This call of the Bike24 Holding AG, following the publication of the Q3 figures of 2024. I am delighted to welcome the CEO, Andrés Martin-Birner, as well as the CFO, Timm Armbrust, who will speak in a moment and guide us through the presentation and the results. After the presentation, we will move on to a Q&A session in which you will be allowed to place your questions directly to the management. So, I would say, let's jump straight into the numbers. Mr. Martin-Birner, the stage is yours.
Thank you very much. Welcome to today's earnings call presentation for the third quarter. My name is Andrés Martin-Birner. I'm the founder and CEO of Bike24. At my side, as always, Timm Armbrust, the CFO of Bike24. Let me now start with the general update on the third quarter of this year before I hand over to Timm for the business update, finishing with a general summary, the confirmation of our 2024 guidance, and a Q&A session. The third quarter was successful overall and clearly shows a positive trend. Despite a difficult market environment, we achieved a revenue growth of + 3% and an adjusted EBITDA margin of + 4%. Our focus on profitability is therefore paying off. We achieved this result due to a better gross margin overall, strict cost discipline, and more focused marketing strategy.
In particular, the continuous improvement of our offering for our customers led to growth in all core markets: DACH region, + 3%; Spain, Italy, France, and Benelux, + 6%; and rest of Europe, + 13%. Especially sales growth in Benelux remains strong at 20% in the second year of localization. Moving on to our assortment segments, our core segment PAC recorded a sales growth of + 2% and a 9% increase in gross profit, demonstrating the success of the revised pricing strategy and the strength of our expert and enthusiast bike market. On the other hand, despite a difficult market environment, the full bike segment also generated robust sales growth of + 6%.
In terms of balance sheet positions, the improved Adjusted EBITDA and our continued improved inventory position resulted in a strong free cash flow generation of around EUR 6 million and a stable cash position at the end of September 2024. Lastly, we are confidently confirming our full year guidance first published in March this year, which assumes a sales growth of between 1% and 5% and a positive adjusted EBITDA margin of between 0.7% and 4.2%. The revenue growth is expected to be at the lower end of the guidance. So, this was the intro from my side. Timm, over to you for the financials.
Yeah, thanks, Andrés. I would now like to share some details on the selected financial and non-financial KPIs of the third quarter 2024 with you. Our active customer base was slightly down to 908,000 at the end of June. It is important to mention that the mix in the customer base has improved and versus the comparison base. The customer base 12 months ago, at the end of September 2023, includes a large number of bargain hunters who only purchased massively discounted products during the fourth quarter of 2022 and the first quarter of 2023. The individuals now included in the customer base as of September 2024 corresponded more to the Bike24's core customer, the bike enthusiast. Quarter over quarter, we increased the number of active customers by 5,000. The trend here is also moving in the expected direction. The repeat order weight was slightly lower with 68%.
This trend cannot be broken down to a single region, but it reflects the general low consumer sentiment. Let's now focus on the top-line performance and our two segments, full bike and PAC. Next slide, please. Perfect. The strategic focus on full bikes a couple of years ago continues to pay off. We record ongoing significant growth for the full bike segment this quarter by 6%, despite the headwinds in the market. PAC sales, on the other hand, increased by 2%. Again, we accepted this slow revenue development to focus on profitable orders only, as the times of heavy overcapacities for PAC are over. That focus, together with the higher market prices, helps to increase the gross profit for PAC sales by 9%. In total, Q3 revenues were up by 3% to now around EUR 63 million. Next slide.
When we look at the various regions, we are very proud to have achieved growth across all European regions by focusing more closely on our core customers. We succeeded in reducing performance marketing expenses by 24% and increasing both revenue and gross profit at the same time. To be more specific about the growth rates by region, growth in DACH was three%, growth in the localized markets was six%, and in the rest of Europe, we were even able to grow by 13%. Within localized markets, the Benelux countries, which were localized during the first quarter of the previous year, recorded again a double-digit growth rate of around 20%. It's important to note that the previous year's sales were already based entirely on a localized web store.
