Release Date: August 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Gross margin expanded to 45%, the strongest quarterly gross margin to date.
- Adjusted EBITDA margin increased by 6 percentage points due to cost and productivity initiatives.
- Breakeven normalized free cash flow achieved for Q2, demonstrating focus on profitability.
- App-centric strategy led to a 52% increase in app installations year over year.
- Successful cost reduction initiatives resulted in a EUR34 million cost reduction year over year.
Negative Points
- Net merchandise value (NMV) decreased by 12% year over year on a constant currency basis.
- Active customer base declined by 16.7% year over year.
- Order frequency saw a decline, now at 2.3 times.
- Revenue declined 13% on a constant currency basis in Q2.
- Significant competitive and discount-heavy market conditions in Australia and New Zealand impacted gross margin.
Q & A Highlights
Q: Are you still expecting an improvement in demand in H2, and at what point in the half are you expecting it? Also, why hasn't there been a change to the full-year adjusted EBITDA guidance range?
A: We expect a gradual recovery in demand throughout the year, though it has taken longer than initially expected. June and July have shown the strongest year-on-year rates, giving us positive indications. However, we remain cautious about Q4 due to its seasonality. We are comfortable with our top-line guidance, which implies a marked improvement in the second half. Regarding adjusted EBITDA, we have made significant progress in reducing losses and have ongoing cost efficiency programs. The second half is our peak trading period, which carries the most risk, so we are confident in our current guidance.
Q: Can you disaggregate the EUR34 million cost reduction in H1 between lower volumes and fixed costs taken out of the business?
A: The majority of the savings are from proactive initiatives, with volume savings being offset by inflation and other external metrics. The cost reductions are balanced between measures introduced this year and last year, with a significant pipeline of activities initiated this year that will flow into the second half.
Q: Could you give an indication of NMV performance in June and July combined? Have we seen the bottom of the top-line decline in H1?
A: In Q1, NMV declined by 16%, which reduced to 12% in Q2. For June and July combined, we saw a mid-single-digit decline, with July being slightly better than June. This indicates a gradual improvement, suggesting that we may have seen the worst of the top-line decline in H1.
Q: How much of the decline is driven by weak consumer sentiment versus intensified competition?
A: It's challenging to allocate precisely, but we focus on adapting our business to serve customers better in this environment. This includes having the right assortment and working closely with brand partners. The improvement in trends is more about adapting to the environment rather than a significant change in the environment itself.
Q: When do you expect to return to positive top-line growth, adjusted EBITDA, and free cash flow on a full-year basis?
A: We don't have positive top-line growth in the guidance for this year. However, if we can significantly improve in the second half, it would give more visibility for moving into positive territory in the not-so-distant future, potentially starting in 2025. We are focused on turning each regional business into positive EBITDA as quickly as possible, which will help achieve adjusted EBITDA breakeven and positive normalized free cash flow.
Q: How will you stop the loss of customers and reverse the trend? What is the lowest level of marketing spend needed to stabilize the business?
A: We focus on an app-centric approach for customer acquisition and engagement, CRM measures to drive next orders, and customer reactivation. Our marketing spend typically represents around 7% of NMV, which we believe is necessary to deliver on the turnaround in customer dynamics.
Q: Are there plans to make the company better known on the stock market? How is your exchange with major shareholders?
A: Our primary focus is on improving business performance, but we continue to engage with existing and potential shareholders. We participate in conferences and are open to conversations with the investor community. Interested parties can reach out to our Investor Relations team for more information.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
