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Zalando SE Call Transcript 2019
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Call Transcript
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Zalando. The Starting Point for Fashion.
Earnings Call
May 2, 2019
Highlights and Business Update
Strong and profitable growth in Q1
Solid financial performance: GMV +23%, Revenue +15%, adj. EBIT €6m
Guidance confirmed for FY/19: Strong growth and solid profitability – in line with long-term growth outlook Progress on starting point strategy: NPS at all time high and growing reach (traffic +29%)
Progress on platform scaling: PP, ZFS and ZMS
Aligning the company on a more focused strategy: concentrating on the right priorities and investments
Customer satisfaction hitting all time high
Platform transition continues to gain traction
5 (1) Product Detail Page (PDP) views that were initiated through an external ZMS ad placement on Zalando, web or social channels
We create focus in our strategy, our priorities and our investments
- Our fulfillment network has evolved and we always strive for optimization
- party operator and will focus on return handling Offering of third party brands has become more
- more focused and integrated way
Strong GMV growth notably outpacing revenue growth
(1) Q1/19 (Q1/18) contains -€130m (-€118m) reconciliation of internal revenues
8
Record-high order frequency and basket size decline slowing down
9 (1) Defined as GMV divided by the number of orders
Good profitability achieved in an off-season quarter
10 (1) Excluding equity-settled share-based payment expense ("SBC"), restructuring costs and non-operating one-time effects of €24.8m in Q1/19 (Q1/18: €15.6m) (2) Q1/19 (Q1/18) contains €0.4m (€0.4m) reconciliation of internal adj. EBIT
Gross margin showing healthy recovery
Costs and margins1
11 (1) Excluding equity-settled share-based payment expense ("SBC"), restructuring costs and non-operating one-time effects
12 (1) Excluding payments for acquisitions of €4.5m in Q1/18 (Q1/19: €0m)
2019 Guidance confirmed – very strong GMV growth and solid profitability
Adj. EBIT1
14 (1) Excluding equity-settled share-based payment expense ("SBC"), restructuring costs and non-operating one-time effects of ~€80m for FY/19E (2) Excludes M&A transactions
Liquidity position
(2) Includes investments in fixed and intangible assets and payments for acquisitions and change in restricted cash (+€1.0m) and a fixed asset sale (+€21.8m)
16 (3) Includes financing cash flow (-€8.6m) and effect of exchange rate on cash and cash equivalents (+€1.6m)
Issued share capital
SHARE INFORMATION (AS OF MAR 31, 2019)
| SHARE INFORMATION (AS OF MAR 31, 2019) Type of Shares Ordinary bearer shares with no-par value (Stückaktien) Stock Exchange Frankfurt Stock Exchange Market Segment Regulated Market (Prime Standard) Index Listings MDAX Total Number of Shares Outstanding 251,054,778 Issued Share Capital €251,054,778 STOCK OPTION PROGRAMS (AS OF MAR 31, 2019) EMPLOYEE INCENTIVE PLANS (AS OF MAR 31, 2019) Weighted average exercise Weighted average # Options outstanding Program # Options outstanding price (EUR) price (EUR) 1,346,400 5.65 EIP1 3,720,331 9,445,771 15.37 VSOP 2017 870,000 3,750,608 20.31 VSOP 2018 750,000 5,250,000 47.44 Total 5,340,331 24.15 19,792,779 Share settled 43% (1) 17 Cash settled 57% (2) |