The Southern region, so France, Italy, and Spain, was more or less at the same level as in the same period of the previous year. However, this is a very strong positive trend over the course of the months. In the rest of the European Economic Area, we recorded growth for the first time since Q1 2022. Our focus on supply and availability for enthusiasts is also helping us in this market, and we expect a further recovery in the coming months. Revenues in the rest of the world were down minus 36%. This is a non-strategic segment, and the development depends predominantly on the exchange rate of the euro, as well as the transportation rates for private customers in the respective country. Let's now turn to the balance sheet and with that, in particular, to inventory. We managed to decrease inventory by the end of September and December 2023.
With targeted sales and marketing campaigns, we successfully reduced older stock with still satisfactory margins while also adding new products. Overall, we have 21% less inventory than at the same time last year. Additionally, over the past few months, we were able to acquire some clearance items. Some of them are already reflected in the balance sheet as of the end of September. This is putting us in a much better position for the upcoming Black Friday weeks compared to last year. In terms of profitability, we show an even stronger picture compared to last year. As already mentioned, gross margins across the PAC segment increased significantly, mostly because of strategic price adjustment and less promotional activity. Despite the pressure on margins for full bikes, driven by the promotional environment, especially at brick-and-mortar stores, we increased the gross margin overall by 400 basis points.
Performance marketing costs in relation to sales have improved. As already mentioned, we have concentrated on the bike enthusiast. Given that growth was driven by localized markets and the rest of Europe, selling costs increased slightly by 0.2 percentage points to now 9%. Personnel costs were only slightly up, despite negatively impacted by lower capitalization of IT expenses and the ongoing wage inflation. So, in total, we recorded an adjusted EBITDA margin of 4%. We were able to surpass last year's strong Q3 results once again. The headwinds in the market for the full bike segment have intensified further. However, this was offset by our consistent focus on the bike enthusiast. That's it for my side. Now, Andrés, back to you.
Thank you, Tim. Following an already successful second quarter, we were also able to increase sales and profit in the third quarter. It shows that our focus on profitability is paying off. The known reasons are the improved gross margins, discipline, and costs, and, as you know, also our improved marketing approach. Our continued focus on our working capital and improvements in our operating business have generated strong free cash flow. As a result, we were able to reduce the Bike24's debt by EUR six million in the first nine months as planned. Our strategic focus over the last three years of rolling out our business model to other European countries, that means driving forward localization and investing more in the full bike assortment, is showing sustainable success.
Lastly, I'm pleased to confirm again our full year guidance first published in March this year, which assumes a sales growth of between 1% and 5% and a positive adjusted EBITDA margin of between 0.7% and 4.2%. The revenue growth is expected to be at the lower end of the guidance. With that, thank you now for your attention, and we are now open for your questions.
Yes, thank you very much for the presentation. We will now move on to the Q&A session. And for a dynamic conversation, we kindly ask you to ask questions in person via the audio line. To do so, click on the raise your hand button. If you have dialed in by phone, please use the key combination star 9 followed by star 6. And if you're not able to speak freely today, you can also place your questions in our chat. So, yes, Mr. Michaels, you should be able to speak now.
Thank you. Congratulations, gentlemen, on a good quarter. Another one. I have a question, a few questions. One would be regarding your bank loans or lines. Could you give us an update on the status and when your next maturity would be and where you stand with your banks?
Oh, thanks, Charlie, for the question. So, yes, we started with the negotiation as agreed last time, yeah, that we start in late autumn again. So, I could not comment really on the outcome now, yeah. And I expect a final solution and a longer-term financing for Bike24, end of January, beginning of February. That's my expectation.
Got it. If I could ask two more questions if there's time.
Sure.
A little bit more longer term. One would be, you used to have double-digit sales growth for a long time, well over 10 years, I believe, typically. How long do you think it will take to get back to such, let's say, your normalized or normal growth rate?
