Q4 2021 MYT Netherlands Parent BV Earnings Call

Greetings and welcome to the my theories of fourth quarter and full year fiscal 2021 earnings conference call. At this time all participants are in a listen only mode. Today's call is being recorded and we have allocated one hour for prepared remarks and <unk>.

Q&A. It is now my pleasure to introduce your host Mark in beer Mitra resist Chief Financial Officer. Thank you Sir please begin.

Thank you operator, and welcome everyone to mitral <unk> Investor Conference call for the fourth quarter and full fiscal year 2021.

With me today is our CEO Michael <unk>.

Before we begin we would like to remind you that our discussions today will include forward looking statements.

Any comments, we make about expectations are forward looking statements Nord and subject to risks and uncertainties, including the risks and uncertainties described.

Our previous annual report Manny.

Many factors could cause actual results to differ materially.

We are under no duty to update forward looking statements.

In addition, we will refer to certain financial measures not reported in accordance with Iff's on this call.

You can find reconciliations of these non iff's financial measures.

Earnings press release, which is available on our Investor Relations website at investors stopped my Teresa Dot com.

I will now turn the call over to Michael.

Thank you Martin also from my side, a very warm welcome to all of you and thank you for joining our call today.

We will today comments on the results and performance of our fourth quarter fiscal year 2021, which does also completed our full fiscal year 2021.

There are three clear messages that I want to leave you with today.

First the fourth quarter showed again outstanding results.

<unk>, an extraordinarily successful fiscal year for my Teresa.

We delivered again excellent growth and consistent profitability.

This confirms in our view the unique position of my Teresa in the luxury digital platforms sector.

Second our strong performance.

Neither base on the outbreak of the pandemic nor is it driven by the end of the pandemic.

Surely the pandemic was a catalyst to accelerate the change and made the difference between the good and the not so good more pronounced.

But the long term success. So my Teresa is based on the fundamental change of consumer behavior that has only started.

And the superior business model as evidenced by many of our performance Kpis.

We view the performance of the last year is a strong affirmation of our superior value proposition for both customers and brand partners.

But we have actively use the last couple of months to build a very strong foundation in the business for continued and consistent future growth.

Let me now comment in more detail on these three key messages today.

First in the fourth quarter, we grew our net sales by 36, 1% compared to Q4 fiscal year 2020.

And for the full fiscal year 2021 by 36, 2% over fiscal year 2020.

This is significantly above our continued long term guidance of 22% to 25% annual growth.

Our success is a curated luxury multi brand digital platform continues to be based on their sharp luxury customer focus.

<unk> brand partnerships and a focused profit making business model.

This is best exemplified by the fact that with a floor for the full fiscal year, we were able to deliver outstanding growth, while keeping our gross profit margin stable at 46, 9% for fiscal year 2021.

<unk> 246, 7% for fiscal year 2020.

All of you. This makes my Teresa unique.

Second.

Our multi year strength is evidenced by the two year growth rate.

Net sales of 65% in the fourth quarter of fiscal year 2021.

Over the last four quarters, we have delivered two year growth rate in net sales of 58, 4% in Q1 of 64% in Q2 of 66, 1% in Q3 and now 65% in Q4 fiscal year 2002.

'twenty one.

Over the corresponding quarters in fiscal year 2019.

While we benefited from the pandemic, we believe the fundamental drivers for our growth or the change in consumer behavior, and luxury shopping and our superior business model compared to many of our competitors. So that we could take advantage of the impact of the pandemic on consumer behavior.

Based on the recent study by Bain and company the estimated that over 30% of the personal luxury goods spend will be online by 2025.

So by the shift of consumer demand to online in luxury hasn't been significantly accelerated by the pandemic.

We clearly believe this trend will continue.

At a lower pace in the post pandemic world, but it will continue.

Independent of new customers coming to our stores were closed or existing customers spending much more as opportunities for going out and travel came back we grew our net sales in all regions in the fourth quarter of fiscal year 2021.

The key highlight was again, the United States, where we grew net sales by 133.3% year over year in Q4 fiscal year 2021.

All this affirms our belief that we offer a superior value proposition.

But we believe that we have achieved again, many significant proof points over the last quarter.

Establishing a strong foundation for significant future growth.

As explained before our business focuses on a highly curated my T brand of attuned to the big spending wardrobe building customer segment, which provides us with the best customer base in luxury and one that is very difficult to attract without a curated Monty brown.

Awesome.

We have significantly expanded our LTM active customer base by 38% year over year to now 671000.

This was again fueled by exceptional new customer growth in Q4, we attracted over 110000 new customers.

In this context. It is good to note that we continue to see that all cohorts of new customers acquired in Q2 of fiscal year 2021 show better repurchase rates.

Also now in the fourth quarter compared to the Q2 cohorts of fiscal year 2020, and their behavior in Q4 or could get themselves in 'twenty.