Issued share capital | |||
|---|---|---|---|---|
| Program | exercise | |||
| SOP 20111 | 35.45 | |||
| SOP 20131 | 42.24 | |||
| SOP 20141 | 39.02 | |||
| LTI 20182 | 37.06 | |||
| Total | ||||
STOCK OPTION PROGRAMS (AS OF MAR 31, 2019) EMPLOYEE INCENTIVE PLANS (AS OF MAR 31, 2019)
| price (EUR) | |||
|---|---|---|---|
| SOP 20111 | 1,346,400 | 5.65 | |
| SOP 20131 | 9,445,771 | 15.37 | |
| SOP 20141 | 3,750,608 | 20.31 | |
| Total | 19,792,779 | 24.15 |
| price (EUR) | price (EUR) | |
|---|---|---|
Income statement
| Income statement | ||||||
|---|---|---|---|---|---|---|
| €m Revenue |
FY/151 2,958.2 |
FY/161 3,639.0 |
FY/171 4,489.0 |
FY/18 5,387.9 |
Q1/181 1,196.0 |
Q1/19 1378.2 |
| % growth | 33.6% | 23.0% | 23.4% | 20.0% | 22.0% | 15.2% |
| Cost of Sales | (1,624.0) | (2,029.6) | (2,529.6) | (3,107.0) | (722.0) | 828.7 |
| Gross Profit | 1,334.1 | 1,609.4 | 1,959.4 | 2,280.9 | 474.0 | 549.5 |
| % margin | 45.1% | 44.2% | 43.6% | 42.3% | 39.6% | 39.9% |
| Selling and Distribution Costs Administrative Expenses |
(1,118.9) (129.0) |
(1,223.7) (191.3) |
(1,530.8) (242.9) |
(1,899.2) (268.9) |
(429.7) (61.1) |
(492.8) (77.8) |
| Other Operating Income | 10.2 | 16.7 | 11.8 | 18.7 | 2.7 | 5.2 |
| Other Operating Expenses | (7.0) | (4.1) | (9.9) | (12.3) | (1.1) | (2.5) |
| EBIT | 89.6 | 207.0 | 187.6 | 119.2 | (15.2) | (18.4) |
| % margin | 3.0% | 5.7% | 4.2% | 2.2% | (1.3%) | (1.3%) |
| Net Financial Result EBT |
(3.0) 86.6 |
(14.1) 192.9 |
(12.4) 175.2 |
(13.6) 105.6 |
(3.4) (18.6) |
(2.8) (21.2) |
| % margin | 2.9% | 5.3% | 3.9% | 2.0% | (1.6%) | (1.5%) |
| Income and Other Tax | 34.9 | (72.5) | (73.6) | (54.4) | 3.5 | 3.6 |
| Net Income | 121.5 | 120.5 | 101.6 | 51.2 | (15.1) | (17.6) |
| % margin | 4.1% | 3.3% | 2.3% | 0.9% | (1.3%) | (1.3%) |
| Depreciation & Amortization | 34.2 | 48.2 | 58.7 | 86.5 | 17.9 | 42.8 |
| EBITDA | 123.8 | 255.2 | 246.4 | 205.7 | 2.7 | 24.4 |
| % margin | 4.2% | 7.0% | 5.5% | 3.8% | 0.2% | 1.8% |
| Share Based Compensation (SBC) |
17.9 | 19.9 | 27.5 | 43.3 | 4.7 | 11.8 |
| Adj. EBIT2 | 107.5 | 216.3 | 215.1 | 173.4 | 0.4 | 6.4 |
| % margin | 3.6% | 5.9% | 4.8% | 3.2% | 0.0% | 0.5% |
| Adj. EBITDA2 | 141.7 | 264.5 | 273.8 | 259.9 | 18.3 | 49.2 |
| % margin | 4.8% | 7.3% | 6.1% | 4.8% | 1.5% | 3.6% |
Share based compensation and adjustments
| Share based compensation and adjustments | ||||||
|---|---|---|---|---|---|---|
| €m Per Income Statement Line Item |
FY/15 | FY/16 | FY/17 | FY/18 | Q1/18 | Q1/19 |
| Cost of Sales | 4.5 | 5.0 | 6.9 | 3.6 | 0.6 | 0.8 |
| Selling and Distribution Costs | 9.0 | 9.9 | 13.7 | 10.1 | 1.3 | 2.0 |
| Administrative Expenses | 4.5 | 5.0 | 6.9 | 29.5 | 2.7 | 8.9 |
| Share Based Compensation | 17.9 | 19.9 | 27.5 | 43.3 | 4.7 | 11.8 |
| Restructuring Costs / Non-Operating One-Time Effects |
0.0 | (10.6) | 0.0 | 10.9 | 10.9 | 13.0 |
Segments
Balance sheet