Of course, it depends. We are really open for that, but of course, it depends really on the market environment. As you know, 80% of our revenues came from PAC, so parts, accessories, and clothing. We see that the situation is getting better and better, especially also in the gross margins. As you know, it's our core focus on profitability, and that means especially increasing our gross margins. It depends really on the market environment, and we see the environment in PAC is better. I think that for the full bikes segment, it would take, yeah, since the end of 2025, and then we expect also again double-digit growth rates.
I think what's important to know is that we sacrifice some growth at the moment for profit, to be honest, so what really is our focus now, making profit with each order, and so we sacrifice some growth. If the market overcapacities are going down again or on a normal level, then we will see again a good gross margin and double-digit growth again.
Last question, longer term. Do you sense there's any level of commoditization, meaning more competition because there's more powerful online players like Amazon? Have you sensed the change in the last one, two, three from that what could potentially be viewed as making your business much more difficult than it was five years ago and 10 years ago?
A good question, of course, yes. But of course, Amazon is a player in our market, yeah, but we see, and it doesn't change in the last years, that our main focus is the expert and enthusiast market. And what we see there is more that there are players leaving the market. So, that's why we feel relatively comfortable in this actual situation, yeah.
And also, if you look on the business model of Bike24, we're still also very attractive in the long term. We have the most brands, the most number of products. And a bike enthusiast at Bike24 orders more than three items per basket in average, yeah. And if he would look on Amazon for these items, it would be in the end marketplace because Amazon, for its own, don't like the long tail, yeah. So, there are different marketplace players that offer the products that Bike24 has. And then you receive three parcels. You have to make maybe two returns, yeah. And I think that's still, for the bike enthusiasts, very important that Bike24 is the one-stop shop for all the brands in the market.
Thank you.
Thank you for the question. We have another question. Mr. Schwecht, you should be able to speak now.
Yes, hello. Can you hear me?
Yes.
Okay, thanks. Two questions from my side. First, on the margin split, you mentioned that PAC saw an increase of gross profit of 9%. Can you give us some more details on the margin spread between PAC and Full Bikes? That would be helpful. And then on your guidance, you get a little bit more cautious on the revenue growth side while keeping EBITDA margin rate stable. That basically signals that also the absolute EBITDA may face some pressure. So, would it be the right assumption to not look at the mid part of the EBITDA margin target you guided us for?
Yeah, let me start with the first question, Mr. Schwecht. So, I think that the spread between full bike and PAC is, in normal market situation, very low, yeah. So, you see on the full bike segment a slightly lower margin as in the PAC segment. But on an EBITDA level, it's different, yeah, because due to the trend of the very high baskets, the e-bikes, you spend after the gross margin the same cost there as it's a bio bike for 1,000 EUR or an e-bike for 5,000 EUR. So, from an EBITDA contribution, normally full bikes are better. But what you see at the moment is really the pressure from the brick-and-mortar store, yeah. I already mentioned that during the presentation.
We see it here in Germany every day that all the brick-and-mortar stores, also the big chains, that they advertise with discounts 40%, 50%, and that's the whole season along, yeah. So, you see that the PAC market, the overcapacities are coming to an end, but in the full bike market, they are still there. And they try to convert inventory into cash. And that was the pressure on the margins, yeah. So, I don't have here exactly the number, but it's in the mid single-digit range, the spread in margins at the moment. Low to mid. And on the guidance, yes, for sure. The Q4 guidance, we are, I think we're looking really forward to the Black Friday season. But for sure, it's also a very promotional area, yeah. So, we could not expect an EBITDA for the Q4 on the same level as in Q3 and Q2.
Understood. Thanks a lot.
Thank you for your question, and we have another one. Mr. Kruse, you should be able to speak now.
Yes, thanks. Thanks for taking my question and congrats to the quarter. Maybe a follow-up on Charlie's question. Actually, if I calculate correctly, even the lower end of your guidance should enable you or should imply a double-digit sales growth in Q4 at least. So, maybe you could confirm that. But my question in terms of growth would be in the localized markets, especially you had a positive growth, even though marketing was on the same level as in the second quarter. So, would this imply that you are seeing more stable development there? I think you mentioned last time, especially Spain was highly under pressure in the parts and accessories. So, could you maybe comment on that, sort of also what you see maybe in the development in the current quarter?