But most importantly.

We grew our top customer base by 64% in the fourth quarter over the corresponding period in fiscal year 2020, and still the average spending of our top customers grew by 10% year over year in Q4 of fiscal year 2012.

Do you want to.

To further enhance our value proposition for our top customers.

Launched an exciting partnership with tier clinic teeth in Q4 of fiscal year 2021.

<unk> a unique resale service for bags and soon also put shoes and ready to wear.

The preferential service for our customers, providing them with a very simple and streamlined process for reselling items.

And they received immediate payment in the form of mitral Reso store print.

The key driver for attracting multi brand wardrobe building customers is our privileged access to exclusive products and pre launches.

Our outstanding brand partner relationships.

We were again honored with outstanding support and trust from our brand partners in Q4 of fiscal year 2021.

We launched exclusive collections and styles as well as executed pre launches with brands, such as <unk> and extend that Mcqueen European.

Jakob Riis Missoni when they look with gene editing Roger I D.

T Visteon labutta and many more.

We also ran our first beauty pop up on our website featuring key brands of Este Lauder companies in Q4 fiscal year 2021.

While we were still not able to execute many physical events in Q4 for our top customers, we still had high impact events in Beijing and in Paris in collaboration with the songs Recompete.

Another exciting development in terms of brand relationships.

Is the innovative evolution and how we collaborate with some major brand partners going forward.

Which will allow us to further strengthen our unique value proposition.

Under the so called curated platform model, we will closely integrate with the retail operations of some of our brand partners.

This means that we will be part of the inventory management of the brand partner.

Quoting us much better access to highly desirable product.

And in season replenishment.

<unk> to today.

This will be greatly appreciated by our customers.

Our control over the assortment building marketing and customer relationships will not change because of each day.

While our capital efficiency will improve.

Inventory remains in the ownership of the brand partner until it is sold by us to the mitral visa customer.

We will therefore book under this model a platform fee.

Our net sales going forward.

This model will already start to become operational in fiscal year 2022, with some key brand partners.

Finally, we demonstrated again in the fourth quarter, the consistency of our operations and performance.

We maintained business continuity across all operations with a focus on health and well being of all nine Teresa employees as the top priority.

This highly correlates with the very high customer satisfaction measured internally with our net promoter score of 85, 6% in Q4 of fiscal year 2021.

The health of our business.

<unk> also demonstrated by our stable gross margin in the fourth quarter on the basis of the high full price share and little dependency on promotional activities.

With all of the above it should come as no surprise that we are very proud of our achievements in fiscal year 2021.

And extremely confident to continue achieving strong results in fiscal year 2022.

And now I hand over to Martin to discuss the financial results and guidance in detail.

Thank you Michael.

I will now review the financial results for the fiscal fourth quarter and the full fiscal year 2021, and we will provide additional detail on some of the key topics previously mentioned.

Unless otherwise stated all numbers refer to Europe.

As Michael highlighted we are very pleased with our performance during the fourth quarter clearly above expectations. While we delivered strong net sales growth due to a robust new customer growth and strong existing customer cohort performance.

With our proven business model, we could scale significantly in the fourth quarter without any compromise on the quality of our profits.

During the fourth quarter net sales increased by $44.0 million or 36, 1% year over year to $166.0 million.

We continued to see strong customer engagement and retention as our active customers who shop with us in the last 12 months grew by 38%.

So 671, thousands now of total orders shipped in the last 12 months increased by 37, 9% to 1.505 million.

Cost of sales increased by $21 million or 32, 7% compared to the prior year period.

Driven by strong growth in total all the ships.

As a percent of net sales cost of sales decreased slightly at 52, 3% in the fourth quarter compared to 53, 7% a year ago.

Gross profit of $81.0 million was an increase of $24.0 million or 41% year over year.

Gross profit margin of 47, 7%.

Improved by 140 basis points.

Compared to the prior year period, or 46, 3% driven.

Driven by our continued higher level of full price sell through.

For the full fiscal year 2021.

Teresa achieved a gross profit of $287 million, an increase of 36, 7% compared to the fiscal year 2020.

Our gross profit margin for the full fiscal year 2021 was stable at 46, 9%.

Compared to 46, 7%.

Full fiscal year 2020.

The sustained stability in our gross profit margin over the last four years.

Underlines our unique high end positioning in the market.

Our ability to achieve a strong topline growth without compromising customer quality.

In Q4 of fiscal year 2021.

Adjusted EBITDA was $13.0 million and adjusted operating income at $10.0 million.

Q4 of the last fiscal year 2020 was heavily affected by some special temporary onetime effects, mostly relating to COVID-19.

These effects drove the adjusted EBITDA margin to them.

One time high of 12, 6% in Q4 of fiscal 2020.

If you did not consider these temporary effects the adjusted EBITA margin would be at six 6% in Q4 of fiscal year 2020.

