Earnings Call: Q1 2023

Nov 8, 2022

Ladies and gentlemen, greetings and welcome to the Mytheresa first quarter of fiscal 2023 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 Q&A. It is now my pleasure to introduce your host, Martin Beer, Mytheresa's Chief Financial Officer. Thank you, and over to you, sir. Thank you, operator, and welcome everyone to Mytheresa's investor conference call for the first quarter of fiscal year 2023. With me today is our CEO, Michael Kliger. 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 and are subject to risks and uncertainties, including the risks and uncertainties described in our annual report. 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 IFRS on this call. You can find reconciliations of these non-IFRS financial measures in our earnings press release, which is available on our investor relations website at investors.mytheresa.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 comment on the results and performance of our first quarter of fiscal year 2023. We are extremely pleased with our results. Our business has shown excellent strengths and resilience in ongoingly challenging economic and geopolitical times. Mytheresa has accelerated its top-line growth in the first quarter of fiscal year 2023, which is the continuation of what we saw in previous quarters. Furthermore, we delivered in the first quarter, once more, very good profitability. Given what we see in the broader consumer sector and with other digital businesses, we believe that Mytheresa is a truly differentiated business with a unique customer focus, a highly adaptive business model, and outstanding operational excellence. These qualities make us confident to deliver against our communicated targets for full fiscal year 2023, despite clear challenges in the macro environment. I will today provide you with details on these three key qualities as evidenced in the first quarter of fiscal year 2023, so that you can fully appreciate the strengths and health of the Mytheresa business. First, our sole focus on the high-end luxury sector, both in terms of customers as well as brands, make us foremost a luxury business and not just a digital business. Our events, brand exclusives, and customer KPIs in the first quarter will speak to this. Being luxury explains why we are in many ways protected from the challenges and uncertainties in the macro environment. This is evidenced by very strong and sustainable growth in the first quarter, unlike more middle-market-oriented digital businesses. Second, we have created a very diversified and agile business model. We are global, we are focused on full price selling, and we have a high share of cost variability. Therefore, we can expand our business along many growth vectors while at the same time delivering outstanding profitability, positive cash flow, and high return on invested capital. Third, a key success factor for Mytheresa has always been the operational excellence in the business. This can be seen in our, once again, outstanding operational KPIs in the first quarter, the high customer satisfaction and the many trust-based relationships we enjoy with luxury brand partners. Let me now comment in more detail on these three key qualities of the Mytheresa business. First, let's look at the very strong and sustainable growth in the first quarter. We grew our gross merchandise value, GMV, by +20.8% compared to Q1 fiscal year 2022. This is a clear acceleration versus the Q3 growth rate of 13.2% and the Q4 growth rate of 18.2% of fiscal year 2022. This accelerated growth in the first quarter clearly sets us apart from other digital businesses in the same period. It is driven by the sole focus on true high-end luxury customers and not on the peripheral occasional luxury shoppers. The latter are and will be impacted significantly by economic downturn, while the true luxury customer is more resilient. In the first quarter of fiscal year 2023, our top customer base grew by +22.7% compared to Q1 of fiscal year 2022. The average spend for all customers grew by +6.5% in the first quarter of fiscal year 2023 compared to Q1 of fiscal year 2022. In that sense, the lower growth of +12.5% for the full customer base during the quarter did not matter as much as it was driven by slower growth in occasional luxury shoppers. To engage and serve our high-end customer base, or as we call them, the luxury wardrobe builders, we partnered again with many leading luxury brands for exclusive collaborations. We produced impactful digital content and campaigns that created visibility for the brands to reach our unique high-value multi-brand customer base, which cannot be easily reached by pure mono brand offerings. Our clear focus on high-end customer engagement is ultimately the key reason for luxury brands to continually partner with us. Examples for exclusive brand collaborations from the first quarter include the launch of the exclusive Eyelet bags from Gucci, exclusive fall winter styles from Loewe and Moncler, as well as the pre-launch of the highly anticipated new collection of Creative Director Matthieu Blazy of Bottega Veneta, giving Mytheresa customers exclusively first access. We were also the exclusive launch partner for the Love Trotter bag from Etro, which was featured on the very first runway show of the new Designer, Marco De Vincenzo, and exclusively available on Mytheresa on the day of