemplating the €3.8 million affect of fastened value after which the scope impact from TFS and RTS and the FX affect, the group delivered an adjusted EBITDA of €39.8 million with a rise within the adjusted EBITDA margin of 8.5 factors to 36.3%.

Turning now to Slide 13 for additional element on the web finance prices, we’re exhibiting right here a major improve of €8.3 million in web finance value. Few factors to contemplate, first, we now have a rise in curiosity value of €5.3 million. This is because of a rise in rate of interest from 3.26% in October-November ’22 final 12 months to this 12 months’s identical interval, 6.5%. And in December, it raised to eight.4% on account of the refinancing.

After which, we now have a detrimental overseas trade variation of €3 million versus the identical interval final 12 months. As a reminder, Q3 final 12 months was impacted by the overseas trade associated to the Certares and Knighthead fairness transaction and in addition the supplemental shareholder facility, which was denominated in USD whereas International Blue report in euro.

Turning now to the element of quarterly adjusted EBITDA. Right here we’re exhibiting the annualized adjusted EBITDA for the group primarily based on the quarterly restoration. You may see right here a gentle and constant enchancment within the annualized quarterly adjusted EBITDA. And now primarily based on the third quarter restoration, the annualized quarterly adjusted EBITDA is at €159 million. This has led to a major enchancment when it comes to margin from 28.8% final 12 months’s identical interval to this 12 months, 36.7%.

Now, I’ll take you thru the monetary element for the 9 months efficiency. Right here, we’re exhibiting the adjusted P&L for the 9 months over the 12 months, and once more we see the identical tendencies as with the Q3. TFS and AVPS reported gross sales in retailer elevated by €5.9 billion a rise of virtually 45% versus the 9 months final 12 months.

Group income elevated by 41% to €317 million after which turning to adjusted EBITDA, we now have delivered a major enchancment to nearly €115 million and with an enormous enchancment when it comes to margin, 11 factors enchancment and the margin now at 36.2%. Lastly, we recorded an adjusted web earnings for the group at €25.3 million once more a major enchancment versus final 12 months, which was detrimental at €7.1 million.

Let’s flip now and get in additional particulars on our adjusted EBITDA. Much like Q3, we’re exhibiting the element for the 9 months. We achieved a 102% improve in adjusted EBITDA versus final 12 months, and we now have a drop by way of of 63%.

Beginning with our adjusted EBITDA at €56.7 million final 12 months for a similar interval, for those who take a look at the extra contribution for every enterprise, we now have an additional €73.3 million in 9 months after which making an allowance for the fastened value, €30 million the scope impact about €2 million after which the overseas trade affect about €500,000. The group delivered an adjusted EBITDA of €114.7 million with a rise, as I discussed, of the adjusted EBITDA margin at 36.2%, meaning plus 11 factors.

Shifting now to the G&A and the online finance value. By way of adjusted G&A, so we now have a slight improve of €600,000, and now we’re at €27.6 million for the interval. On the annualized foundation, this provides us a G&A of €36 million which is in step with our present stage of CapEx. Then associated to the online finance value, we skilled the identical tendencies right here as we had in Q3.

The web finance prices elevated over the 9 months interval by €9 million, and that is due primarily to the curiosity value as a result of they’ve elevated on a blended foundation from 3.17% to six.37%. This was offset by a lower of different finance prices by €8.3 million and that is the results of the overseas trade affect associated to Certares and Knighthead transaction and supplemental shareholder facility that I’ve already defined.

Let’s flip now to the money circulation assertion. After an adjusted EBITDA of €114.7 million, the extent of CapEx is €27.9 million. After which you may see right here a working capital influx of €6.1 million within the interval, which I’ll cowl intimately on the subsequent slide. You’ve gotten additionally a better stage of curiosity paid, about €41 million and that is primarily as a result of rates of interest over the interval that has been raised over the interval.

Then, the strategic fairness investments from Tencent, that has been achieved in November and that resulted in an influx of €45 million. It’s also possible to see right here the price associated to our refinancing for about €24 million. Lastly, our web debt has improved by €41.2 million.

Let’s flip now to the subsequent slide so as to take a look on the working capital dynamics. As a reminder, our working capital is pushed by timing distinction between the moments we proceed the refunds that we make to the worldwide vacationers and the second we obtain VAT funds from service provider and tax authorities.

We sometimes refund vacationers on common 30 to 45 days earlier than we’re paid by the service provider or authorities. In consequence, we skilled money circulation seasonality by way of the 12 months with a bigger web working capital wanted throughout spring summer time months, when worldwide consumers journey extra steadily adopted by working capital and wind throughout autumn winter season, our off-season.

As we now have seen the journey business get better, we now have additionally seen a major improve in quantity, which result in a a lot larger working capital want. You may see right here, the place we add a very excessive outflow of €43 million throughout the 9 months earlier 12 months, that means monetary 12 months ’22, ’23 the place we have been in full restoration.

Now, we’re in a extra settled atmosphere. You may see this stabilize with a extra balanced working capital wanted throughout spring and summer time adopted by working capital extra throughout the autumn, which has led right here to a €6 million influx however undoubtedly we will say that, we’re in a enterprise with working capital neutrals.