| Balance sheet | ||
|---|---|---|
| €m | Q1/18 | Q1/19 |
| Total Non-Current Assets | 588.9 | 1,266.9 |
| Thereof: Property, Plant and Equipment | 377.0 | 562.0 |
| Lease Assets | - | 490.6 |
| Other Non-Current Assets | 211.9 | 214.3 |
| Total Current Assets Thereof: Inventories |
2,435.3 891.0 |
2,491.6 985.4 |
| Trade and Other Receivables | 294.8 | 376.6 |
| Other Assets1 | 321.1 | 259.8 |
| Cash and Cash Equivalents1 | 928.5 | 869.8 |
| Total Assets | 3,024.2 | 3,758.5 |
| Total Equity | 1,499.5 | 1,508.4 |
| Thereof: Issued Capital | 247.0 | 246.8 |
| Capital Reserves | 1,157.4 | 1,136.2 |
| Retained earnings | 10.4 | (7.6) |
| Accumulated Loss | 84.8 | 133.1 |
| Minority Interests | (0.1) | (0.1) |
| Total Non-Current Liabilities | 64.3 | 504.6 |
| Thereof: Non-current Lease Liabilities | - | 442.0 |
| Financial Liabilities | 7.7 | 4.8 |
| Other Non-Current Liabilities Total Current Liabilities |
56.7 1,460.5 |
57.8 1,745.5 |
| Thereof: Trade Payables and Similar Obligations | 1,220.6 | 1,374.4 |
| Other Current Liabilities | 239.9 | 371.1 |
| Total Equity & Liabilities | 3,024.3 | 3,758.5 |
| Net Working Capital |
(34.8) | (12.4) |
Cash flow statement
| Cash flow statement | ||||||
|---|---|---|---|---|---|---|
| €m Net Income |
FY/15 121.5 |
FY/16 120.5 |
FY/17 101.6 |
FY/18 51.2 |
Q1/18 (15.1) |
Q1/19 (17.6) |
| Non-Cash Expenses from Share-Based Payments | 17.9 | 19.9 | 27.5 | 43.3 | 4.7 | 11.8 |
| Cash Settlement of Claims from Share-Based Payments |
(2.3) | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Depreciation & Amortization | 34.2 | 48.2 | 58.7 | 86.5 | 17.9 | 42.8 |
| Income Taxes |
(34.9) | 72.5 | 73.6 | 54.4 | (3.5) | (3.6) |
| Income Taxes Paid, Less Refunds |
(0.0) | (33.8) | (49.4) | (42.4) | (10.4) | (13.3) |
| Change in Provisions | (0.5) | 0.1 | (1.5) | 0.3 | 0.1 | 0.2 |
| Other Non-Cash Income | (1.0) | 1.2 | 6.5 | 4.2 | 1.0 | 0.3 |
| Change in Inventories and Receivables | (154.2) | (147.4) | (251.0) | (157.0) | (128.2) | (147.4) |
| Change in Trade Liabilities | 154.9 | 264.3 | 198.4 | 180.6 | 92.4 | 75.0 |
| Change in Other Assets/Other Liabilities | (16.2) | (69.7) | 29.2 | (8.5) | (34.8) | (6.7) |
| Cash Flow from Operating Activities | 119.4 | 275.8 | 193.7 | 212.8 | (75.9) | (58.6) |
| Payments Received from the Sale of Fixed Assets | 0.0 | 0.0 | 0.0 | 58.9 | 0.0 | 22.5 |
| Payments for Investments in Fixed and Intangible Assets | (60.0) | (181.7) | (243.9) | (278.4) | (41.8) | (42.3) |
| Payments for Acquisitions | (16.8) | (30.4) | (34.9) | (7.1) | (4.5) | 0.0 |
| Cash Paid for Investments in Term Deposits | (155.0) | (65.0) | 180.0 | 20.0 | 20.0 | (5.0) |
| Change in Restricted Cash | 35.3 | 0.0 | 10.4 | (0.4) | 0.0 | 0.4 |
| Cash Flow from Investing Activities | (196.5) | (277.1) | (88.3) | (207.0) | (26.3) | (24.4) |
| Payments Received from Capital Increases | 6.4 | 1.1 | 3.9 | 38.2 | 0.0 | 6.7 |
| Cash Received from Loans |
0.0 | (0.7) | 0.0 | 0.0 | 0.0 | 0.0 |
| Repurchase of Treasury Shares | (1.7) | 0.0 | (11.3) | (111.3) | (33.2) | (38.8) |
| Cash Payments for the Principle Portion of Leasing Liabilities | (10.0) | |||||