the show. Please see our investor presentation for more details on brand collaborations in the first quarter of fiscal year 2023. Our unique ability to excite and engage through such unique brand collaborations with true high-end luxury customers and then build long-lasting relationships provide us with a very sustainable and growing revenue base. This comes on top, of course, of the continued shift of luxury consumers to online shopping. Bain and Altagamma predict that by 2025, still only 30% of the personal luxury goods spend will be online. Second, let's look on the very diversified and agile Mytheresa business model. The first quarter of fiscal year 2023, we grew across all categories such as womenswear, menswear, and kidswear, as well as our recently launched Life category featuring home and lifestyle products. Also, in terms of geographic presence, we continue to see growth in all regions. In the United States, which is one of our key growth markets, we achieved again an above average GMV growth with +28.5% compared to Q1 of fiscal year 2022. We drove this growth with a strong lineup of customer and brand events across the United States. Please see our investor presentation for more details on our events in the first quarter of fiscal year 2023. We also partnered with Women's Wear Daily during New York Fashion Week for physical and digital marketing activities, and hosted a high-impact lunch for designer Gabriela Hearst at the Eleven Madison Park restaurant. Additionally, in July, we announced Steven Xu as our new president for China and Asia Pacific as a clear commitment to invest into this region. We grew our team of personal shoppers and marketing staff for China in the first quarter. Despite the ongoing COVID-related challenges for customers, our mainland China GMV grew by +22.5% in the first quarter of 2023 compared to the first quarter of fiscal year 2022. In two days, we will actually launch the Chinese designer program by Mytheresa to support and create visibility for Chinese luxury designers, as well as raise our public profile in China. Please see our investor presentation for more details on this significant and highly publicized program. In terms of business model diversity, we not only grew our Life category on the basis of a drop ship model, but also continue to expand our curated platform model CPM to now seven brands in the first quarter of fiscal year 2023. Just as a reminder, the CPM allows us to curate and serve our customers as we do under the wholesale model, while the inventory ownership remains with the brand, which allows for better inventory management and control for them. As in the previous quarters, we achieved our GMV growth with a continued focus on full price selling. Our average LTM order value increased by +5.4% in the first quarter of fiscal year 2023 compared to fiscal year 2022. The repurchase rates of new customer cohorts acquired in Q4 fiscal year 2022 show positive trend versus Q4 fiscal year 2021 cohort in the respective first quarter. Please see our investor presentation for more details on the cohort repurchase rate. Our customer acquisition costs only increased moderately by 6% in the first quarter. Finally, we achieved our growth with a very healthy gross profit margin, which was 90 basis points higher in the first quarter of fiscal year 2023 compared to fiscal year 2022. All these KPIs demonstrate the agility of our business model. Martin will talk in a few minutes about how all this translated into excellent bottom-line results for the first quarter of fiscal year 2023. Third, let's look at the key strengths of Mytheresa, the operational excellence in the business. A key indicator for this is customer satisfaction, which reached an outstanding level as measured internally with a Net Promoter Score of 81.0% in the first quarter of fiscal year 2023. This is only achievable with a very high consistency and quality across all functions and in particular, warehouse operations, customer care, and technology services. Furthermore, high customer satisfaction for our top customers is achieved by the flawless execution of true money can buy experiences for them. Examples for these in the first quarter include the celebration of Victoria Beckham's first show in Paris with a star-studded guest list, including Eva Longoria, Gigi Hadid, and many more. The sponsoring of the Christian Louboutin exhibition in Monaco, accompanied by a dinner for our top customers with the iconic shoe designer Christian Louboutin himself. A weekend experience for top customers in Solomeo, the home of Brunello Cucinelli, including being part of his personal birthday party. Finally, operational excellence today also means continual progress against sustainability requirements. Mytheresa recently published its first positive change report. Some of the highlighted achievements in this report for fiscal year 2022 include a 34% decrease of CO2 emissions per order shipped, achievement of carbon neutrality for the company, 90% usage of renewable electricity in the company, 57% women in leadership positions, and more than EUR 2 million worth of products resold by our customers by our partnership with Vestiaire Collective. Please see our investor presentation for more details on the Mytheresa positive change report. With all the above, it should come as no surprise that we strongly believe in our communicated targets for full