Now turning to an evaluation of our web debt place. As of 31 December 2023, our web monetary debt amounted to €508.6 million together with money and money equal of €101.4 million. You may see right here that there was a powerful enchancment of the online leverage ratio, which was talked about on this introduction by Jacques. So from 6.5x on the finish of March ’23 we are actually at 3.6x on the finish of December ’23.

As a reminder, in November, we took the chance to renegotiate our senior debt to strengthen the steadiness sheet with, on the finish, meaningfully deleverage the group. The refinancing was closed on the start of December and with a senior debt at €610 million with maturity of seven years and the revolving credit score facility at €97.5 million which was not drawn on the finish of December.

Turning now to the important thing takeaways. First, we’re happy to report a stable restoration with vital improve of 41% of our income, which lands at €370 million. Then due to the robust income progress and ongoing administration on the price base, we’re happy to report a powerful enchancment in 9 months on our adjusted EBITDA. We’re at about €115 million, a rise of c% versus the identical interval final 12 months and a drop by way of of virtually 63% in adjusted EBITDA.

On that foundation, if we analyze the adjusted EBITDA primarily based on the quarterly efficiency of the group, there’s an acceleration in 9 months at €159 million. And to strengthen the steadiness sheet, the group refinanced its whole indebtedness with a senior debt of €610 million and a revolving credit score facility of €97.5 million. That is in place till 2030.

Lastly, we now have delivered a powerful key enchancment within the web leverage ratio to three.6x and that is reiterating our goal of being beneath 2.5x. So this concludes the monetary part.

And I’ll now hand over to Jacques to current the newest tendencies in the long run progress of Nobel.

Jacques Stern

Thanks, Roxane. So fast replace on the newest tendencies particularly January 2024, we now have seen a worthwhile stable efficiency an enchancment versus Q3. We are able to see right here the figures with 7 level enchancment of restoration in Europe, 11 factors in APAC. So, it is a good dynamic in January.

If we go intimately in Web page 25, you may see that in Europe we now have reached now 125% restoration to be in comparison with 118% in Q3 and that is led specifically by a rise of the spend of 34%. If we glance when it comes to variety of worldwide shopper, we nonetheless are beneath 2019 at 93%. If we go now into the element of the nationality coming to Europe, continental Europe as a vacation spot, I believe I’ll make just a few feedback there.

First, we’re seeing and I’ve just a few slides for you within the coming second. On the U.S., we’re seeing a U.S. holding agency SAME for the Gulf nation each nationality or group of nationality being round 275% to 300% restoration versus 2019, very robust, and in addition worse to say that Mainland China, who used to signify 25% of the spend in 2019 have seen in January an acceleration from 58% in Q3 to 80%. So, these would be the two focus that I wish to share with you.

Beginning by the American, we’re seeing that regardless of some weak point when it comes to shopper demand domestically within the U.S., the worldwide spends are very robust. So, 290% in January, which is pushed by a restoration very robust when it comes to variety of consumers, nearly 200%, particularly 195% and in addition a powerful improve of the spend of American going and buying in Europe at 49%, resulting in this 290% restoration of the spend versus 2019.

If we go into a bit bit extra element making an attempt to know why this efficiency, you may see on this chart the place we’re evaluating shopper who used to — who’ve shopped within the final quarter of the calendar 12 months. So our Q3, however calendar 12 months This fall, you may see that because it has been the case for the reason that starting of the restoration, the restoration is actually very robust for top community people and prosperous. You may see that on excessive community people, so folks in our segmentation, that are spending greater than 20K, they’re spending in common greater than 3x what they used to spend in 2019, and within the final quarter, it was even nearly 4x.

In abstract, American restoration, very robust, we see no signal of decline and it is led by the, I might say, excessive spender. If we transfer for Chinese language going into continental Europe as a vacation spot, we see there that the acceleration as talked about in January with 80% restoration, which is a mixture of low restoration when it comes to variety of shopper, 49%, effectively beneath the restoration when it comes to air capability in January.

Few clarification, one, the price of the flight, which remained very excessive, but in addition some constraints when it comes to the visa issuing, which stays vital specifically when traveler desires to go to France or to Germany. I’ll give a bit bit extra element within the subsequent slide, which principally explains why we now have this low stage of restoration of 49% versus air capability.

However like for different nationality, we’re seeing a powerful improve of the spent, 63%, which result in this 80% restoration when it comes to spent. If we transfer now to the restoration in APAC as a vacation spot, you see that additionally they in January, the restoration has been stronger than in Q3, 161 versus 150%.

And I might say, not like in Europe, it is principally pushed by the mix of the robust improve of worldwide shopper. We’re effectively above 2019 in APAC as a vacation spot, one in 18, but in addition by a powerful improve of spend, 36%, in step with what we’re seeing in Europe.

After we go to the element of the newest tendencies per nationality coming into APAC as a vacation spot, a very powerful factor on this slide is, the acceleration of mainland China, which used to signify 56% of the spend of 2019 and for which we now have seen an acceleration from 105% in Q3 to 127% in January.