These effects relates to marketing cost and SG&A.

Due to the early stages of Covid in April May and June last year, we cut performance marketing costs and were not able to host any of our scheduled events.

Therefore, the marketing cost ratio was about 400 basis points lower than what was expected at that time and what we had seen in the preceding quarters of last year.

In addition in SG&A, we had I R S accounting effects in that quarter and other COVID-19 driven effects.

These amounted to 200 basis points lower cost and SG&A.

So in total we had in last year's quarter 600 basis points of special and temporary margin increasing effects.

In Q4 of fiscal year 2021, we achieved and reported an adjusted EBITDA margin of six 9%.

And this margin 160 basis points of one time, RFS accounting effects and other pull forward operating costs are included.

That are one time by nature.

Technically cannot be adjusted.

These one time effects of 160 basis points, we're not considered the adjusted margin would have been eight 5%.

And these eight 5% are in line with the 9% adjusted EBITDA margin.

We achieved for the full fiscal year 2021.

We therefore are very pleased with our reported adjusted EBITDA margin of six 9% in the quarter and.

And the resulting 9% adjusted EBITDA margin for the full fiscal year at the upper end of our guide at 7% to 9% adjusted EBITDA margin.

The continuous top line growth and strong profitability pattern.

The lines are unique positioning in the market.

We're very confident on sustaining the overall strong profitability levels and later I will talk more on the guidance for the full fiscal year 'twenty, two which is already coming close to the end of Q1.

But coming back to fiscal year 'twenty one.

For the full fiscal year 2021, mitral, we achieved an adjusted EBITDA of $63.0 million compared to the $39.0 million in fiscal 2020, and thus representing a significant growth of 55, 2%.

For the full fiscal year, the adjusted EBITDA margin increased two 9% from seven 9% in the previous fiscal year.

<unk> achieved this strong increase in profitability also on adjusted operating income.

For the full fiscal year 2021, My Teresa reported and adjusted operating income of $53.0 million.

To the $32.0 million in fiscal 2020, and thus representing a significant growth of 69, 8%.

For the full fiscal year adjusted operating income margin increased to seven 6% from.

From six 1% in the previous fiscal year.

If we look at the sources of this increase in profitability and going through the P&L lines for the full fiscal year.

We see a lot of stability, increasing efficiencies and cost leverage.

We already talked about the stability in the gross profit margin.

Which is a key indicator for our continued successful positioning in the market.

Then going down further in the P&L.

We see a stable shipping on a payment cost ratio at 11, 7% for the full fiscal year 2021, compared to 11, 5% in fiscal year 2020.

Our marketing cost ratio decreased from 13, 9% in fiscal 2022.

To 13, 3% in fiscal 2021.

Despite a strong 38% increase in active customers with very good customer cohort performance comp.

Two previous customer cohorts.

My Teresa was able to attract new customers at a lower cost.

Our strong online marketing performance is in line with a CAC decline that we achieved in the past four years.

It is our stated strategy to increase our brand building efforts by reinvesting.

We achieved cost efficiencies in online performance marketing.

Due to the Covid situation.

We could not execute our targeted level of PR and events.

Going forward.

We intend to keep the total marketing cost ratio stable.

For the full fiscal year 2021 the.

The adjusted selling general and administrative cost ratio was at 12, 8% compared to 13, 6%.

Fiscal year 2020.

Despite a ramp up of public company costs, we achieved cost leverage and personal costs.

The improvement in the operating performance is visible on adjusted EBITA.

Adjusted operating income and also on adjusted net income level.

The net income in Q4 of fiscal 2021 was $13.0 million as compared to $13.0 million in the prior year period.

For the full fiscal year 2021, adjusted net income.

Increased 67% from.

From $22.0 million in fiscal 2020 to $33.0 million in fiscal 2021.

The achieved margin of five 2% in fiscal 2021, all the way at the adjusted net income level.

Also shows the structural attractiveness of mitral <unk> unique business model.

In the past years.

It's been profitable.

And it has achieved strong growth with.

Stable profitability.

As always our adjustments are simple and straightforward.

In fiscal year 2021, we adjusted IPO preparation and transaction costs.

The one time IPO share based compensation.

And the finance expenses on our shareholder loans, which we fully paid back with parts of the IPO proceeds.

All of these items are clearly non indicative of our core operating performance.

In fiscal 2021.

There were no additional adjustments on any other line in the P&L.

Except for these clear and transparent as adjustments.

Our financially reported P&L fully reflect our strong operating performance.

Including these onetime effects and the expenses from the show the loans the net loss of Q4 and fiscal 2021.

Was that $8 million and $38.0 million for the full fiscal year 2021.

EBITA adjusted EBITA adjusted operating income and adjusted net income are non <unk> measures.

Moving to the cash flow statement.

During the 12 months ended June 32021.

Operating activities used $21.0 million in cash and cash equivalents.