fiscal year 2023. We are extremely satisfied with our performance in the first quarter. We believe that our results demonstrate the fundamental strengths and consistency of our business model, delivering profitable growth. We see ourselves as one of the few winners in the clearly consolidating luxury e-commerce space. Now I hand over to Martin Beer to discuss the financial results in detail. Thank you, Michael. I will now review the financial results of the first quarter of fiscal year 2023 ended September 30, 2022, and will provide additional details on some of the previously mentioned factors influencing our performance. Unless otherwise stated, all numbers refer to euro. As Michael highlighted, we are extremely satisfied with our results. GMV in the first quarter running from July to September was at EUR 197.9 million, a 20.8% increase from EUR 163.9 million in the prior year quarter. We have been able to accelerate growth throughout calendar year 2022, despite a negative consumer sentiment resulting from the outbreak of the war in Ukraine in March. This is quite a remarkable and resilient performance, highlighting the unique Mytheresa positioning in online luxury. GMV is one of our key value drivers as it shows the depth and growth of our customer relationships. In the first quarter, we delivered strong GMV due to excellent existing customer cohort performance and robust new customer growth. Customer engagement and retention continue to grow as our active customers who shopped with us in the last twelve months grew by 13.4% to 800,000. During the first quarter, net sales increased by EUR 18.1 million or 11.4% year-over-year to EUR 175.9 million. As in previous quarters, net sales reported is impacted by brands transitioning to our curated platform model. During the first quarter of fiscal 2023, we now have 7 brands operating under the curated platform model compared to 1 brand in Q1 of fiscal year 2022. In Q2 of fiscal year 2022, we operated with 6 brands under the CPM. We therefore expect the growth rates of net sales to be much closer to GMV in the second half of fiscal year 2023. To be more similar in fiscal year 2024 and beyond as only a few further brands will join the CPM over time. As stated before, due to the one-time effect of selected brands transitioning from the wholesale model to our curated platform model, the increase in net sales is lower than our GMV growth in the quarter. The difference in growth rates between GMV and net sales is purely a one-time financial accounting effect. As for the CPM brands, we book the platform fee as net sales. 12 months after the full transition of those brands, this one-time effect will be over and net sales will grow in line with GMV again. The curated platform model offers special financial characteristics to Mytheresa. It enables a stronger top-line growth due to in-season replenishment and overall yields a similar profit profile for Mytheresa. In addition, inventory risks stays with the brand as they maintain ownership of the inventory, and Mytheresa has a much better cash cycle as we only pay the brand once the customer has paid us. In the first quarter of this fiscal year, we once again saw significant growth in many regions of the world. We grew strongly in the U.S. and other parts of the world as we fortified our global leadership position in curated online luxury experiences. Our net sales share outside Europe increased from 40% in Q1 fiscal year 2022 to 45% in Q1 of fiscal year 2023. Our total orders shipped in the last twelve months increased by 16.4% to 1.84 million. Our AOV LTM increased by 5.4% to now EUR 631, one of the highest in the industry. In absolute figures, this growth in AOV equals an increase of EUR 32 per order shipped. The gross profit margin of 49.9% improved by 90 basis points compared to the prior year period of 49.0%, driven by an increasing CPM share. The high level of our gross profit margin reflects our successful full price positioning, fully consistent with the high-end brand perception of Mytheresa itself. Shipping and payment costs increased by EUR 4.1 million to EUR 24 million in the quarter, driven by an increase in total orders shipped. As a percentage of GMV, shipping and payment costs in this quarter remained stable with 12.1% compared to 12.2% in the prior year quarter. During the first quarter, marketing expenses increased to EUR 25.4 million compared to EUR 22.4 million in the prior year quarter due to the number of new customers acquired and an increasing share of PR customer events executed. As a percentage of GMV, marketing expenses decreased to 12.8% from 13.7% in the previous year quarter. We again saw excellent customer cohort performance and kept the marketing ratio in line with our expectations. Adjusted selling general administrative expenses grew by EUR 7.1 million to EUR 27.7 million in Q1. Adjusted SG&A expenses as percent of GMV increased by 140 basis points to 14% from 12.6% compared to the prior year quarter. The increase is due to higher personnel costs, especially in logistics and energy costs. We have seen a 14% SG&A cost ratio already in Q4 of fiscal year 2022. The increase in the SG&A cost ratio is fully in line with our budget, and we expect to manage those cost pressures throughout fiscal year 2023. Despite current macroeconomic uncertainties, we will continue to invest in the quality of our personnel and will make