If we go a bit bit extra intimately on this Chinese language restoration, we see that like in Europe, the variety of worldwide traveler continues to be, I might say low, 59% could be in comparison with an air capability of 82%. However the improve of spend is rather more vital, 115%, resulting in this 127% stage of restoration.

And a bit like for the American, this desk present per phase for folks having store within the final quarter versus 2019, so ship passport what’s the a number of of spend that they’ve. And also you see that, surprisingly or unsurprisingly, as you need, we see the identical development then for American, i.e. the restoration is actually led by a networked particular person that are spending 3x greater than what they used to spend in 2019 and the affluence is round 2x. Virtually the identical, I might say, figures that you’ve seen a few minutes in the past for the US.

If we mission ourselves when it comes to subsequent month for mainland China, just a few components to bear in mind, first, the willingness to buy and overseas stay very robust. You may see that on this slide, each month we survey greater than 10,000 Chinese language to guage their willingness to journey and to buy overseas. You see that the willingness is robust at greater than 76% and it has been fairly secure for the previous few months.

By way of air capability, we now have seen this inflow of January in Europe and in APAC, which is an excellent information. We should always stay excessive specifically February, which is Chinese language New Yr. Clearly, we are going to see the acceleration of the buyer coming again. Everyone knows that, after capability being in place, you want a few months or weeks in an effort to see the profit when it comes to the variety of vacationers.

Excellent news from that viewpoint. Simply right here, simply to say when it comes to air capability, what we’re seeing is that the restoration may be very robust when it comes to Tier 1 metropolis. You see that, it is 84% for Europe and 90% for APAC. Tier 1 metropolis in China going to Europe or going to APAC.

The secondary and the third cities of China being a bit bit much less, I might say recovered, which clarify additionally why for these shoppers who’re spending lower than the one from Tier 1 metropolis, we’re seeing this undeniable fact that we now have a restoration of vacationers, which is decrease than the air capability, however a rise of spend which is larger. One of many causes being this blended impact when it comes to restoration from traveler coming from Tier 1 versus different cities.

You’ve gotten on the left the restoration for the varied geographies. You see that France, which is likely one of the hub for Chinese language, however typically for vacationers while you are available in Europe, nonetheless has a low restoration when it comes to variety of flights. So if in Europe we are actually again to nearly 80%, the restoration of France is dragging down the efficiency in Europe as a result of often alternative need first to go in France after which go on different nations.

Final factor when it comes to details about China is the visa issuance, which present that, one, issues are going higher as a result of we see an increasing number of nations the place Chinese language can get their visa in lower than seven days, however we nonetheless see that France and Germany, that are two key nations when it comes to traction for Chinese language, stay, I might say, tough if you would like or prolonged if you wish to get the visa.

So these issues ought to enhance within the coming months. However for now, clearly, they’re nonetheless one of many the reason why we see this decrease variety of consumers versus air capability. However once more, this could enhance.

Final however not least, if we mission ourselves within the coming months, coming quarter, clearly you understand this slide it’s how we simulate primarily based on the restoration on Mainland China what could possibly be the restoration of the EBITDA of the Group.

And as common, I provides you with a bit little bit of element. So in grey, you’ll acknowledge the Q3 annual figures at €159 million that Roxane talked about a couple of minutes in the past, which implied a 52% restoration when it comes to mainland China, if we simulate a restoration, which hopefully will come within the subsequent quarter of this stage of restoration.

For instance, being at 100% of restoration, you may see that the implied stage of EBITDA could be round €200 million on this slide to be exact, €202 million. This slide is simply there that will help you to know primarily based on completely different stage of simulation of Chinese language, what could possibly be the affect — optimistic affect on International Blue EBITDA of subsequent 12 months, which is an effective transition to speak about steering and targets.

So, we difficulty steering and goal in September. So two feedback there, first, we’re confirming our steering for full 12 months ’23 and ’24 of €145 million to €165 million. Having in thoughts that we attain after 9 months, €150 million, and for ’24, ’25, we’re on the lookout for an EBITDA above 200 million.

With that in thoughts, you see additionally the reiteration of the target of leverage ratio beneath €2.5 million. Nothing has modified, however we wish to reaffirm these targets and steering. And final however not least, simply to remind you that International Blue is effectively aged when it comes to inflation, as a result of the highest line of International Blue, i.e., the amount, the SIS is immediately linked to the luxurious bronze value improve, which have grown and which can proceed to develop larger than the inflation.

And there and on the alternative aspect, simply to remind you if ever we’re getting right into a recession, which appears to be not the case within the newest educational state of affairs, but when ever that is the case, to remind you additionally that we’re effectively hedged towards that, due to this excessive community people, that are much less delicate to the financial shock that I used to be exhibiting to you earlier than.

So, in abstract, a really wholesome Q3 with a optimistic development in January and a really robust work of the crew in an effort to strengthen the steadiness sheet after which leverage the Firm. So, thanks for the listening. And as common, you may contact our Investor Relations, Frances Gibbons, who will prepare a one-on-one assembly between you, Roxane, and myself. Thanks very a lot.

Query-and-Reply Session

Finish of Q&A

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