Maybe let me take the first part of the question. So, yes, for sure, we do the math. We expect at the moment double-digit growth in the fourth quarter. But I hope I understand Charlie correctly that this was more long term, yeah. So, we know that last year, due to the, I would say, liquidity situation, the situation in the market, we were not in a so good position as we had this year, yeah, to really increase sales during the Black Friday week, yeah. So, we feel good prepared there. And therefore, we expected that double-digit growth for Q4 at the moment. But I hope, Charlie, it was more longer term thing and not only one quarter, yeah.
Maybe the second one, Mr.
Yeah, regarding the localized markets and also other regions in Europe, what we see first is our concentration on the DACH market and that we have a little changed our marketing strategy. I think it makes really sense to concentrate on that. On the other hand, of course, localized market and also rest of Europe is a part of our core business. And what we see especially is that also our marketing approach is helping now that we are looking really more and more, and you see it also in our costs in marketing or in paid marketing, that we are concentrating more and more on organic traffic, on the increasing of the organic traffic, and try to, I would say, to have more stable or stabilizing our paid marketing or also reducing our paid marketing for these areas.
Our focus is really more on the increasing of the organic traffic.
Okay, understood. But that does imply that sort of the market was open for your organic prices in a way, yeah? You didn't head into these price walls that maybe were in Q2 and distracted other customers. So, I would gather that people are more, the market has stabilized in a bit.
Correct, yes. Correct.
Yeah. Okay, thanks for that. Tim, maybe a question on the inventory. Is it fair to assume that absolute inventory levels will go down to the end of the year like they did in last year? Or is that something considering sort of inventories? And you said you were able to, yeah, to take some market opportunities in terms of offers of suppliers. So, is that something we should factor in when we look at inventory levels at the end of the year?
No. So, over the course of the month, for sure, we will see an increase, yeah, before Black Friday will start, yeah. But, end of the year, we could expect a lower level of inventory as compared to now.
Okay, perfect. Perfect. That makes sense. I know it's still early. You have to finish this year. But what is sort of your gut feeling for 2025? Is it maybe the second half of this year in a bit more positive momentum, something we could sort of expect going into the next season? And also with the model year, 2025, I think you brushed on that in other calls. So, what are your current views on 2025, sort of from today's point of view?
Today, we are really looking slightly optimistic to the beginning of the next year. I think we did a lot of work and worked hard to stabilize, I would say, our business, our gross margin, and to have, I would say, yeah, sustainable growth. That's what we are doing and what we are focusing on, yeah, and I think we, yeah, we feel well prepared and look slightly optimistic for the next year.
Okay, good to hear. Fingers crossed and good luck for Black Friday and the days around that. Thanks a lot.
Thank you.
Thank you for your question, and we have one question via the chat. In the Q3 report, you talk about slightly adjusted conditions for the syndicated loan. Can you please provide some more details on the new terms? Is there a chance to refinance the debt at lower interest rates in the near future?
So, yeah, the terms not changed during the months, yeah. We are still, for sure, we have a margin grid that we test at each quarter, but there was no change in it, yeah. And for sure, we expect that we could finance the business. I think we now have a very positive two quarters, yeah. And also, the first discussion with the bank was very positive. So, we expect better conditions for the future financing by 2024.
Okay, thank you. In the meantime, we have received no further questions. We therefore come to the end of today's earnings call. Thank you for joining in this lively conversation, and should further questions arise at a later time, please feel free to contact Investor Relations. A big thank you also to you, gentlemen, for your presentation and the time you took to answer the questions. I wish you all a lovely remaining week, and with this, I hand over to some last words of you, Martin-Birner, and Mr. Armbrust.
Yeah, thank you again for your attention. And thank you for joining our Q3 earnings call. And yeah, we see and hear you again. Thank you. Bye-bye.
Thank you. Bye.