no compromise in our service excellence. This will be key to sustain our medium and long-term growth strategy, capturing market share and thus fortifying our market leadership position. Adjusted EBITDA in Q1 of fiscal 2023 was EUR 11.6 million as compared to EUR 14 million in the prior year quarter. The adjusted EBITDA margin was at 6.6% compared to 8.9% in the previous year quarter. The decrease of 230 basis points is mainly due to the aforementioned increased cost effects in personnel and energy. Nonetheless, the adjusted EBITDA margin shows the strength and resilience of our profitable business model, and we continue to deliver an industry-leading performance on top and bottom line despite increased costs and within an uncertain market environment. We have proven that our business model is agile to cope with macro challenges and to stay inside targeted levels for the full fiscal year. Within our growth trajectory, we are able to absorb SG&A cost increases through our operating leverage. Depreciation and amortization expenses in Q1 were consistent with the prior year period at EUR 2.5 million or 1.3% of GMV, compared to the prior year period at EUR 2.2 million or 1.3%. The resilient profitability of our business model is also visible on operating income and net income level. Despite the current macro challenges, Mytheresa reported an adjusted operating income of EUR 9 million at a 5.1% margin and an adjusted net income of EUR 6.1 million at a 3.5% margin in the first quarter of fiscal 2023. We focus on continuously delivering profitable growth, which is clearly visible in our very simple and transparent P&L. EBITDA, adjusted EBITDA, adjusted operating income, and adjusted net income and their related margin percentages are non-IFRS measures. Moving to the cash flow statement. During the three months ended September 30, 2022, operating activities generated a seasonal EUR 18 million negative operating cash flow on the same level as in the previous year quarter with delivering a positive cash flow for the full fiscal year 2022. Net decrease in cash and cash equivalents was at EUR 25.6 million, including EUR 5 million of CapEx for the construction of our new warehouse in Leipzig, which will enable us to better serve our consumers through quicker shipping times. Including last year's portion, EUR 17 million or 40%-50% of the assumed total cost of the new warehouse between EUR 35 million and EUR 40 million have been paid already. The majority of the remainder will be paid during the current fiscal year and the rest next year upon finalization. As outlined in our last investor presentation, we run a highly efficient capital-light model. In fiscal year 2022, we had a positive operating and free cash flow and were able to increase our adjusted return on capital employed to 28%. We ended the quarter in a strong financial position with cash and cash equivalents of EUR 87.9 million, no bank debt, and EUR 60 million unused availability under the revolving credit facilities as of September 30, 2022. Turning now to our expectations for the current fiscal year ending June 30, 2023. Most of the unprecedented overall market challenges of the past quarters are still intact. Fear of an upcoming recession, a war in the middle of Europe, increased energy prices, ongoing COVID restrictions in Asia, and predominant inflationary pressures may also affect online luxury sales of high-net-worth individuals, but to a much lesser degree. Even in these times, Mytheresa has shown a strong top line and a highly resilient bottom line performance as we cater to the dedicated luxury shopper. We expect to manage these cost pressures throughout fiscal year 2023. As said before, despite current macroeconomic uncertainties, we will continue to invest in the quality of our personnel and will make no compromise in our service excellence. This will be key to sustain our medium and long-term growth strategy, capturing market share and thus fortifying our market leadership position. With prudence, we confirm our guidance as the situation is less predictable. Therefore, our guidance for fiscal year 2023 remains GMV in the range of EUR 865 million-EUR 910 million, representing 16%-22% growth. Net sales of EUR 755 million-EUR 800 million, representing 10%-16% growth. Gross profit at EUR 410 million-EUR 435 million, growing in line with GMV, also representing 16%-22% growth. Adjusted EBITDA in the range of EUR 68 million-EUR 76 million, and an adjusted EBITDA margin between 9%-9.5%. We are extremely satisfied with our excellent performance and the acceleration during the first quarter of fiscal year 2023. The upcoming months will give more transparency on how the world is affected by the ongoing macroeconomic situation and related cost pressures. I will now turn the call back over to Michael for his concluding remarks. Thank you, Martin. We are extremely satisfied with the first quarter of fiscal year 2023 earnings result. We see ourselves very well positioned to achieve our short-term targets despite the challenging environment and based on this, take advantage of the ongoing shift to online in luxury spend. Continued consolidation in digital platforms and the global market share expansion opportunities. We are confident that Mytheresa offers high value consumers the best multi-brand digital shopping experience there is. With that, I'd like to ask the operator to open us for