Primarily driven by a $86.0 million increase in inventories and strong operating profitability.

The increase in inventories is in line with our exceptional sales calls.

And it's in anticipation of continued strong sales.

We ended the quarter in a strong financial position.

Cash and cash equivalents of $84.0 million.

And total unused availability under the revolving credit facilities of $90 million as of June 32021.

My Teresa has no liabilities two bands.

And equity ratio of 74%.

And fourth size, a solid cash position.

Turning now to our expectations for the current fiscal year ending June 32022.

The past fiscal year 2021 has been an exceptional year for my Teresa.

Strong topline growth and increasing profitability.

Covid has only accelerated that.

Prevalent and fundamental shifts.

Offline to online luxury shopping.

All our customer cohort data underlying the high quality of the customer influx in the last 18 months.

Our highest full price share strong sell through and stable gross profit margin are visible kpis of this underlying trend.

<unk> continued high level of net promoter score.

From new and existing customers is also a clear signal of an expected continuation of.

Strong customer support.

The high degree of loyalty and repurchase rates of customers a key driver for <unk> ongoing strong top and bottom line performance.

We built our expectations for fiscal 2022.

On this achieved strong customer base for fiscal year 2021.

The expected growth rate of our total active customers for fiscal year 'twenty two.

It's at 22% to 25%.

And therefore in line with our long term target of annual growth.

And as stated before this growth is on top of.

The strong already achieved active customer base of fiscal 2021.

Michael already gave the highlights to our curated platform model or short CPM, which is an exciting evolution of our partnership approach of selected major prints.

For fiscal 2022, we will see the ramp up of this adaptive platform model.

The CPM allows us.

With respect of major brands to scale, the availability of merchandise much more and even provide in season replenishment. While my Teresa continues to do what it does best unique curation.

Engaging marketing content.

Superior customer service.

We expect the CPM share to gradually increase over time, but my Teresa will continue to also operate a wholesale business model.

We expect the CPM share in our business in fiscal year 2022 to be not higher than 20% of our total platform revenues.

And the long term.

We expect that share to be not higher than 35% of our total platform revenues.

As we are now able to offer the right model for the right brands.

The creator platform model is fully in line with our core focus on providing superior customer value.

For curation Hunt.

Content and service, but it also provides us better capital efficiency.

As the inventory under the CPM remains in the ownership of the brand partner until it is sold to the micro as a customer.

We booked a platform fee as our net sales.

We will therefore shift the focus of our topline reporting.

G M B, a gross merchandise value as an operating measure.

Which is fully in line with our strategy as it captures the total amount of merchandise that our customers transact on our platform and that shows the full depth of our customer relationships.

We will of course continue to report.

Also net sales as an IR fast reporting figure.

The most important kpis in our business model, our GMB active customers gross profit and adjusted EBITDA.

Our guidance for the full fiscal year 2022 is therefore.

<unk> in the range of $750 million to $770 million representing.

Representing 22% to 25% growth.

Active customer growth of 22% to 25%.

Lodging the customer base to 820, K to 845 active customers.

Net sales at $680 to $700 million.

Gross profit at $345 million to $355 million, representing a growth of 21% to 24%.

Due to our continued strong new and existing customer cohort performance.

We expect the financial year 2022.

Come out at the upper half of these ranges.

In addition, we also expect our adjusted EBITDA margin in the upper half of our long term range of 7% to 9%.

This will translate and might restart reaching its Europe profitability levels.

Originally targeted in fiscal year 'twenty three.

Already in fiscal year 'twenty two.

On the basis of the clear and sustained market trends are.

Our strong customer cohort performance and current trading we are very confident to achieve these expectations for fiscal year 2022, ending in June 2022.

I will now turn the call back over to Michael.

His concluding remarks.

Thank you Martin.

We are delighted with the strong fourth quarter earnings results and the full increase full year 2021 results.

Both were above our expectations.

We see ourselves perfectly positioned to take advantage of the short term opportunities.

In the market I E.

Increasing vaccination progress around the world the strong shift to digital.

And the better deliveries by Brian.

We have provided a very strong guidance for the full fiscal year 2022.

Even more importantly, we continue to see ourselves perfectly positioned to take advantage of the long term opportunities in the market.

We believe that the positive trend towards multi brand digital platforms will continue.

I believe at a slower pace than what we saw the last 12 months, but it will continue therefore, we continue to see strong growth of 22% to 25% per annum.

Ahead of us with a stable EBITDA margin.

And with that I'd like to ask the operator to open up for your questions.

Thank you.

Reminder, to ask a question you will need to press star one on your telephone can we draw. Your question press the pound key be seen by while we compile the Q&A roster.

Your first question comes from Kimberly Greenberger with Morgan Stanley. Your line is open.

Okay, great. Thank you so much.

And it's great to see the U S. Just continue to explode I see revenue here in the first quarter or rather in the fourth quarter up 133%.