| Cash Repayments of Loans Cash Flow from Financing Activities |
(3.2) 1.5 |
(3.2) (2.9) |
(3.2) (10.6) |
(2.8) (75.9) |
(0.4) (33.6) |
(0.4) (42.6) |
| (75.7) | (4.1) | 94.8 | (70.1) | (135.9) | (125.5) | |
| Change in Cash & Cash Equivalents Effects of Exchange Rate on Cash & Cash Equivalents |
0.9 | 0.5 | (1.9) | 0.3 | (1.2) | 0.4 |
KPI development
| KPI development | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| FY/15 | FY/16 | FY/17 | Q1/18 | Q2/18 | Q3/18 | Q4/18 | FY/18 | Q1/19 | ||
| Site Visits (m)1 | 1,656.4 | 1,991.6 | 2,563.5 | 713.5 | 734.3 | 728.7 | 960.7 | 3,137.2 | 923.6 | |
| Mobile Visit Share (in % of Site Visits)2 | 57.1% | 65.6% | 70.7% | 76.6% | 78.4% | 80.0% | 81.6% | 79.3% | 82.4% | |
| Active Customers (m) 3 |
17.9 | 19.9 | 23.1 | 23.9 | 24.6 | 25.1 | 26.4 | 26.4 | 27.2 | |
| Number of Orders (m) 4 |
55.3 | 69.2 | 90.5 | 25.4 | 29.0 | 27.7 | 34.1 | 116.2 | 31.4 | |
| Average Order per Active Customer (LTM) |
3.08x | 3.48x | 3.92x | 4.02x | 4.18x | 4.30x | 4.40x | 4.40x | 4.49x | |
| Average Basket Size (in €) (LTM) 5 |
- | - | 60.6 | 59.4 | 58.4 | 57.7 | 57.2 | 57.2 | 57.1 | |
| Average Basket Site (in €) (quarter) | - | 60.6 | 56.1 | 56.9 | 55.0 | 60.0 | 57.2 | 55.9 | ||
| Gross Merchandise Volume (in €bn) 6 | 3.57 | 4.40 | 5.48 | 1.43 | 1.65 | 1.52 | 2.05 | 6.64 | 1.76 | |
| Fulfillment Cost Ratio (in % of revenue) 7 |
26% | 23% | 26% | 28% | 28% | 30% | 25% | 28% | 29% | |
| Marketing Cost Ratio (in % of revenue) 8 |
12% | 10% | 8% | 7% | 6% | 8% | 7% | 7% | 7% |
Upcoming events
| Upcoming events | |
|---|---|
| Date | Event |
| Monday, May 6 | NDR Frankfurt |
| Tuesday, May 7 | NDR Brussels |
| Thursday, May 9 | Citi's Internet & eCommerce Day, London |
| Wednesday, May 15 | JP Morgan Global Consumer and Retail Conference, London |
| Thursday, May 16 | Credit Suisse Stockholm Consumer IR Day, Stockholm |
| Wednesday, May 22 | Annual General Meeting 2019 |
| Thursday, August 1 | Q2/19 Results |
| Thursday, October 31 | Q3/19 Results |
| 24 |
Zalando Investor Relations Team
Team Contact T: +49 3020 9681 584 10243 Berlin [email protected] https://corporate.zalando.com/en
Disclaimer
Certain statements in this communication may constitute forward looking statements. These statements are based on assumptions that are believed to be reasonable at the time they are made, and are subject to significant risks and uncertainties. You should not rely on these forward-looking statements as predictions of future events and we undertake no obligation to update or revise these statements. Our actual results may differ materially and adversely from any forward-looking statements discussed on this call due to a number of factors, including without limitation, risks from macroeconomic developments, external fraud, inefficient processes at fulfillment centers, inaccurate personnel and capacity forecasts for fulfillment centers, hazardous material / conditions in production with regard to private labels, lack of innovation capabilities, inadequate data security, lack of market knowledge, risk of strike and changes in competition levels.