your questions. Thank you. Ladies and gentlemen, at this time, we will be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Ladies and gentlemen, we request you to restrict yourselves to one question and one follow-up. We will wait for a moment while we poll for questions. Our first question comes from the line of Oliver Chen from Cowen. Please go ahead. Thanks a lot. Good morning, Michael, Martin. Regarding your guidance on GMV looking forward, it'd be great if we could get some color on regional trends, Europe, North America, Asia. You have really good momentum, but there are plenty of cautions in the marketplace that you called out. Second follow-up question, as we model inventory growth relative to sales, how's the freshness of your inventory? Any shifts we should be aware of? Also, what are your thoughts on the promotional environment? We're starting to see some intensification and some more accessible luxury in the US. Thank you. Thank you, Oliver. Let me take the geography question, and then Martin can speak to the inventory. We have experienced ongoing challenges in Asia, particularly in China. We believe that will continue for sure until beginning of next year. There may be a potential upside as the COVID situation becomes more controlled. If not, we will face the same situation that we have faced since January. Maybe an upside, but if everything is as it is now, then we will continue to see a good growth that we have been able to achieve. In Europe, we believe for our customer segment, the potential recession that will happen beginning of next year is not of large significance. We believe that what is out there in terms of challenges, inflation, energy prices, is already evidenced in their behavior right now. We expect Europe to be a very strong place for us to be. The US has shown continued outperformance, not as high as it was maybe last fall, but we believe that the stronger performance that we have seen in the US so far will continue well into next year. We actually believe that come March, particularly as you look into our numbers, you will remember that Q3 of last fiscal year was really heavily hit. There is an opportunity in Q3 to achieve on a not so great last Q3 good numbers. Otherwise, based on what we see at the moment, we don't believe that significant changes in trends will happen by geography. Martin, on the inventory. Yeah. Happy to speak to the inventory. Also there, we are quite happy and satisfied with the inventory levels. They are exactly on budget, if we look at the different season deliveries. We expect GMV over inventory to be exactly around last fiscal year's level. On that front, we are fully delivered as expected and have the freshness to satisfy the customer needs. Thanks quarter. Best regards. Thank you. Our next question comes from the line of Matthew Boss from JP Morgan. Please go ahead. Great. Thanks. Michael, maybe as we think about customer growth, top customer growth up 23% in the first quarter, that's on top of more than 40% growth a year ago. Maybe could you just expand on the customer acquisition strategy, the marketing that you're doing around these top customer cohorts, and then how you're balancing the gross margin at the same time with the new customer acquisition? Sure. Happy to do so, Matt. I always say if you see good top customer growth now, the origin is a year ago because you need to acquire the right one then to develop them. We have seen now for almost a year, always a very strong trend of top customer growth. We believe that it will continue as there are definitely economically challenging times. The more peripheral customer, the more occasional customer may postpone purchases, but the core luxury customer is continuing to spend. As these cohorts age and mature, is a better word. We continue to see that development. The original acquisition is really done by immensely refined targeting, really bidding on the right traffic, really bidding on the right ad words, really putting the digital marketing in the place where it belongs. The nurturing of the clients is, of course, very much centered on one-on-one personal relationships with the personal shoppers. The money can buy experiences that we have highlighted a couple of times in these calls, which are really unique because they allow our best shoppers to meet the designers, to be part of the fashion environment they like so much. The good news is, of course, that as long as we deliver the operational excellence, they have high loyalty in these top customers. They are not requiring endless marketing and endless discounts. They are requiring outstanding service. They require outstanding curation and exclusive capsules. The more you focus on this customer, that's one key strategy to protect your margin. Great. Maybe Martin, just to follow up. Relative to gross profit dollar growth of almost 14% in the first quarter, what's the confidence in 16%-22% growth for the full year? Just how best to think about maybe the gross margin cadence for the rest of the year? Yeah. Happy to do so, Matt. I mean, gross profit grew to 14%, exactly as you said. This is a faster growth than net sales of 11.4%, but a bit slower than GMV growth. Also driven by the share of CPM in the prior year quarter, which we just had one CPM brand and now have seven, and then have compensating effects throughout the P&L, as shown in the last quarters. I mean, the