On on some pretty large growth last year. This is a sort of.

More recent you know, let's say within the last year, our focus geography for you. So you can you just talk about.

The underpinnings of the growth that you're seeing in this geography and is it is it just a matter of having some local resources here in the U S that supporting the growth of what other factors do you attribute the U S performance tail.

Thank you Kimberly.

As always when you have these exciting numbers.

Multiple factors.

One very important factor is what you already alluded to I mean, we have put a team in place for the U S. We hire Tiger <unk>, our president for North America, We opened an office.

In New York, we have local team person shop those for the last couple of months. So we are actively working on the market. We have started to do events, we had already two events.

Have engaged influences as we.

Absolutely aware that one of the big hurdles for even further growth as brand awareness brand trust because when people use our services in the U S. We actually see very high.

Customer satisfaction.

Two other factors and also of course driving this is that the.

The U S.

It's clearly turned into us very bullish consumer market, it's not only for US we also hear it from brands.

Businesses, it's very hot so the U S consumer has again demonstrated.

It's their strengths in in a turnaround in the coming out of the pandemic can finally into very important factor is that also in the U S and.

Everywhere in the World is this ongoing shift of traditional luxury consumers to shop production online in all three combined beach to this extra ordinary growth. We currently seen in the U S.

That's excellent. Thank you so much for that and I just wanted to follow up on.

SG&A in the fourth quarter, it looks like it's coming in about $20 million higher than than we were looking for.

It strikes me that one of those factors it looks like the very largest factor might be stock based compensation.

As a as a delta versus our estimates. So I'm wondering if you can just dig into that a little bit more and then looking out to the 2022 revenue guidance.

I'm looking at that.

Ah well, let's say net sales growth it looks like 11% to 14%, but if I look at it on a two year basis, 23% to 25% compounded annual growth.

This looks.

And compared to two years ago, let's say, so you've got somewhat of a high base effect.

Just given the extraordinary growth in fiscal 'twenty, one revenue and then secondarily you're introducing.

The new.

Partnership model, which could be converting some of the net sales growth into G. M D.

So I'm just wondering if maybe you can talk to us about how you thought about the right revenue targets for the upcoming year and how you considered all of the factors as well. Thank you so much.

Maybe I heard Kimberly let me take the your SG&A.

Exactly yes, SG&A I mean, clearly it's also highlighted in our presentation that in SG&A, we had in this quarter.

Not only compared to the previous year quarter, but also in absolute terms as you pointed out in this quarter some some onetime effects.

I am speaking to the adjusted SG&A, Obviously also in the press release in the numbers.

The share based compensation is adjusted its clearly transparent. So if you take that out we are on an adjusted SG&A base in this adjusted SG&A base, we basically had.

Two major effects.

That relate mostly to the 160 basis points that are referred to in my.

In my report it is.

One time effect of shifting.

Your first accounting revenues to the next quarter, we changed that model due to our increasing share of international revenues.

That is in line with the higher first revenue recognition.

That's about 110 basis points.

And the second also major effect is an acceleration.

The finalization of our ERP and HR platform change projects. So it costs, mainly because we wanted to finish them earlier.

And are they both ERP and HR platform change projects. They both are already.

That's fully implemented in this Q1 of this fiscal year. So this is on the on the SG&A side.

Okay.

And on the revenue side I think Youre, absolutely correct you referred to the say so of course, a factor off the base from 2021 and also the extend or share.

New range of platform model in our overall business.

As margin explained.

We will start in fiscal year 'twenty, two with this new model, allowing us to.

Benefits from being integrated supply chain benefit means.

Ongoing replenishment and makes it also means of course much higher capital efficiency, we're looking for fiscal year 'twenty two that this new edition will.

Adaptive platform for our Big partners will not have a higher share than 20%.

Gradually expand this.

We really integrate into the retail operations of brands to execute this and that share of course drives what part of business will run as a curated platform model.

Overall.

To better have an understanding that we are guiding.

And reporting for fiscal year 'twenty, two on gross merchandise value as the total amount of value that is transacted by our customers.

On the site because that really.

Tells you how much business is done by our customers and depending of course, how much gross merchandize revenue that has been that part has translated into a platform fee and so the net sales growth that you referred to on one hand, there is the base effect of an extra ordinary good 'twenty, one business, but on the other hand there.

So.

Part of the business that we're in net sales is no longer met.

Merchandise spend you sold on the platform by platform booked.

Makes perfect sense. Thank you so much and congratulations on the very nice momentum here in the business.

Alright. Thank you. Your next question comes from Matthew Boss with Jpmorgan Your line's open.

Great. Thanks.

Maybe first could you just speak to the acceleration in customer acquisition that youre seeing maybe across cohorts, what what are the spending trends that youre seeing.