overall logic is that we always have significant shifts of gross profit between quarters and in comparison to the quarters in the preceding year, due to the seasonality of the business. We don't give quarterly guidance, but we confirm our guidance for the full fiscal year with gross profit growing in line with GMV between 16%-22%. This high level of gross profit margin and its resilience reflects our successful full price positioning. Great. Best of luck. Thank you. Our next question comes from the line of Michael Binetti from Credit Suisse. Please go ahead. Hey, guys. Thanks for all the detail here today. Congrats on a nice quarter. Could you maybe unpack the gross margin a little bit more? Maybe how much I know you don't want to give us too close to the CPM impact, but how much of the gross margin change in the quarter was from mix of products, especially as you guys move into some of these new categories. How much did discounting impact it year-over-year, maybe foreign currency as well? I'd be curious. On shipping, how much excess shipping is there versus 2019, and when do you think that can start to move back below the 12% level that we saw before? Then I did find your comment on marketing interesting. You said CAC was up 6%, but marketing leveraged. Your number of first-time buyers was about 15,000 lower than the prior quarter. Maybe more of the growth, it looks like more of the growth came from existing customers, and you didn't have to advertise as much. Can you just speak to whether that continues or if you have to push harder into customer acquisition through the year to help us with the marketing line? Maybe Michael, I start with the last one, and then Martin will focus on the gross margin. Absolutely correct observation. What we believe is happening at the moment is, as I spoke again, as I mentioned before, the peripheral customer, one-time customer is not out there in the market as much as they were 12 months ago. Seeing lower numbers of first-time customers does not mean that we acquire less good customers. As you know, we have quite a significant churn of customers from year one to year two, which is a natural churn of customers that actually only buy luxury items once or twice a year and then don't come back. We continue to focus to as much as possible in our marketing efforts to really get the good customers that over 12 months mature and become top customers. If the total number of first-time buyers is shrinking, but really what is happening is less peripheral, less occasional shoppers, then all is fine. All is fine. The average CAC then goes up, but you actually in the mix have an even better quality. All of that is constantly monitored. We always provide you the 90-day, 30-day repurchase rates. As long as those numbers are fine, then the strategy works actually. I mentioned before in the earnings statement, having less total growth in customers is totally fine for the moment, as long as we get our share of top customers and the top customer development is playing out as it does, and we get more from existing at the moment. With 21% growth in this environment, we're more than happy to have that slightly different mix for the moment at least. Martin, on GM? Yeah. On the gross profit margin, as you rightfully state, the gross profit margin for the full fiscal year will go up as expected. I think as we talked and guided before, it will be for the full fiscal year around 54%, driven by an increasing share of CPM. That is also the main reason why the prior year quarter had a different gross profit margin in relation to GMV than the current quarter. That's why the gross profit growth, the absolute gross profit growth is 14%. That is stronger than net sales growth, but less than the GMV growth of 21%. You should not so much focus on the quarterly gross profit margin as it is also driven by seasonality. Q1 and Q2 in this fiscal year and Q1 and Q2 in last fiscal year, there's always a shift in, you know, days and sales per days. The quarterly look is not so much in focus. The overall logic is that we confirmed our guidance and are very confident for the full fiscal year with the gross profit growing at 16%-22% in line with GMV. Thank you. Thank you. Ladies and gentlemen, if you wish to ask a question, please press star one. Our next question comes from the line of Kunal Madhukar from UBS. Please go ahead. Hi, thanks. A few if I could. Want to start to pick up, you know, with the last question, in terms of gross profit growth of 14% versus a target of, you know, 16% to north of 20% for the full year. Martin, given your report numbers on a quarterly basis, we definitely have to look at, you know, the trends in the quarter versus what the guide is. You know, then the gross margin growth, the leverage there for this quarter was significantly smaller than the leverage in the last few quarters. Can you help us understand, you know, exactly what's happening with the gross margin? I have a couple of follow-ups. I mean, the gross margin, that's why we deliberately are not giving quarterly guidance on the gross margin because it is influenced by so many factors. One factor is the preceding CPM share, which was much lower with one brand. Now we have several brands. As stated before, the gross profit of a CPM brand in relation to GMV is a bit lower than the gross profit of a wholesale product or wholesale brand in relation to GMV. That's