From your top customers could you speak to spending that you're seeing from your new customers that have recently been acquired and then maybe just near term any color on current performance.

Quarter to date, maybe just relative to that 11% to 14% revenue guidance for the year I think would be helpful.

Yeah.

Yes, sure so on on cohort acquisition customer acquisition.

We continue to see that we acquire a lot of new customers. So the customer acquisition.

Our side is very positive again in Q4 over 110000 new customers.

And we also continue to see good quantity of these new customers. So spend of the new customer new customers is stable if not slightly even higher the biggest story in Q4 was there.

Our top customers are coming back with was of engines and that is of course tied to the <unk>.

Would you need to go out the opportunity to go to occasions to Red carpet events Q4, we reported 64% increase in the number of course.

Customers versus Q4, 'twenty and average spend going up by 10% so.

The new customer acquisition is very positive and quantity number.

<unk> strong story underpinning our growth is that our best customers are spending more and more.

That we believe is tied to now.

Now the opening up an opportunity to buy because as we explained many times, our wardrobe building high spending customer their needs our video occasion driven and.

Not necessarily driven by a specific product applications to dress up and that drives their business.

In terms of current.

Current trading I mean, we can clearly say that the current training fully supports our guidance we feel very comfortable.

And again, it's very important to understand that.

And the model that we are now.

Additionally to wholesale.

Have them the platform. The key metric is how gross merchandize value develops because that tells you how much customer spend on my Teresa.

As you go down this is just the way how we booked it in the guidance for the for the profitability remains seven to nine we expect based on the current trading that we are in the upper half of that so we really.

Believe that the key metrics to look at to understand the financial house businesses, how much merchandise is transacted on the platforms of <unk> and of course, one is the EBITDA at the platform reports on current trading makes us very confident to again be 22% to 25%, even though the hiring.

The upper half of that range, and GMP and 7% to 9%.

There the upper half of the range.

That's great to hear and then maybe just a follow up on gross margin.

Could you just speak to the drivers of the gross margin consistency over the past year.

This has been a real key storylines, just given the customer acquisition that you've been showing just the underlying drivers of your gross margin outlook as we think about next year.

I think youre absolutely right I think this is a key factor to understand why this business can achieve growth and profitability.

The fact is that we continue to acquire customers not based on promotional book.

Emotional.

Sure and our business has actually decreased over last 12 months, we have seen in the business environment.

For the last 12 months has been less promotional than what we've seen.

It can be used before but also internally we are continuously focusing on the high end.

In luxury brands. The high end luxury brands are also very keen to have a distribution system where.

Brand equity protection is key so I think the industry.

Has used the dramatic change in dramatic shock of the pandemic also.

You realize what is key in March and what is important is brand equity protection and it is gross margin protection and we are driving our new customer acquisition by excellent marketing by highly targeted marketing on the backhaul.

Using artificial intelligence algorithms, but we are not backing our custom acquisition based on promotional intensity because we know from the past customers are attracted by promotions will only come back by promotions and then it's a it's a downward slope.

Great Best of luck.

Pardon me. Your next question comes from Oliver Chen with Cowen Your line is open.

Hi, Thank you Michael on the curated platform model what are the main brands that will participate in how do you see the EBIT mix.

Mix or contribution.

Trending over time, given that it's a high margin take rate and what are just some principles of the arrangements in terms of.

The financial arrangements with the vendors.

And.

How does it what's the timing of this as well in terms of how you implement this over time and if you have any thoughts on how geographically.

It will we'll distribute as well that would be great to know thank you.

Sure so the.

The thoughtful model its a gradual evolution. So we will we will.

Starting in fiscal year 'twenty, two with some major bones, it's not by geography. It is by individual brands.

So if we if we.

If we work on that platform with a brand that's immediately global.

The arrangement is.

That.

We will no longer own the inventory.

Inventory will remain in the possession of the.

Ownership of the brand until we sell it to the mitral user customer.

But we will continue to create so that inventory will sit in our warehouse.

We will ship from our warehouse, we will continue to do marketing.

And the real advantage for both sides is the close integration on the supply chain.

So collaboration on marketing.

We are able to adapt to demand not only in terms of overall demand, but also in terms of specific product during the season as we are part of the <unk>.

<unk> inventory of the brand.

That of course tells you that this model meets certain.

Certain capabilities.

On the brand side and also the ability to manage the supply chain that's why.

Margin Canadian stated this is the right brand for <unk>.

Brandon we have wholesale.

<unk> model like module for sometimes.

Wholesale is the right model for other brands and we expect that this evolution.

We'll make an even more integrated approach with some of the bigger groups bigger brands.

We currently expect that medium term this may be 35% of the total revenue in our <unk>.

Our platform.

No.

This is a gradual step by step evolution in terms of bottom line impact because it creates efficiencies because it allows us to work much closer in to avoid spur.

Spending money on things that don't work it is not only on the topline accretive because we are actually getting access to heightened desirable product in season replenishment. It is also accretive on the bottom line, but this is space because there is efficiencies to be gained out of this.

Okay, Michael and what's the framework for deciding what's most appropriate for curated platform model.

Versus you actually buying the inventory and the C. P. M also will likely enable you to.

Tap into a whole wide array of brands and.

To your assortment in a capital light fashion, so what's your vision for evolution and does that.

Alter or give you opportunity to compete in different ways.

Is this can unleash a big step change in what Youre doing.

We are truly excited to also now have this.

Additional model because indeed, it allows us to offer two different brands different solutions on how to be present in mitral visa and speak to the mitral reads a customer story.

I see.

Great upside that is not only one model, but there are different.

Different models for different brands.

The criteria is always that we.

We discussed and develop these things joined People's brands in some brands.

Feel that that model allows them to work, even better with us and the other brands to say well actually.

The traditional model is perfectly attuned to our capabilities and our interest. So it is and has always mutual.

Interest, but we firmly believe it opens up more opportunities for us as we have an additional models to work with brands.

API as a pretty key infrastructure wise as well as thinking about the seamless integration with the customer and speed and D. CS.

What are your capabilities you know technically speaking is the.

The infrastructure and also the proprietary relationship with each of the.

Brands, you know is critical to making this work.

This is based on.

Capabilities.

To be very clear, we are starting in fiscal year 'twenty two.

So the capabilities already in place, we will start with the first brands already.

And fall winter and then even more so with spring somewhat 2002. So this is quite as additional capabilities, but we have them in place.

Okay. Thank you and finally <unk>.

Inventory availability has been a big topic.

What are your thoughts on inventories relative to sales and did you have enough to did you leave top line on the table, given some industry constraints and Martin marketing cost and shipping and payments and freight cost in the quarter, how did those align versus your expectations.

So let me take deliveries.

Compared to the fall winter 2000 T forward into 'twenty one.

Swing back I mean, we are.

Fairly well deliver on fall winter.

We have seen good availability of products of course, there are always the best seller hub centers that you wish you would you would have more of the overall the industry has really recovered.

Last year as you remember there was impact on the supply chain as production in Italy in March April and May actually had to shut down.

Factories in Italy are fully back since July and August and have fully caught up.

Our supplier base and that she is really focused on Europe, and so we don't see any negative impacts anymore.

Apply chain and product availability.

It was very good I would describe it as almost back to pre pandemic.

Yes.

Yeah, and maybe until the P&L Oliver I mean, yeah.

Great observation on we finished the year with 9% EBITDA margin.

Margin and we guide the next fiscal year on the upper end of the southern and two 9%. So if we look at the individual cost lines, we talked about the stability.

Despite the strong growth of stability in the gross profit margin.

If you look at the more technical.

Shipping in payments payment cost ratio, we were able to offset cost increases and we we also expect great stability there theres nothing that we we.

We don't think that we can manage looking looking forward. So we expect stability there on the marketing side. It is a set of the continuation of this trend.

Hum.

Proving performance marketing cost ratios.

But we want to reinvest those efficiency gains on the online marketing side into <unk>.

Brand awareness activities and PR events that we couldn't do so much of fiscal 'twenty, one and that's why we expect the overall marketing cost ratio too.

To be stable and SG&A, we expect a continuation of cost leverage.

Okay. Thank you best regards.

And your next question comes from Mike Hobey Nappy with Credit Suisse. Your line is open.

Hey, guys. Thanks for taking our questions here and thanks for all the detail today, so with CPM.

It looks like if we look through the guidance you just adds a layer of sales with higher gross margin.

22, gross margin seems to be guided to about 51% to 52, you did about 47 last year I'm trying to understand.

With the EBITDA margin guided to the to the eight to nine range.

Seems to imply opex.

Rough math, 43% to 44% of sales versus 39% in 2022 or 2021. So it seems like there is some some costs coming into the Opex line associated with C. P. M. Maybe you could speak to that a little bit so we understand a little bit how it influences the P&L.

Okay.

I.

If I look at the of the CPM effect off the P&L and I think in this what I've talked about in the earnings call.

Clear that we don't see any increase in the.

Cost line items due to CPM. So the CPM passes effect as Michael outlined from a shift of G M b into.

Into booking the.

The platform fee S. Net sales. So it's just a slower increase all at one time shift effect from those brands G. M V into net sales, but the overall <unk> will.

Grow strongly the overall.

Gross margin will go.

Will it be very stable.

In relation to the to the slower growth of the net sales obviously.

Have an increase there and all the other cost line items are.

In line with our stability and what we have seen in the successful past years, because as Michael said the CPM brands. It's just the ownership of the inventory how we treat the merchandize is does not change from the wholesale to the CPM model, we select we curate.

We do a marketing content and we do the full end to end customer service.

So okay. Thank you for that.