why it is compensated by other, I mean, cost efficiencies and marketing, SG&A and top line. We talked about those. They're also outlined in our investor presentations. Therefore, we have the stability in the overall EBITDA margin as shown in the last quarters. If you take one factor is the CPM share, preceding quarter now. Second one is an increasing CPM share, which drives the gross profit margin in relation to net sales. You have shifts between quarters. We, yes, we have a 14% gross profit growth in this quarter. As we guide towards the 16%-22%, we target and we maintain our target to achieve a 16%-22% gross profit growth for the full fiscal year. Got it. You know, a couple of quick follow-ups. One is on the modeling side. You know, you reported 28.5% GMV growth in the U.S. How much was that FX? Overall on the GMV, how much was the FX impact? When we account for the FX impact, how much of the GMV growth was essentially coming from, you know, price increases that the luxury brands have kind of implemented over the past, you know, year or so? Yeah, maybe I take the FX topic and then Michael can also talk to AOV or price increases. The FX effect overall in our business model is very small as we have an FX exposure after our natural hedge of about 22%. That's why in this quarter, and we talked about this in the last quarter as well. This quarter, the FX effect is about 3%. 3% is a constant currency growth would have been 3% lower. Speaking to the growth in the U.S., obviously, would be a much higher number, as the strengthening of the U.S. dollar occurred already in Q1. Okay. Yeah, on the price factor, it's true. Luxury brands have increased prices, particularly on bags, but price increase is a bit Difficult to assess because 80% of what we sell each season had no equivalent the season before. Only on bags and shoes there is the same model that has existed for multiple seasons. When you look at the total number, 20.8% GMV growth, at the same time, AOV increased by 5%. There is some price impact here, but to achieve 20.8%, we sold more items, we served more customers, and AOV growth of 5%. There's some price increasing there. There is some customers buying more expensive pieces, even though you can't compare, but they may buy it. Now shoes with heels, which are more expensive than flats. I wouldn't really say this is inflation, what you see there with 20.8% or inflation, what you see with the 5% AOV. It's the customers are really willing to spend money. Thanks, Michael. Just a quick follow-up then. In terms of the number of orders, LTM orders per average per buyer, that improved modestly over 2019 levels. Now, when we think of your buyer base, one of the questions we keep getting a number of times is how much of this buyer base is really the high net worth individual that buys and builds wardrobe or wardrobes? What proportion of your customers are like, you know, this high net worth individuals? You know, in terms of the frequency, what percentage of your customer base over the past 12 months are people that bought once, and then they did not come back again for a reorder? On the last question, we don't disclose that detail, but we disclose in our F-1 a pattern that has been quite stable that from year one to year two, we actually lose about 75% of customers. We retain 50% of revenue, and then as of year two onwards, we actually retain 95% of the customers and 95%-100% of the revenue. There is a significant amount of one-time customers, which are sort of naturally not coming back because they don't come back in general. In terms of how much of our customers are high net worth individuals, I think a large part. I mean, we not always capture every wallet of what they spent, but for sure the 3% customers that now account for over 1/3 of our revenues are all high net worth individuals. The best evidence for that is this is a business in digital that just delivered 21% GMV growth. This is the fact of a business that is focusing on high net worth individuals that continue to spend, even though for sure, for many customer segments, economic times are very tough and at least very uncertain. Our customer base is really skewed towards those that at the moment don't feel any reason to reduce spending. Well, thank you, Michael. Thank you, Martin. Thank you. Our next question comes from the line of Flavio Cereda from Jefferies. Please go ahead. Thank you, Michael and Martin. Two, possibly three quick questions from me. In terms of geographical mix, there's been an interesting shift. I know it's just one quarter, but say comparing Germany to rest of the world, I was wondering if you could give us a little bit more color on what happened there. One's down, and the other one's up quite a bit. Second thing, can you give us or remind us what the projected IPO share compensation expense is likely to be for the year? Lastly, I was wondering in recent weeks, have you seen any particular momentum when it comes to return rates? Are they aligned to past metrics, or have you seen any significant shift in any particular geography? Thank you. Thank you, Flavio. Let me take questions 1 and 3, and then Martin can talk about share-based compensation. On number 3, in recent weeks, we have seen a slight increase in return rate. Nothing out of proportion in terms of fluctuation. We still believe for the full fiscal year, we will have a stable return rate. As presented