I'm also I'm also curious if you said this is an accretive program to the to the Bottomline if.

Maybe what are some of the new headwinds to consider to EBITDA I know, we spent a bit of time on that on the on the tailwind, but you pointed to the top half of the 8% to 9% EBITDA range that you'd established previously, but we had we add CPM in which you described as accretive and it sounds like you pulled some ERP costs into 2020.

One from 2022 are there a couple of new takes from EBITDA that we should consider that maybe you didn't outline there.

And then I.

I guess I'm trying to understand.

In the in the Powerpoint presentation Slide 21.

There's a there's a brief comment there that you guys will control.

Shipping costs associated with customer service, but you said the inventory for CPM goes from the brand's warehouse to.

To the customers I mean is that just you guys are handling the shipping costs associated with returns is that what that means.

If I can.

Yes, sorry, it was not.

I'll explain the inventory is in our warehouse.

Okay financial ownership is with the Brian, but the inventory isn't all else that may have not been well explained.

Okay.

So before.

Exactly and maybe to Q4. This was just this one time effect in Q4.

But bear in mind, I mean for fiscal year 'twenty. One we grew our adjusted EBITDA by 55%, we achieved a 9% adjusted EBITDA margin, which is.

I'll, probably among the highest in the industry and there we don't see any cost pressure.

Have you seen any cost per se, but we couldnt handle in fiscal year, 'twenty, one and going forward in fiscal year 'twenty two so despite this.

Effect and I described it in Q4.

Going forward.

There's no.

Cost pressure.

Actually not driven from CPM.

Okay. Thanks, guys.

And your last question comes from the line of Jeff Point de Mendez of Bank of America. Your line is open.

Yeah. Thank you very much for taking my question just.

To come back on the CPM so.

If I understand correctly.

The main reason why your sales are going to grow slower than <unk>, because you're going to increase the share of CPM towards.

Something close to 20%.

And then he says in the long term you're going to go to 35% C. P. M. A share so should we expect the net sales growth to.

Be slower the new GM vehicles in the next I don't know two to three years.

Because I understand <unk> is very important to understand Europe your market share.

But your net salaries all your margins are all calculated so if your net sales are growing slower than you'd CMV and fluid in the guidance you used to have at the IPO.

You EBITDA in Euro terms will potentially be are under pressure. So just wanted to clarify on that.

And then second question, if we have the time any comments you can give them.

Now the launch of beauty has has it been with Este Lauder and your comments on the impact from average basket size.

<unk> opportunities with with fashion. Thank you very much.

Yes, thanks, So Bob maybe maybe on the first question clearly.

The strength of the CPM model with all the advantages that we talked about so we really embrace of having the right model for.

The right brands.

And.

The the GM and shifting some of those major brands some brands from a profit from wholesale to Cfp's CPM has this one time effect of the net sales. So as you rightfully said, we expect that this year and some some months some period of next year coming to that to that range.

And from that on that base.

Net sale will also grow and we target we clearly outlined in the presentation also have this 22% to 25% in the long run so it's more or less a one time effect on net sales and on profitability. I mean, you just saw that clear guidance on gross profit.

Growth of 21% to 24%. So you see the CPM is fully accretive and.

Again, we grew.

Adjusted EBITDA, 55%, we guide and we continue to guide to a 7% to 9%.

In the upper half of that range and.

And.

Fully.

Aware of this strong profitability that we want to keep and we will be able to show that strong profitability. Despite the very strong growth on the top line.

Attracting more customers to the platform and having the strong growth in champion.

Yes.

This combination of growth and profitability is and continues to be a unique feature of mitral reside.

Digital luxury platform sector, so and we will continue to have that so we don't see ourselves.

And the pressure on the bottom line, we see ourselves well positioned for growth and profitability on beauty you view exactly outlined the right questions and these are exactly the ones. We're looking at with these pop ups.

As Vince attracting the same customer that we have.

Great does that bring new customers are these additional beauty products going into the same basket or do they create an additional basket because that is exactly what we wanted to better understand not only in terms of economics, but also in terms of operations and we will in the next or in this current new fiscal year 'twenty two.

<unk> continued to do pop ups.

Because we really want to understand the appetite of our customers.

The operational requirements to do this well because we wont add any categories until we are absolutely convinced we can do it well and so in beauty we are still in.

And in the face of understanding it but there's great appetite by major beauty brands to at least create pop ups with us.

Okay. Thank you very much just one quick follow up if I may on I think someone already asked the question, but I didn't I.

I don't know if there was an answer.

Are you willing to give the take rate for the CPM part of the business or is it something you don't want to talk about.

No. These are commercial arrangements, we don't talk about individual commercial arrangements most important message.

We will continue our EBITDA guidance as we have since IPO. So there's no change to that.

Okay. Thank you very much.

Alright. This concludes today's conference call. Thank you for participating you may now disconnect.

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