in our document, the return rate has edged up by three percentage points. To your question on that part, on geography, we continue to see very good performance outside of Europe. Inside of Europe, there is clearly in the DACH region maybe a sentiment that is a bit more conservative. Also remember that in the DACH region, we probably have an even higher share of, I want to say, not only high net worth individuals, because that's our deepest penetration into the customer segments. We do believe outside of Europe, outside of Germany, that at least for sure for the next couple of quarters, given the economic environment, the growth will be stronger out there, and that's where we invest most with HR, with personnel, as well as with marketing activations. On share-based, Martin? On share-based, this year we expect about $30 million share-based compensation. Next year, 15 million, and the year after that, 5 million. This comes to an end, and it's all originating from the IPO, with a share price of $31. This is the IFRS accounting for that. It is stable as we account for that based on a $31 share price, leading to $30 million this year, next year 15 million, and then 5 million. Thank you. Thank you. Our next question comes from the line of Lauren Schenk from Morgan Stanley. Please go ahead. Great. Thanks for taking my question. Maybe if I can ask the growth margin question in a little bit of a different way. I guess the last two quarters, you've cited about a 290 basis point benefit to gross margin from the CPM model. If we assume that is roughly consistent in this quarter, that would imply sort of the underlying gross margin was down nearly 200 basis points. Is that the right conclusion? If so, what is driving that decline? Thank you. Thanks, Lauren. I can take this question. I mean, the difference or the effect of the CPM share in Q4 obviously cannot be compared to the Q1 development of the gross margin. Because in Q4 of the last year, of the preceding year, we didn't have any CPM. So it's a pure CPM share effect of 290 basis points. In Q1, we already had a major brand, a key brand on the CPM model. Therefore, the CPM share increase effect is much lower. It is more around half of that. The decrease in the gross profit on the overall wholesale products is compensated by effects that you see, for example, in marketing and SG&A overall. This is the key asset of the overall curated platform model, which keeps a very stable overall profit pool. We have an increasing gross profit margin in relation to net sales, driven by the curated platform model, and giving us the ability to have a very high gross profit margin double, one of the highest in the industry, and leading to a bottom line with an EBITDA margin, which we guide for the full fiscal year, 9.5%-9.0%, which is also one of the highest in the industry and one of the highest compared to our competitors. We are very happy with our full price selling success and our positioning of the overall business model, and are able to have this curated platform model yielding a very similar overall profit pool and enabling to offer and to operate both models to the brands. The overall development, I mean, always there's fluctuations between quarters, as stated, we are very happy on the gross profit development. Lauren, do you have any more questions? No, that's it. Thank you. Thank you. Our next question comes from the line of Abhinav Sinha from Société Générale. Please go ahead. Yeah. Hi. I was just wondering, could you give some comment on the current trading that you're seeing given that we are already like half quarter done? Second thing is, in terms of the FX impact. So basically what you're saying is excluding the FX impact, the GMV growth would have been 18%? Is that the correct way to look at it? Thanks. Yeah. Hi, Abhinav. Yes, exactly. I mean, so the FX impact, if you would calculate that as constant currency, so constant currency growth would have been 3% lower. Exactly. This is the FX impact. On current trading, that is also a reason why we are confident on our guidance for the full fiscal year, because as of October, looking at October, also looking at today, we see a continuation of those trends that we spoke to in Q1. Yeah. I mean, on current trading, let me just summarize. I mean, we guided for this fiscal year from 16%-22%. I remember when we put out this guidance last time, there was a bit of skepticism. Is that achievable current environment? I mean, we rightly pointed out that we see continued acceleration. There was a debate whether the last quarter had actually accelerated. We clearly said, yes, it had to 18. It should come as no surprise with having delivered the first quarter already with a 21% or 20.8% GMV growth that we feel very comfortable with the 16%-22% guidance, which I have to accept is of course way above many, many other digital platforms in terms of what they guide to in terms of growth, which comes back to the customer focus. We feel with the first quarter and with what we see at the moment, very confident regarding our guidance. All right. Just one follow-up. Like last year, this year also, you expect to be free cash flow positive, right? Yes. This is our expectation. Okay. Great. Thanks. Thank you. Ladies and gentlemen, we have reached the end of the question and answer session. Thank you for your participation for today's call. You may now disconnect your line.